What slow economic growth means for HR and the workforce.
By Michael Switow
Singapore’s economy is beginning to show signs of collateral damage from the trade war between the United States and China. The manufacturing sector has been hit particularly hard, but the top line numbers also belie an economic transition that is benefiting modern service providers like data centres and internet companies.
“If you just look at the headline numbers, it looks like slower growth, slower job creation, and fewer opportunities,” says CIMB Economist Song Seng Wun. “The overall labour market may be weaker, but it is not across the board.”
Unemployment in Singapore has been inching upwards but the jobless rate, at 2.3 percent, is still relatively low by global standards.
Singapore is one of the most open economies in the world, but one-third of its exports go to China, Hong Kong, and the United States, leaving it particularly vulnerable to trade tensions.
The island nation barely avoided dipping into a technical recession in the second quarter, growing only 0.2 percent, and many analysts say that the manufacturing sector—particularly companies in the chemical, petrochemical, and semiconductor space—is contracting.
Manufacturers are reporting their weakest hiring plans in a decade, according to the ManpowerGroup’s quarterly employment outlook survey. Some observers see signs that more manufacturing and engineering companies are shifting out of Singapore.
For the first time in nearly two years, there are fewer job openings than unemployed workers, and government figures show that the “re-entry” rate of retrenched workers has dropped sharply. On top of that, business confidence has hit a two-year low, according to the Singapore Commercial Credit Bureau.
What does this mean for hiring and salaries in the island nation? The picture is mixed.
Professionals Are Not Immune
Retrenchments jumped in the third quarter of the year, compared with the previous three months. What is particularly striking is the type of workers that are losing their jobs. The vast majority are professionals, managers, executives, and technicians (PMETs).
DBS Bank senior economist calls PMETs “the newly vulnerable.”
“This goes against conventional wisdom,” Seah says. “Most people assume that the lower-wage workers are more prone to retrenchment, which is not the case in Singapore.”
Unemployment has been inching upwards. The overall jobless rate is just 2.3 percent, since more than one-third of the workforce consists of foreign contract workers and expatriates. But the citizen unemployment rate is 3.3 percent.
And the tightening labour market is affecting employees’ bargaining power. “I have seen at least two cases where candidates have accepted offers of up to 3000 Singapore dollars less than their previous drawn salaries, simply because they are out of jobs,” says Belinder Kaur, a team manager at Hays Singapore who specialises in supply chain and logistics.
Hays Singapore also reports a growing preference for hiring contracted workers over permanent staff, particularly as companies lack budgets for new hires. Engaging contract workers allows firms to save on costs associated with benefits and mandatory retirement account payments.
“I don’t feel that candidates are yet affected by what they see externally,” says Michael Page Regional Director Jeffrey Ng. “They are still quite bullish on changing jobs. We are not seeing signs that they are not moving because they are uncertain about the market right now.”
However, Ng says that Singapore’s slowing economy is lengthening the time required to fill vacancies. Whereas in the past, a line manager in a Singapore office could make a hiring decision, many multinational firms today require candidates to also pass an interview with someone in the corporate headquarters in Europe or the U.S.
“Companies want to be more sure about who they are hiring,” Ng says. “The whole process can take an extra two weeks to one month,” sometimes causing candidates to lose interest in the position.
A Smart, Green Nation
Not every sector is suffering. A visit to the annual Singapore FinTech Festival quickly highlights the buzz surrounding finance and technology. Some 60,000 participants from 140 countries filled the Singapore Expo, about 30 per cent more people than a year ago.
The Singapore government used the event as a backdrop to announce several new initiatives, including the launch of a U.S.$2 billion green investment fund. The country is also offering new licenses for up to five digital banks and is pumping money into digital services, artificial intelligence (AI), and other tech-enabled solutions via its Smart Nation initiative.
“That’s creating job opportunities against the backdrop of the strong rise in digital trade, e-commerce, and internet platforms,” Song notes. “Anything to do with digital, the labour market is very strong.”
Infrastructure providers like data centres as well as companies that work with data analytics, monitor data flows, and offer IT security are benefiting from the government initiatives and fuelling demand for experts in the areas of AI, analytics, cloud computing, digitisation, information security, and transaction platforms. Growth in the financial industry, meanwhile, is benefiting professionals with expertise in governance and compliance.
“In these sectors of strong professional demand, Singapore is very much a candidate’s market,” says Michael Page Managing Director Nilay Khandelwal. “Many businesses are wisely tackling the market pressures head on by investing in crucial skill sets. This can come in the way of hiring the right talent at a salary premium or upskilling their existing employees with training and development plans.”
Professionals in these areas can command salary increments of between 10 and 15 percent when switching jobs, according to Page’s Singapore Salary Benchmark 2020 report, which is based on more than 10,000 data points, including job advertisements and placements.