As mentioned, Singapore's economy had to undergo incessant restructuring over the past decades in order to keep ahead of competition from other emerging economies. This need to move up the value-add ladder posed a great demand on its lean labour force to upgrade its skills and knowledge continuously.

 

Inadvertently, the economic restructuring produced winners and losers. In time, more and more older workers faced dislocation due to skill obsolescence. The mismatch in supply and demand of skill sets as the economy moves up the value ladder resulted not only in more structural unemployment but also increasing dependence on foreign talent with the skill sets for emerging high-growth economic sectors.

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Influx of Foreign Workers and Talents

To be sure, human resource has all along been a binding constraint that limits economic growth since as early as the 1970s. By 1970, for example, there were a total of 72,590 foreign workers making up about 11% of the work force. Since then, the number of foreign workers had grown rapidly in tandem with high economic growth. 

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Notably, during the ’70s and ’80s, Singapore’s industries were more capital intensive and the labour shortage was more in terms of quantity than quality. Domestic workers were also in their prime. Foreign workers were brought in then to supplement, not to supplant them. In the end, the influx of foreign workers helped to spur economic activities that resulted in rising wages across the board. Growth was inclusive as evidenced by the falling Gini coefficient then.

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However, this began to change by the 1990s as more older Singaporeans were displaced with the Singapore's economy moving progressively from capital intensive to technology intensive. After the turn of the century when Singapore again upgraded its economic structure to focus on knowledge-based and innovation-driven industries, the floodgate for unskilled foreign workers destined for non-tradable services sector — such as public transport, cleaning, retailing and construction — should have been narrowed or closed, so that the jobs in that sector could go to the older Singaporean workers who were by now becoming increasingly unemployable because the hollowing out of lower value-add manufacturing operations had resulted in the obsolescence of their skill sets.

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To make matter worse, while foreign workers occupied mainly the bottom rungs of the job ladder in the past, they were now also competing with displaced PMETs for jobs in the middle rungs.[8] With the rising of business costs, Singapore was becoming progressively uncompetitive. As MNCs relocated to lower-cost destinations, displaced engineers and IT professionals in the "global periphery" track sought employments with SMEs in the "domestic core" track but were unhappy with the significantly lower pay that the SMEs could afford. Disappointed, many switched to driving taxis while continuing to look for green pastures. More recently, with the emergence of private car hailing services, many of these young, skilled displaced PMETs became registered drivers of Uber, Grab and GoJek. Today, out of 41000 private registered drivers in Singapore, more than 40% or about 18,000 aged less than 40.  

 

Meanwhile, SMEs became increasingly dependent on lower-cost foreign skilled workers for mid-level jobs to maintain its competitiveness. But the mid-level foreign talents did not just flow to SMEs. MNCs and larger private companies and institutions were also taking in these cheaper mid-level foreign talents with skills that the more expensive Singaporeans also possess to help lower costs and raise profitability. Efforts to drive growth in new economic sectors (electronics, biomedical, chemicals, and engineering) and to position Singapore as a global financial centre also led to the shortage of professionals at the upper middle and top rungs with both the relevant skills and international exposure that Singaporeans lack. 

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In short, after the turn of the century, Singapore's labour market had been made more complicated by the shrinking of the lower value-add manufacturing sector due to economic restructuring; the departures of the MNCs due to Singapore's declining cost competitiveness; the efforts to position Singapore as a hub for new business services and as a financial centre to enable it to exploit emerging opportunities (e.g. in wealth management) presented by the Global Financial Crisis and the Eurozone Crisis.

 

Even when the economy was expanding prior to the Global Financial Crisis in 2008, Singapore was faced with a bewildering predicament of having both an excess and a shortage of workers at the same time. 

 

Overall, the number of foreigners working in Singapore was expanding rapidly especially after the turn of the century as the economy rebounded from the external shocks associated with 9/11 attack and bird flu. In 2005, for example, about 49,800 (44%) of the 113,300 jobs created went to foreign workers even though foreign workers made up only 28.9% of the labour force. Foreign labour growth of 8% was double that of local labour growth.[6] In 2007 and 2008, as many as 300,000 foreigners took up jobs in Singapore.[7] By 2009, they accounted for a third of the three-million-strong labour force, up from only a quarter in 2004.

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Gradually but surely, adverse impacts of Singapore’s overdependence on foreign workers began to show. Voices of discontent grew, first and foremost with the issues of job poaching. The availability of these foreign workers willing to work for a significantly lower pay also depressed wage growth of Singapore workers at not only the lower but also middle rungs. Cleaners, for example, were paid as low as about $600 a month. 

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Besides being accused of poaching job and depressing wages, foreign workers have also been partly blamed for the trend of declining productivity in recent years. While the overall economy has grown with the enlarged workforce, the productivity of each worker has fallen. The fall is thought to be caused by the easy availability of low-cost foreign workers which incentivizes employers to employ more workers instead of investing in capital equipment to raise productivity.

 

Lastly, the influx of foreigners is said to be also exerting demand pressures on Singapore infrastructures, pushing up housing prices, taking up places in school at Singaporeans’ expense and contributing to the frequent breakdowns of the mass rapid transit system.

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Changes in Singapore's Population and Demographic Composition

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As a result of the influx of foreign workers, Singapore's total population expanded 23.6% from 4.03 million in 2000 to 4.98 million in 2009. During that period, the foreign population increased by 70.9% while the number of citizens increased by only 7%. In terms of composition, citizens constituted only 64% of the total population, a decline of 10% over the same period.[5]