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The first half of 2014 (H1 2014) saw the local share of employment in Singapore rise to a high of 73%, while the growth of foreign workforce fell sharply in a tight labour market.
The overall and resident unemployment rates stayed low at 2% and 2.8% respectively.
The macroeconomic review, released twice a year by the Monetary Authority of Singapore (MAS), noted that domestic economic activity has been sluggish over the last six months, slowed by the domestic-oriented sectors and uneven recovery in the global economy.
Overall, employment in Singapore expanded, albeit at a slower pace. The two rounds of increases in the Employment Pass minimum qualifying salary led to a slowdown in the rise of Employment Pass Holders.
Foreign workforce now makes up 27% of employment gains, compared to 39% last year.
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The country’s domestic-oriented sectors drove overall job creation in H1 2014. This was supported by the construction sector, which added 9,100 new workers, for projects such as expansion works at Changi Airport, and Stage 2 of the Downtown MRT Line.
On the other hand, “employment growth in the external-oriented sectors was mixed.” The manufacturing sector let go of 3,500 workers in H1 2014 after adding 4,200 in H2 2013.
Post the MH370 incident, demand for labour in the air transport and allied sectors was also weak, given fewer visitor arrivals.
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Given the labour market conditions, overall labour productivity dipped 0.3% year-on-year. Resident wage growth, however, eased to 3% in H1 2014, from 4.3% in 2013.
Going forward, the MAS anticipates labour demand to remain firm, driven by strong hiring intentions in the domestic-oriented sectors.
Pay increments are likely to remain firm in the domestic-oriented sectors where labour supply constraints are relatively more binding and demand is robust, says the report.
Despite that, aggregate wage growth may be dragged down by an increased share of part-timers in the workforce and the shift in employment composition to the domestic-oriented industries, which have lower wages on average.
With this in mind, the report expects economy-wide resident wage growth at around its 10-year historical average of 3.7% in 2014 and 2015.
“Meanwhile, productivity growth will be constrained in the short-term, given the lack of a strong cyclical rebound. It will also take time for firms to reduce their reliance on workers, especially in construction and services.”
The report highlights that Singapore may well follow the experience of the advanced economies, where the relevance of skills, rather than academic qualifications, determines the employability and wages of workers.