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Budget 2019: Government to tighten workforce quota for services sector from 2020

Vernon Lee
Senior Editor
Shuttered stores where tenants have moved out are seen in a mall along Singapore’s shopping street, Orchard Road on Thursday, July 27, 2017. (AP Photo/Joseph Nair)

The workforce quota for the services sector will be tightened as some segments remain “very labour-intensive”, Finance Minister Heng Swee Keat announced on Monday (18 February) in his 2019 Budget statement.

The sector’s Dependency Ratio Ceiling (DRC) will be reduced in two steps: from 40 per cent to 38 per cent on 1 January 2020 and to 35 per cent on 1 January 2021.

The S-Pass sub-DRC for the sector will also be tightened: from 15 per cent to 13 per cent on 1 January 2020 and to 10 per cent on 1 January 2021.

While some services firms have done well on the productivity front despite a tight labour market, some segments like F&B and retail are still very dependent on labour, Heng said in Parliament.

Growth in S-Pass and work permit holders in the sector has risen by about 3 per cent annually, or 34,000, in the last three years, with the S-Pass growth in services being the highest in five years.

“If this trend persists, foreign manpower growth will be on an unsustainable path. We need to act decisively to manage the manpower growth in services and encourage our companies to revamp work processes, redesign jobs and reskills our workers,” Heng said.

While the government recognises the economic headwinds and cost pressures, Singapore should use the “narrow window” to double down on restructuring as its workforce growth is tapering, according to Heng. Otherwise, firms in Singapore will find it harder to compete in the future and workers will be left behind, he warned.

“Relying on more and more foreign workers is not the long-term solution – other economies are developing too,” Heng said.

The government is announcing the changes a year ahead to give services firms time to prepare. For firms with workers in excess of the new limits, the DRC will apply when these firms apply for renewal of permits.

More stories on Budget 2019 here.

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