The paradox of Singapore's shrinking employment in a tight labour market

Things are getting a little strange in Singapore's labour market.

On the one hand, a recent report released by the Ministry of Manpower (MOM) indicated that Singapore's employment shrank in Q1, with the number of people employed here falling by 6,100 workers in the first three months of 2015. This marked the first time employment has dipped after five years of strong increases.

Meanwhile, a separate MOM report stated that the number of job vacancies had climbed 8.9% to 67,400 in September last year – the highest in six years.

What's going on? How is it that the labour market is getting tighter while the number of job positions that remain unfilled is creeping up?

To make sense of these numbers, we need to understand the market dynamics that are creating this phenomenon.

For a start, the dip in employment could be indicative of how certain segments of the economy are transitioning towards a reduced reliance on manpower, prompted by the tighter foreign worker policies and economic restructuring that began years ago.

According to the MOM report, the loss of jobs was led by the manufacturing sector (particularly due to weak output in marine and offshore engineering) followed by the services sector namely, retail trade, accommodation, and food services.

Incidentally, some of these findings correspond with PrimeStaff's own Employment Outlook Quarter 3, 2015 report that was released early July. The report forecasts that the low-cost manufacturing sector will experience a hiring freeze or even layoffs in Q3, along with other "sunset" industries such as oil & gas and construction.

This situation is compounded by moderate business conditions and slower economic growth, with businesses not expanding fast enough to demand more workers.

Additionally, given the increases in labour force participation already attained in recent years, further growth in Singapore's labour market is likely to be limited.

Now how do we go about explaining the rise in job vacancies?

The MOM report stated that sales assistants, security guards, waiters, and office cleaners were the most sought after. This is unsurprising on two counts: the first is that Singaporeans generally shun such jobs due to the low pay, long hours, and physically tough labour amongst other "disincentives".

Secondly, these jobs had predominantly been filled by foreigners in the past but with the clampdown on the hiring of foreign workers, vacancies for such jobs have since spiked.

Where do we go from here?

It is a long road ahead for Singapore as it continues to strive to achieve that employment "sweet spot": striking the right balance between gainful employment for all citizens and transitioning to a less labour-intensive economy so that businesses do not have to suffer further due to the tough business environment.

As for the more immediate employment situation, Q3 is likely to be an "employee's market" due in part to the slower economy, which makes people more cautious about changing jobs.

PrimeStaff's Q3 Employment Outlook report also states that there will be a great demand for workers in the following sectors: retail, food & beverage, IT, health & allied healthcare, and some areas of manufacturing (operators, technicians, etc.) this quarter.

Given the tight labour conditions that are likely to continue for some time to come, employers really ought to embrace flexi-work arrangements and warm up to hiring older and more experienced workers, as these should go some way towards easing their manpower woes.

To attract and retain the right talent in this tight labour market, the report offers these three strategies:

1) Develop & promote from within: Training and developing existing staff is a powerful retention tool that HR should capitalise on.

2) Apply targeted selection: Define core and critical competencies necessary for the position instead of "nice to have" competencies.

3) Engage multi-generational workforce: Learn to engage employees both young and old across all four generations currently in the workforce: Gen M, Y, X, and the Baby Boomers.

As businesses, we may not be able to influence labour policy but we can always improve and refine our own internal HR policies, processes, and programmes in order to secure and retain the best talent for our workforce.