Higher EP minimum pay may not raise local graduate wages

The Fair Consideration Framework aims to stir firms' sense of fairness. Aimed at their pockets, instead, is another move: raising the Employment Pass (EP) qualifying salary from $3,000 a month to $3,300 from Jan 1.

This applies to young graduates from good educational institutions. Older applicants will have to earn even more.

The change is "in line with rising salaries", said the Manpower Ministry. But it was stagnation - of local graduate starting pay - which Acting Manpower Minister Tan Chuan-Jin worried about in a Business Times interview in April. Then, he noted that graduates were earning less in their first jobs compared to older cohorts, after adjusting for inflation.

The rise in EP qualifying pay was meant to "level the playing field" for locals competing against foreign graduates willing to work for less.

The idea is that if foreigners can no longer compete on "price", local graduate wages should rise.

Will the starting salary rise achieve Mr Tan's aim?

Sure, $3,300 far exceeds last year's $3,050 median monthly starting pay for local graduates. But the calculation may not be that straightforward.

Singapore National Employers Federation executive director Koh Juan Kiat observes that "$3,300 for an EP holder would be comparable to a basic salary of about $2,800 plus employer CPF. Employers will weigh these costs".

Then there is the question of why firms want entry-level EPs.

The chief executive of interior design and events company Cityneon, Mr Ko Chee Wah, hires both local and foreign graduates.

The $300 cost increase in itself won't make him favour locals. He says: "When we hire people, it is not about whether they are local or foreign. We hire people with the right skill-sets.

"But if two persons - a local and a foreigner - have the same skill-sets and cost the same to a company, I am sure most will hire the local."

The problem is when locals do not have the same skills - or do not apply. "Most companies that employ Q1 EP holders do so to fill junior-level positions for which they are unable to hire local candidates," says Mr Mark Hall, vice-president and country general manager of recruitment firm Kelly Services, referring to the lowest tier of EP holders.

Such foreigners are needed for jobs which require niche skills or which locals shun. And higher EP costs are unlikely to change this.

If so, the change means firms may simply have to pay more, "because of the lack of Singaporeans coming forward to fill those vacancies", worries Singapore Chinese Chamber of Commerce and Industry president Thomas Chua.

The MOM's move should help in scenarios where local and foreign graduates do compete on pay. But if, as suggested, this may not be that common, then it may take more than that to raise graduate starting pay.

janiceh@sph.com.sg

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