As Singapore retools, fresh takes on labour numbers

With reports emerging of layoffs in various sectors, expectations of an increase in unemployment are on the rise. But as Singapore enters a fresh phase of economic restructuring, such negative changes in labour market data - a rise in unemployment or workers staying jobless for longer stretches - may in fact signal that transformation is progressing as intended at the macro level.

To be sure, "high unemployment is never a good thing for any economy", DBS economist Irvin Seah cautions. High levels of joblessness can shake political and social stability, and demand higher levels of social spending - adding to fiscal pressures.

But in Singapore's context, where the unemployment rate now sits at a multi-year low of 1.9 per cent, even the combined impact of the current sluggish growth environment and economic restructuring are not likely to push jobless levels so high as to risk instability.

Rather, it is a "slow drift higher" to an unemployment rate of about 2-3 per cent, that OCBC economist Selena Ling, for one, forecasts. Labour economist and nominated member of parliament Randolph Tan also believes that Singapore should expect a 0.5-1.5 percentage points increase in the unemployment rate over the next few years.

Mr Tan, an associate professor at UniSIM, says that there are already signs of deterioration in the rate at which those laid off are able to find new jobs. That this re-entry rate hasn't worsened significantly to date, is thanks to the previous round of restructuring with its focus on weaning businesses off an unhealthy reliance on low cost foreign labour by hiking levies and shrinking quotas. "To a large extent, the policy tightening in the labour market over the last few years has benefited job seekers and ensured a healthy re-entry rate."

With the fresh push to transform industries and seed new economic sectors though, Singapore should be prepared for the prospect that unemployment "may not return to the low levels we have enjoyed in recent years", Prof Tan says.

On the other hand, should unemployment stay unusually low, that need not mean restructuring is faltering either. "By 2025, the labour force will have started to shrink, as demographics change - without considering immigration - so the supply of labour may contract," says Mr Seah. It's not unthinkable that even as the economy transforms and sheds jobs, the labour force grows leaner and the unemployment rate stays low, he says.

Nuances in the labour data, rather than the headline unemployment rate or layoffs alone, will become more significant in the analysis as "Future Economy" initiatives get going. These will tell a truer story and flag labour market developments that might end up hampering industrial restructuring, economists say.

"Rising layoffs is a proxy indicator of churn due to a rapidly evolving economy and industrial structure. You really need to see the flip side of the coin, which is the re-hiring rate and how long it takes for redundant workers to find alternative employment, and whether this is a higher or lower wage job, especially for PMETs," says OCBC's Ms Ling.

Determining whether long-term structural unemployment is taking hold - with more workers unable to find work because of fundamental mismatches in skill - will also be important, especially in the PMET and older workers' sections of the workforce.

Also, while disruptive technologies and automation will mean more skills mismatches and higher frictional unemployment become par for the course - policymakers will still need to ascertain the point at which it "becomes too painful for the individual" and offer help in the interim, Ms Ling says. The mandate of policymakers engineering this economic change after all, is to create meaningful jobs and ensure that real wages continue to rise, adds Mr Seah.

There are other aspects of the labour market not captured by existing indicators, which may be relevant to assessing the success of Singapore's restructuring push.

Underemployment is one, says Mr Seah. While this is a problem of cyclical weakness rather than one brought about by restructuring, it could well become an obstacle to economic change.

"With the slowdown, we have observed this trend - bankers, professionals taking on jobs that are lower paying, and which require less of their skills sets. This problem of underemployment, not maximising the true potential of a worker, if amplified, becomes a problem of not maximising the true potential of the economy," says Mr Seah.

Companies that have cut down their workforce in 2016

  • Tripda

    Rocket Internet's carpooling app, Tripda announced earlier this month that they would be organising a global shutdown of the platform.

  • Autodesk

    Autodesk a design-focused software announced early month that they will be laying off 925 positions, around 10 per cent of their entire workforce.

  • Yahoo

    Recently tech giant Yahoo confirmed that would be shedding 15 per cent of their entire workforce, and its also exploring other "strategic alternatives".

  • Yahoo

    Employees in Yahoo's Singapore office were notified of the layoffs on Feb 18.

  • Rakuten

    e-commerce platform Rakuten announced in Feb 2016 that they would be shutting down all their operations in Malaysia, Singapore and Indonesia.

  • Rakuten

    The platform probably faced a significant number of challenges in Malaysia, and they will be withdrawing to focus their efforts in countries like Japan and Taiwan.

  • Bombardier

    Bombardier will be cutting their workforce by about 7000 over the next two years.

  • Bombardier

    They will be cutting 580 jobs from their Belfast operation this year and potentially another 500 the following year.

  • Shell

    Multinational oil and gas company, Royal Dutch Shell operates in more than 70 countries and employ more than 94,000 people worldwide.

  • Shell

    Given the fact that oil prices have dropped by almost 70 per cent in less than two years, the company has already started cutting 10,000 jobs to try and recover from all their losses.

  • Devon Energy

    Devon Energy, a US oil producer, mentioned that 700 people would lose their jobs by the end of the Feb 18, 2016, and this is all in response to the current commodity price environment.

  • Top Glove

    Malaysian company Top Glove is currently the world's largest maker of natural rubber gloves with operations in 27 countries. The company announced that they would cut their foreign labour by 5 per cent due to rising costs and increasing automation.

  • Barclays

    Some 100 Barclays employees in Singapore were axed on Jan 21 in a drastic cost-cutting exercise which saw the bank exit multiple businesses across Asia.

  • Standard Chartered

    Global bank Standard Chartered had laid off a number of people in Singapore late last year as it axed 15,000 jobs globally.

  • Standard Chartered

    Its previous workforce globally was at 86,000, and currently employs about 7,000 staff in Singapore.

  • HSBC

    HSBC has announced that they will be freezing salaries and freezing hiring in 2016 globally in the battle to cut costs, affecting 3,000 Singapore employees.

  • Resorts World Sentosa

    According to a report on Straits Times, more than 30 employees at Resorts World Sentosa (RWS) have been laid off earlier in February.

  • Resorts World Sentosa

    However, the lay offs was due to overstaffing and it is not an isolated case. There are currently about 12,000 people working at Resorts World Sentosa.

  • Maersk

    Maersk Line, one of the world's top container shipping companies, recently merged its Singapore and Hong Kong regional offices. Last November, it also shared new plans to reduce its network capacity and announced that it will be cutting 4,000 jobs.

  • STMicroelectronics

    STMicroelectronics will cut about 1,400 jobs and close its loss-making set-top box business, including 670 in Asia.

  • Goldman Sachs

    Goldman Sachs has been reducing the size of its investment-banking team in Singapore by about 30 per cent compared with the start of last year, according to a report from Bloomberg.

  • Credit Suisse

    Credit Suisse announced 4,000 job cuts globally, although no layoffs are expected in the Asia-Pacific region yet.

  • Royal Bank of Scotland

    Royal Bank of Scotland has also announced that they could be cutting as many as 80 per cent of the jobs in its investment banking unit over the next 4 years, and last year laid off "hundreds" in Singapore.

This article was first published on May 31, 2016.
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