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Tighter rules on foreign workers put Singapore's growth at risk

Government struggles to balance economic dynamism with job security

Singapore has created a wealthy and dynamic economy by readily accepting workers from around the world.

SINGAPORE -- Singapore is at risk of undermining the foundation of its economic growth by imposing stricter rules on the hiring of skilled workers from overseas.

The city-state has tightened the criteria that allow companies to hire foreign managers and professionals in response to complaints from Singaporeans that they are losing out in the job market. This has slowed the growth of Singapore's population, the lifeblood of its economic expansion, to near zero. Local companies, for their part, say the new policy has made it difficult for them to hire competent employees.

Singapore has flourished by attracting talent from across the world. Experts warn the country may lose its economic vitality if it becomes less hospitable to foreign workers.

Employment passes, which are issued to foreign managers and professionals are harder to come by these days. "The growth of employment passes slowed to an average of 3,000 a year in the past three years. This is significantly lower than the peak of 32,000 in one year, in 2011," said Lim Swee Say, minister for manpower, on March 6. Lim stressed the government has toughened the criteria for issuing passes to ensure employment opportunities for Singaporeans.

While about 50,000 foreign workers a year received employment permits over the three-year period, nearly as many did not renew them, Lim said.

Singapore has put the stricter rules in place as domestic employment conditions have worsened. Although Singapore added 100,000 jobs a year between 2012 and 2014, the pace slowed to less than one-tenth that over the next three years. The government, fearing rising unemployment and popular discontent, made it harder for overseas workers to get permits.

The new policy has had an immediate effect on Singapore's demographics. The country's total fertility rate -- the average number of children borne by a woman over her lifetime -- stands at 1.16, far below the replacement level of 2.1. Singapore has long maintained population growth by accepting large numbers of workers from abroad.

Last year, Singapore's population grew by just 0.1% as the inflow of foreign workers slowed to a trickle. That was its smallest rise since 2003, when the population shrank.

In January, Ravi Menon, managing director of the Monetary Authority of Singapore, issued a warning: "Let us assume that we have zero net immigration starting from this year. The resident working-age population will begin to shrink from around 2020. By 2035, the working-age resident population will possibly decline by a cumulative 3.5%," he said. 

For an economy to grow, it must either increase the size of its workforce or raise productivity. If the influx of foreign workers stops, Singapore will have to rely solely on higher output per worker to sustain economic growth.

In recent years, the government has committed to building an efficient society and sophisticated industries. It may be able to maintain economic growth for a while through higher productivity alone. But some of these productivity gains have come from foreigners, who have brought know-how with them. Some observers worry that Singapore lacks manpower in such high-tech fields as artificial intelligence and robotics. Fewer experts from abroad may leave Singapore behind in these areas.

While the government has recently emphasized job security in its labor policy, it remains aware of the importance of skilled foreign workers. In December 2017, a government-affiliated website, posted a report titled, "Singapore needs foreigners - here's why" that concluded foreign workers do not take jobs from Singaporeans, but rather create them by bringing in needed skills and technology. 

Singapore has maintained a diverse and dynamic society since independence in 1965 by taking in large numbers of immigrants, as the U.S. has. Many of these newcomers have gone on to become citizens. The question of how Singaporeans and their foreign guests can get along better is key to maintaining both Singapore's economic growth and its social values.

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