Why Singapore’s labour market remains a question mark in 2017
There were many cases of mass layoffs in Singapore this year, which included the likes of Keppel, SembCorp Marine, and Standard Chartered Bank, and HRM Asia covered them all.
In October this year, SembCorp Marine said it had slashed 8,000 jobs "throughout 2015 till to date", while Keppel revealed it axed some 660 employees between June and September.
It was not only the oil and gas, marine, and banking and finance sectors that bore the brunt of the economic downturn.
The hospitality sector was another industry that counts among its victims. Resorts World Sentosa, for example, shed 400 jobs earlier in June after reporting a second consecutive quarter of lower year-on-year revenue.
The latest retrenchment numbers from Singapore’s Ministry of Manpower confirmed the job market is at its worst since 2009 in the third quarter of 2016. Meanwhile, total employment for the same period contracted for the first time since the start of 2015, by nearly 3,000 jobs.
But some recent salary forecast surveys indicate that things are still looking bright for at least some Singaporean employees.
Despite the negative trends this year, a new global Korn Ferry Hay Group study revealed that more than 75% of local employers are still likely to implement salary increments in the New Year.
Real wage growth is also expected to hit 4.7% next year, even after inflation has been factored in. This figure is comfortably higher than 2016’s forecast of 3.7%.
Such an increase must also be good news for job-seekers, right? Not necessarily.
The natural assumption is that if employers are increasing their salary budgets next year instead of tightening their belts, then the overall labour market should be picking up.
However, the reality is a lot more complex than that, with several factors to consider.
1. Contrasting hiring outlook findings for 2017
ManpowerGroup’s newest Employment Outlook Survey revealed that employers remain cautious about their hiring plans next year.
Of the 620 employers surveyed, 15% expected to increase headcount, 7% expected a decrease in hiring plans and 71% foresaw no change. But once the data was adjusted for seasonal variation, the employment outlook stood at a relatively soft +9%.
Compared to 2016, hiring intentions actually contracted by one percentage point.
However, a similar survey from Michael Page found that 36% of companies in Singapore were planning to increase headcount in 2017, which was considerably more optimistic than the sentiment recorded by ManpowerGroup.
Michael Page’s research found that despite predictions the employment landscape would remain largely unchanged from 2016, market activity in Singapore was still expected to see a slight uptick. This was largely due to the Government's continued investment in the three key industries of digital, information technology and healthcare.
As a result, employers across these three sectors are likely to continue hiring actively, the research found.
2. Employers are hiring with precision, not aggressively
Further complicating the matter is the lack of skilled talent in the Singapore workforce.
According to the Monetary Authority of Singapore’s biannual Macroeconomic Review, the gap between jobs available and skills in the domestic labour market has been widening since 2012.
In this age of digital disruption, employers are now seeking talent who possess technical skills in areas like software engineering and web development.
In fact, LinkedIn’s Top Skills 2016 ranking found that cloud computing, search engine optimisation and marketing, as well as algorithm design were among the ten most-sought after skills in 2016.
But with a limited pool of skilled workers to tap into, employers will face fierce competition in their bid for this niche talent. Thus, hiring the right talent, rather than hiring aggressively, will be a key focus area in 2017.
Furthermore, many employers also expressed that rather than fighting for a small pool of specialised talent, they would rather equip their existing workforce with the necessary tools and skills by sending employees for technical training and development programmes.
3. Employers are focusing on retention, not recruitment
Employers are also increasing their salary budgets not because they are looking to ramp up hiring activities, but as a means of keeping the talent they already have.
Nearly 60% of companies in the Michael Page survey agreed that salary increases were the most important factor in retaining Singaporean talent.
Employers are prepared to provide pay increments because multiple studies have shown that investing more in retaining existing employees will still prove to be a more cost-effective strategy than replacing talent that leaves.
According to one US study, the replacement cost for a mid-level manager earning between US$30,000 to US$50,000 per annum is 20% of that annual salary.
Mercer’s latest Market Pulse surveys also found that voluntary turnover rates throughout Asia, including Singapore, continue to increase year-on-year.
Again, these rising numbers represent a challenge in replacement costs in the form of higher salaries for new joiners, one-off recruitment costs, and lost production, all of which adversely impacts overall cost of operations and margins that are already under close scrutiny.
With turnovers rising, increasing pay as a retention strategy remains key to the banking industry in particular, according to Puneet Swani, Partner and Growth Markets Talent Leader at Mercer.
“Changing business models and restructuring in the financial services has meant that the sector may not be hiring at rates seen in the last three years, but we continue to see highest level of pay increases as retaining high-performing talent has become even more critical,” said Swani.
4. Employees themselves are pessimistic
Employees themselves are bracing themselves for the economic downturn.
More than 60% of Singapore workers in Randstad’s latest Workmonitor report highlighted their concern and expectations of further economic deterioration.
“Retrenchments and hiring freezes as well as news of major global issues, such as Brexit and the US elections, have kept employees taking a more cautionary stance with regards to their expectations for the coming year,” noted Michael Smith, Managing Director for Randstad Singapore, Hong Kong and Malaysia.
He added that with organisations taking a “wait-and-see” approach, it was unclear if or how employee sentiment would be further affected.
2017: The year of skill development
Sure, the varying findings about hiring intentions are dizzying, but one thing stands clear: In 2017, technical skills will have great currency as businesses continue to be disrupted by technological advancements and employers recognise the importance of developing their workforce.
It is no wonder the Singapore Government continues to regularly remind Singaporeans about the importance of upgrading their skillsets through state-driven initiatives like the SkillsFuture Credit scheme.
With 2016 being one of the worst economic years in recent memory, 2017 cannot come soon enough. Perhaps it’s time to start enrolling in a programming course (or two) as a way of ringing in the New Year, one HR leader suggested to HRM Asia, only half-jokingly.