Comment: Increase salaries to attract more locals in the hotel and restaurant industry? It is not so simple


Take the construction industry, for example. When COVID-19 first hit in 2020, border restrictions led to massive labor shortages in the sector, raising concerns about meeting project deadlines.

Fast forward two years later and the sector is recovering, with levels of foreign workers reaching more than 90% of pre-pandemic levels, according to Minister of Manpower Tan See Leng in an interview with CNBC in June.

Eventually, the labor shortage in the hospitality sector should also ease and employers can continue hiring, subject to the quotas in force on foreign workers.

That said, uncertainty persists. In the wake of Singapore’s discovery of two imported cases of Omicron’s new BA.2.75 sub-variant, it is unclear whether the next variant will pose a serious risk to public health. If epidemics affect the countries of origin of our foreign workers, inflows of foreign labor may be more intermittent.

Some argue that government regulations on foreign labor have exacerbated the situation. In the service sector, only up to 35% of a company’s total workforce may be foreign workers with work permits and S pass.

The Federation of Singapore Businesses said in May that additional foreign labor was needed to meet demand for services as the number of volunteer local job seekers dwindled. He noted that the current classification of services, which includes the finance and insurance sectors, does not reflect labor market dynamics in other sectors such as waste management and cleaning.


Should the authorities increase the quotas on foreign labour?

Given the temporary nature of the labor shortage, I don’t think so. Indeed, this can all be a chicken and egg problem. Allowing companies to have freer access to foreign labor would have the effect of driving down the wages of these jobs, making them even more unattractive to local workers.

Businesses will find it harder to employ locals and will once again seek freer access to foreign labour. The cycle feeds.

For a long time, Singapore has relied heavily on foreign labor to drive its economy, with the service sector being one of the most dependent. The maximum percentage of foreign workers allowed in companies in the service sector in 2011 was 50%.


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