04 November 2012

Labour Force to Grow 1.5 to 2 Per Cent?

Minister in the Prime Minister's Office Lim Swee Say warned on Thursday that Singapore's jobs would grow 2 per cent or less per annum in the coming years.

He attributed this to the Government's tightening of foreign labour inflow and the weak global demand for goods and services.

The following day, Acting Minister for Manpower Tan Chuan-Jin said job growth could moderate to 1.5 to 2 per cent.

The labour force in September 2012 was 3.31 million.  1.5 per cent is about 50,000 people and 2 per cent is about 66,000 people.

What are the implications?

Economic growth and productivity
With job growth of between 1.5 and 2.0 per cent, productivity growth has to be between 1.0 and 3.5 per cent in order to achieve the target GDP growth of 3 to 5 per cent per annum.  Labour productivity was 1.0 per cent in 2011, -2.3 per cent in Q1 2012 and -1.9 per cent in Q2 2012.

Perhaps tightening immigration and foreign labour inflow will force labour productivity higher.  Otherwise, the economy will grow very slowly, if at all.[1]

September 2012
In the first 9 months of 2012, the labour force grew by 83,800.

With "calibrated" immigration and foreign worker inflow, we can assume the number of people joining the labour force in Q4 2012 is similar to that in Q3 2012, and consequently the labour force will grow by about 110,000 this year.[2]

Note that 51,600 residents, including 46,100 citizens, were unemployed in September.

Data on the composition of the labour force in September 2012 were not available.  Let's look at June 2012 instead.

June 2012
The labour force in June 2012 was 3.29 million.

In the first 6 months of 2012,  the labour force (excluding foreign domestic workers) grew by 56,800.  Of these, 22,700 were residents.

77,700 residents, including 68,800 citizens, were unemployed in June.  (The seasonally adjusted numbers were almost unchanged from those at September 2012).

34,100 foreign workers (excluding FDWs) joined the labour force in H1 2012 — an annualised rate of 6.9 per cent, or 3 times as fast as the 2.2 per cent growth of the resident labour force.

Potential entrants
In the past three years (2009-2011), an average of 45,300 residents joined the labour force each year.

153,600 economically inactive[3] residents in June 2011 said they intended to look for a job within two years.  58 per cent preferred full-time employment.  72 per cent had previous work experience.  48 per cent had post-secondary education.  Not all will end up joining the labour force, however (at least from a manpower statistics perspective).

Conclusion
If the labour force grows 1.5 to 2.0 per cent annually and about 45,000 residents join the labour force annually, foreign workers (excluding FDWs) can only increase about 5,000 to 21,000 annually.  This is a drastic reduction from the estimated increase of about 65,000 to 70,000 this year.  Will it likely happen?

This has happened before.  In 2009, 41,800 residents joined the labour force while 8,900 non-residents (excluding FDWs) left the labour force.  But the period from Q4 2008 to Q3 2009 was an exceptional time, when the economy contracted sharply.

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Addendum

Part-timers
194,700 residents were employed part-time in June 2011.  While some were satisfied with their hours worked, 91,200 were willing and available to work additional hours. These time-related under-employed (also known as employed part-time for economic reasons) are considered to be employed but can and want to be "more employed".  The time-related under-employed account for 4.5 per cent of the resident labour force.  If they are better utilised, output and productivity may rise without increasing the labour force.

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Notes

1. This is simply an inference from the numbers, and is not intended to imply that labour force growth should continue at the rate of recent years.

2. In the past two years, the labour force growth in Q4 exceeded the average for the year.  However, this effect is not taken into account.

3. For a discussion on the concepts of labour force, employed, part-time employed, under-employed, unemployed, and not economically active, see here.

4. Ministry of Manpower Employment Situation Third Quarter 2012.

5. Ministry of Manpower Employment Situation Second Quarter 2012.

6. Ministry of Manpower Report on Labour Force in Singapore 2011.

7. Department of Statistics Population Trends 2012.

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