PAPER NO. 3/2005 Recent Trends in Employment Creation

PAPER NO. 3/2005 Recent Trends in Employment Creation Manpower Research and Statistics Department Singapore October 2005

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EXECUTIVE SUMMARY 1 The economic upswing over the past 18 months has benefited workers with job creation in the first half of 2005 at its strongest in four and half years, adding to the robust gains seen in 2004. This has brought total employment in June 2005 to an all-time high. The majority of jobs created over this period have also gone to local workers. 2 In the first six months of 2005, employment gains numbered 49,500, double the 24,600 over the same period in 2004. This pace of job creation is the highest recorded since the economic boom of 2000. Together with strong employment expansion of 71,400 in 2004, some 120,900 jobs were created over the last one and half years, far exceeding the losses totaling 35,900 from 2001 to 2003. By June 2005, there were a record 2,256,100 persons in employment. This is 210,000 more people employed than at the start of 1998. So despite the volatile economic conditions in recent years, brought about by a series of economic shocks amid structural challenges in a highly competitive global economy, our economy has still succeeded in creating jobs. 3 The bulk of the jobs created have been going to locals. In the last one and half years, local employment alone rose by 78,400, contributing 65% of the total employment created over this period. Overall, local employment has risen by 186,400 since the start of 1998. On the other hand, foreign employment has increased by 23,600 over the same period, with the bulk of the growth occurring only during the economic upturn in the last one and half years and in 2000. During the difficult years of 2001 to 2003, foreign employment contracted while local employment continued to grow. At the overall level, foreigners have therefore acted as a buffer in the labour market. While supporting economic growth during the upturn, foreigners had borne the brunt of the job losses suffered during the economic downturn. 4 The jobs created in recent years have been of good quality driven mainly by gains in professionals, managers, executives and technicians (PMETs). This reflects the restructuring in the economy towards higher value-added and knowledge-intensive activities as low-end ones shift out of Singapore to capitalize on cheaper costs in the emerging economies. In contrast, job losses were observed for plant & machine operators and production craftsmen as manufacturers continue to shift their operations overseas to take advantage of the cheaper labour and business costs. As a result of the shift towards higher quality jobs, the share of PMETs among the locals employed has been rising steadily over the years, increasing from 41% in 1998 to 48% in 2004. In contrast, the share of production craftsmen and plant & machine operators declined from 22% to 17% of total local employment. Employment shares of clerical workers, sales & service workers and cleaners & labourers were relatively stable over the period studied. 5 Encouraged by increased job opportunities brought about by the economic upturn, more people have entered the labour force to seek work. Consequently, while employment creation has been very strong, this has not led to a significant fall in unemployment. In June 2005, the overall seasonally adjusted unemployment rate was 3.4%, which is only slightly lower than 3.6% of a year ago. This partly reflects the skills mismatch between lower educated job seekers and the new jobs created. Over time, as job seekers pick up new skills in demand and jobs are redesigned to attract lower skilled Singaporeans, more can look forward to securing employment so long as the economy continues to grow and create jobs.

Recent Trends in Employment Creation 1 Introduction 1.1 The Singapore economy continued to grow healthily this year, on the back of a strong rebound in 2004 from SARs-hit 2003. Advance Estimates indicate that the economy grew by a strong 6.0% in 3Q 2005 (year on year), following growth of 5.4% in 2Q2005 and 2.7% in 1Q 2005. The economic upswing has benefited workers with job creation in the first half of 2005 at its strongest in four and half years, adding to the robust gains seen in 2004. The majority of jobs created over this period have gone to local workers. 1.2 This paper analyzes the trends in employment and quality of the jobs created in recent years. It also examines how the labour supply has evolved amid the improving economic conditions. The analysis draws on data compiled from administrative records as well as the Labour Force Survey. 2 Employment 2.1 In the first six months of 2005, employment gains numbered 49,500, double the 24,600 over the same period in 2004. This pace of job creation is the highest recorded since the economic boom of 2000. The growth was broad-based supported by improvements in all the major sectors. Services and manufacturing sectors grew strongly, registering employment gains of 29,200 and 14,800 respectively. Construction added 4,900 workers in the first half in a turnaround from the losses recorded from 2001 to 2004. 2.2 Together with strong employment expansion of 71,400 in 2004, some 120,900 jobs were created over the last one and half years, far exceeding the losses totaling 35,900 from 2001 to 2003. By June 2005, there were a record 2,256,100 persons in employment. This is 210,000 more people employed than at the start of 1998. So despite the volatile economic conditions in recent years, brought about by a series of economic shocks amid structural challenges in a highly competitive global economy, our economy has still succeeded in creating jobs. 2

Chart 1: Cumulative Employment Change by Sector (January 1998 June 2005) 350 Number ( 000) 300 Services 250 200 Total 150 100 50 0 Manufacturing -50-100 Construction -150 1998 1999 2000 2001 2002 2003 2004 2005 Table 1: Total Employment by Industry In Thousands Industry Employment Change 1998 1999 2000 2001 2002 2003 2004 1H 2005 Employment Level as at Jun 2005 Total -23.4 39.9 108.5-0.1-22.9-12.9 71.4 49.5 2,256.1 Manufacturing -27.6 4.4 25.8-15.2-5.3-4.9 27.2 14.8 462.0 Construction -4.7-18.0 1.1-20.5-34.3-17.5-9.1 4.9 231.1 Services 8.6 53.2 80.5 37.5 16.5 8.0 54.7 29.2 1,550.4 Others 0.2 0.3 1.1-1.9 0.2 1.5-1.4 0.6 12.5 Notes : (1) Others includes Agriculture, Fishing, Quarrying and Utilities. (2) Data may not add up to the total due to rounding. " - ": nil or negligible (3) Explanatory notes on employment statistics are in Appendix I. Source: Administrative Records 3

2.3 The bulk of the jobs created have been going to locals. In the last one and half years, local employment alone rose by 78,400, contributing 65% of the total employment created over this period. Since the start of 1998, local employment has increased nearly every year, rising cumulatively by 186,400. On the other hand, foreign employment has increased cumulatively by 23,600 over the same period, with the bulk of the growth occurring only during the economic upturn in the last one and half years and in 2000. During the difficult years of 2001 to 2003, foreign employment contracted while local employment continued to grow. At the overall level, foreigners have therefore acted as a buffer in the labour market. While supporting economic growth during the upturn, foreigners had borne the brunt of the job losses suffered during the economic downturn. Chart 2: Cumulative Employment Change by Residential Status (January 1998 June 2005) Number ( 000) 250 200 Total Local 150 100 50 Foreign 0-50 -100 1998 1999 2000 2001 2002 2003 2004 2005 2.4 At the industry level, the services sector has been the main source of jobs created for locals. Cumulatively, the last 18 months saw local employment in services rise by 65,300 with manufacturing and construction adding another 13,900 and 400 locals respectively to their workforce. In contrast, foreign employment gains were concentrated in manufacturing which added 28,100 foreigners over the last 18 months or 66% of the total foreign gains over the same period especially in the marine industry which has been experiencing double-digit growth in demand for building and repair of ships and oil rigs. In the first half of this year, construction for the first time also took in more foreigners after persistent cutbacks since the onset of the Asian economic crisis in 1997/1998. 4

Table 2: Employment by Residential Status and Industry In Thousands Industry Employment Change 1998 1999 2000 2001 2002 2003 2004 1H 2005 Employment Level as at Jun 2005 Local Total -27.7 41.7 58.4 1.3 19.4 14.9 49.9 28.5 1,613.7 Manufacturing -19.9 0.4 4.8-11.0-4.1-1.1 7.5 6.4 272.6 Construction -3.0 1.6 1.7-3.4-3.4 1.4-1.6 2.0 95.5 Services -5.2 39.5 50.8 17.8 26.9 14.9 45.7 19.6 1,236.4 Others 0.3 0.2 1.1-2.1 - -0.2-1.7 0.4 9.2 Foreign Total 4.3-1.8 50.1-1.4-42.3-27.9 21.5 21.0 642.4 Manufacturing -7.7 4.0 21.0-4.2-1.2-3.8 19.7 8.4 189.4 Construction -1.7-19.6-0.6-17.1-30.9-18.8-7.5 2.9 135.7 Services 13.8 13.7 29.7 19.7-10.3-7.0 9.0 9.6 314.0 Others -0.1 0.1 0.1 0.2 0.2 1.7 0.3 0.2 3.2 Notes : (1) Others includes Agriculture, Fishing, Quarrying and Utilities. (2) Data may not add up to the total due to rounding. " - ": nil or negligible (3) Explanatory notes on employment statistics are in Appendix I. Source: Administrative records 2.5 As at June 2005, there were 1,613,700 locals and 642,400 foreigners in employment. Foreigners as a share of total employment stood at 28%, down from 30% at the start of 1998. 5

3 Quality of Employment Creation 3.1 Job growth in recent years has been driven mainly by gains in high-paying professionals, managers, executives and technicians (PMETs) as the economy shifts increasingly towards higher value-added and knowledge-intensive activities both in the manufacturing and services sectors. Data from the Labour Force Survey 1 show that PMETs accounted for nearly all the employment gains among locals after the Asian financial crisis. In particular, professional jobs accounted for the largest share (44%) of the local employment gains from 1998 to 2004, mainly from community, social & personal services, business and financial services, wholesale & retail trade and manufacturing. Associate professionals and technicians (39%) made up the next largest group, followed by managers (31%). These are high-paying jobs, commanding median wages of $5,600 for managers, $4,000 for professionals and $2,700 for associate professionals & technicians in 2004. Table 3: Share of Local Employment Change and Wages by Occupation Occupation Share of Employment Change, 1998-2004 (%) Median Gross Wage, 2004 ($) Managers 31.0 5,624 Professionals 44.2 3,950 Associate Professionals and Technicians 39.1 2,650 Clerical Workers 3.6 1,807 Sales and Service Workers 2 19.2 1,681 Production Craftsmen -11.0 2,052 Plant and Machine Operators -27.2 1,760 Cleaners and Labourers 1.3 1,120 Total 100.0 - Source: Labour Force Survey and Occupational Wage Survey Note: Figures may not add up to 100 due to rounding. 3.2 In contrast, job losses were observed for plant & machine operators and production craftsmen as manufacturers continue to shift their operations overseas to take advantage of 1 Based on Labour Force Survey for June 1997 and June 2004, excluding NSmen and contributing family workers. Data for 2005 are not available yet. Breakdown of employment by occupations are available only from the Labour Force Survey. 6

the cheaper labour and business costs. Consequently, their contributions to employment gains were negative. On the other hand, clerical workers and cleaners & labourers among the locals employed increased marginally while sales & services workers 2 chalked up creditable gains, mainly in hotels & restaurants, business services and community, social & personal services. 3.3 As a result of the shift towards higher quality jobs, the share of PMETs among the locals employed has been rising steadily over the years, increasing from 41% in 1998 to 48% in 2004. In contrast, the share of production craftsmen and plant & machine operators declined from 22% to 17% of total local employment. Employment shares of clerical workers, sales & service workers and cleaners & labourers were relatively stable over the period studied. Chart 3: Share of Resident Employed by Occupation 6.7 Cleaners and Labourers 6.2 21.9% 14.3 7.6 Plant and Machine Operators Production Craftsmen 10.8 6.1 16.9% 13.6 Sales and Service Workers 14.1 29.5 % 30.0 % 16.4 Clerical Workers 15.4 18.1 Associate Professionals and Technicians 19.9 41.4% 10.2 Professionals 13.0 47.5% 13.1 14.6 Managers 1998 2004 Source: Labour Force Survey Note: To ensure comparability of data, food and drink stall assistant was re-classified under sales and services workers (based on SSOC 1990), instead of cleaners and labourers (based on SSOC 2000). 2 To ensure comparability of data, food and drink stall assistant was re-classified under sales and services workers (based on SSOC 1990), instead of cleaners and labourers (based on SSOC 2000). 7

4 Labour Supply 4.1 Encouraged by the recent improvement in job prospects, more people have been entering the labour market increasing the manpower supply. Chart 4 below shows the correlation between the annual change in labour supply 3 over 1993 to 2005 and GDP growth. Chart 4: Annual Change in Resident Labour Supply 1993 to 2005 (Jun-to-Jun) Labour Supply Change ( 000) 80 70 60 50 40 30 20 10, GDP Growth (%) 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0-2.0 0 93 94 95 96 97 98 99 00 01 02 03 04 05 Labour Supply Change 27.3 36.8 33.0 31.1 42.6 20.3 33.2 67.4 12.0 27.0 14.7 38.7 55.9 GDP Growth 12.3 11.4 8.0 8.2 8.6-0.8 6.8 9.6-2.0 3.2 1.4 8.4-4.0 4.2 The increase in resident labour supply averaged 33,900 a year over the period 1993 to 2005. Although the annual increase had been quite stable during the period of high GDP growth from 1993 to 1996, this has not been the case during the volatile economic conditions of recent years. 4.3 The annual increase in resident labour supply was substantially below average during the economic slowdown in 1998 (20,300) and 2001 to 2003 (12,000 to 27,000). However, the expected labour inflows that did not materialize during these periods returned when the economy picked up, as evident in 2000 when labour supply increased by as much as 67,400, and in 2004 and 2005 which saw higher-than-average increases of 38,700 and 3 Labour supply is computed based on a combination of employment data from administrative sources and unemployed data from the Labour Force Survey (LFS). This is a more reliable source of data on changes in labour supply than the LFS per se which suffers from sampling errors. We use June-on-June annual change in labour supply so as to capture the recent changes in the first half of 2005. However, GDP growth data presented are for calendar years. 8

55,900 respectively. This is because in periods of strong growth, some of the economically inactive e.g. discouraged workers, young retirees, housewives and students would enter or rejoin the labour market when jobs are easier to find. Conversely, during an economic downturn those who find it hard to find jobs and/or can afford to do so would exit the job market while some may even leave Singapore for overseas jobs. Consequently, our net inflow to the labour supply would be reduced during these periods. 4.4 These changes in labour supply explain why in periods when employment creation is strong as in the recent one and a half years, unemployment has yet to fall significantly. In June 2005, the overall seasonally adjusted unemployment was 3.4%, which is only slightly lower than 3.6% of a year ago. In short, other than changes in demand, unemployment can also be affected by changes in inflows to the labour force. Hence, despite an increase in jobs created, unemployment may not show a decline due to larger-than-usual inflows to the labour force. 5 Concluding Remarks 5.1 Employment creation over the last one and half years has been robust driven by the strong economic performance during the period. Total employment in June 2005 is at an alltime high. Jobs created are also of good quality with demand skewed towards the higher skilled workers. This reflects the restructuring in the economy towards higher value-added and knowledge-intensive activities as low-end ones shift out of Singapore to capitalize on cheaper costs in the emerging economies. 5.2 Encouraged by increased job opportunities brought about by the economic upturn, more people have entered the labour force to seek work. Consequently, while employment creation has been very strong, this has not led to a significant fall in unemployment. This partly reflects the skills mismatch between lower educated job seekers and the new jobs created. Over time, as job seekers pick up new skills in demand and jobs are redesigned to attract lower skilled Singaporeans, more can look forward to securing employment so long as the economy continues to grow and create jobs. MANPOWER RESEARCH AND STATISTICS DEPARTMENT MINISTRY OF MANPOWER OCTOBER 2005 9

Appendix I EXPLANATORY NOTES Employment Source Administrative records, unless otherwise specified. The self-employed component is estimated from the Labour Force Survey. Coverage The employment data comprises all persons in employment i.e. employees and the self employed. However, it excludes males who are serving their 2-year full-time national service liability in the Singapore Armed Forces, Police and Civil Defence Forces. Data on the number of local employees are compiled from the Central Provident Fund (CPF) Board s administrative records of active contributors defined as local employees who have at least one CPF contribution paid for him/her. A local employee is any Singaporean or Permanent Resident of Singapore who is employed by an employer under a contract of service or other agreement entered into in Singapore. Every local employee and his/her employer are required to make monthly contributions to the CPF which is a compulsory savings scheme to provide workers financial security in old age and helps meet the needs of healthcare, home-ownership, family protection, and asset enhancement. Data on foreigners working in Singapore are compiled from the stock of foreigners on valid work passes issued by the Ministry of Manpower. Foreigners can work in Singapore only if they have valid work passes issued by the Ministry of Manpower, upon application by their employers. The number of self-employed persons is estimated from the Labour Force Survey. The self-employed comprises persons aged 15 years and over who performed some work for profit or family gain, in cash or in kind. Concepts and Definitions Employment change refers to the difference in the employment level at the end of the reference period compared with the end of the preceding period. Uses and Limitations This data series allows users to identify individual industries where employment is growing or stagnating. An analysis of the data over time also helps in understanding the impact of economic cyclical and structural changes on the demand for workers. Detailed data are published in the quarterly Labour Market Report. The change in employment over time is the net result of increases and decreases in employment i.e. net of inflows and outflows of workers. Users should not mistake an increase in employment as gross job creation. 10

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