SINGAPORE: Three years ago, Mr Chan Chun Sing took over from Mr Lim Swee Say as Labour Chief while Mr Lim assumed the appointment of Minister for Manpower.
The changes did not surprise labour market analysts as Singapore’s tripartism works for Singapore from the perspective of the macro-economy.
Mr Lim with his vast experience in shaping labour relations brings a practical perspective to the Ministry of Manpower’s formulation of government policy and legislation regarding employment, workforce development and labour protection.
That Mr Chan has now taken over the Minister for Trade and Industry portfolio also makes sense as MOM, MTI and NTUC are three key agencies involved in Singapore’s system of tripartism.
The rotation of Cabinet ministers among these three portfolios is key to achieving Singapore’s goals of enhancing employment outcomes, including boosting our people’s competitiveness in attracting foreign investment.
PROGRESSION, ON TOP OF REPRESENTATION AND RELEVANCE
In his 2018 May Day rally statement, Mr Chan laid out NTUC’s new focus on helping workers find progression, on top of ensuring their protection and providing them with union membership privileges.
Some labour markets analysts are surprised by Mr Chan’s statement. First, because Mr Chan will soon leave NTUC, such a statement may create new expectations and put pressure on the new Labour Chief.
Second, an overt articulation of this new role of progression for workers for NTUC may lead every worker and employee to expect to progress in terms of pay, job responsibility and job title.
This may also put pressure on the Government and certainly on himself as the new Minister for Trade and Industry.
Why the emphasis on career progression and tripartism? Mr Chan may well be signalling to our workforce that we must be motivated to look beyond our current jobs given the pace of technological disruptions and economic restructuring, and focus on staying employable in near future.
He may also be sending a signal to companies and employers, where ensuring a smooth career progression also depends on whether companies are able to retain workers as their wages rise.
So what kinds of companies are able to provide progression for their workers?
GROW COMPANIES WITH HIGH LABOUR SURPLUS RATIOS
From my studies on competitiveness, I find that firms with a high labour surplus ratio are able to retain their workers as wages increase. Labour surplus ratio refers to the ratio of annual surplus over total labour cost, where a company’s annual surplus is the difference between total revenue and total operating cost.
Most companies’ main operating cost is labour which includes wages and other forms of remuneration including medical benefits.
While wages and non-wage costs have been rising in Singapore, and helping incomes keep up with costs of living, the trouble is when labour standards in developed countries including wage growth there spur wage growth here rather than productivity or innovation gains.
This would be a troubling situation precisely when some of our industries like those within the manufacturing sector do not have high surplus ratios.
The textile industry within Singapore’s manufacturing sector has a surplus ratio of only 11 per cent in 2015 for instance. This means that, once wages and other wage costs rise, the annual surplus can be negative for some firms.
Where many are price takers in product markets and wage takers in labour markets, if wage costs rise, and they are unable to raise product prices to increase total revenue, their annual surpluses will be impacted. In some cases, some firms may face closure, with many of their workers forced to look for other jobs.
On the other hand, industries such as pharmaceuticals have an annual labour surplus 13 times more than their total wage costs. Any increase in wage costs would not affect the financial position of this industry. The jobs of their employees are secure, which also allows them the capital to provide for some form of career development and progression.
Interestingly, industries with high labour surplus ratios, including chemicals and electronics, also have higher labour costs per worker – where wages are higher compared to many other industries.
This is what Singapore wants to do in the name of implementing and buying into the ethos of the Industry Transformation Maps. If we succeed in industry upgrading, in driving a culture of pervasive innovation, then companies can move up the value chain to earn a higher labour surplus, and hopefully our workers can have job progression.
FOREIGN FIRMS STAND BETTER CHANCES OF GIVING WORKERS PROGRESSION
Another interesting finding in the course of my research is that local firms within the manufacturing sector have low surplus ratios compared to firms with capital ownership from foreign countries.
In fact, firms operating in Singapore with capital ownership from the US have the highest surplus of five times the total labour cost, based on figures from 2015. Workers in these firms are protected from rising wage costs.
In terms of total labour cost per worker, firms with capital ownership from UK and France top the list with almost S$100,000 per worker annually.
The implication is this - if we want to provide lifetime jobs to Singapore workers with progression consistent with Mr Chan’s vision, we need to continue to attract quality investment from developed countries. So government policy must continue to focus on attracting foreign companies here while ensuring that they also contribute to the creation of good jobs for Singaporeans.
Another conclusion from my research is that we have no choice but to upgrade our manufacturing sector, which is why the adoption of advanced manufacturing technologies including robotics and artificial intelligence will be important in spurring the growth of good jobs.
So government policy must continue to spur this on, and companies must upgrade themselves.
This need is even more urgent now as many developing cities are catching up with us in terms of the costs of doing business in Singapore (whether logistical, administrative or after including government incentives) and as they move up the logistic supply chain.
From this broader, national perspective, Mr Chan’s new role for NTUC makes sense.
NTUC MUST WORK WITH OTHER AGENCIES
Another point raised by Mr Chan is that NTUC must work with MTI, MOM and MOE to ensure people are prepared for jobs of tomorrow. NTUC alone cannot protect workers from rising wage costs as industry transformation is a national project.
In this context, NTUC must continue to work with MOM and Singapore National Employers Federation (SNEF) to provide training for workers. NTUC must also continue to engage bodies such as the Chinese Development Assistant Council (CDAC) to persuade workers to take part in training.
Mr Chan, being the minister for MTI, would be in the best position to see how this new goal of tripartism works to ensure a win-win outcome for workers, companies and the Singapore economy.
However, workers must also take matters into their own hands. Jobs will be lost if workers do not take the initiative to learn and re-learn.
Tripartite partners must ensure that workers are given plenty of training opportunities and encourage workers to take advantage of existing schemes and programmes such as SkillFuture to upgrade their skills.
If anything else, Mr Chan’s remarks were a rallying call to action – to NTUC, government agencies, companies and workers. Job progression must be earned in this era of worker empowerment for sure, but it must also be a new mantra that Singapore collectively strives towards.
Chew Soon Beng is professor of economics and industrial relations at Nanyang Technological University.