Singapore is making life tougher for global talent

It is employment pass renewal season in Singapore, and the new regime is dominating the conversation at after-work cocktails on Fridays. From September, overseas employees on a work visa will need to fulfil the city-state's new points-based system, and earn a minimum salary threshold to stay in their jobs. While this mirrors what happens in other countries, it risks turning foreign companies away, and could tarnish the nation's image as a global business hub.

The program was announced in 2022 in a bid to promote fair hiring practices. Points are awarded for how a candidate's salary compares to local peers, along with their education and skills, and whether their nationality improves the diversity of the firm. It puts the onus on employers to prove why they need to hire foreigners.

The government knows that catering to the local population on jobs is important. In 2020, resentment over foreign workers led to the worst showing since independence for the ruling People's Action Party. It is undergoing the biggest leadership transition in its history, and elections are expected by the end of the year. The issue is a vote winner, a convenient political tactic that both the opposition and ruling party raise whenever polls come around.

Safeguarding jobs for citizens is not unusual. Many countries — including the UK and Canada — do this, to strike a balance between the foreign and local workforce. For many sectors, it makes sense to hire Singaporeans: The population is extremely well-educated and regularly scores among the highest in the world in math, reading and science. It has historically struggled with instilling a culture of creativity in the exam-driven curriculum, but there are efforts to change that. Still, for a government that trumpets an open and free economy, the perception that it's restricting jobs for foreigners, after a history of being relatively easy, could do more harm than good.

The new rules are more transparent, says Hsien-Hsien Lei, chief executive officer of the American Chamber of Commerce in Singapore, though she cautions that they have made it harder for US firms to find suitable candidates. "At times we do feel that the talent in Singapore may not be ready for senior level jobs," she told me. "Those require different levels of exposure and specific skill sets. It's a small country, with a limited and shrinking workforce."

Data from AmCham's 2023 Manpower survey supports this. The new framework provides predictability, certainty and transparency, the survey notes, but companies have expressed lower confidence and increased uncertainty about whether it will allow them to access the talent they need.

There are other factors to consider. The new regulations could have an impact on companies making the decision to set up their regional headquarters here, recruitment firms have told me. Singapore is also no longer a place where foreign talent can start or develop their careers, the way it used to be about a decade ago. Entry-level and the middle of the market jobs are being reserved for the resident population.

For many locals, this is a long overdue adjustment. Some have told me they have felt like second-class citizens in their own country, passed over for jobs they know they are capable of doing. There has been rising frustration with what is seen as a preference to recruit foreigners. Many want the government to implement policies that encourage hiring Singaporeans and see the new guidelines as way to address this discontent and growing income disparity.

The changes seem to be working. In the first quarter of 2024, employment growth for residents was higher than in previous quarters. Meanwhile, non-resident employment contracted for the first time since the third quarter of 2021, driven mainly by jobs in construction and manufacturing sectors.

It is a tricky balance for the government to get right — keeping the economy open, yet also helping the local workforce achieve their career aspirations. The Ministry of Manpower, in an emailed statement, pointed to the number of work permits that are available for foreign staff, including the Overseas Networks and Expertise (ONE) Pass, created for what it calls top talent. It also notes the number of people granted the permission to work has continued to grow, as has overseas investment and the number of foreign firms looking to set up regional headquarters.

The reality is that the government's focus on foreign talent will soon fade. It is an easy fix for a ruling party that has enjoyed enviable political support over almost six decades since Singapore's independence. Citizens could instead ask that their leaders address the higher cost of living, income inequality and a brutally competitive education system. The bogeyman of overseas talent may well win votes, but in longer term it won't fix fundamental issues within Singaporean society.

Disclaimer: This article first appeared on Bloomberg, and is published by a special syndication arrangement.