Commentary: Raise salaries to attract more locals to hospitality and F&B? It’s not so simple

Take the construction industry, for instance. When COVID-19 first struck in 2020, border restrictions led to a massive labour shortage in the sector, sparking concerns about meeting project deadlines.

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

In the long run, the manpower shortage in the hospitality sector should likewise clear and employers can continue hiring, subject to prevailing quota limits on foreign workers.

That said, uncertainty lingers. On the heels of Singapore finding two imported cases of the new Omicron subvariant BA.2.75, there is no knowing whether the next variant will be pose a serious public health risk. If outbreaks affect the home countries of our foreign workers, then inflows of foreign labour may be more intermittent.

Some argue that government regulations on foreign manpower have exacerbated the situation. In the services sector, only up to 35 per cent of a company’s total workforce can be foreign workers on work permits and S passes.

The Singapore Business Federation said in May that foreign manpower supplements are necessary to meet the demand for services, as the number of willing local job seekers dwindles. It noted that the current classification of services, which includes sectors finance and insurance, does not reflect labour market dynamics in other sectors like waste management and cleaning.

A CHICKEN AND EGG PROBLEM

Should authorities raise quotas on foreign manpower?

Given the temporary nature of the manpower crunch, I do not think so. Indeed, all this may be a chicken and egg problem. Allowing companies to have freer access to foreign labour would serve to depress the wages of these jobs, making them even more unattractive to local workers.

Companies will find it harder to employ locals and will yet again seek freer access to foreign labour. The cycle feeds itself.

For a long time, Singapore relied heavily on foreign manpower to drive our economy, with the services sector being one of the most reliant. The maximum percentage of foreign workers allowed in service sector companies in 2011 was 50 per cent.