Government needs to send clear signal to companies which choose not to restructure
Acting Manpower Minister, Tan Chuan-Jin says the ministry is aware of the concerns that Foreign Worker Levy (FWL) increases could have an impact on domestic inflation.
In a written reply to a question in Parliament, he however stressed that the government needs to send a clear signal to companies that do not choose to restructure and continue to rely heavily on Foreign Workers for their business operations.
Mr Tan says the Government will also continue to provide assistance to companies that are motivated to embark on productivity improvements.
And it has already introduced several measures to help these companies, such as through the Innovation and Capability Voucher, and the Productivity and Innovation Credit.
These measures help to moderate some of the cost pressures that companies face, and ease their transition towards raising overall productivity.
Mr Tan adds that raising the cost of foreign labour will encourage companies to consider investing in technology or equipment, which they would be more hesitant to pursue, if the cost of getting more workers is cheaper than the cost of capital.
Mr Tan said, "Singapore has reached a stage where we need to move away from a labour-intensive mode of growth which is not sustainable. There are several factors that we considered in adjusting Foreign Worker levy rates; whether productivity has improved, the rate of Foreign Worker growth, and local wages. Sectors that continue to rely heavily on Foreign Workers, have stagnating wages for locals, or with the greatest scope for productivity improvements, have been subjected to higher Foreign Worker Levy increases."
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