Diagnosing the stress points in Singapore's labour market

Singapore scored very highly for wage pressure in high-skill industries and talent mismatch in a global assessment of 31 skilled labour markets.

The 2015 Hays Global Skills Index, produced in collaboration with Oxford Economics, scores Singapore's labour market against seven indicators, or points of potential pressure. For each indicator Singapore received a score out of 10.

A score close to 0 indicates little to no pressure, while a score close to 10 shows severe pressure. The Index shows that in Singapore, pressure on our labour market comes from five of these indicators.

The first is 'wage pressure in high-skill industries', for which Singapore received a very high 8.4. This shows that wages in high-skill industries are rising much quicker than those in low-skill industries relative to the past.

Sector-specific skill shortages, such as in engineering and technology, have emerged and employers are competing for top talent.

Additional pressure comes from 'wage pressure in high-skill occupations' for which Singapore received a score of 5.9. Wages for highly-skilled candidates such as managers, senior officials, or skilled trades are rising faster than for low-skilled candidates such as process, plant and machines operatives, and administration workers.

The high demand but short supply of talent for highly-skilled occupations is leading to wage pressure for suitable candidates.

Singapore's score for 'overall wage pressure' rose significantly from 1.3 last year to 5.8 this year. This huge increase shows that wages are rising much faster than we've historically seen. This indicates overall labour market tightness as employers attempt to remain competitive.

Singapore's standing as a regional hub for multinationals and the sheer number of construction and infrastructure projects bolsters a highly active recruitment market. But Singapore faces a significant talent gap thanks to growing technical skill shortages.

Government initiatives that endorse local Singaporean hires for middle-income jobs have further exacerbated the shortage of talented locals, as the huge increase in overall wage pressure shows.

Our advice to employers therefore is to use a range of innovative attraction strategies, not just salary increases, to keep recruitment plans intact.

Another indicator or pressure point is 'talent mismatch', for which Singapore received a high score of 6. This shows that available talent often doesn't have the skills employers want, leading to both higher rates of vacancies and unemployment.

Finally, Singapore received a score of 5.5 for 'labour market participation', suggesting that most of our workforce is already utilised and the available talent pool therefore can't be increased in great numbers. In other words, we can't relieve the skills shortage by raising the employee participation rate.

Given all these pressure points, it's unsurprising that the overall Index score now stands at 4.7, a 0.6 increase on the year.

For the remaining two indicators, the Hays Global Skills Index ranked Singapore very positively. Our education system is very well equipped to meet future talent needs (we received 0.7 for 'education flexibility') and our labour market legislation is very flexible (0.6 for 'labour market flexibility'). These are positives for our labour market since they indicate low pressure points.