Why Are Singaporean PMETs Losing Their Jobs? Here’s Why.

November 27, 2013

On May 4 this year (2013), Prime Minister Lee Hsien Loong was quoted to have said that, “Polytechnic students have many good options after graduating and need not just aim for a university degree.”

A few days later, National Development Minister Khaw Boon Wan echoed Lee’s statement by saying that, “If they cannot find jobs, what is the point? You own a degree, but so what? That you can’t eat it. If that cannot give you a good life, a good job, it is meaningless.” 

This was followed by Minister for Social and Family Development Chan Chun Sing , who said that, “It’s not the degree or the diploma… that is most important… What matters most is the training of the mind and the ability to grasp an issue, ask the correct questions, dissect the problem and find the solutions.”

Do you know why the ministers are saying these?

What Khaw said is the most telling and pointed – he had said, “What you do not want is to create huge graduate unemployment.”

There is something that the government is not telling you, but it’s all summed up in that one sentence by Khaw.

Take a look at the unemployment statistics. Do you know that for Singaporeans with primary education, the unemployment rate has been steadily going down (Chart 1)?

Chart 1: World Development Indicators

For Singaporeans with secondary education, the unemployment rate had remained at a consistent low – and actually the lowest among all the high-income countries (Chart 2).

Chart 2: World Development Indicators

But take a look at Singaporeans with tertiary education – the unemployment rate among Singaporeans have shot up to be the highest among all the high-income countries (Chart 3).

Chart 3: World Development Indicators

And if you look back all the way to 1985, you can see that the unemployment rate among tertiary-educated Singaporeans have been on the upward trend since 1985 – from having one of the lowest unemployment rate among tertiary-educated Singaporeans, we now have the highest unemployment (Chart 4).

Chart 4: World Development Indicators

But why is this happening?

If you look at the proportion of Singaporeans who have primary education, the proportion has actually dropped – which might explain the decline in unemployment among primary-educated Singaporeans (Chart 5).

Chart 5: Global Education Digest

You would see that the proportion of Singaporeans who have secondary-education has remained constant, which would explain the consistent unemployment trend (Chart 6).

Chart 6: Global Education Digest

Finally, when you look at the proportion of people in Singapore who have tertiary education, you can see that the proportion of people here with tertiary education actually shot up dramatically (Chart 7)!

Does this thus explain why there is also a dramatic rise in the unemployment rate among tertiary-educated Singaporeans as well?

Chart 7: Global Education Digest

Quite obviously, since a higher and higher proportion of Singaporeans are receiving university education (Chart 8), this might have contributed to the rise as well.

Chart 8: Statistics Singapore Newsletter March 2013 – Educational Profile of Singapore Resident Non-Students, 2002 – 2012

But what could the more plausible reasons be?

(1) Singapore’s CECA Agreement With India Does Not Protect Singaporean Workers

First, as I had discussed before, do you know that in the Comprehensive Economic Cooperation Agreement (CECA) Between The Republic Of India And The Republic Of Singapore, there are clauses which allow easy access for foreign workers from India to work in Singapore, because Singapore is not allowed to “require labour marketing testing” for the entry of these workers (Chart 9).

Chart 9: Comprehensive Economic Cooperation Agreement (CECA) Between The Republic Of India And The Republic Of Singapore

Also, these workers have “been allowed to bring in their spouses or dependants (and Singapore is required to)… grant the accompanying spouses or dependent of the other Party the right to work as managers, executives or specialists.” (Chart 10)

Chart 10: Comprehensive Economic Cooperation Agreement (CECA) Between The Republic Of India And The Republic Of Singapore

So, do you know where our jobs are going now? Of course, it would not be illogical to assume that India would not be the only country where such clauses exist to protect foreign workers over Singaporean workers. Of the other agreements that Singapore had signed with the other countries, which other agreement would also allow for such an easy entry for their workers to compete with the Singaporean workers in the job sector of “managers, executives or specialists”?

(2) The Lack Of Levies And Quotas For The Employment Pass Disadvantage Singaporeans

Second, do you also know that when companies would like to hire workers on Employment Passes (E Pass), do not need to pay additional levies on these workers or adhere to any quota (Chart 11)?

Chart 11: Ministry of Manpower Levies & quotas for hiring Foreign Workers: E Pass employment is exempted from levies and quotas

To qualify for the E Pass, foreign workers are required to “earn at least $3,000“. This means that workers on E Passes would directly compete with Singaporean university graduates, whom starting pay is $3,000.

Thus as there are no levies or quotas to hire workers on E Passes, there is no restriction or disincentive for companies to hire foreign workers over Singaporeans in positions which require a degree – and this would necessarily put Singaporeans at a disadvantage. Has this contributed to the over-influx of tertiary-educated workers and the resultant high unemployment?

Not only that, the Ministry of Manpower had also explicitly stated that, “Spouses of Employment Pass holders can work in Singapore.”

(3) The Fair Consideration Framework Will Not Protect Singaporeans

Third, the PAP government had recently announced the Fair Consideration Framework which they would like to use to “persuade” employers to consider Singaporeans fairly before hiring Employment Pass (EP) holders”.

But as I had written previously, this “framework” doesn’t have any bite because the MOM had said that it “does not review the merits of a firm’s hiring decision, as the firm is best placed to decide on which candidate can do the job“. Essentially, this “framework” does not fundamentally change the nature of hiring practices in Singapore. Employers are still allowed to advertise on different platforms on job openings, they are still allowed to interview foreigners at the same time with Singapore, or even foreigners only, and they are allowed to hire foreign workers without any justification.

Thus the broad policy measures created by the PAP government will in no way protect the employment of Singaporean degree holders over competition from other countries.

(4) Over-Influx Of International University Students In Singapore

Finally, as I had discussed in an article earlier this week, the PAP government is bringing in a massive influx of foreign students on scholarships – 52% of the foreign students are on scholarships. Are the rest of the 48% also on some form of financial assistance? Also, “Upon graduation, scholars are obliged to work in Singapore or Singapore companies for up to six years,” which again is competition with the Singaporean university graduates.

The question to ask is – if there are also deserving Singaporean students for scholarships, why is it that only less than 6% of Singaporeans are on scholarships, when 52% of foreigners are on scholarships? And if there is already a saturation of degree holders in Singapore, shouldn’t the PAP government focus on grooming the students in Singapore instead of creating a glut of degree holders in Singapore, by importing even more students into Singapore?

This is no wonder that Lee, Khaw and Chan would go to such great extent just to convince Singaporeans that a polytechnic diploma is a more viable “option” than a university degree.

And so, they have proclaimed in unison that polytechnic diplomas are good on their own right.

However, what is the problem here?

Unequal Pay of University And Polytechnic Graduates

The problem, as a Miss Tan Yen Ling had pointed out is that, “Diploma holders get about $2,000 to $2,500 as starting pay, but degree holders get about $1,000 more.” It has also been reported by The Straits Times that, “A diploma holder’s average starting salary is $2,000, while that of a degree holder is $3,000. So the difference is $1,000 at the starting line. (Chart 12)”

Chart 12

But why is this worrying? In a previous article, I had written about how Singaporeans would need to earn at least $2,000 to have a basic standard of living in Singapore. At a starting pay of $2,000, polytechnic graduates are barely scraping by.

Also, I had estimated that the proportion of Singaporeans living in poverty is 28% – the poverty line has been defined by the National University of Singapore Social Work Department as being half of median income, or $3,000. This means that at the poverty line of $1,500, polytechnic graduates are earning just above the poverty line. Of course, for Singaporeans without a degree or diploma, you can imagine how worse off life can be for them in Singapore.

But what is also of concern isn’t just the starting pay of polytechnic graduates, but of how their pay will pan out over their lifetime.

If you look at the chart below, for wages which start at around $2,000, or the starting pay of a diploma graduate, you can see their as the workers who receive this pay grow older, their pay would either stagnate or decrease. This means that for polytechnic graduates, they would be forever making barely enough to scrape by.

However, what about degree holders? Their wages will rise dramatically over their lifetime.

Chart 13: Report on Wages in Singapore, 2011

This is worrying because “30% (of students in Singapore would progress) to the junior colleges (and mostly to university), 40% to the polytechnics, 20% to the ITE, and 3 to 4% to the private education organisations.

This means that only 30% of Singaporeans with the highest likelihood of entering university will ever see their lot get better in life – because of the higher pay, whereas for the rest of the 70% of Singaporeans, they will struggle to barely survive, or not even be able to survive adequately in Singapore.

The PAP Government Needs To Pay Fair Wages

What this means is that if the PAP is serious about wanting Singaporeans to see a polytechnic diploma as a viable “option”, they would also need to ensure that Singaporeans are paid wages that are also “viable” to the standard of living in Singapore.

But already, Singaporeans are paid the lowest wages among the high-income countries. What this means is that even the wages of degree holders are already being depressed. If the wages of diploma holders are even lower, this means that the wages of diploma holders are even more severely depressed!

Indeed, for Singaporeans to be earning wages that are in tandem with the cost of living in Singapore, we should be earning a median pay of about $6,000, or twice the current median wage – similar to that of the other similarly high-income countries. This would mean that degree holders should have a starting pay of $6,000, and at the current peg, that diploma holders should be earning $5,000.

Yet, does this mean that the university population in Singapore cannot go on increasing?

If you compare Singapore’s university cohort participation rates (on an annual basis) with the other countries, you would see that Singapore has a relatively much lower participation rate (Chart 14). So, there is indeed room to increase the university enrollment for Singaporeans in the Singapore universities. It is thus perplexing why there is a sudden about turn by Lee, Khaw and Chan to encourage Singaporeans not to pursue degrees.

Chart 14: Report of the Committee on University Education Pathways Beyond 2015 (CUEP)

But the other important question is this – it is not just whether Singapore should produce more university graduates but whether our graduates have the skills and flexibility to work in the labour market? Indeed, the Ministry of Education has also recognised the need for the education system to “incorporate a broad-based education into higher education to develop higher order thinking and soft skills,” as well as to emphasise “on the importance of multidisciplinary learning and critical thinking skills that would better equip students for the future”.

However, it is perhaps worrying that Singaporeans perceive creativity and risk-taking as values that are less important – a by-product of the rote-based learning education system in Singapore (Chart 15)?:

Chart 15: Our Singapore Conversation Survey Final Report

In fact, most damningly, in the The Global Competitiveness Report 2013–2014 report, when compared to the other high-income countries, among the “most problematic factors for doing business”, a higher proportion of employers voted on Singapore as having the most insufficient capacity to innovate (Chart 16).

Chart 16: The Global Competitiveness Report 2013–2014

To sum up,

• Lee, Khaw and Chan have not addressed the right question when they try to persuade Singaporeans to see polytechnic education as a viable “option”. Just because there is increasing unemployment among tertiary-educated Singaporeans doesn’t mean that the immediate solution should be to reduce the number of tertiary-educated enrollment. This is short-sighted, a knee-jerk reaction and not well-thought through.

• Evidently, the increasing unemployment among tertiary-educated Singaporeans is due to several factors. If the agreements that Singapore had signed with other countries and the labour policies enacted can be exploited through the inherent loopholes, then the solution is to ensure that the agreements and labour policies provide stringent protection for Singaporean workers. However, it is clear that the PAP government is resistant to do so. As such, they have decided to take the easy way out to persuade Singaporeans not to take university degrees. But this is at the expense of educating your own citizens and strengthening the local core and pool of tertiary-educated Singaporeans. It is surprising that the PAP government would be willing to compromise on the people’s education and Singapore’s long term future – a core population that is weakened in their education will threaten the foundation that prop Singapore up.

• In persuading Singaporeans not to pursue university education, the PAP government has also chosen to sideline the issue of wages. If Singaporeans do not pursue a university education, the wages that they would receive for the rest of their lifetime would be barely sufficient for a respectable standard of living in Singapore. The question is, why are wages and job types structured along only educational lines – such artificial demarcation will only entrench the differences and thus wage differentiation, and result in growing disparity, as has happened in Singapore. There is a need to relook how wages are pegged at, and the weightage their education qualifications should play in this. Again, is the PAP willing to do so?

• Finally, as the MOE had also realised that there is a need to provide “multiple progression pathways and options for students, making the institution more attractive to prospective applicants“. Instead of the PAP ministers saying that Singaporeans should opt not to enter universities, the more apt response would be to look at how universities can be made more relevant to the needs of Singaporeans and to the job market. The MOE had noted that, “in Finland, the government expanded the higher education sector by creating a distinct tier of polytechnics/universities of applied sciences (UAS),… (where) their mission was clearly defined as providing vocational and professional training for labour market and industry needs… Students would typically graduate with a Bachelor degree after three to four years of study.” Thus there is a need to relook our understanding of what a university education means, and how it can be redesigned to not only expand the opportunities for Singaporeans, but to ensure that a university will continue to be relevant to the job market.

Written by Roy Ngerng Posted in Education