Singaporeans themselves were universally viewed as the nation's best natural resource. In 1989, however, the work force was a shrinking resource. The high rate of economic growth combined with an increasing number of Singaporeans over the retirement age of fifty-five (nearly 12 percent) and a lower-than-replacement birth rate had resulted in a significant labor shortage. By the end of the century, the labor market was projected to be even tighter. According to the Ministry of Health, the fifteen to twenty-nine age-group would decline 25 percent, from 816,000 in 1985 to 619,000 in the year 2000.

In 1987 and 1988, slightly more than six Singaporeans out of ten were working or looking for work. Men's rate of participation, 79 percent, remained steady. Women, however, responding to job opportunities in the manufacturing and commercial sectors, were increasingly entering the labor market (48 percent in 1988, up from 47 percent in 1987, 40 percent in 1978, and 24.6 percent in 1970). Job-switching was rampant, particularly in manufacturing, where a 1988 survey showed that three out of four new workers quit within the month they were hired. Higher wage and input costs, as well as job-switching, resulted in a decline in the growth of manufacturing productivity (2.4 percent in 1988 compared with 3.7 percent in 1987 and 13.6 in 1986). The labor market, then, was at the center of challenges facing the Singaporean economy. The nature of the concern about the labor market had been almost totally reversed since independence. The early 1960s were a time of labor unrest, and unemployment was still about 10 percent by 1965. By the late 1960s, however, there was substantial industrial peace, which had continued through the 1970s and 1980s. With unemployment at a very manageable 3.3 percent in 1988, the government's attention was focused on other aspects of the labor market.

Industrial Relations and Labor Unions

Industrial relations in Singapore reflected the symbiotic relationship between the labor movement and the dominant political party, the People's Action Party (PAP), a relationship rooted in a political history of confrontation that evolved into consensus building. Trade unions were a principal instrument in the anticolonial struggle used by both the democratic socialist PAP and the communists with whom they cooperated uneasily. In 1961 the Singapore Trade Union Congress split into the left-wing Singapore Association of Trade Unions (SATU) and the noncommunist National Trades Union Congress (NTUC). The NTUC quickly became the leading trade union organization, largely because of its effectiveness and government support. Moreover, in 1963, when SATU led a general strike against the government, the pro-communist trade organization was banned and many of its leaders were arrested.

Strong personal ties between leaders of the PAP and the NTUC formed the background of the symbiotic relationship, which was institutionalized by formal links. In 1980 NTUC Secretary General Ong Teng Cheong was made a minister-without-portfolio, and a NTUCPAP Liaison Committee comprising top leaders of both organizations was established. As the "second generation" political leaders assumed more government leadership following the 1984 election, Ong was named second deputy prime minister. Following the September 1988 general elections, the NTUC reaffirmed its close relationship with the PAP by expelling officers of NTUC-affiliated unions who had run for Parliament on opposition tickets. The NTUC and the PAP shared the same ideology, according to NTUC officials, so that active support of the opposition was inconsistent with membership in NTUC-related institutions. Workers who did not support the PAP were advised to form their own unions.

The legal-institutional framework also exerted control over labor conditions. In mid-1968, in an attempt to woo private foreign investment, Prime Minister Lee Kuan Yew successfully pushed through Parliament a new employment bill and amendments to the 1960 Industrial Relations Act. In order to make factors such as working hours, conditions of service, and fringe benefits predictable, and thus make businesses sufficiently attractive for investors, trade unions were barred from negotiating such matters as promotion, transfer, employment, dismissal, retrenchment, and reinstatement, issues that accounted for most earlier labor disputes. To spread work and help alleviate the effects of unemployment, overtime was limited and the compulsory retirement age was set at fifty-five. Lee's actions, which the militant unions opposed but could do little about, were part of the government's efforts to create in Singapore the conditions and laissez-faire atmosphere that had enabled Hong Kong to prosper. Such measures, in the government's view, were necessary to draw business to the port. Lee stressed survival, saying: "No one owes Singapore a living."

Rapid economic growth in the late 1960s and early 1970s reduced unemployment and resulted in the amendment of these laws. A National Wages Council was formed in 1972 and many of its recommendations adopted. By 1984 a twelve-hour shift was permitted. In order to enlarge the limited labor pool, in 1988 changes were introduced in Central Provident Fund policies reducing payment rates for those over fifty-five, thereby encouraging employers to raise the retirement age to sixty. The discipline imposed on, and expected of, the labor force was accompanied by provisions for workers' welfare. The Industrial Arbitration Court existed to settle disputes through conciliation and arbitration. The court, established in 1960, played a major role in settling labor-management disputes through binding decisions based on formal hearings and through mediating voluntary agreements. Adjudication of disputes between employers and nonunion workers came under the separate jurisdiction of the Labour Court. To help job seekers, the government maintained a free employment service serving both job seekers and employers. A comprehensive code governed the safety and health of workers and provided a system of workers' compensation. Under the Ministry of Labour, the Factory Inspectorate enforced these provisions in factories, where more than 35 percent of Singapore's workers were employed in 1988.

The trade unions' role and structure also had been modified. In the 1970s, the NTUC began establishing cooperatives in order to promote the welfare of its members. In the 1980s, omnibus unions were split along industry lines and further split into house unions to facilitate better labor-management relations and promote company loyalty. In the 1982 Amendment to the Trade Union Act, the role of trade unions was defined as promoting good industrial relations between workers and employers; improving working conditions; and improving productivity for the mutual benefit of workers, employers, and the country.

Union membership declined steadily beginning in the late 1970s. In 1988 there were some 83 registered unions, with about 1,000 branch locals, representing one-quarter of the organizable work force. This number was down from ninety unions in 1977. Increasing emphasis on developing white-collar, capital-intensive, and service-oriented industries was partly responsible for the union membership decline. The unions were countering the decline by offering attractive packages to bring in new members.

Wage Policies

Following the rapid economic growth of the late 1960s and early 1970s, signs of a tight labor market emerged along with a concern that wages might escalate. In response, the government in 1972 established the National Wages Council, a tripartite forum with representation from the employers' federations, trade unions, and the government. As a government advisory body, the council recommended annual wage increases for the entire economy; ensured orderly wage development so as to promote economic and social progress; and assisted in the development of incentive schemes to improve national productivity.

The wage guidelines were not mandatory but were followed by the public sector (by far the largest employer) and widely implemented in the private sector. The influence of these recommendations generally was not applicable to private-sector professional and managerial workers, whose wages were determined more by international forces, but was more important for non-professional white-collar workers. For blue-collar workers, who constituted about 40 percent of the labor force in both the public and private sector, union influence was more crucial than the National Wages Council's recommendations, but market forces were even more important.

Between 1973 and 1979, actual wage increases followed the council recommended wage increases closely. In 1979 the "wage correction policy," in which there were three years of high-wage recommendations, was designed to force an increase of the productivity of higher value-added operations, to reduce the reliance on cheap unskilled foreign labor, and to raise labor productivity. From 1980 to 1984, however, actual wage increases exceeded the recommendations by an average of 2.4 percentage points per year, as the increasingly heavy demands for labor apparently outstripped its supply. Additionally, collective agreements for unionized workers lasted for two or three years with built-in wage increases. Although starting pay was relatively low, large gaps in wages were institutionalized through longevity of employment and annual raises.

The effect of wage increases, compounded by a further raise in the mandatory Central Provident Fund component of wages, was to price Singapore out of the market. High wages were a major contributor to Singapore's 1985 recession. Consequently, in 1986 and 1987 the government instituted a wage restraint policy: wages were frozen and the employer's contribution to the fund substantially reduced. The policy's relative success could be attributed to close government-labor ties and to the tripartite forum of the National Wages Council.

Proposals for wage reform--a "flexi-wage policy"--were announced in mid-November 1986 and became effective with the enactment of the 1988 Employment (Amendment) Act. Under this plan, the basic wage remained relatively stable with adjustments for good or bad years made by increasing or reducing the annual bonus. Negotiating the size of the bonus--frozen to the equivalent of one month's salary since 1972--was left to employers and unions, who would be able to bargain for its retention, abolition, or modification. Profit-sharing, productivity incentive, and employee share plans were encouraged to ensure that high wage payments awarded in fat years were not perpetuated in lean years and that individual as well as company productivity, growth, profitability, competitiveness, and prospects for the industry were taken into account. The government was anxious that wages not increase precipitously. This concern was shared by management, which worried about shrinking profit margins resulting from higher operating costs. Workers, on the other hand, wanted to share in the benefits of the economic boom after giving up wage increases to help cope with the 1985 recession.

Foreign Labor

Two groups comprised foreign nonresident labor in Singapore. The majority were unskilled work-permit holders who could only enter and work in the country if their prospective employers applied for work permits for them. Skilled workers and professionals on employment passes comprised the other group.

Work permits were for a short duration with no guarantee of automatic renewal. Malaysia, particularly the southernmost state of Johor, was the traditional source of such workers. Singapore's tight immigration policy was relaxed as early as 1968 to allow in these workers. At the peak of the economic boom in 1973, noncitizen work-permit holders reportedly accounted for about one-eighth of the total work force. Large numbers of these "guest workers" were repatriated during the 1974-75 world recession because of retrenchments, particularly in the labor-intensive manufacturing industries.

With the tightening of the labor market in 1978-79, it became more difficult to fill less desirable jobs with domestic labor or labor from Malaysia, which also had a tight job market. Foreign workers were then recruited from Indonesia, Thailand, Sri Lanka, India, Bangladesh, and the Philippines. By 1984 workers from South Korea, Hong Kong, Macao, and Taiwan were being allowed in, on the basis that their Confucian cultural background might enable them to adapt more readily than immigrants from other cultures.

The increase in foreign workers was remarkable; by 1980 they comprised 7 percent of the total compared with 3 percent a decade earlier. No figures on foreign labor were published after 1980. According to the 1980 census, 46 percent of the foreign workers were in manufacturing, 20 percent in construction, and 9 percent in personal and household services. The recession led to a repatriation of some 60,000 foreign workers in 1985, two-thirds of the total employment decline. The foreign worker levy was raised to S$250 per month in July 1989, and the maximum foreign worker dependency at the firm level was reduced from 50 percent to 40 percent. Both measures were designed to encourage firms to speed up automation of labor-intensive operations in order to reduce reliance on foreign workers.

Manpower Training

The main goals of manpower training were to increase the average skill level of the labor force and, at the same time, provide sufficient numbers of workers with the specialized skills necessary to meet future industrial needs. Beginning in the late 1970s, the government placed increased stress on education in order to achieve the objective of industrial restructuring. As of 1987, however, Singapore's work force was less educated than that of some of the countries with which it competed. Five percent of the work force had university educations compared with 19 percent for the United States and Japan and 6 percent for Taiwan. Some 11 percent had received post-secondary schooling other than in universities, compared with 46 percent for Japan, 23 percent for Taiwan, and 16 percent for the United States.

In the early 1980s, government studies showed that about half of the work force had primary-level education or less, and many older workers had low levels of English language skills. To remedy this situation, the Basic Education for Skills Training (BEST) program was introduced in 1984 to provide opportunities for workers who had not completed primary education to improve their English and math. By 1989 some 116,300 workers (half the target group) had had some BEST training. Time was also solving the problem as younger people received more education and the older, less-educated workers passed out of the work force; between 1979 and 1984, entrants to the work force with only primary-level education or less declined from 43 percent to 26 percent. The government needed, however, to ensure that this better-educated work force was trained in the necessary skills to complete the transformation of Singapore from a labor-intensive economy to a high-technology city-state--a "technopolis."

A further problem in achieving this transition resulted from "government brain drain." Each year 50 to 60 percent of new university graduates were absorbed by the government, including government-owned companies and the statutory boards. A system of awarding undergraduate scholarships, which often tied the awardees to eight years of government service, assured that the public sector absorbed many of the top-ranking students. Some critics thought that this concentration of the country's valuable human resources in the public sector might be to the long-run detriment of entrepreneurial and private-sector development.

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Source: U.S. Library of Congress