Impact of Increased Work Pass Qualifying Salaries on Singaporeans' Pay
Ministry of ManpowerSpeakers
Summary
This question concerns whether raising Employment Pass (EP) and S Pass salary thresholds caused a wage divergence between foreign workers and Singaporeans as firms adjust salaries to meet criteria. Minister for Manpower Dr Tan See Leng explained that qualifying salaries are benchmarked to the top one-third of resident wages, meaning they follow rather than lead resident wage growth. He noted that raising these thresholds helps enlarge the economic pie, which has historically led to higher local PMET employment and median resident incomes. Data indicates that employers typically do not raise wages solely to meet criteria but instead churn workers whose value-add does not match the higher salary requirements. Finally, the Ministry provides an 18-month lead time for existing work pass holders to allow businesses to plan for such changes and maintain workforce quality.
Transcript
78 Assoc Prof Jamus Jerome Lim asked the Minister for Manpower whether the Ministry has studied if the increased salary qualification thresholds for Employment Pass and S Pass holders may have paradoxically led to a divergence in salaries paid to such Work Permit holders vis-à-vis Singaporeans as companies raise salaries to satisfy the qualification criteria for their existing workers.
Dr Tan See Leng: The Employment Pass (EP) and S Pass qualifying salaries are benchmarked to the top one-third of resident professional, manager, executive and technician (PMET), and Associate Professional and Technician wages respectively. This ensures that EP and S Pass holders are of good calibre relative to the improving wages of resident workers. The salary benchmarks are based on actual resident wages from previous years. Thus, EP and S Pass qualifying salaries follow, instead of lead, resident wages.
It is not a zero-sum game between foreign workers and local workers. Improving the quality of our foreign workforce enables our businesses to grow and move up the value chain. By enlarging the economic pie, we create better jobs for locals. This can be seen by the fact that over the last decade, we have raised EP qualifying salaries from $3,000 to $5,000, and S Pass qualifying salaries from $2,200 to $3,150. The number of EP and S Pass holders grew by 30,300 and 17,600 respectively. Over the same period, the median income of resident PMETs grew from $5,500 to $7,020, and the number of local PMETs increased by 381,100.
Most employers will not just raise the wages of their existing EP and S Pass holders to meet the qualifying salaries. Instead, they would let them go or convert them to another pass if their value-add to the business is not commensurate with the higher salaries. This is reflected in data showing that qualifying salary increases are associated with upticks in the churn rate of foreign workers. To provide employers with lead time to plan for such changes, we typically implement qualifying salary increases to existing work pass holders around 18 months after announcing the new qualifying salaries.