Buried within an announcement about a new minimum percentage of higher-skilled workers in construction firms, the Ministry of Manpower also announced that work permit construction workers will be able to move to new jobs at the end of their work permit periods without first having to go home. This new policy will take effect from 1 June 2015. This is a small step towards reducing churn — a characteristic of our construction workforce, where experienced workers are too often replaced by new workers from foreign countries. It is one of the reasons why productivity in Singapore’s construction industry is poor.
The actual effect of this new policy tweak on reducing churn is not assured. TWC2 believes it may be small especially as other factors that favour churn are not addressed by the announcement. More discussion further down.
The main thrust of the announcement however, dealt with a new requirement for construction firms with respect to skill levels.
Ten percent to be R1
Deputy Prime Minister Tharman Shanmugaratnam and the Ministry of Manpower (MOM) announced 30 October 2014 that from 1 January 2017, at least ten percent of work permit holders in any construction firm must be an R1 worker. The classification R1 indicates a higher of two skill levels (the other being R2).
As steps to get there, MOM will require “construction firms to upgrade 5% of their own [work permit holders] to R1 status by end 2015, and another 5% by end 2016,” it said in its press release. It further explained that “Undergoing the 2-year upgrading phase would allow most firms to meet the minimum 10% R1 requirement, if they have retained their R1 [work permit holders].”
This does not appear to be too onerous. Across the construction industry, about fifteen percent of work permit holders have qualified as R1 workers, the ministry also said, but they are unevenly distributed across firms. Moreover, the press release also noted that “About 60% of construction firms already meet the 10% R1 requirement. Of the remainder, the vast majority (around 80%) need to upgrade one or two of their R2 [work permit holders] to R1 status over the next two years in order to meet the requirement.
No clear avenues for upgrading workers
The new announcement did not provide details how workers can upgrade to R1 while they are already working here in Singapore. TWC2 has heard from many workers how their bosses dislike them taking time off for courses. Some companies even fine workers as much as $50 a day (when their daily wage is little more than $20 a day) for taking a day off. The Employment Act’s stipulation of annual leave entitlement is often ignored in the construction industry too. Better enforcement may be needed to provide workers with practical time off and avenues to upgrade.
Explaining R1 and R2
It is not easy discerning from MOM and Building and Construction Authority (BCA) websites what R1 and R2 mean in practice. Or how BCA’s CoreTrade registration fits in with these. The language can be confusing. To the best of our knowledge, it appears that:
An R2 construction worker (or basic-skilled worker) is someone who has a Skills Evaluation Certificate “SEC” or Skills Evaluation Certificate (Knowledge) “SEC(K)” issued by the Building and Construction Authority (BCA). Workers in selected countries can attend a course and take their tests in their home country. The vast majority of construction workers are in this category.
A CoreTrade-registered construction worker is a step up from there. As seen from this page and this page on BCA’s website, to be registered as a CoreTrade tradesman, the person must be “skilled” and “experienced”. It appears that SEC and SEC(K) are sufficient proof of “skill” though the BCA webpage also says “if necessary, verified through a skills assessment” which implies the possibility of an additional test. However, the BCA website gives no indication what constitutes sufficient “experience”.
That said, it may inferred from an MOM press release 21 Feb 2014 that a minimum of four years’ experience is required. That press release seems also to say that having a CoreTrade registration would promote a worker to R1 status, but it takes four years’ experience to get that CoreTrade registration.
Currently, [work permit holders] in the Construction sector who are able to obtain the CoreTrade or Multi-skilling certification are classified as ‘Higher Skilled’ (R1). This requires [work permit holders] to have at least four years’ experience in Singapore’s Construction sector and pass a skills test.
Thus, it suggests that CoreTrade registration is indistinguishable from R1 status.
There are currently two routes to R1 status, with a new, third, route available from September 2015. The routes (there are actually five routes if one parses bureaucratic language carefully) are:
1(a) The worker must be CoreTrade-registered with at least four years’ experience, or
1(b) The worker must be “multi-skilled” with at least four years’ experience.
2. The worker must have at least six years’ experience and earn a fixed monthly salary of at least $1,600 (a relatively new route, see box at right)
3(a) The worker is Core-Trade registered and earn a fixed monthly salary of at least $1,600, or
3(b) The worker is multi-skilled and earn a fixed monthly salary of at least $1,600.
3(a) and (b) take effect only from 1 September 2015.
What does “multi-skilled” mean? It means a worker with an SEC or SEC(K) in two different trades.
“Fixed monthly salary” means the sum of basic salary and fixed allowances.
Other incentives include a more favourable levy rate for R1 employees, and a longer maximum period they can work in Singapore. The Straits Times reported that construction companies now pay $250 less in monthly levies for each higher-skilled worker, but this difference will rise to $400 a month over the next two years.
R1 workers can work in Singapore for up to 22 years; the maximum period for R2 is currently ten years (Source).
Productivity problem
The Straits Times reported 31 Oct 2014 that productivity within the construction sector has disappointed.
…while some sectors have made an effort to raise their game, the construction industry remains a laggard, with its productivity in the first half of this year actually falling compared with last year.
Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam noted in his speech given at the 20th Business Excellence Awards and Inaugural Singapore Productivity Awards Ceremony on 30 October 2014 that “we have to be clear about our objective, and work towards getting there: construction must be transformed into an efficient and more integrated industry, led by progressive firms and supported by a higher skilled workforce.”
MOM’s 30 Oct 2014 press release also revealed that “For every three new construction [work permit holders], one would leave Singapore after gaining two years’ of work experience here. At the same time, the construction industry continues to hire inexperienced [work permit holders]. Such churn imposes a drag on workforce capability and productivity.”
MOM moving towards TWC2’s recommendations
These concerns have been raised by TWC2 many times over the past few years. Even the word “churn” was first used by us around 2011 to describe the manpower carousel.
Allowing workers to switch to new jobs without first going home indicates that MOM is moving to accept the case long made by TWC2. The 30 Oct 2014 press release said “employers will be allowed to hire construction [work permit holders] at the end of their work permit period, without [the workers] having to leave Singapore, from 1 June 2015. This will allow Singapore to retain better workers and reduce the risk of losing them to other work destinations.”
It may allow, but it may still not produce the desired result. As TWC2 has highlighted repeatedly, there are several other reasons why churn is as prevalent as it is, an important one being that taking in new hires is very profitable, not only for agents, but for employers too through taking a cut of agents’ fees. This angle is not addressed by the newly announced measures. It needs to be before employers will have an appetite for hiring workers who are already in Singapore.
MOM mentioned in its statement that “further details on this initiative in due course”. It is hoped that additional measures will be included.
Workers still cannot change employers freely
Disappointingly, the new policy still does not allow workers to change employers freely. This is apparent from a close reading of a sentence in the press release: “Employers will continue to have certainty on the availability of their foreign workers during their work permit duration, while avoiding additional costs of having to arrange and pay for sending their workers home, 
and on search and hiring costs for experienced construction workers who want to switch employers at the end of the work permit period.” (Emphases added by TWC2).
This may not help the productivity push by much. As we have pointed out repeatedly too, by stripping workers of their bargaining power, e.g. by disallowing them from changing employers freely, construction wages are artificially depressed. As a result, many construction bosses will consider mechanisation for productivity to be unjustifiable cost-wise compared to just using more labour.
It may be argued that excessive labour can be controlled though a tightening of the dependency ratio, but there may be perverse effects from using this lever alone, in the absence of giving workers the freedom to change jobs. As the dependency ratio tightens, employment agents will simply demand more in placement fees for the jobs that are available. It increases the debt burden of workers, making them even easier to exploit (e.g. demanding they do unsafe tasks).
This is the reason why TWC2 has also highlighted the need for MOM to do something about agents’ fees. A complete overhaul of the recruiting system may be necessary.
Tying a worker to an employer too creates a situation of vulnerability, which opens the door to abuse. Employers routinely make arbitrary salary deductions and demand kickbacks for renewing work permits. They also demand long overtime hours (thus risking fatigue and work accidents), a demand workers find hard to resist when their basic salaries are so low. MOM may encourage workers to lodge complaints if employers break the law, but from the worker’s point of view, what if lodging a complaint results in his work permit being prematurely cancelled by the employer? Would he be treated as if he had not completed his work permit period and thus be ineligible to look for a new job locally? If so, it would only disincentivise workers from complaining.
Even in the absence of lodging a complaint, a worker would fear that his employer may terminate him prematurely for any number of reasons known and unknown. Would he too be treated as if he had not completed his work permit period and thus be ineligible to look for a new job locally? This fear would heighten his vulnerability to abuse and exploitation, not reduce it. MOM needs to clarify this, and make it patently clear that when an employer cancels a work permit before the end of its full term, the worker is still considered to have reached the end of his work permit period.
In general, micro-managing is not an ideal solution. Instead of having fine print upon fine print, it is better to sweep away the rule that binds the worker to an employer. Let wages rise; it will powerfully motivate employers to think hard about productivity.
In a letter published by the Straits Times on 12 Nov 2014, an alternative view was expressed: that prefabricated construction methods may not turn out to be of higher productivity.
Prefab construction not so productive
Prefabrication construction of Build-to-Order flats eliminates or reduces the need for skilled workers such as bricklayers and plasterers (“Push to raise skills, productivity in construction sector”; Oct 31).
Most workers in prefab construction are unskilled general workers whose primary role is to coordinate the setting of prefab walls and slabs as the tower crane hoists them and sets them in place.
A bricklayer can erect a brick wall in a couple of hours, depending on the size of the wall. And the cost of erecting walls on-site can be a fraction of that for prefabricating walls in a factory and installing them.
Prefab requires large land and factory space, large amounts of electricity, automation, production engineers, electrical and mechanical engineers and production workers, and large-truck transportation. Also, more crane operators are needed as well as large on-site storage holding space for the prefab components.
Prefab construction may require five unskilled workers and a tower crane to coordinate the setting of a small wall in position, and up to an hour to install it. So, productivity in prefab construction is lower than that when building walls and slabs on-site.
Aaron Ang Chin Guan