Labour market visibility for effective labour market policy

singapore workersBy Jeremy Chen

Labour Market Testing (LMT), as implemented by the PAP government, is an unqualified failure. Its policy intent to ensure that Singaporeans are "fairly considered" for jobs is unenforceable and only weakly supported by "moral suasion". Commentators have characterized the Fair Consideration Framework (FCF) as a labour market regulation whose only tangible impact is imposing a (short) delay.

The reason why the Ministry of Manpower (MOM) is unable to introduce more impactful regulation (even if it wanted to) is that it has poor visibility over the labour market, in particular, over the entry-level thru mid-level jobs. It is impossible to compel companies to hire more Singaporeans for jobs if it cannot be ascertained that there are indeed unemployed individuals have the skills needed to do the jobs in question.

More generally, it is difficult to craft effective labour market policies without visibility of the capabilities present in the labour market and their frequency of occurrence. As such, a proposal for achieving Labour Market Visibility is presented and its benefits described. These benefits will, where relevant, be illustrated in the context of Labour Market Testing.

What is Labour Market Visibility?

Simply speaking, one cannot rigorously claim that there is a lack of Singaporeans who are capable of doing X job using Y technology without knowledge of the number of unfilled positions requiring that capability and the number of unemployed Singaporeans with that capability.

Labour Market Visibility (LMV) entails having well-defined descriptions of capabilities, knowledge of what capabilities individuals have (especially unemployed individuals), and precise knowledge of states of employment of individuals. With that, it becomes easier to rigorously make statements about the state of the labour market for the purposes of making policy.

A version of this idea was presented in the SDP's proposals on immigration and foreign manpower policy in February 2013 as a component of a proposed "point system for immigration". The concept of Labour Market Visibility was implied along with a strict but rigorous Labour Market Testing framework.

Labour Market Visibility for what jobs?

Labour Market Visibility makes sense for the well-defined capabilities needed for effectiveness in entry-level to mid-level jobs in large professions. Given that it would be difficult to get agreement on what is needed to perform effectively at senior levels across firms in an industry and the relatively small number of senior positions, this is sensible.

On the question of which capabilities to track, a few considerations naturally arise:

  1. Is substantial use of that capability by a large number of workers needed in Singapore?
  2. Can having the capability be inferred readily from post-secondary coursework and grades?
  3. How readily (and rigorously) can the capability be tested for if the above does not apply?

For example, the ability do programming in some specific language, or some kind of spreadsheet business modelling and analysis, might pass the first consideration, but neither can be rigorously inferred from a degree in Computer Science or Business, respectively. However, those capabilities may be readily tested using sandboxes and mocks that are widely used for automated marking.

Another example – "communications skills" are widely applied. However, since they can neither be inferred from coursework nor rigorously tested, such capabilities should not be tracked.

Industry should have a substantial voice in determining whether to track capabilities and how to test for them. Noting the existence of competency frameworks such as the National Infocomm Competency Framework and the work of standards bodies in various industries, getting professionals and even academics to come together to develop standards that affect hiring in their fields is feasible.

While there might be disagreement over the specific tools and techniques that should be applied to certain use cases, the creation of a sensible hierarchy of methodology will support the diversity present in any industry. Furthermore, it will be in the personal interest of industry experts to work towards achieving the right level of granularity.

National Infocomm Competency Framework websiteFor instance, a job requirement to "build web services that support routing to functions by URLs" might branch into server-side approaches and client-side approaches, and again into specific approaches with various web-frameworks. Job requirements might demand a more general capability such as "ability to build web services that support routing to functions by URLs" or something far more specific such as "ability to use flask". This reflects the reality that job postings may request capabilities at various levels of specificity. Of course, capabilities will necessarily be evaluated at the most specific level.

To support this, a public institution that administers the above tests and tracks certifications can be created, or exiting institutions develop such a testing framework as a chargeable service. Such a system would be supported by industry participation and be funded by test fees.

Some might complain that testing exacts an onerous preparation burden. However, with a task-oriented testing philosophy that focuses on the practical, this should not be so. Having the capability to execute a particular task means that it should be relatively easy to perform that task, within reasonable time limits, when called upon to do so. No extended period of preparation should be required for individuals already possessing the capabilities to be tested for.

Integration with the education system

Unusual as it might sound, the main source of unemployed Singaporeans in the labour market is the education system graduating students. Of course, one would hope that those periods of unemployment are brief or voluntary.

It then makes sense to begin such testing and capabilities tracking from within the education system. If certain skills can be tested for in the context of appropriate courses, then they should. This would naturally lead to a closer dialogue between academia and industry, one which would certainly be welcome by most students. While this may rankle idealists in universities who view university education as a realm of "pure inquiry", the value of visibility over the labour market solidly outweighs the comfort of the few, who are free to not involve themselves with this initiative.

Immigration and testing for capabilities

Let us begin with the supposition that it is easy to track unfilled job vacancies. Now, if the number of jobs available demanding a skill set is low relative to the number of unemployed individuals with that skill set, it makes sense to set a very high bar for immigration by foreign professionals seeking employment in jobs that require those skills to reduce the impact of excessive supply-side competition (to protect the interests of workers); If the numbers are close, immigration standards should be calibrated to create some competition on both the supply and demand sides of the labour market; If there is a large deficit, then more foreign professionals with that skill set should be let in to Singapore to protect the interests of businesses.

When the government is able to track employment and the number of individuals with certain skills among the unemployed, it becomes possible to soundly set sensible policy thresholds for immigration. While I do not think that a system of absolute priority for Singaporeans would be good for Singapore, there should be sensible data-driven calibration of immigration levers so wages will not be driven down to harmful levels by excessive supply-side competition and incentives will exist for Singaporeans to build up their capabilities.

MOM signboardAlso, to support effective Labour Market Testing, the work permit system should be modified to support and be compatible with effective labour market policy. At the point of hiring, foreign professionals can be granted provisional work permits tied to the desired capabilities of the hiring company, instead of granting work permits that are tied to the hiring company. Foreign professionals would be required to get themselves certified for those capabilities within a certain period of time, as their own expense, or lose their work permits.

Labour Market Testing enables the government to ensure appropriate levels of competition in the labour market on the supply-side and demand-side, creating the incentives for improvement on the part of workers, and for pursuing productivity improvements on the part of employers.

Labour Market Testing leveraging Labour Market Visibility is a sensible middle ground between the extremes of unmitigated absolute priority for Singaporeans – however such absolute priority might be implemented – and fully porous borders for job seekers.

Sketching a roadmap

If the task of implementing such a system seems daunting, then we should begin with capabilities that are simple to test for, such as entry-level IT skills, particularly since the existing National Infocomm Competency Framework gives a relevant, albeit coarse grained, starting point. As the certification function builds up its own capacity, Labour Market Visibility can then be extended to capabilities associated with mid-level IT capabilities and eventually to other industries.

There should be no regulatory requirement for Singaporeans who are currently in jobs to get their capabilities certified. However, should any Singaporean find himself unemployed, he/she might benefit by obtaining certification of the skills he/she has within the context of Labour Market Visibility. Incentives can also be given for Singaporeans to get certified. Eventually, the passage of time would allow certification within the education system to be the dominant method, creating a seamless system for certifying the workforce.

With visibility over most of the employed and unemployed segments of the labour market, more effective forms of labour policy will be possible.

While Labour Market Visibility would take time to implement to full effect, positive spill-over effects over the course of implementation exist, such as closer links between industry and the various pathways of education, as well as an building an international reputation for rigorous immigration practice.

This entry was posted in Commentaries, Economics and tagged .
This entry was posted in Commentaries, Economics and tagged .