Foreign Labor and Economic Growth : Policy Options for Singapore

Prior to the Asian economic crisis in 1997, Singapore's official projected medium-term GDP growth target was set at 7% per annum. Since then, the targeted growth rate has been reduced to 5%. This paper examines the implications of the 5% growth target on the labor requirements of the Singapore economy. It is shown that the projected resident labor force will not be able to keep pace with the increased labor demand and the share of foreigners in the labor force will increase significantly even under the most favorable scenario. Some implications of the increased dependence on foreign labor in Singapore are discussed. With permanent immigration fixed at the current level, various policy options and their effects on the demand for foreign labor are considered. These include improving labor productivity, raising the total fertility rate, increasing labor force participation of older workers and lowering the targeted rate of economic growth