In recent weeks, this trend has become evident with the government – the civil service, statutory boards and government-linked corporations – taking the lead.

Unlike in the West where outsourced jobs travel abroad, much of the action in Singapore remains at home, at least for now.

They are merely transferred to contract firms, without a significant drop in employment – only in wages.

Larger savings could naturally come only from moving to foreign countries where wages are a fraction of Singapore’s own but that would invoke a high political price.

So far, it has hit thousands of IT, finance and low-level employees in government-linked companies, including Singapore Airlines and Changi Airport operator SATS (Singapore Airport Terminal Services).

The exact level of foreign outsourcing is not known.

In cases where work remains here, the retrenched workers (with compensation) are offered re-employment by the contract firms at lower salaries, hence the savings.

The spate of announcements has come shortly after Lee Hsien Loong, who has a reputation for firmness, became Prime Minister. Reducing business costs and improving the job market are among his most pressing problems.

The practice is more extensive in the United States and Europe but, unlike here, the jobs actually go to a foreign country where wages are 75% to 80% lower, resulting in millions of lost jobs.

Still, it entails insecurity, an immediate drop in employment and lower wages, but in the longer term it will strengthen competitiveness, attract more investors and create more jobs.

In recent years, employers – including SIA, SATS, and Port of Singapore Authority (PSA), had “downsizing” manpower to stem increased competition from Malaysia and others in the region.

The restructuring at SIA is the most widespread because of competition from budget airlines and pressure from rising oil prices.

The airline said it would outsource 70 finance jobs over the next three months and transfer an undisclosed, possible large, number of IT jobs this year. It has a total of 14,010 employees, of whom 30% perform IT and other administrative tasks.

“Sometimes, these changes may involve difficult decisions,” a statement said.

Following in its footsteps was SATS, which controls 80% of the ground-handling work at Changi. It has to lower charges to meet lower-cost regional airports.

The company shed 108 workers and will ask 1064 others to join companies that would be taking over their operations. When completed, SATS will have a staff of 7692, down 16% from last year’s peak of 9200.

A cleaner, for example, told reporters her new salary would be less than S$1000 a month, compared to S$1400 now, without referring to compensation.

“It is quite a big cut, especially if you have bills to pay and children to feed. But I need the job, so I will probably sign up anyway,” she told the Straits Times.

By next year-end, SATS will have to compete with two foreign players – Dubai-based Dnata, part of the Emirates Group, and Switzerland-based Swissport – for the S$1.2bil business.

One unconfirmed online report says: “Many workers will be getting S$15,000 to S$40,000 and a new job at 80% of previous pay. They won't be losing too much.”

At the Ministry of Manpower, 23 people reported for work on Sept 1 but not as civil servants. They make up 60% of a technology department contracted to Hewlett Packard and the InfoCom Development Authority of Singapore (IDA), which became their new employers.

The whole civil service, except Defence and Teaching, is trimming its workforce, cutting 8,100 jobs or 9% in the next three years.

The public hopes it will lead to a slowdown in increases of public service charges like health, housing, and public transport, which have caused much public anger.

The government is likely to move cautiously, without moving too many jobs overseas too quickly, despite its obvious benefit. A professional job that pays S$90,000 here will cost only S$20,000 in India.

Moving too aggressively will worsen job prospects among graduates, who are the most politically vocal group, and push more youths to migrate. For years, they had been encouraged to get a degree.

Despite the temporary pain, Minister Mentor Lee Kuan Yew has been a strong advocate of the strategy.

“If you deprive yourself of outsourcing and your competitors do not, you're putting yourself out of business,” he said.

Outsourcing, however, is not a one-way street. With its strong infrastructure and educated workforce, Singapore can also benefit from higher-value contract work like chip design, consultancy or research.

The strategy offers hope to Singaporean businesses weighed down by high costs, including wages.

In a parallel move, the government is pushing for a flexible wage structure by this year, in which 70% of a worker’s salary is fixed and 30% determined by his performance and company profits.

For middle managers, the ratio is 60-40 and top management, 50-50. If all these measures are in place, Singapore’s workforce will become leaner and hungrier.

In the weeks ahead, there will likely be more outsourcing announcements from other statutory boards, government-linked companies (among the state’s biggest) and the private sector.

In fact, few in Temasek’s stable – including SingTel, Sembcorp, Singapore Technologies, the state-controlled banks and so on – are exempted.

Economists agree that non-action is not an option. The Yale Centre for the Study of Globalisation (Yaleglobal) says the current spate of outsourcing suggests no oasis on the horizon. But Singapore has to resort to drastic options.

“Singapore doesn’t need to worry about workers leaving but whole businesses,” it said.

“With a maturing economy based largely on IT, finance, and trade, Singapore no longer attracts budding entrepreneurs looking for the next big thing.”

Understandably, Singaporeans who are worried about their jobs are critical. They include civil servants, who once thought they had fail-safe employment.

One cynic said: “The airlines outsource their ground-handling requirements to SATS, and SATS outsources more and more functions to other agencies that in turn outsource them further.”

o Seah Chiang Nee is a veteran journalist and editor of the information website littlespeck.com (e-mail: cnseah2000@ littlespeck.com )

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