Labor Crunch of Construction Sector in Singapore

Question: Develop a research proposal (it may be real or hypothetical) which would satisfy the requirements of the MBA Project. It should therefore address a practical problem which organizations face. Answer: Literature Review Historical Overview During late 50s, construction industry in Singapore experienced both structural and systemic problem like present developing countries. In the post-independence period, construction industry is booming nature strengthens overall numbers of the economy. However, by the end of 1984, the construction industry became saturated. This has resulted into recession of 1985 (Eresources.nlb.gov.sg 2014). Construction industry is a major sector that plays key role in national and economic development. This sector is highly labor-intensive in nature, this indicates that construction firms require more labor relative to capital. Labors are required to operate the tools and machineries for the construction purpose. This sector engaged 114,500 workers during 2003 that were significantly lower than 200,000 in 1999 (Stjobs.sg 2012). The GDP of this country declines due to fall in employment. The unemployment rate in 2003 was highest in this country and most of the unemployment has been found in the co nstruction and manufacturing sector. In 2014, the employment rate has fallen by 0.5% between first half of the year. This has led to drop in production by 0.4% during the same time (TODAYonline 2015). The manpower crunch in the construction sector has been leading to closure of the firms. The winding up of the construction firms started since 2007. In 2013, the 27 firms and in 2014, 51 firms filed application for liquidation (Heng 2015). The following diagram represents how decline in the labor caused fall in productivity. Source: Todayonline.com 2015 Research Theory The theory of general demand and supply can be used in the context of labor crunch in Singapore. It is interesting to note that, there are sufficient numbers of jobs but there is no one to take that opportunity. The following diagram can represent this. Source: Created by Author At the prevailing wage rate, the workers are not willing join the construction sector, as a result of this the demand for labors in the construction market is less that supply for construction labor. This has generated shortage of labor in this industry. Theoretically, the shortage of supply will be eliminated by providing higher wage. However, here the market fails to increase the labor supply as the supply curve for the construction industry is highly inelastic. The review of the past and current performance of this industry in Singapore also supports that Okuns law, which states that one percentage rise in unemployment causes fall in the production by two percent. This theory is evident in the case of Singaporean construction industry (Kim, Park and Jei 2015). This is because; lack of labor engagement in this sector is leading to closure of the firms that adversely affecting the economic growth of the country. The relationship between unemployment and output level is thus negatively related. The following diagram can represent this. Source: Created by Author Common Problems Faced By Construction Industry There are various challenges that are faced by the construction industries in Singapore. Labor crunch in Singapore leads to deficit in labors in the construction industries. Singapore being a developing country, the people of Singapore get proper education than their ancestors. These educated people prefer to do white collar jobs (Hwang et al. 2014). They do not want to get perform any labor class work and subject themselves to physical exhaustion. This had led to decrease in number of labors in the construction industry of Singapore. Construction sector used to recruit labors from the foreign market and relied significantly on the supply of foreign labors. However, due to tighter foreign labor policy regarding hiring foreign workers, companies are limited to get necessary labors from the foreign market. Labors of construction industry get less payment than the people who do white collar jobs. The payment criteria attracts more youths into better jobs than the jobs of labor in construction industry. Moreover, there are various dangers being a labor in the construction industry. The labors of the construction industry in Singapore had to work in various dangerous situations (Hwang et al. 2014). They have to work in unhealthy situations and they risk their lives to do their work. The labors of construction industry face various physical damages, which sometimes cost their lives. This had been a serious fear among the youths of Singapore and they do not want to risk their lives and work in unhealthy situations in Singapore. Another disadvantage that the youths of Singapore face in construction industry is the political influence and the presence of union. These influences land them into various troubles and can destroy their career as well (Ofori and Toor 2012). They do not want to fall into trouble and instead live a peaceful, happy and comfortable life. Thus, these disadvantages of the position of labor in construction industry in Singapore, do not encourage the youths to get a job in this industry. This leads to lack of efficient labors in the construction industry of Singapore. Research Methods Adopted by Other Researchers There has been few literature has been found that has conducted studies regarding the labor crunch in the construction sector of Singapore. However, within the limited research papers, it has been found that to measure the decline of labors and its impact on the productivity, quantitative research has been conducted (Yi and Chan 2013). By looking at the correlation coefficient, it has been evident that the relationship negative. However, to be sure about the significance of their association, the studies have conducted regression analysis. The shortage of labor has been obtained through personal interrogation with the higher authority of the respective firms (Tan 2015). In addition to this, productivity can be obtained in the annual reports of the respective companies. Hence, researches are mostly conducted based on both primary and secondary data. Previous research philosophy follows positivism as they relied on the fact and the figures obtained, rather than any subjective human foc uses. The research approaches of the studies are exploratory in nature, as they are not postulating any theory at the end of the research (Panneerselvam 2014). The research designs of the other researchers are mostly inductive in nature, as they focuses on answering the questions like how construction industry is affected due to labor crunch; what are the reasons for labor crunch in this industry; how much foreign labors are engaged in this industry and so on. However, some of the articles are also deductive as they tested hypothesis like: there is no significant relationship between labor engagement and productivity. Recommendations From the literature review, it can be concluded that labor crunch in the construction sector has mostly caused due to youths interest in the white-collar jobs rather than work that is physically strenuous, like the one in the construction sector. They are becoming highly educated due to the higher standards of education level. Moreover, the remaining workers are unskilled to join the construction sector. Hence, it is recommended that, the low skilled workers should be given proper training so that they can get a job in the concerned sector (Finkel 2015). It is also recommended to increase the wage rate potentially in order to attract the labor force to join this sector. Another thing that can be suggested is that, policy that tightened the foreign labor engagement should be relaxed to a certain level to increase migration in the construction sector. References Eresources.nlb.gov.sg. (2014). Singapore experiences its first post-independence recession - Singapore History. [online] Available at: https://eresources.nlb.gov.sg/history/events/9f9489cf-5432-4797-bf66-fd1b3bab7a2b [Accessed 15 Jul. 2016]. Finkel, G., 2015.The economics of the construction industry. Routledge. Heng, J. (2015). More construction firms join winding-up list. [online] The Straits Times. Available at: https://www.straitstimes.com/singapore/manpower/more-construction-firms-join-winding-up-list [Accessed 15 Jul. 2016]. Hwang, B.G., Zhao, X. and Goh, K.J., 2014. Investigating the client-related rework in building projects: The case of Singapore.International Journal of Project Management,32(4), pp.698-708. Hwang, B.G., Zhao, X. and Toh, L.P., 2014. Risk management in small construction projects in Singapore: status, barriers and impact.International Journal of Project Management,32(1), pp.116-124. Kim, M.J., Park, S.Y. and Jei, S.Y., 2015. An empirical test for Okuns law using a smooth time-varying parameter approach: evidence from East Asian countries.Applied Economics Letters,22(10), pp.788-795. Ofori, G. and Toor, S.U.R., 2012. Leadership and Construction Industry Development in Developing Countries.Journal of Construction in Developing Countries,17. Panneerselvam, R., 2014.Research methodology. PHI Learning Pvt. Ltd. Stjobs.sg. (2012). Tackling Singapore's labour crunch, HR Updates, Singapore Jobs, Job Resources - STJobs. [online] Available at: https://www.stjobs.sg/career-resources/hr-updates/tackling-singapores-labour-crunch/a/85874 [Accessed 15 Jul. 2016]. Tan, W., 2015. Knowledge management in the construction industry: The strategy of Singapore.International Journal of Construction Management,15(1), pp.10-16. Todayonline.com. (2015). Productivity stuck in reverse amid labour crunch. [online] Available at: https://www.todayonline.com/singapore/productivity-stuck-reverse-amid-labour-crunch [Accessed 15 Jul. 2016]. Yi, W. and Chan, A. (2013). Critical Review of Labor Productivity Research in Construction Journals. Journal of Management in Engineering.