It took six months, a flurry of letters, e-mail messages and several interviews before fresh graduate Koh Hong Wei, 25, landed his first job as a conference manager in the events industry with a pay of $3,000.

While it may have taken him longer than expected to get a job, he considers himself lucky because of the "intense competition in the job market", he says, not least from skilled foreigners.

The business graduate from Nanyang Technological University says that at job fairs and interviews, 40 per cent to 50 per cent of the applicants for posts he applied for were from China, India, and other countries, many having come to Singapore as students.

"I definitely felt the pressure, because many of them are quite aggressive," he adds, saying that these candidates apply for jobs not only in their field of expertise, but across many sectors, and do not mind starting at lower wages.

The young graduate's concerns mirror the new turn that the debate on foreign labour has taken. Previously focused on how a ready supply of foreign labour has hurt lower-skilled workers, the debate has now shifted to how it strikes at the heart of middle- class aspirations.

This is because, as shown in the recent Budget debate, the spotlight is on professionals, managers and executives (PMEs), and competition they face from skilled foreigners on Employment Passes (EPs), who do not face quotas.

The Government has promised to address the issue, with the EP framework up for review, and plans to make companies consider Singaporeans first. Yet, while this may reassure Singaporeans, the business community regards the tightening of foreign talent inflows with concern. Insight looks at the nature of the problem, and what can - or should - be done.

What it is about at its heart, the issue of controls on skilled foreign labour is "one of balancing the needs of companies against the interests of Singaporeans", as Singapore Management University (SMU) economist Augustine Tan puts it.

Companies - not least multinationals - insist they need access to international talent. On the other hand, Singaporean PMEs are under pressure from competition that is not just global in nature, but that sometimes seems unfair.

Frustrations over skilled foreigners have taken several forms, as Acting Manpower Minister Tan Chuan-Jin identified in the Budget debate: First, employers who unfairly "hire their own kind"; second, those who overlook Singaporeans for foreigners in undue haste; and third, qualified foreigners who are willing to work at lower wages than local fresh graduates and mid-level PMEs.

In other words, these are problems of bias, neglect of the local talent market and price. Each is distinct - and may call for distinct solutions.

Undercutting locals

Perhaps the most straightforward problem is price. Foreigners may simply be better value, whether it is a case of equally qualified candidates with different salary expectations, or an experienced foreigner willing to be paid the same as a local fresh graduate.

This, as Mr Tan says, is meritocratic. But as he also noted, it could deprive young Singaporeans of opportunities.

The employment rate of university graduates six months after their final examinations dipped from 2007 to 2009, and still has not recovered to 2007's pre-recession figure of 94.5 per cent.

Of course, competition from foreigners might not have been the main cause. But EP numbers did rise in that period, as they have in every year except last year, when they fell by 1,600.

Senior PMEs may not be spared either, with SMU's Professor Tan noting that "companies have been known to fire more senior Singaporeans and replace them with cheaper foreigners".

PMEs generally have lower unemployment rates than all other groups of workers. But among PMEs, unemployment rates are highest for the youngest and oldest workers. For PMEs aged 50 and over, the jobless rate was 2.2 per cent last year, the highest in four age groups (see table).

Older PMEs were flagged by MP for Holland-Bukit Timah GRC Liang Eng Hwa in Parliament as an area of concern. Many fall out of the job market after being let go, and have difficulties re-entering in the face of competition from foreign workers and even younger PMEs, he tells Insight.

"We must help our older PMEs be more employable, reskill them as the economy undergoes changes and bring them back into the workforce," he adds.

Older PMEs may also face the stumbling block of the perceptions of employers, who worry about their lack of skills or overqualification, says Ms Ng May May. She is assistant director of CaliberLink, a career centre for PMEs set up by the Singapore Workforce Development Agency, which organises workshops to help such PMEs get jobs.

But while older PMEs improve themselves, they and young graduates can be protected from wage competition if the price of foreign talent is controlled - and the Government has been doing just that.

Previously, foreigners coming in on a Q1 pass, the lowest level of EP, had to earn at least $2,500.

This was raised to $2,800 in 2011, and again to $3,000 the following year - not too far off from the median starting pay of university graduates, which was $3,000 in 2011 and $3,050 last year.

Since last year, Q1 qualifying pay has also been tiered such that older applicants have to earn more. This should help avoid the scenario where an older foreigner undercuts a fresh graduate by being willing to work on the cheap.

UniSIM economist Randolph Tan argues that higher qualifying EP salaries best suit the scheme anyway, if it is meant for talent that is hard to find here.

"As a guide, it is a bit strange to see that EP holders can earn lower amounts than locals being given support under the Wage Credit Scheme," he says, referring to the scheme under which the Government subsidises pay rises for locals earning up to $4,000.

A foreigners' club?APART from competition, there is discrimination - sometimes discreet, other times blatant.

Mr Tan told the House of a discriminatory online job ad put up recently by a prominent company that wanted to recruit people only of a certain nationality.

And in 2011, the top complaint to fair employment watchdog the Tripartite Alliance for Fair Employment Practices (Tafep) was, for the first time, that employers preferred foreigners to locals.

There are no publicly available numbers on what industries EP holders are in, or indeed, whether certain nationalities do cluster in single companies.

But anecdotally, preferential hiring can be widespread in industries such as banking and IT. Association of Small and Medium Enterprises vice-president Kurt Wee says: "We often hear of people in banks hiring their own kind. Some home-grown firms which have made it big are also known to hire many foreigners at the mid- to highly-skilled level to run their organisations."

In cases of hiring bias, Mr Tan says Tafep will investigate and the Ministry of Manpower (MOM) may suspend the work-pass privileges of offending companies.

Hire local

The problems of price and bias can have targeted solutions: raising the price of foreign skilled labour and cracking down on reported discrimination, respectively.

But there remains the more general question of how to get companies to give fair consideration to local hires before looking abroad. Companies wanting to hire fast may find it easier to rely on recommendations or foreigners supplied by headhunters, says Mr Tan.

Some human resource experts suggest that this problem may not be that large. Says Ms Stella Tang, director of Robert Half Singapore: "In our experience, companies in Singapore prefer to employ a Singaporean first as long as they can find a candidate with the right skills and qualities. It is only when no suitable local candidate can be found that they broaden their search internationally."

Still, MOM wants all companies to give first consideration to locals, and is consulting stakeholders in the coming months to design a framework to ensure that. What form might this take? Some MPs have suggested labour market testing, in which companies must prove they cannot find locals before taking on foreigners.

Other MOM ideas include job- matching with a database of unemployed Singaporean PMEs before employers are granted EPs.

To complement labour-market testing, labour MP Patrick Tay has even suggested a dependency ratio for "certain sectors and industries with excessive numbers of foreign PMEs", which would limit the maximum proportion of foreigners in the company. Such ratios are already in place for lower-skilled foreign workers.

Local problems?

While looking at the problems surrounding inflows of foreign executives, there is also the question of whether locals themselves might be adding to the problem.

One issue is that too many Singaporeans may be aspiring to PME jobs. Even within the PME population, Singaporeans might be more attracted to certain jobs, such as in the high-paying finance and management areas.

This might mean that locals trained as engineers, doctors, lawyers and technologists do not practise as such, "exacerbating the skills mismatch" and requiring foreign skilled workers to pick up the slack, says SMU's Prof Tan.

Singaporeans may also fail to meet requirements. Dr Linda Lim, professor of strategy at the University of Michigan business school, says multinationals may need PMEs who can travel, be relocated or know regional languages. "Do we have these kinds of Singaporean PMEs?" she asks.

Tighter foreign talent controls will not help local PMEs if they lack baseline skills and qualifications, says Mr Victor Chan, global management consultancy Hay Group's regional general manager for productised services in Asean.

And even if all this is the case, tighter foreign labour policy will still help - it will just not solve all the issues in the PME sector.

The way forward

In deciding how to level the playing field for local PMEs, there are several considerations.

First, different parts of the foreign skilled labour question have different answers. Second, there is the question of whether intended solutions could indirectly harm locals instead, by hurting businesses. And third, distinctions should be drawn between different types of PMEs - and hence different types of foreign skilled workers.

Experts agree that tackling the price competition problem by raising qualifying salaries is unlikely to hurt businesses much.

This is because there are many local graduates suited to roles at that level, says Mr George McFerran, managing director for Asia- Pacific at jobs site eFinancialCareers, and Mr Mark Hall, vice- president and country general manager at recruitment firm Kelly Services Singapore.

National University of Singapore economist Basant Kapur says higher qualifying pay may put pressure on bottom lines, but may be bearable if companies can still get the number of workers they need - a more important concern.

He and other experts agree that the bigger issue is about continued access to highly skilled talent. But this in turn relates to the distinction between different levels of PMEs, local or foreign.

Q1 pass holders, who compete with local fresh graduates and mid-level PMEs, are in a different league from P1 and P2 EP holders, who command higher salaries - at least $4,500 and $8,000 respectively - and have larger roles.

Survey data from Hay Group shows in recent years, salaries have risen more for higher-level PME jobs, but less for lower-level ones, with almost no rise in the latter between 2011 and last year.

This suggests even within the PME population, higher-skilled and lower-skilled workers face different labour market situations.

Quotas might well work at the Q1 level, since locals can take up such jobs instead. UniSIM's Dr Tan argues in favour of this, as Q1 passes do not fit into the idea of EPs as an exclusive category.

He suggests that the higher P1 and P2 tiers of EPs should be kept as "a special preserve for exclusive talent", while the Q1 category should be subject to quotas and levies, as is the case for lower- skilled passes such as the S Pass and work permits. This is similar to Britain, where there is an annual cap on skilled workers - but only for those earning below £150,000 (S$283,000) a year.

But quotas for the highest- skilled foreigners would be dangerous, say experts. Access to such "top talent from a global pool" is what companies worry about, says Mr McFerran.

He and Mr Chan say that overly stringent policies in this area could put multinationals off. Curtailing access to the highly skilled could also hamper innovation and productivity, they add.

Labour-market testing avoids the rigidity of quotas, but NUS economist Tilak Abeysinghe fears that too much of it may create delays and costs for both companies and the Government, which has to oversee it. To him, employer education is a better option.

Others are more optimistic. UniSIM's Dr Tan notes that labour-market testing is a "well-known practice adopted in many countries like Canada, Australia and the United States".

Kelly Services' Mr Hall says: "While a number of hiring managers predict that the framework could delay and complicate hiring procedures, its existence should not prevent Singapore from retaining its global status as a leading financial centre."

Leading financial hub Hong Kong has a similar framework, without preventing companies from hiring the best, he adds.

Even if tighter controls on foreign skilled labour exact a cost, the real question is whether the cost is worth bearing.

For NUS economist Hui Weng Tat, companies are clearly better off with greater access to foreign labour - but the issue for the Government is weighing the profitability of companies against the cost of local unemployment.

Resources invested in educating and training local graduates would be wasted if they do not find jobs here, he says - "hence the need to tighten EP to protect and justify the additional investments in the education sector".

And bearing costs may be easier if one starts from a position of strength - which Singapore does, says Bank of America Merrill Lynch economist Chua Hak Bin.

After all, he points out, inflows in recent years suggest that Singapore is "too attractive to foreign companies and foreign talent".

With that in mind, some loss of competitiveness might be a fair price to pay if it means a more level playing field for local PMEs.