2023 HCI Prelim EQ Suggested Answers

1 Post pandemic Singapore experience a shortage of skilled labour as formerly closed borders were slow to reopen and there was a surge in the demand for p rofessional services. These two factors have contributed to a shortage and rapid rise in wage ra tes. Singapore typically strives to develop its domes0g”I–c skilled labour whilst relying on the inflow of foreign skilled labour to make up for such shor0g”I”all. Singapore has recently launched a new employment pass to a0g”A–ract the top-0g”I–er foreign skilled labour, giving firms in Singapore access to skilled labour. (a) Use supply and demand analysis to explain why the above factors may have led to a shortage in skilled labour and a rapid rise in their wage rate. [ 10] (b) In the light of the sQgT↑qff global compeQgT↑qQgT↑qon for skilled labour, discuss whether the new employment pass is likely to be the most effecQgT↑qve way the Singapore government can address the shortage of skilled labour. [15] (a) Use supply and demand analysis to explain why the above factors may have led to a shortage in skilled labour and a rapid rise in their wage rate. [10] IntroducQgT↑qon Many countries face shortage of skilled labour and are grappling with the problem of rapid rise in their wage rate. R1: Low SS of skilled labour as borders were slow to reopen and rise in derived dd for skilled labour caused by surge in dd for professional services There is low supply of skilled labour as this is th e a0g““Aermath of what happened in the past few years. Many skilled workers have le0g““A in the early days of the pandemic and could not return when borders closed. This, together with formerly closed borders which were slow to reopen have contributed to a low supply of skilled workers. Simultaneously, as economic ac0g”I–vi0g”I–es increase in the post-Covid world, there is also an increase in demand for professional services leading to an increase in derived demand for skilled workers. Fig 1: Impact of Low SS with a rise in demand on steep rise in wage rate of skilled labour SS DD2 W2 W1 DD1 No of Skilled Labour Q1 Q2 Wage Rate Low SS of Skilled worker post - pandemic with no spare capacity as those who le0g““A during the pandemic has yet to return. The lack of spare capacity contributes to SS being price inelas0g”I–c. DD2 Shortage of Q1 to Q2

2 With reference to fig 1, the ini0g”I–al low supply with ini0g”I–al demand curve DD0 would give rise to an ini0g”I–al equilibrium wage rate of W1 and equilibrium quan0g”I–ty is Q1. In a post covid world, the surge in the demand for professional services would increase the demand of skilled labour rightwards from DD0 to DD1. This would result in a shortage of Q2 – Q1 at the original wage of W1. The shortage at W1 will be more severe when the extent