AI Disruptions And Structural Restructuring Among The Labor Force In Singapore – Analysis

Key Takeaways:

• Singapore, an ASEAN AI-governance leader aiming to use its 2027 chairmanship for regional infrastructure and data flows, posted Q2 2026 job growth of 11,400 and 1.9% unemployment (2.9% for residents) but the highest outward-sector retrenchments since 2020 (4,620).
• Most new jobs (9,200) were outward-facing and filled by non-residents in construction and manufacturing; 2,200 domestic jobs went to residents. Cuts hit manufacturing (870) and I&C (720) as firms shift into AI, plus mid-to-senior PMETs and workers in their 50s; finance is splitting wealth-hub hiring from AI-thinned retail/middle-office roles while GDP guidance rose to 4.5–5.5%.
• The author says domestic logistics, public administration, education, and health are absorbing locals; IMDA’s TechSkills Accelerator target of 40,000 upskilled tech workers and Jobs Transformation Maps are the proposed buffer if unions, firms, and government cut the skills mismatch.

Singapore is a leading economy in artificial intelligence (AI) adoption, governance, and infrastructure within ASEAN (IMDA website). In this context, Singapore chairs the ASEAN Working Group on AI Governance (WG-AI) and aims to use its ASEAN Chairmanship in 2027 to drive better AI infrastructure, regional AI adoption, and cross – border data flows (Straits Times, 17 June 2026). However, Singapore would also need to mitigate the adverse impact of technological and AI advancement on its own labour force. Singapore’s challenges and mitigating strategies might be useful lessons for other ASEAN member countries.

Singapore released its Labour Market Report Second Quarter on 21^st September 2026. Singapore is a trade dependent economy (Export to GDP is more than 300%), and exposed to geopolitical externalities and supply chain, tech and AI disruptions but had maintained resilient growth with employment growing by 11400 and unemployment rate at 1.9% overall with resident unemployment at 2.9%. However, retrenchments in outward oriented sectors have risen to 4620, the highest since 2020 during the Covid pandemic (Labour Market Report, Second Quarter 2025). 

This article aims to show that the constant challenge of technological disruption in employment caused primarily by AI has to be mitigated by key stakeholders. The dual track economy that is outward and inward oriented in Singapore will cause friction among the workforce if not properly managed. Of the 11400 jobs created, 9200 were in the outward oriented sector and filled by foreign labour (non-resident workers) mainly in construction and manufacturing. The remaining 2200 were in the domestic oriented sector and filled by resident workers (Labour Market Report, Second Quarter 2025). Table 1 below shows the disrupted sectors.

Table 1: Disrupted Sectors, Displacement Overview and Estimated Impact

In the domestic sector, the retrenchments are affecting more Professionals, Managers, Executives, and Technicians (PMETs) and degree holders. Rather than simple entry-level cost-cutting, companies are focusing on removing redundant layers of mid-to-senior management. In addition, resident workers in their fifties recorded the highest retrenchment incidence rate, climbing from 3.1 to 3.6 per 1,000 employees. 

The retrenchments are highly concentrated within outward-oriented sectors undergoing aggressive business reorganization and structural shifts. The hardest-hit sectors included manufacturing where retrenchments rose to 870 workers in Q2 (up from 670 in the previous quarter). Companies are aggressively consolidating operations, shedding general tech roles, and pivoting resources into artificial intelligence infrastructure.

Similarly, In the Information & Communications (I&C) sector, retrenchments climbed to 720 workers in Q2 (up from 530 in the previous quarter). However, these are post-Covid boom adjustments where companies are aggressively consolidating operations, shedding general tech roles, and pivoting resources into AI infrastructure. Table 2 below shows the outward and domestic sectors retrenchment.

Table 2:  Disrupted Outward and Domestic Sectors and Retrenchment Count

The Finance and Insurance sector is experiencing massive safe-haven wealth inflows because; First, Singapore has cemented its status as Asia’s premier wealth management hub. The expansion of the Variable Capital Company (VCC) regime has successfully attracted over 2,000 family offices and fund management companies. The total number of fund management companies grew rapidly to 1,320 (MAS Asset Management Survey Report, July 2026). Second, capital flows from regional ultra-high-net-worth individuals into Singapore’s top-tier private banks, directly boosted wealth management fees and created a strong pipeline of hiring for relationship managers, compliance specialists, and trust experts. 

Despite robust growth in high-end wealth management, many retail and commercial banking structures are optimizing headcount, using AI to replace routine transactional workflows, and streamlining middle-office roles. While core banking operations face tighter headcounts, corporate restructuring, turnaround, and risk advisory practices are actively hiring to manage corporate transformations.

Similarly, the insurance sector is experiencing a significant structural rebound, expanding far beyond traditional life policies. This is due to the investment-linked demand because life insurers reported a 21.4% year-on-year surge in total weighted new business premiums. Consumers are moving away from fixed deposits and doubling down on investment-linked and participating policies to grow wealth (Business Times,21 August 2026). Meanwhile, foreign insurers continue to use Singapore as their primary hub to capture growth across emerging markets in Southeast Asia. The financial sector is not growing in isolation because it is feeding into, and benefiting from, a sharp upward revision in Singapore’s GDP outlook. Singapore’s upgraded its full year 2026 GDP growth forecast to 4.5% to 5.5% from previous range of 2.0% to 4.0% (Ministry of Trade and Industry, Press Release, 11 August 2026).

The Information and Communications (I&C) sector is also marking a profound transition from the “explosive hiring boom” of previous years to a period of measured, highly targeted discipline. The I & C sector is experiencing a drop in overall vacancies down to 4,400 alongside rising retrenchments due to corporate restructuring. The hiring environment has stabilised around specific structural pillars (Accenture Report: Talent Reinventers). 

Rather than a broad market decline, the stabilisation is driven by a distinct shift in what and how companies are hiring:  First, the “Structural Upgrading” of technical roles because hiring has shifted dramatically away from routine, rules-based tasks towards high-value capabilities. Second, the automation of junior roles, the overall technical volume has stabilised because employers are upgrading the baseline requirements for these positions. Third, the drop in generic roles is balanced by sharp demand for specialized talent. Over 70% of current openings in the sector are for newly created roles rather than backfills, particularly for software engineers, web developers, and multimedia creators. Fourth, the digital risk landscape in Southeast Asia has become significantly more complex, turning specific digital safeguards into operational imperatives. 

In order to address increased retrenchments and lack of entry level vacancies for resident labour, the government has implemented national upskilling initiatives. First, the Infocomm Media Development Authority (IMDA) has expanded its TechSkills Accelerator framework with a goal to upskill 40,000 tech professionals to combat AI disruption. Second, targeted pathways where programmes like the Jobs Transformation Map actively guide mid-career professionals away from highly automated roles (like basic infrastructure or applications support) into resilient digital specialisations. Table 3 below shows the growth sectors. 

Table 3: Growth Sectors in Singapore Economy

The financial, insurance, communications and information sectors showed that continued growth requires restructuring and reorganization of job scopes and business organisations. The PMET category that employs the bulk of resident labour will be impacted the most by AI.  Employers will value highly worker skill sets that complement their company restructuring with digitalization and AI tools. Therefore, employment portfolios are needed to highlight relevant skill sets.

In conclusion, the domestic oriented sectors as they are restructuring are also driving resident employment growth and absorbing PMETs in Singapore. While outward-oriented sectors are actively restructuring, domestic industries are serving as the primary buffer for local talent. For example, growth industries like the transport and storage or logistics sector are experiencing heavy operational expansion to support global and regional logistics. The public administration and education sectors are also absorbing a steady stream of administrative, structural, and educational professionals. In addition, the health and social services sector is seeing persistent, non-cyclical demand for healthcare executives, operations managers, and specialised medical coordinators. However, stakeholders like the government, workers – unions and employers have to ensure that the skills mismatch is reduced through appropriate retraining at scale, better funding, and predictive forecasting of employment trends. 

About Dr. Faizal Yahya

Dr. Faizal Yahya is a Senior Research Fellow with the Institute of Policy Studies, Lee Kuan Yew School of Public Policy at the National University of Singapore. He is in the Governance and Economy Department. His current research interests includes, business transformation, human capital development, state led development, industrial policy, connectivity, foreign trade and economic regionalisation among other themes. Prior to entering academia, he was working in the Ministry of Foreign Affairs and the Ministry of Sustainability and the Environment.

View all posts by Dr. Faizal Yahya →