A report published by two university economists said foreign workers took three of every four jobs created between 1997 and 2002.
The study was front page news and sparked an angry denial from the government.
Acting manpower minister Ng Eng Hen said that in reality nine out of 10 new jobs during this period had gone to Singaporeans.
The economists later admitted they had made an "honest error".
Open door policy
The controversy is likely to persist as questions remain over Singapore's policy of openness towards foreign workers, who account for about 24 percent of the work force.
Unemployment is at 4.5 percent - the highest since a recession in the 1980s - and workers currently employed are being asked to agree to steep wage cuts as the economy struggles to emerge from the impact of SARS and a global economic slowdown.
The economists' report could not have come at a worse time for Prime Minister Goh Chok Tong, according to Song Seng Wun, a regional economist with GK Goh brokerage.
Government figures that Singaporeans took 90 percent of jobs created between 1997 and 2002 "may not be taken as gospel truth by the man on the street," Song said.
"Unless the people are locked up behind bars, they can see for themselves how many foreigners are here in Singapore."
Foreigners manage many top companies here, while labourers from China and Bangladesh are the mainstays of the construction industry.
Professionals, engineers and architects from Malaysia, the Philippines and other countries are fixtures in offices.
During a recent dialogue, Singapore's founding father and current senior minister, Lee Kuan Yew, was asked by a trade unionist why some Singaporeans working for a local firm were retrenched, while Filipinos receiving higher salaries were retained.
"Unless the people are locked up behind bars, they can see for themselves how many foreigners are here in Singapore"
Song Seng Wun
Regional economist with GK Goh brokerage.
"Our boys served their national service," the 30 months of military training mandatory for all able-bodied Singaporean men, the interlocutor emphasised.
But about 41 percent of Singapore's gross domestic product growth in the 1990s came from foreign workers, according to a Ministry of Trade and Industry report in 2001.
Without overseas workers, Singapore could not have achieved an average quarterly growth of 7.8 percent during the period, said the report cited by the Straits Times on Saturday.
The government's employment policy has long won support from the international community and analysts have warned backtracking on the open-door attitude to foreigners would hurt Singapore's economy.
"Tightening restrictions on foreign workers could prove counterproductive," said Michael Backman, an Australian economist, author and commentator on Asian political and economic affairs.
"Foreign workers attract investment to Singapore and help to promote trade. Rather than take jobs from Singaporeans it's quite possible that their presence helps to create jobs."
In the end, companies will continue to hire foreigners if they find them cheaper.
"A lot of this involves the economics of trying to save costs," said Nizam Idris, a regional economist with research house IDEAglobal.
"If it means employing cheaper foreign labour so be it."