Population Plan for Singapore: Pausing the growth in foreign workforce & improving fertility rate

7/29/2019 Population Plan for Singapore: Pausing the growth in foreign workforce & improving fertility rate

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National Solidarity Party Singaporeans: Bold & Beautiful

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Population Plan for Singapore:Pausing the Growth in Foreign Workforce &Improving Fertility Rate

By

National Solidarity PartyBryan LongHazel PoaRavi PhilemonTony Tan


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Executive Summary

1 This Paper seeks to:

i. Point out that population density adversely affects fertility rate. Looking at the databoth internationally and domestically, we can see that when population densityincreases, fertility decreases. This is supported by independent research in Austria.Increasing our population to 6.9 million by 2030 is therefore likely to further depressour fertility rate, creating a vicious cycle. We need to focus on improving our fertilityrate if we want to continue growing our economy with minimal social problems.

ii. Point out that the declining old age support ratio (OASR) in 2030 does not justifybringing in new citizens now. Firstly, economic support of the aged is shared by thewhole labour force including citizens and non-citizens. Granting citizenship is notnecessary. Secondly, if the low old age support ratio is a concern, then the foreignlabour force should only be increased when OASR (calculated using the wholelabour force, not just citizens) falls too low, not now, when our OASR is very high by

international standards. In fact, bringing in adult new citizens now further add to thesize of our aged population beyond 2030.

iii. Conclude that low fertility rate and declining OASR are not the reasons for theliberal immigration and population growth plan.

iv. Point out that our foreign labour policies is depressing the wages of lower skilledSingaporeans and driving up income inequality

2 NSP proposes to:

i. Focus on improving fertility rate by addressing families needs on housing,education and cost of living:

HDB:

(a) HDB housing for joint selection by first timers and parents, i.e. young couplesand their parents select their flats together so that they can choose separateunits close to each other (e.g. within the same block but at different levels), foreasier child care arrangements and future eldercare arrangements.

(b) Remove resale levy for parents to move near their child

(c) Stop shrinking HDB flats

(d) Free upgrade to larger flats (upgrade by one room, max 5 room flat) with 3 ormore children

Education

(e) Primary 1 registration priority for children in families with 2 or more children

(f) Further subsidies for tertiary education: 2nd child to enrol in local tertiaryeducation institutions pay half the fees, 3rdand subsequent child free

(g) Abolish PSLE to reduce stress, and the need to pay for supplementary classesfor parents who can ill afford them


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Others(h) Free delivery and hospitalisation for 3rd and subsequent child

(i) All benefits for children to similarly apply to single parents, not for economicreasons, but because we empathise and we care

ii. Focus more on wage growth and overall quality of life rather than immediateeconomic growth:

(a) New citizens limited to under 10,000 per year

(b) Pause the growth in foreign workforce until productivity grows at more than 1.5%and public infrastructure has been expanded

(c) Uniform quota of 33% for S Pass and E Pass

(d) Higher Development Expenditure for Densely Populated Singapore

3 PAPs population plan places at its core immediate economic growth. It continues tobelieve that economic growth, however derived, will lead to better lives for the people. Theirproposal is a continuation of current policies, but with added promises that infrastructure will bebuilt up quickly to accommodate the larger population, one that grows at about 94,000 per year onaverage.

4 The trade-off will therefore continue to be the same: higher population density,

overcrowded public spaces and infrastructure (which may be relieved if the government can keepto its development plans and schedule), unequal distribution of income, limited resources beingshared by more people, higher asset prices, higher COE, and higher cost of living.

5 Contrary to its claim, there is no sustainability in this plan. Even if we accept the PAPsassurance that growing the population to 6.9m by 2030 will bring about greater prosperity for manySingaporeans, what happens after 2030? Grow the population some more?

6 Over the longer term, seeking productivity growth is still what we will have to come back to.We need to stop kicking the can further down the road.

7 NSP would like to offer Singaporeans an alternative plan, one which is more sustainable,focusing more on wage growth and overall quality of life rather than immediate economic growth.We therefore propose to pause the relentless rapid growth in population, give time forSingaporeans to raise their fertility rate, a chance for lower income Singaporeans to level up theirwages, and create the necessity for companies to innovate and to raise productivity, ultimatelylifting everybodys wages over the longer term.


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Part 1: Population Density and Fertility Rate

1. Singapore has been inducting new citizens at a rate of 16,000-20,000 per year in 2009 to20111. We have been told this is due to our low fertility rate and ageing population.

2. The National Population and Talent Division did a projection of our citizen population andpresented 5 scenarios as shown in figure 1 below to justify an annual intake of about 15,000-25,000 new citizens.

Figure 1 Citizen population under 5 scenarios

Source: Straits Times, 25 April 2012

3. Since the governments solution to our low fertility rates involves massive increase in foreigners,as high as 19% in 2008, and Permanent Residents (PRs), as high as 11.5% in 2009, it isappropriate to examine how population density and the percentage of foreigners in thepopulation may affect fertility rate. Figure 2 below shows the fertility rate of various countries.

Figure 2 Fertility Rate vs Year (1995-2010)Source: http://www.worldbank.org/

1Population in Brief 2012, 2011 and 2010, NTPD


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4. For comparison purposes, we look at the fertility rates of a few European countries, USA,Japan, South Korea, Hong Kong, Macau and Singapore. Of these countries, all exceptSingapore has seen an improvement in their fertility rates over the last decade. Macau, HongKong and Singapore shared one of the lowest fertility rates.

5. By examining the population density graph in figure 3, it is observed that the regions with thehighest population density also have the lowest fertility rate. The correlation is even strongerwhen considering Singapores fertility rate from 1995 to 2010 (See Figure 3c).

Figure 3a Population Density vs Year (1995-2010)Source: http://www.worldbank.org/

Figure 3b:2010 Fertility Rate vs Population Density (International)

0

0.5

1

1.5

2

2.5

0 5000 10000 15000 20000 25000

fertility

Rate

Population Density


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6. The graph in figure 4a quantifies the percentage of foreigners in a country and it suggests thatregions with the highest percentage of migrants in its population also have the lowest fertility.

Figure 4a Percentage of Immigrants vs Total Population versus Year (1995-2010)Source: http://www.worldbank.org/

7. Figure 4b examines the correlation between the percentage of foreigners in a country andfertility rate. The correlation is weaker.

0

0.2

0.4

0.6

0.8

1

1.21.4

1.6

1.8

5000 5500 6000 6500 7000 7500

Fertility

Rate

Population Density

Figure 3c: Singapore Fertility Rate from 1995 to 2010 vs

Population Density


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8. A study by researchers working in 3 research institutions in Austria also reached the conclusionthat population density is a key factor in declining human fertility. Their report is available athttp://link.springer.com/article/10.1007/s11111-007-0037-6.

9. Increasing our population to 6.9 million by 2030 is therefore likely to further depress ourfertility rate, creating a vicious cycle. We need to focus on improving our fertility rate ifwe want to continue growing our economy with minimal social problems.

0

0.5

1

1.5

2

2.5

0 10 20 30 40 50 60

Fertility

Rate

% Migrant Population

Figure 4b: 2010 Fertility Rate vs Migrant Population

(International)


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Part 2: Old Age Support Ratio (OASR)

10. The government has also used the declining old-age support ratio (number of those aged 20-64 for each aged 65 & above) as the reason for bringing in hordes of new citizens each year.This is shown in figure 5 below. Why is this argument spurious?

Figure 5 Old Age Support Ratio for Singapore

Source: Straits Times, 25 April 2012

11. The economic support of the aged is shared by both citizens and non-citizens in the workforce.The above OASR is calculated using only citizens, thus making the burden appear heavierthan it actually is. While OASR in other countries is also generally calculated using onlycitizens, few countries in the world has such a high percentage of foreign workforce asSingapore (as shown in figure 4a).

12. Figure 6 shows the various OASR, calculated using (i) citizens only, (ii) residents only, and (iii)residents and non-residents. Our current old age support ratio (OASR) is 5.9 when we onlyconsider citizens, 6.7 when we include PRs, and 9.8 if we include both residents and non-residents.

2001 2006 2011 2012

Citizens Only 8.2 6.9 6.3 5.9

Residents (Citizens &PRs) 8.8 7.8 7.2 6.7

Residents and Non-Residents 11.6 10.2 10.5 9.8

Figure 6 Old Age Support Ratio for Singapore 2001 2012 (See Annex A for details.)

13. An OASR of 9.8 makes us one of the highest in the world. Annex B shows the OASR aroundthe world in 2008. Turkey had the highest OASR of 9.9 in OECD in 2008. China had an OASRof 7.9 in 2008. The OASRs of US, UK, Germany and Japan in 2008 were 4.7, 3.7, 3.0 and 2.8respectively.


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14. The OASR is especially important to countries with a pension system as their workingpopulation need to generate sufficient tax revenue to pay the pensions. In Singapore, however,most of our working population have moved away from the pension system into the CPFsystem, with the exception of Ministers.

15. Given that our OASR is currently high, there is no reason to bring in new citizens now. This isbecause when we bring in new citizens of working age now, they become part of our aged 20 -30 years later, contributing further to our aged population in 2030 and beyond.

16. If low OASR is the reason for immigration, we should only start to take in people of working agewhen the OASR has fallen below a comfortable level. In addition, we challenge the necessityto do so by granting citizenships instead of merely granting work permits or employmentpasses. If the intention is to attain the economic contributions of foreigners, the same can beachieved by granting them the necessary permits to work in Singapore. Upon retirement, theycan return to their home country.

17. Conversely, if we grant citizenship, we also take on the responsibility of taking care of them

after retirement, and they will also contribute to our aged population thirty years later. In thisday and age of global mobility, the granting of citizenship also does not ensure that the newcitizens will continue to work in Singapore. It is also foreseeable, and understandable, thatnew citizens would wish to bring in their parents, further adding to our aged population.

18. Therefore, declining OASR cannot be the reason to justify liberal immigration.Citizenships should not be granted liberally in order to maintain a citizen populationnumber. It should be granted where individuals have contributed to the nation, and areable to fit well into local culture and values.


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Part 3: Negative Productivity Growth & Suppressed Wage Growth for Lower-incomeSingaporeans

19. While NSP acknowledges that the increase in new citizens and non-citizens will lead to growthin the workforce and in turn, contributes to Growth in GDP (see figure 7), excessive growth innon-citizens will bring about 2 ills: negative productivity growth and suppressed wage growth

for the lower income Singaporeans.

Figure 7 Growth in GDP Source: MTI

20. Though our government has set a target growth of 2-3% productivity growth target, our current2012 negative quarterly productivity growth (see figure 8) looks worrying, and it indicates thatwe are growing our labour force faster than the growth in goods and services produced.

2008 2009 2010 2011 2012Qtr 1 Qtr 2 Qtr 3

TotalLabourProductivity

-7.3% -3.6% 11.1% 1.0% -2.2% -1.5% -3.5%

Figure 8 Total Labour ProductivitySource: Singapore Department of Statistics and Manpower Research & Statistics Department, Ministry of Manpower

21. A breakdown of the foreigners in 2012 in Singapore is as shown overleaf in figure 9. Nearly half(46%) of the foreigners in Singapore are Work Permit Holders excluding foreign domesticworkers (WP will henceforth be used to represent this category of foreigners working inSingapore) and more than half of the WP is employed in the manufacturing and constructionsectors. As Singapore strives to move up the higher value added industries, it makes sense forSingapore to limit the number of WP.

22. Furthermore, the ease of access to cheap labour through WP further depresses the wages ofthe lower income Singaporeans and creates an income divide. An extract from Paper by MOMand Singapore Department of Statistics titled: Singaporeans in the Workforce confirmed thatlower income Singaporeans did not enjoy any real income growth (i.e. growth in earning merelykeep pace with inflation) from 2001 to 2010, even while real economic growth for Singaporeincreased by 75% over the same period.

Extract from Paper:


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Figure 9 Breakdown of Population in Singapore in 2012

23. The government should continue to restructure the economy, moving Singaporetowards higher value-added industries. In the long run we can no longer be cheaper andfaster, or cheaper and better. We need to be better and faster, and accept the fact thatwe will be more expensive. Singapore should limit the number of foreign workers. Indoing so, companies will have to restructure with Singaporeans as their coreemployees. Lower income Singaporeans working in these industries will benefit byearning higher wages, as companies would have to pay better to attract locals to take upthese jobs.


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Part 4: NSPs Proposals

(I) Improving Fertility Rate

24. We need to be more aggressive in raising our fertility rate. The Baby Bonus scheme has beenin place since 2001 and our fertility rate has continued its steady decline for the past 12 years.

They have been proven ineffective. Further tweaking the quantum of bonus is highly dubiousand raises questions about the Governments level of commitment to raise the fertility rate.

25. In the recent parenthood survey, the average number of children couples intended to have is2.2, but the actual average number of children they ended up having is only 1.5. NSPrecognises that marriage and having children are personal choices, but for those who wouldlike to have more children, we should make it easier for them to do so.

26. The main obstacles facing parents who would like to have more children are as follows:

(a) High cost of greater living space for more children The high correlation between

population density and fertility rate underscore the importance of sufficient living space. InSingapore, high property price is a significant barrier.

(b) Education Financial burden of tertiary education and pre-school, high stress educationsystem are issues parents need to grapple with.

(c) High cost of living makes dual income a necessity for most households. Long workinghours and stressful working life leaving little time and energy for raising children and child-care arrangement is a huge concern.

27. NSP proposes the following:

HDB:

(j) HDB housing for joint selection by first timers and parents, i.e. young couples and theirparents select their flats together so that they can choose separate units close to eachother (e.g. within the same block but at different levels), for easier child care arrangementsand future eldercare arrangements.

(k) Remove resale levy for parents to move near their child

(l) Stop shrinking HDB flats

(m) Free upgrade to larger flats (upgrade by one room, max 5 room flat) with 3 or more children

Education

(n) Primary 1 registration priority for children in families with 2 or more children:


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Phases Current Criteria Proposed Criteria1 Child with a sibling in the school1A Child with at least 2 other siblings (i.e.

parents have 3 or more children)2A(1) Parent is in the Alumni, or member of

School Advisory or ManagementCommittee2A(2) Parent is an old student or teacher in

the school2A(3) Child with 1 other sibling (i.e. parents

have 2 children)2B Parent is a volunteer, or member of

connect church/clan, or activecommunity leader

2C Others

Figure 10 Primary 1 registration priority for children in families with 2 or more children

(o) Further subsidies for tertiary education: 2nd child to enrol in local tertiary educationinstitutions pay half the fees, 3rdand subsequent child free.

(p) Abolish PSLE to reduce stress, and the need to pay for supplementary classes for parentswho can ill afford them.

Others(q) Free delivery and hospitalisation for 3rd and subsequent child

(r) All benefits for children to similarly apply to single parents, not for economic reasons, butbecause we empathise and we care

(II) Citizenship and Foreign Labour Force

28. At the heart of our policy proposals, is the core consideration that the well-being of our peopleshould come first, including that of the weakest members of our society. Economic growth isdesirable only to the extent that it improves the quality of life of Singaporeans.

29. NSP refute the argument that massive import of new citizens and foreign workers are neededbecause of our low fertility rate and ageing population. We contend that this policy will furtheraggravate our low fertility rate and lead to a vicious cycle. With our OASR at 9.8, high by

international standards, there is no justification for further increase in our foreign workforce nowfor demographic reasons. In future, closer to 2030, if we are still unable to raise our fertilityrate, and our OASR falls below 4, we can then reconsider the import of foreign labour fordemographic reasons.

30. The only reason for further immigration is for economic growth, but this growth has come at acost of greater income inequality, overcrowded public spaces and infrastructure, higher assetprices, higher cost of living, and higher social friction. This does not enhance the well-being ofSingaporeans.


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31. NSP proposes the following measures:

a. New citizens under 10,000 per year

NSP supports that talented and distinguished individuals be embraced as citizens. Ournatural increase in citizen population (birth minus death and those who renounces

citizenship) is about 20,000 to 25,000. NSP proposes that new citizenships belimited to no more than half of that, i.e. 10,000 per year. At the same time, weshould strive in the next 5 years to improve our fertility rate.

b. Pause the growth in foreign workforce until productivity grows at more than 1.5%and public infrastructure has been expanded

WP(workers earning less than $2000 per month excluding Foreign Domestic Workers):Pause the growth in the number of work permit holders so that wages of lower-income Singaporeans are not further depressed. In 2011, we have 464,000 Singaporeresidents earning under $1500 per month. We have brought in 685,400 work permitholders to compete with them for jobs. This has resulted in a large downward pressure

on the wages of the poorest Singaporeans. If the number of work permit holderscontinue to increase while productivity declines, the wages of lower incomeSingaporeans will be further squeezed. Companies that wish to expand will either haveto offer higher wages to attract locals, or innovate to produce more with less manpowerthus improving productivity.

c. Uniform quota of 33% for S Pass and E Pass

Currently, a quota of 20% is imposed on S pass holders (those earning between $2000and $3000 per month) while there is no limit to the number of E pass holders (thoseearning at least $3000 per month) a company may employ. NSP proposes to imposeone uniform quota of 33% throughout for equal protection across all salary levels.

This also removes the incentive for fraudulent declaration of salary to benefit from thelack of quota for E Pass.

d. Higher Development Expenditure for Densely Populated Singapore

Over the past two decades, the proportion of development expenditure versusoperating expenditure has been dropping. In FY 1996, development expenditure was40% of the total expenditure, while operating expenditure was 60% of total expenditure.In 2001 36%, 2009 26%, and in 2011, development expenditure has dropped to 25% oftotal expenditure. We have been under-investing in our public infrastructuredevelopmental projects. We need to adjust our budget to put more into building publicinfrastructure, especially housing, healthcare and transportation, and less on

operational budget, in order to support our population and economic growth strategy.

1996 2,001 2006 2007 2008 2009 2010 2011

Developmentexpenditure (S$million) $9,600 $9,999 $6,412 $6,983 $8,880 $10,612 $11,295 $11,761

Percentage of Totalexpenditure 40% 36% 21% 22% 24% 26% 26% 25%

Operating expenditure(S$million) $14,500 $17,846 $23,463 $24,352 $28,590 $29,871 $32,755 $35,011

Percentage of Totalexpenditure 60% 64% 79% 78% 76% 74% 74% 75%

Total expenditure(S$million) $24,100 $27,844 $29,875 $31,334 $37,470 $40,483 $44,049 $46,771

Figure 11 Development and Operating Expenditure 1996-2011 Source: Singapore Budget


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Impact on Businesses and Prices

32. It is anticipated that pausing the growth in foreign workforce will lead to renewed claims ofshortage of manpower from some companies that rely on cheap foreign labour. It is often

claimed that Singaporeans just do not want to do certain jobs.

33. Recently, Sakae Sushi offered $3000 per month for dishwasher jobs. Their HR Departmentsaid they received many applications. This shows that it is not just about the nature of jobs, butalso the salary that is offered. If the salary is raised sufficiently high, there will be takers. If acertain job is onerous, there will be few takers until the salary is raised high enough tocompensate. If that gets too high, higher than the cost of automation or job redesign,companies will choose to automate or redesign jobs, thereby increasing productivity. However,when we allow companies easy access to cheap foreign labour, this adjustment process ishijacked and salaries remain low for these jobs.

34. Companies with healthy profit margins should be able to adjust to the higher manpower cost atthe lower income level. They can either (i) accept lower profit margins, (ii) re-distribute salariesamongst the higher-income and lower-income staff and directors, or (iii) raise productivity.50.5% of Singapores GDP in 2011 is corporate profits.

35. However, we do recognise that there may be some small local SMEs without the healthy profitmargins to adapt to the higher salaries at the lower end, and may not have the resources toautomate. To help them maintain their cost, we can (i) be more lenient in applying the quotafor the very small SMEs employing no more than 5 employees, and (ii) look at reducing othercomponents of their overall business costs, particularly foreign workers levy, transportationcost and rent. These, however, will be the scope of another subsequent paper and touches onother Government policies.

36. It is therefore possible to maintain the overall business cost by adopting a multiple-throngedapproach. In any case, a rise in wages of say 10% will result in an overall rise in cost of lessthan 10%, if other components remain unchanged. Supposing wage cost is 30% of overallcost, then a 10% rise in wages will raise overall cost by 3%. The resultant price increase of 3%can be covered by the 10% increase in wages.

37. It is necessary for businesses reliant on cheap foreign labour to adjust their business modelssooner or later, even if the Government does not apply the brakes. The rapid economicdevelopments in other countries are leading to higher wages in their home countries such thatit would no longer be attractive for them to come to Singapore to work for low wages. Thesupply is going to dry up and alternative solutions will be needed.


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Conclusion

38. PAPs population plan places at its core immediate economic growth. It continues to believethat economic growth, however derived, will lead to better lives for the people. Their proposalis a continuation of current policies, but with added promises that infrastructure will be built upquickly to accommodate the larger population, one that grows at about 94,000 per year onaverage.

39. The trade-off will therefore continue to be the same: higher population density, overcrowdedpublic spaces and infrastructure (which may be relieved if the government can keep to itsdevelopment plans and schedule), unequal distribution of income, limited resources beingshared by more people, higher asset prices, higher COE, and higher cost of living.

40. Contrary to its claim, there is no sustainability in this plan. Even if we accept the PAPsassurance that growing the population to 6.9m by 2030 will bring about greater prosperity for

many Singaporeans, what happens after 2030? Grow the population some more?

41. Over the longer term, seeking productivity growth is still what we will have to come back to.We need to stop kicking the can further down the road.

42. NSP would like to offer Singaporeans an alternative plan, one which is more sustainable,focusing more on wage growth and overall quality of life rather than immediate economicgrowth. We therefore propose to pause the relentless rapid growth in population, give time forSingaporeans to raise their fertility rate, a chance for lower income Singaporeans to level uptheir wages, and create the necessity for companies to innovate and to raise productivity,ultimately lifting everybodys wages over the longer term.


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Annex AAge Old Support Ratio in Singapore 2001-2012

2001 2006 2011 2012

Residents 8.8 7.8 7.2 6.7

Citizens 8.2 6.9 6.3 5.9

Residents and Non-Residents 11.6 10.2 10.5 9.8

Number of Residents('000) 3325.9 3525.9 3789.3 3818.2

Percentage of Residentsaged 65 & above 7.3 8.4 9.3 9.9

Number of residentsaged 65 & above ('000) 242.8 296.2 352.4 378.0

Number of Non-Residents ('000) 812.1 875.5 1394.4 1494.2

Number of Non-residents employed

(000) [Assumed to beaged 20-64] 686.2 713.2 1157.0 1177.0

Basis for the calculation1. Data are obtained from Ministry of Manpower and Singapore Statistics, and State of the Elderlyin Singapore 2008/2009 by the former MCYS.2. The non-residents who are employed are all aged 20-64.3. The non-residents employed exclude those who are students and dependents ofcitizens/PR/work pass holders.


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Annex BAge old Support Ratio Around the World


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Annex C

Distribution of Foreign Workers in the Various Industries

Population Plan for Singapore: Pausing the growth in foreign workforce & improving fertility rate

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