Primer [immigration]
1
JOIN us for The Big Quiz! For registration details, news reports on school talks and students’ responses, go to www.straitstimes.com/ thebigquiz/ L View clips from school talks at www.razortv.com.sg L Student teams will compete for the top cash prize of $5,000 and a trophy. The next best teams will receive $3,000, $1,000 and $500 respectively. The competition is open to students in the first year of junior college or the equivalent, such as Year 5 of a six-year integrated programme. Teams of three students and a reserve will slug it out over four rounds this month and the next. Questions will be based on reports in The Straits Times. L Upcoming talks: Today, Anglo-Chinese Junior College. Next week’s primer topic is on the environment. Readers with questions on primer topics can e-mail them to stprojects@sph. com.sg L Does Singapore need foreign workers and immigrants for economic growth? THE short answer is yes. This has been true for most of Singapore’s recent history be- cause of its limited local popula- tion and a declining fertility rate. Traditional economic growth theory explains that the more fac- tors of labour and capital are add- ed, the faster the economy ex- pands. The efficiency of labour is determined by its productivity. The higher the productivity, the faster the growth. By adding foreign workers to the local labour force, Singapore’s economy can grow even faster than its potential might have al- lowed – likened by some to ster- oids that enhance performance. Singapore has used levies and quotas to manage the foreign worker inflow, while making sure the economy did not overheat. For most of its history, this has worked. But in the last 10 years, the foreign workforce has increased much faster than anticipated. The foreign labour force ex- panded from 605,000 in 2003 to 1.19 million people at the end of last year. The Government has explained that it allowed more foreign work- ers to enter Singapore to ride on a strong wave of growth after its economy suffered a period of weak growth at the century’s start. In 2000, the dot.com bubble burst in the United States, and not too long after, the Sars crisis followed in 2003. The economy stabilised and grew after that. Prime Minister Lee Hsien Loong explained in 2006: “When the conditions are good and the sun is shining, we should go for it, as fast as we can, as much as we can.” But there are drawbacks to using large numbers of foreign workers to drive growth. The first is that there is less in- centive to raise productivity, espe- cially in sectors where large num- bers of foreign workers are al- lowed such as in construction. Productivity growth aver- aged 1.7 per cent a year over the past decade, falling from an average of 2.5 per cent between 1995 and 2000. It creates a vicious cir- cle: Cheap foreign workers depress wages for some jobs, fewer locals are will- ing to do the work, and companies are forced to de- pend on foreigners. A second effect is that wages at the bottom have stagnated. The median monthly household income grew 1.8 per cent in real terms – after inflation is accounted for – each year from 2001 to 2010. But the monthly household in- comes of the poorest fifth grew on- ly 0.8 per cent in real terms over the same period. A third effect is rising income inequality. As wages at the bot- tom fall, wages at the top are pushed up by the very top earners who include locals, as well as for- eigners and immigrants. Result: a widening income gulf in between. The top fifth of employed households earned 12.9 times that of the bottom fifth last year. The rapid influx of foreigners in the last decade has also led to unhappiness over crowded trans- port and public spaces, clashes over the location of foreign work- er dormitories, and strong de- mand for housing driving prices to record highs. This has sparked debate on whether Singapore should go for slower growth so it does not need so many foreign workers. Tweaking numbers THE prevailing thought has been to pursue productivity, and to re- duce the reliance on foreign la- bour. The Government has acted to slow the inflow of foreigners, to raise wages at the bottom and to boost productivity. By July next year, the levies for foreign workers are set to increase to between $300 and $600 for those in construction and ser- vices, and $250 to $550 for those in the manufacturing sector. Dependency ratio ceilings, which determine how many for- eigners a company can employ for every Singaporean, have also been reduced across the board. At the higher income end, S-Pass and employment pass crite- ria have been raised, making it tougher for companies to bring in foreign professionals. Permanent residency and citi- zenship are also being given out in smaller numbers than before. The Government has acted on the social aspects as well. It has recently raised the in- come requirements for foreigners who want to sponsor their family members to live in Singapore. But is it too much, too soon? Or not enough? Some foreigners are growing wary of Singapore turning “an- ti-foreigner”, despite wanting to remain open. Singapore firms have been in a tizzy over the tighten- ing of the tap, with many small and medium-size firms warning that the costlier lev- ies and difficulty in finding Singa- porean workers may force them to shut down. During the restructuring, economists say unemployment will probably rise. And PM Lee has said: “Because it’s not as if you send away all the foreign workers or keep out all the foreign workers, then we live in paradise. There is a price, and it’s quite a high price to pay. As we try to manage the population in Singapore, we are going to also ac- cept a lower growth rate.” With fewer foreign workers, la- bour inputs are reduced, leading to slower growth. But slower economic growth can lead to higher wages, econo- mists say, if it is driven by produc- tivity increases. A more productive worker can do the job of more workers, and should therefore be paid a higher wage for doing more with his time. This would help to raise wag- es at the bottom, and reduce the need for foreign labour. As Economic Society of Singa- pore vice-president Yeoh Lam Keong has argued: “We should grow at our potential where la- bour force growth is restrained to a low rate estimated to be around 0.5 per cent to 1 per cent, that both enables incen- tivisation of productivity growth and does not lead to an overcrowded population.” Based on 2 per cent to 3 per cent productivity growth a year, and popula- tion growth of not more than 1 per cent, Singa- pore’s optimal growth rate is around 2 per cent to 4 per cent, he said. This is lower than the 3 per cent to 5 per cent the Govern- ment has previously esti- mated. But raising productivi- ty is no easy feat. Busi- nesses will have to change their attitudes after being reliant on foreign labour. Some employers may hope that the Government will re- open the tap for temporary relief. But there is no in- dication it will do so. Singapore- ans too will have to adjust their life- styles with fewer foreign workers. They will have to take up jobs now filled by large numbers of foreign work- ers, such as construction workers, factory machine operators or wait staff. But they will demand high- er salaries. Will companies be pre- pared to pay more for these ser- vices? And if they do, the price of goods and services will surely rise. How will Singaporeans ad- just and adapt? And at the top end of the skills spectrum, other countries are competing for the same pool of foreigners that Singapore may re- linquish. Australia recently tweaked its immigration policy to boost the economy and woo workers to jobs shunned by its citizens. A new visa category is being created to give permanent residency to wealthy migrants who invest at least A$5 million (S$6.5 million) in the country. Singapore is feeling the stress- es and strains of a decade of growth assisted by the steroid of a large pool of foreign workers. The conversation on foreign workers and immigration has cer- tainly changed, but Singaporeans should be wary of the tide turning too much against foreigners. Singapore does not have the lo- cal population needed to drive the fast growth of the past. Growth can therefore come from produc- tivity, or foreign workers, or both. Unless productivity increases dramatically, or the birth rate ris- es sharply, Singapore will contin- ue to need foreign workers, even if it is in smaller numbers. [email protected] By ROBIN CHAN POLITICAL CORRESPONDENT Think you know it all? This primer is the ninth instalment of a 12-part series in the Opinion pages, in the lead-up to The Straits Times-Ministry of Education National Current Affairs Quiz. PRIMER Foreigners still needed for growth WHAT DRIVES GROWTH? ST GRAPHICS 1,200 1,000 800 600 400 200 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 GDP (% Growth) Foreigners in labour force ('000) A liberal foreign worker policy has helped spur economic growth, but also caused strains in the economy Source: MINISTRY OF MANPOWER -3 0 3 6 9 12 15 4.9% 1,157,000 foreign workers 1,157,000 foreign workers Financial crisis A30 O P I N I O N FRIDAY, JULY 20, 2012
Transcript of Primer [immigration]
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JOIN us for The Big Quiz!For registration details,news reports on schooltalks and students’responses, go towww.straitstimes.com/thebigquiz/L View clips from schooltalks atwww.razortv.com.sgL Student teams willcompete for the top cashprize of $5,000 and atrophy. The next best teamswill receive $3,000, $1,000and $500 respectively.
The competition is opento students in the first yearof junior college or theequivalent, such as Year 5of a six-year integratedprogramme. Teams of threestudents and a reserve willslug it out over four roundsthis month and the next.
Questions will be basedon reports in The StraitsTimes.L Upcoming talks: Today,Anglo-Chinese JuniorCollege.
Next week’s primer topicis on the environment.Readers with questions onprimer topics can e-mailthem to stprojects@sph.
com.sg
L Does Singapore need foreignworkers and immigrants foreconomic growth?
THE short answer is yes.This has been true for most of
Singapore’s recent history be-cause of its limited local popula-tion and a declining fertility rate.
Traditional economic growththeory explains that the more fac-tors of labour and capital are add-ed, the faster the economy ex-pands. The efficiency of labour isdetermined by its productivity.The higher the productivity, thefaster the growth.
By adding foreign workers tothe local labour force, Singapore’seconomy can grow even fasterthan its potential might have al-lowed – likened by some to ster-oids that enhance performance.
Singapore has used levies andquotas to manage the foreignworker inflow, while making surethe economy did not overheat.
For most of its history, this hasworked.
But in the last 10 years, theforeign workforce has increasedmuch faster than anticipated.
The foreign labour force ex-panded from 605,000 in 2003 to1.19 million people at the end oflast year.
The Government has explainedthat it allowed more foreign work-ers to enter Singapore to ride on astrong wave of growth after itseconomy suffered a period ofweak growth at the century’sstart.
In 2000, the dot.com bubbleburst in the United States, andnot too long after, the Sars crisisfollowed in 2003. The economystabilised and grew after that.
Prime Minister Lee HsienLoong explained in 2006: “Whenthe conditions are good and thesun is shining, we should go for it,as fast as we can, as much as wecan.”
But there are drawbacks tousing large numbers of foreignworkers to drive growth.
The first is that there is less in-centive to raise productivity, espe-cially in sectors where large num-bers of foreign workers are al-lowed such as in construction.
Productivity growth aver-aged 1.7 per cent a year overthe past decade, fallingfrom an average of 2.5 percent between 1995 and2000.
It creates a vicious cir-cle: Cheap foreign workersdepress wages for somejobs, fewer locals are will-ing to do the work, andcompanies are forced to de-pend on foreigners.
A second effect is thatwages at the bottom havestagnated.
The median monthlyhousehold income grew1.8 per cent in real terms– after inflation is accounted for– each year from 2001 to 2010.
But the monthly household in-comes of the poorest fifth grew on-ly 0.8 per cent in real terms overthe same period.
A third effect is rising incomeinequality. As wages at the bot-tom fall, wages at the top arepushed up by the very top earnerswho include locals, as well as for-eigners and immigrants. Result: awidening income gulf in between.
The top fifth of employedhouseholds earned 12.9 times thatof the bottom fifth last year.
The rapid influx of foreignersin the last decade has also led tounhappiness over crowded trans-port and public spaces, clashesover the location of foreign work-er dormitories, and strong de-mand for housing driving pricesto record highs.
This has sparked debate onwhether Singapore should go forslower growth so it does not needso many foreign workers.
Tweaking numbers
THE prevailing thought has beento pursue productivity, and to re-duce the reliance on foreign la-bour.
The Government has acted toslow the inflow of foreigners, toraise wages at the bottom and toboost productivity.
By July next year, the levies forforeign workers are set to increaseto between $300 and $600 forthose in construction and ser-vices, and $250 to $550 for thosein the manufacturing sector.
Dependency ratio ceilings,which determine how many for-eigners a company can employ forevery Singaporean, have also beenreduced across the board.
At the higher income end,S-Pass and employment pass crite-ria have been raised, making ittougher for companies to bring inforeign professionals.
Permanent residency and citi-zenship are also being given out insmaller numbers than before.
The Government has acted onthe social aspects as well.
It has recently raised the in-come requirements for foreignerswho want to sponsor their familymembers to live in Singapore.
But is it too much, too soon?Or not enough?
Some foreigners are growingwary of Singapore turning “an-ti-foreigner”, despitewanting to remainopen.
Singaporefirms have beenin a tizzyover thetighten-ing ofthetap,with
many small and medium-sizefirms warning that the costlier lev-ies and difficulty in finding Singa-porean workers may force them toshut down.
During the restructuring,economists say unemploymentwill probably rise.
And PM Lee has said: “Becauseit’s not as if you send away all theforeign workers or keep out all theforeign workers, then we live inparadise. There is a price, and it’squite a high price to pay. As wetry to manage the population inSingapore, we are going to also ac-cept a lower growth rate.”
With fewer foreign workers, la-bour inputs are reduced, leadingto slower growth.
But slower economic growthcan lead to higher wages, econo-mists say, if it is driven by produc-tivity increases.
A more productive worker cando the job of more workers, andshould therefore be paid a higherwage for doing more with histime. This would help to raise wag-es at the bottom, and reduce theneed for foreign labour.
As Economic Society of Singa-pore vice-president Yeoh LamKeong has argued: “We shouldgrow at our potential where la-bour force growth is restrainedto a low rate estimated to bearound 0.5 per cent to 1 percent, that both enables incen-tivisation of productivitygrowth and does not lead toan overcrowded population.”
Based on 2 per cent to 3per cent productivitygrowth a year, and popula-tion growth of not morethan 1 per cent, Singa-pore’s optimal growth rateis around 2 per cent to 4per cent, he said. This islower than the 3 per centto 5 per cent the Govern-ment has previously esti-mated.
But raising productivi-ty is no easy feat. Busi-nesses will have tochange their attitudesafter being reliant onforeign labour.
Some employersmay hope that theGovernment will re-open the tap for
temporary relief.But there is no in-
dication it willdo so.
Singapore-ans too willhave to adjust
their life-styles with
fewer foreign workers.They will have to take
up jobs now filled by largenumbers of foreign work-ers, such as constructionworkers, factory machine
operators or wait staff.But they will demand high-
er salaries. Will companies be pre-pared to pay more for these ser-vices?
And if they do, the price ofgoods and services will surelyrise. How will Singaporeans ad-just and adapt?
And at the top end of the skillsspectrum, other countries arecompeting for the same pool offoreigners that Singapore may re-linquish.
Australia recently tweaked itsimmigration policy to boost theeconomy and woo workers to jobsshunned by its citizens. A newvisa category is being created togive permanent residency towealthy migrants who invest atleast A$5 million (S$6.5 million) inthe country.
Singapore is feeling the stress-es and strains of a decade ofgrowth assisted by the steroid of alarge pool of foreign workers.
The conversation on foreignworkers and immigration has cer-tainly changed, but Singaporeansshould be wary of the tide turningtoo much against foreigners.
Singapore does not have the lo-cal population needed to drive thefast growth of the past. Growthcan therefore come from produc-tivity, or foreign workers, or both.
Unless productivity increasesdramatically, or the birth rate ris-es sharply, Singapore will contin-ue to need foreign workers, evenif it is in smaller numbers.
By ROBIN CHANPOLITICAL CORRESPONDENT
Think youknow it all?
This primer is the ninth instalment of a 12-partseries in the Opinion pages, in the lead-up toThe Straits Times-Ministry of EducationNational Current Affairs Quiz.
PRIMER
Foreigners still needed for growth
WHAT DRIVES GROWTH?
ST GRAPHICS
1,200
1,000
800
600
400
200
02001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
GDP (% Growth)Foreigners in labour force ('000)
A liberal foreign worker policy has helped spur economicgrowth, but also caused strains in the economy
Source: MINISTRY OF MANPOWER
-3
0
3
6
9
12
15
4.9%
1,157,000 foreign workers 1,157,000 foreign workers
Financial crisis
A30 OOPPIINNIIOONN F R I D A Y , J U L Y 2 0 , 2 0 1 2
