Govt’s foreign worker-productivity policy in disarray

he said..he saidIn January 2010, Finance Minister Tharman Shanmugaratnam announced the findings of the Economic Strategies Committee (ESC) which he headed.

At the centre of the Committee’s report was the fact that Singapore’s productivity was taking a beating: Productivity in manufacturing and services is about 55 percent to 65 percent of the levels in the U.S. and Japan.

Mr Tharman acknowledged the problem saying:

“Raising skills and productivity is the only viable way we can achieve higher wages, and is the best way to help citizens with low incomes. If we achieve this goal, we can raise real incomes by one-third in 10 years. The scope to improve is clearly there, but the easy gains in productivity are over.”

The biggest factor contributing to low productivity is our dependence on foreign workers. The ESC report admitted that it was the influx of foreign workers that was causing the slowdown in productivity.

So what was the remedy?

“We now need to take calibrated steps to manage our dependence on foreign workers,” the Minister said. “They already comprise almost a third of the total workforce, and there are social and physical limits to how many more we can absorb.”

And so he announced that the Government would increase levies for companies hiring foreign workers to reduce our reliance on overseas labor. Levies will be increased in a phased manner over the next three years.

But that was two years ago. On Wednesday, the Straits Times reported:

Singapore created 121,300 jobs last year and it caused the unemployment rate to fall to 2 per cent, a 14-year low.

This put a further squeeze on the already-tight labour market and as a result, two out of every three new jobs went to foreigners.

Overall, the number of foreign workers rose by almost 85,000, including 5,000 maids, according to preliminary Ministry of Manpower figures released on Tuesday.

Explaining the continued reliance on foreign workers, Minister of State for Manpower Tan Chuan-Jin said in a blog post that a ‘significant proportion’ of the demand came from the construction sector, which added 22,200 jobs compared to 3,400 in 2010. (Emphases added)

When the ESC report was published, the SDP said that it was a regurgitation of old, failed policies: “In truth, these recommendations are a rehash of old ideas, repackaged to make it look as if the PAP has a workable plan. It doesn’t.” (Read ESC recommendations: Here we go again)

The SDP has been proven right. While Mr Tharman elaborated on the need to boost productivity by reducing our dependence on foreign workers, two years later, Mr Tan Chuan-Jin tells us that the number of foreign workers has, in fact, increased.

Mr Tan tries the spin that “demand for labour last year clearly exceeds the growth of the local workforce, which was 36,600, there is a need to improve productivity and restructure the economy up the value chain.”

Translation: We don’t know any other way to increase the GDP other than to rely on foreign workers. 

The truth is that the Government does not know how to take our economy forward without relying on cheap foreign labour. Just two years into its existence, the ESC’s economic strategy is in disarray.

Let’s see what the Finance Minister comes up with in this Budget.

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