GOVT: CHEAP FT WORKERS DID NOT DEPRESSED LOCAL WAGES

Mrs Cindy Keng, Director of Corporate Communications Division, MTI and Ms Chong Wan Yieng, Director of Corporate Communications Department, MOM, wrote a joint letter to ST today (16 Aug), debunking an ST article from Dr Tan Kong Yam (“Growth in a decade of shocks”, 12 Aug).

The 2 spokeswomen said, “We have embarked on major restructuring of our economy in recent years. This has included the tightening of foreign worker policies, promoting productivity and ensuring a sustainable social balance.”

However, they denied that the inflow of foreign workers had suppressed local wages before 2008.

“Dr Tan’s suggestion that the inflow of foreign workers suppressed local wages before 2008 is not borne out by the facts. Foreign worker employment in fact fell during the period when local wages weakened, and rose at the same time as the recovery in local wages,” they said.

“The weakness in local wages occurred during 2001-2004, when the economy was weighed down by the global dot.com recession and Sars. Local unemployment went up and real wages fell, especially for those at the lower end of the income ladder. The number of foreign workers in Singapore declined.”

“The most rapid inflow of foreign workers took place in 2004-2008. But this was also when we saw a recovery in local employment and wages. Median local wages rose significantly during the period, and that for lower-income workers began recovering,” they continued.

“Local wage trends have hence been shaped by employers’ demand for labour, and not just the supply of foreign workers. Higher demand led to higher local wages, even when more foreign workers were employed,” they added.

In their letter, they explained that wages have continued to strengthen since the global financial crisis, with the labour market remaining tight. Consequently, taking the last decade as a whole, real incomes for the median worker and worker at the 20th percentile have grown by 24 per cent and 12 per cent respectively, they said.

“The decline in the wage share of income from 2001-2007, which Dr Tan highlighted, was also not due to foreign worker inflows. Rather, it reflected a shift in the economy towards more capital-intensive industries,” they wrote.

“The more capital-intensive industries have lower wage shares, but workers in these industries generally earn significantly higher wages compared with a number of other sectors with higher wage shares. A Ministry of Trade and Industry study published in the Economic Survey of Singapore 1Q13 establishes this.”

Prof Lim already warned Govt danger of relying on cheap foreign labour 9 years ago

However, 9 years ago at a conference in Jul 2005, Professor Lim Chong Yah, a key architect of the economic restructuring exercise that overhauled Singapore’s wage system in the late 70s, already warned the Government to tread carefully on relying too much on cheap foreign labour [Link].

Prof Lim then said Singapore had done well economically since its independence, leaping from a Third World country to a First World economy but it might also have been “too free” in letting in cheap foreign labour.

He said, “Maybe we should not allow a too free flow of very low value-added labour, very low-wage labour to Singapore.”

He added that such an “excessive supply would dampen the wage rate among the lower income people”.

“That will create another problem… it will contribute to the development of a very lowly paid sector in the economy, because we can get very cheap labour from the region.”

So, the government should “maybe be a little more careful in allowing cheap labour to move into Singapore in our pursuit of high growth”, he said. “Which means that we cannot aim for very high growth… because if you aim for very high growth, then you’d want to bring in a lot of labour from outside. Then, only you can have very high growth.”

Unfortunately, this was precisely what the Government did – opening the floodgates to bring in a lot of foreign labour from outside stimulating “high growth” in Singapore.

This was in part due to the general success of the general election in 2006, which “emboldened” the PAP Government. In the 2006 GE, PAP won 82 of the 84 seats with a respectable 66.6% votes (37 seats were won through walkovers).

With the full backing of the votes and seats won, PAP embarked on a huge population expansion programme by massively importing foreign labour. Between 2006 and 2011, the number of non-resident foreigners increased from 876K to 1.4 million (59% increase) while that of PRs increased from 418K to 532K (27% increase).

The big increase in number of foreigners affected the quality of life for Singaporeans, competing with Singaporeans in jobs and resources, and not to mention depressing the wages of Singaporeans.

By 2011, Singaporeans were visibly fed-up with the PAP Government’s over-liberal foreign labour policies. It showed in the general election of 2011.

Angry Singaporean voters began to speak out against PAP Government and voted against the PAP. For the first time since the independence of Singapore, all the constituencies were contested in 2011 GE with the exception of Tanjong Pagar GRC which was walked-over due to technicalities – the opposition team was disqualified as the nomination papers were submitted 35 seconds late. PAP scored the lowest winning of % votes (60.1%) in the history of Singapore and lost 6 seats to the opposition.

Furthermore, also for the first time, PAP lost a GRC with two full PAP cabinet ministers kicked out in an election. Not only that, three other PAP cabinet ministers were indirectly affected. Even though the 3 have won the election with low % votes, Raymond Lim, Wong Kan Seng and Mah Bow Tan, were forced to step down due to public anger at their missteps in their respective ministries. To appease the public, PM Lee even quickly formed a pay review committee after the 2011 GE to look into lowering the ministers’ pays.

Two years ago in Apr 2013, Prof Lim gave a lecture at the Economic Society of Singapore, warning that the Singapore’s growing income inequality is approaching dangerous levels. He said that Singapore ‘needs shock therapy to wake up its economy’ and ‘the only way out is to restructure again’, in the area of wages of low earners (see: ‘Professor Lim Chong Yah: Singapore’s income gap approaching dangerous levels’).

So, do you believe in the words of Mrs Keng and Ms Chong or Prof Lim Chong Yah?

Mind you, if Mrs Keng or Ms Chong was studying Economics in their ‘A’ level, they were probably reading the ‘A’ level textbook written by Prof Lim.

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