THE TEMASEK REVIEW

Written by Our Correspondent

DBS economist Irvin Seah had spoken out against the Singapore government’s foreign worker policy. He said that low-wage foreign workers have contributed to the widening of the income gap as they are more willing than local workers to accept less pay for lower-skilled jobs.

According to Mr Seah, some Singapore workers are struggling to keep pace as the economy develops and are in danger of losing their jobs.

His comments came in the aftermath of the release of the Singapore Competitiveness Report which showed that Singapore’s labour productivity – measured in terms of total output per employee – lags that of developed countries including the United States, France and Norway, as well as Asian neighbours Hong Kong and Taiwan.

The report also found that productivity here is falling in the sectors of manufacturing, construction, hotels and restaurants, business services and wholesale and retail trade – which, taken together, employ two-thirds of the workforce and make up 60per cent of the economy.

Another economist who declined to be named suggested the increasing number of foreign workers as a cause for the lower productivity:

“One reason for the lower productivity may be the large influx of foreign workers in recent years. With more workers available, each worker doesn’t have to work as hard,” he said.

Citigroup economist Kit Wei Zheng said that Singapore’s rapid growth over the last few years has been mostly driven by a massive increase in the workforce.

“Between 2006 and last year, the number of workers in Singapore jumped an average 6.5per cent a year, largely due to liberal immigration policies……But it is clear that growth powered by importing foreign labour is simply not sustainable,” he added.

Foreigners accounted for a third of the three-million-strong labour force om 2008, up from only a quarter in 2004.Singapore’s economy boomed correspondingly with average growth of 8.2per cent a year between 2004 and 2007.

But while sheer numbers have fuelled growth, the actual productivity of each individual worker has fallen.

The Economic Strategies Committee, set up to find new ways for Singapore to grow over the medium term will look into the problem of the declining productivity of Singapore workers.

Singapore’s income gap is the highest among developed countries after Hong Kong whose figures are skewed by an exceptionally higher number of billionaires.

The worsening income gap between the poor and rich was accentuated by the relentless influx of low-wage foreign workers into the labor force.

MM Lee Kuan Yew dismissed the significance of Singapore’s widening income gap during a recent ministerial forum at NUS. He opined it is more important to create jobs for Singaporeans.

Despite the rising resentment and disgruntlement on the ground at the government’s liberal immigration policy, senior leaders continue to insist that foreigners are essential to Singapore’s continued growth, as measured by GDP growth figures.

A substantial portion of Singapore ministers’ multi-million dollar salaries are pegged to GDP growth as defined by the market value of all final goods and services made within a country in a year.

Low-wage foreign workers keep business costs down, thereby helping to boost the performance of the economy and indirectly contributing to GDP growth, but it does not enhance labor productivity.

With diminishing returns over time, Singapore’s over-reliance on low-skilled workers is unlikely to sustain its economic growth for long.

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