Speaker Sir,
The Economic Strategies Committee (ESC) calls for a “clear shift” to sustain our future economic growth on skills, innovation and productivity rather than on expanding the labour force. Such ideas are not new.
It was recently reported in The Straits Times that notable economists, including University of Michigan professor Linda Lim, have questioned Singapore’s obsession with GDP growth and suggested that more thought be put into whether this growth is ‘good’, and who it benefits.
The report also stated that: “Fifteen years ago, Nobel Prize-winning Princeton economist Paul Krugman caused a mild sensation by warning that while Singapore’s headline growth numbers were impressive, its total factor productivity – the efficiency with which people, capital and land are combined to produce goods and services – was among the lowest in the world.”
Although this Government has always considered Singapore as a small and unique nation, its fiscal measure, so far, has been fairly conservative. For Budget 2010, the Government is relying again on its own conventional wisdom to address the fundamental problems caused by the implementation of its policies for the past decade.
The ‘growth at all costs’ strategy initiated since the late nineties has resulted in the present state of our economy where low wage earners are growing dependent on state-funded handouts to subsist, and productivity is stagnating at 1 percent from an influx of cheap foreign labour.
Furthermore, social stress is on the rise and threatening to move our ever-changing society closer to the brink of polarization. The level of comfort in our public infrastructures like transport and healthcare is also declining under a population spike of almost a million people in the last decade with 75 percent of the increase arriving in the last 4 years alone.
Growing Our Economy to Raise Singaporean Incomes?
Although the Finance Minister has said in his Budget speech that the impressive growth of the past decade achieved with the help of foreign workers was not a strategy of ‘growth at all costs’ but of growing our economy to raise Singaporean incomes, the increase in median income per household member from 2005 to 2008 cited by the Minister tells only part of the story.
The Report on Wages in Singapore for 2008 released by the Manpower Ministry shows clearly the wages of the lowest-paid group of workers has remained stagnant for a decade. The wage gap between the higher-skilled occupational groups and the lowest paid group has also widened in 2008 from a decade ago.
Sir, when the Workfare Income Supplement (WIS) has to be revised upward and the qualifying monthly income limit increased to $1700 to ensure low wage earners do not left behind in our foreigner-dependent economy; doesn’t that raise an alarm in the Government about the meager salary our low wage workers are getting?
The growth strategy adopted by the Government for the past 10 years has definitely not made these Singaporean workers feel any sense of progress with the nation.
Minister Mentor’s speech to the residents of Tanjong Pagar probably summed up the ‘growth at all costs’ strategy best. He said: I quote “between the two, growth as against no growth? I have no doubt we made the right decision: growth, whatever the inconveniences or competition of space, buses, MRTs, even schools – but we always give preference to our own citizens. “(Unquote)
That qualification at the end of MM Lee’s remark is cold comfort to Singaporeans struggling to make ends meet because there is also the competition of jobs.
Budget 2010 – Raising Productivity and Income
This year’s budget is touted as a fiscal measure for Singapore to move ‘Towards an Advance Economy’ with ‘Superior Skills, Quality Jobs, and Higher Incomes.’ The three key elements in this year’s budget are ‘Raising Productivity’, ‘Growing Globally Competitive Companies’ and ‘Including All Singaporeans in Growth.’
Stripping away the rhetoric, the fiscal policies put forth by the Government for 2010 are neither innovative nor groundbreaking enough to reflect the uphill task of making Singapore an advance economy and more importantly, less dependent on foreign workers.
I am not concern with the quantum of the budget, it is the initiatives that worry me; in particular, the initiative in raising productivity and income.
First, let me touch on Raising Productivity. To undo years of dependency on cheap foreign labour and to grow the economy through higher productivity is a difficult journey.
The impressive GDP growth of 5 percent a year in the last decade, as reported by the ESC, was achieved through the expansion of our workforce, specifically with a lot of help from a rapidly growing non-Singaporean workforce.
Years of economic expansion have not done much to help low wage earners move up the value chain as the labour statistics have shown. Productivity has stagnated at 1 percent for the last decade.
Sir, Singaporean workers are constantly asked to up-skill, re-skill, multi-skill, be cheaper, better, and faster. On top of all that, they must also work longer and the latest demand on our workforce is to work smarter as well. I must say this Government is highly productive at squeezing every drop of effort and energy from our workers to achieve its desired GDP numbers.
But are Singaporean workers that hard to manage? Are they so lazy and resistant to change that they have to be constantly reminded to up-skill, re-skill and multi-skill? Are they so expensive and unproductive that NTUC has to initiate a ‘Cheaper, Better, Faster’ rally call to all companies and workers?
In case the Government has forgotten, this workforce has stood by Singapore since our independence. Singaporean workers have given their best years to grow the economy. They have contributed their blood, sweat, and tears to nation building before the floodgates were opened for foreign workers to continue to satisfy the Government’s appetite for high GDP growth.
While the Government has been very pro-business all the while, it should spare a thought on what our workers want out of the healthy economy. Singaporean workers’ perspective of employment is simply about bread and butter issues. Can the wages they make meet their expenditure after deducting for transport, meals, CPF, housing, medical fees, etc?
Thus, wages for workers, especially for the low-income group, must go up when the economy is doing well. This is just not the case as the 2008 Report on Wages in Singapore has shown.
The Minister said in his budget speech that ‘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.’
Sir, I want to state clearly the responsibility and enabling factor for helping citizens with low income to achieve higher wages rest squarely on the shoulder of the Government. It should not attempt to link the cause of low wages in our healthy economy on the low productivity of our workers.
It is easy to blame our local workforce for low productivity but who opened the gates to allow foreign workers to flood the labour market in the first place? The easy access to cheap foreign labour offers little incentive for companies to up their productivity and this is stated in the ESC report. The Government has to assume some responsibility for the low productivity registered in the last decade.
Low wage workers have lived with low productivity and high growth for the past 10 years with little improvement to their incomes. I made the same comment at last year’s budget debate speech. Meanwhile, this Government has taken every opportunity to bask in the glory of having brought our tiny economy from third world to first.
But how long more must our low wage workers wait to enjoy a first world pay? Must they wait until our productivity reaches 2 to 3 percent?
Low wage workers have every reason to be concern with this productivity drive. The Minister has said the Government’s goal is to grow our productivity by 2 to 3 percent per year over the next decade. Only then, real income can go up by one-third in 10 years.
Does this mean the Government expects low wage workers to wait another 10 years for something that may not happen as we have witnessed the last 10 years? Low wage workers do not have the incentive to go for training after training. If they have any time to spare, they will probably take on a second job to supplement their meager income.
Therefore, the question the Government should answer is why after decades of promoting productivity and skill training, and despite that we have achieved 5% productivity growth in the 1980s and about 3% in the 1990s, we are back to the same call again?
The next question is why manual workers like cleaners and garbage collectors in developed economies are paid so much more than their counterparts in Singapore? Are the cleaners there more productive than ours or do these developed economies have more compassionate and effective policies to ensure workers at the bottom of the economic ladder do enjoy a decent and dignified life?
With the new emphasis on productivity, it seems the Government is suggesting that workers with low income have only themselves to blame because they have low productivity and low skill. The call to workers to up-skill, re-skill and multi-skill may not yield the desired results as well.
I know of machine operators in the construction sector who participated in MOM’s safety course and other skills recognition programs only to end up losing their jobs to foreigners or have their wages depressed because foreign workers are prepared to work for lower pay and longer hours.
Abolish Foreign Workers Levy
Sir, I will move on to the issue of dependency on foreign workers in our economy.
The Government’s intention to use the price mechanism to manage the growth of foreign workers will probably not affect large profitable companies. As you can read in the newspaper, most of the concerns came from SMEs. It will probably create a divided economy with profitable companies hiring foreign workers as per normal and struggling companies relocating or downsizing.
The price mechanism will not work too if the total cost of hiring a foreign worker, with the levy thrown in, is below a decent living wage for a Singaporean worker. Most companies will have to hire foreigners because no Singaporean worker will apply.
The price mechanism is also opened to abuses. MOM has stated it will step up monitoring and enforcement efforts against employers who try to pass on the levy to the foreign workers.
This whole exercise could just end up fattening the Government’s coffer with little results to show in controlling the ever-expanding foreign workforce.
With the Government’s determination to expand our economy using productivity growth so that Singaporean workers can finally achieve real wage growth and income level comparable to developed economies, it should take the bold step to remove the foreign workers levy completely. The Government should just use the Dependency Ratio to control the growth of foreign workers in Singapore.
Dependency Ratio can be refined by industry sectors as well as size of the company to allow foreign workers to supplement local manpower when it is necessary. The Government can decide on the dependency ratio in consultation with the industry and set realistic target on productivity growth in different industrial sectors by gradually reducing the ratio.
The savings in foreign workers levy can then be used by the company to provide employment for local workers when the dependency ratio is reduced, upgrade the production process or send local workers for training to upgrade their skills.
The dependency ratio will force employers to look hard at how to re-skill and make Singaporean workers productive instead of looking to relatively lower cost foreign workers as an option to compete in the market. It becomes an incentive for the employer to find ways to raise productivity in order to stay competitive.
The new system proposed by the government of using price mechanism and a tiered system levy based on the proportion of foreigners on the payroll to address the dependency on foreign workers is too complicated. It does not look like a system designed to control the growth of foreign workers but as a source of revenue for the Government.
Sir, it was reported in the news that there are about 856,000 work permit holders in Singapore as at December. Taking away 196,000 domestic helpers, we are left with 660,000 work permit holders. A $10 to $30 per month increase in levy will translate to an additional $79 million to $238 million per year in work permit levy for the Government.
If I use the low end of the work permit levy, which is $150 per month, and multiply that by 660,000 workers, this Government is taking in about $1.2 billion per year in work permit levy. If I use the concessionary domestic helper levy, which is $170 per month, and multiply that by 196,000 workers, the total levy collected by this Government for all 856,000 work permit holders is a conservative estimate of $1.6 billion per year before any increase scheduled on 1 July. I have not even added the levy for 82,000 S-Pass holders yet.
Productivity and Innovation Credit
This brings me to the next issue of helping workers upgrade through Continuing Education and Training (CET) and innovation. Although CET and innovation are key components to boost productivity, the emphasis should be on innovation.
To achieve an ‘Advance Economy’ with ‘Superior Skills, Quality Jobs, and Higher Income’ requires innovation through research and development, redesigning work method and machinery, information technology and automation. Productivity will be a natural by-product of innovation.
While a total of $5.5 billion is set aside to boost productivity over five years, only $1.5 billion is going into R&D via the National Research Fund. Currently, the Gross Expenditure on R&D stood at 2.8 percent in 2008. The ESC has recommended raising that to 3.8 percent but the Minister highlighted Finland and its R&D spending as an example of putting money to good use. Finland spent about 3.4% of its GDP on R&D at the end of 2000.
Companies such as Sony, LG, Samsung, Acer, and Canon, are private and highly innovative multinationals. I can hardly name any private entity here that comes close to what these companies have achieved. Of course, some of you may say we have Creative, the sound card maker. If you read its story, you will find the Government has very little to do with Creative’s growth and success at all.
I believe we do have a lot of room to improve in R&D funding and nurturing SMEs into global companies. I urge the Government to take bold steps now rather than a measured approach to make that vision a reality. We should raise the R&D funding and involve SMEs in nation building as much as we can.
Continuing Education and Training (CET) & Older Citizens
Let me now move on to Continuing Education and Training, and our ageing society.
The Minister has said the Government will place additional emphasis on our older, low-wage workers by providing them the needed support to enhance their skill and continue to be valued in the workplace. While all these CET activities are good for low wage workers, continuing education does not always have to be work and wage-related.
As Singapore is an ageing society, we must include older Singaporeans, working or retired, in the master plan towards becoming an advance economy. While CET may serve a purpose for older workers, an adult continuing education (ACE) programme should be initiated to cater to the needs of retirees.
Learning, as we know, is a lifelong process. We should develop a community college for citizens of all ages, especially older Singaporeans, to enrich themselves in courses not related to their work. The college will have no or minimum entry requirement. Courses are totally modular. A senior citizen can earn credits towards a degree or simply for self-enrichment purposes.
Entrepreneurs can come in any age group. For an ageing society like Singapore, we should not even have any preconceived ideas on the limitation of what older Singaporeans can do to help build our economy.
Conclusion
In conclusion sir, looking at the revenue the Government collects every year from the foreign worker levy; it has a moral obligation to ensure our low wage workers are not left behind. Ten years is long wait for low wage earners to move up the economic ladder. Asking these people to wait another decade for that to happen and to depend on state handouts in the interim is wrong.
I again urge the Government, as what I did at the last budget debate, to work harder to up the wages of the workers soonest possible rather than wait for productivity to improve because that is also conditional upon the affordability of companies to pay the increase in levy.
There is no easy road to success. I believe Singaporeans understand that very well. Singaporeans have shown resilience and endured the economic hardship and discomfort with the influx of foreign workers for the past 10 years. On top of that, Singaporeans have to cope with depressed income and rising cost of living such as high utility prices.
It is only fair that the Government starts looking at how to uplift the lives of Singaporeans and make them more pleasant. This is a timely wake up call to the Government as General Election is getting nearer.
