[Updated 1] Triple confirm. “Tightening on foreign labour” was a lie.

Updated: The editors at TRE pointed out quite rightly that the increase in the number of foreign workers coming to Singapore is on target this year to be less than in previous years. Whether this “reduction in the increase” represents a tightening rather than a “slower loosening” is debatable. The chart below appears to show that the overall trend is mostly unchanged. However, the most important questions still remain. In light of increasing unemployment and decreasing wages, can the government be said to have delivered policy results that benefit Singaporeans? Despite lots of noise around a “tight labour market”, it would appear not.

Government claims to have been tightening on foreign labour could never be reconciled with a population white paper that laid out a path to GDP growth through massive immigration. As I wrote at that time, propaganda rather than policy changes appeared to be driving the debate. The truth – that the government is not tightening the inflow of foreign workers – has recently been revealed by three pieces of information released by the government itself. These revelations leave many in government with some explaining to do – why so much focus on the problems associated with a labour shortage when one does not appear to exist. On the contrary, the problems caused by an over abundance of cheap foreign labour – stagnant wages and increasing unemployment – are very much still present and, if anything, worsening.

Strike One: Business as usual increase in foreign worker numbers

Business as usual increase in Singapore foreign workforce population

Business as usual increase in Singapore foreign workforce population

The above graph shows the size of the foreign workforce in Singapore from December 2009 to June 2013. Despite government claims that the flow of foreign workers was being reduced, it is clear that no such reduction has occurred – business as usual appears to be the best description. We should note that this graph shows the trend back some time prior to the 2011 general election. It was widely held that dissatisfaction with an excessive influx of foreign labour was one cause for the ruling party’s poor results at the polls, so it is particularly puzzling that no meaningful policy changes have appeared to rectify the situation. That the government has made plenty of noise about solving this problem implies that they have heard Singaporeans’ concerns, however the fact that noise rather than meaningful policy changes have been the result is extremely concerning. It would appear that the government, despite being aware of the problem, is either unwilling or unable to provide an effective solution.

Strike Two: Unemployment increased

It was reported recently by CNA that unemployment has increased in Singapore from 1.8% to 2.1% in the last six months. The indomitable Leong Sze Hian pointed out that the unemployment rate for citizens increased from 2.7 to 3.0% over the same period. These numbers may compare favourably with values in other developed economies around the world (that the comparison is not necessarily a fair one is a topic for another time), but increasing unemployment is the exact opposite of what one would expect in a tight labour market. Common sense tells us that when there is a shortage of manpower, unemployed people will most easily be able to find work – this is supply and demand at its most basic. Yet in Singapore, if you believe the hype, we apparently see the opposite. We have been led to believe that the supply of labour is so tight that restaurant CEOs had to resort to themselves cleaning tables, while at the same time unemployment increased. It has also been reported that dishwashers could not be found for such a high salary as $3k per month – again while unemployment increased. Such reports completely defy common sense and the reality – as the chart above shows – is that no such manpower crunch probably ever existed. Stories to the contrary – published uncritically by the state controlled mainstream media – appear to be nothing more than propaganda.

Strike Three: Wages decreased for most job categories

Another recent revelation from Leong Sze Hian was that six out of eight job categories saw negative real wage growth last year. In fact two of these categories saw significant decreases even in nominal terms – that means the number on your pay check got smaller, even before accounting for inflation. Again, this is exactly the opposite of what one would expect under the tight labour market conditions that Singapore has supposedly been experiencing. As with the case of increasing unemployment, common sense tells us that what we see in Singapore is the opposite of what we should expect if there were a shortage of labour. In a tight labour market, those companies which are more productive or more profitable would be willing to pay a premium to recruit the staff they need over their competitors. In this way, we would expect salaries to increase in a tight market, again by virtue of supply and demand, as the price of the scarce resource – labour – is bid up by employers that can deploy it to create the most wealth. That most professions saw the opposite outcome implies that the influx of foreign labour has not been tightened, and the supply is as readily available as ever.

Some explaining to do?

Now that it appears abundantly clear that Singapore has not experienced any reduction in the inflow of foreign workers, and the behaviour of the labour market has been the opposite of what one would expect under allegedly tight conditions, it would seem that certain members of the ruling party have some explaining to do. The story of a tight labour market has been repeated by many in government, yet it apparently has escaped all of them that common sense and government statistics contradict this claim. Propaganda or not, whatever efforts have been taken to improve the position of local workers have clearly not succeeded – the obvious problems caused by excessive cheap foreign labour – stagnant wages, unemployment, poor productivity – have all worsened rather than improved.

PM Lee as the leader of the government is ultimately responsible for policy and public perceptions. He was reported as long ago as 2011 as saying “businesses in Singapore have to adjust to a tightening labour market”, but was he correct? Did the tightening occur? In his May Day 2012 speech, the PM spoke at greater length:

But in total, we have to slow the inflow of foreign workers significantly in the coming years because we just cannot keep on bringing in 80,000 more foreign workers a year. There is just not enough space and it is not sustainable. The number of foreign workers will keep on going up and up and up. So we have tightened up, slowed down, not squeezed and reduced but just slowed down the increase and I think the companies are already feeling the squeeze.
PM Lee speaking at the 2012 May Day Rally.

It is not obvious where PM Lee gets the 80,000 figure from, but clearly his government has not “[slowed] the inflow of foreign workers significantly”. Where is the tightening he speaks of? Where is the squeeze, where is the reduction? Never mind a reduction in absolute terms, does the chart above even imply that PM Lee’s government has “slowed down the increase”? Hardly. How to reconcile all the talk of tightening, with the statistical “hard facts” that show no meaningful tightening or crunch has actually occurred? Reality does not appear to be in agreement with the Prime Minister and what one can only suppose are his expected policy goals have not been achieved. Was it all just propaganda, or a failure to deliver?

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13 Comments

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13 responses to “[Updated 1] Triple confirm. “Tightening on foreign labour” was a lie.

  1. Pingback: Anonymous

  2. Good heavens Andy, where on Earth did you read your economics from? Ever heard of employment mismatches? Please go read your economics 101 once again please!

    • Hi Bernard,

      Thanks for the comment, but not sure really what to make of that? How to explain increasing unemployment and decreasing wages in a so called “tight labour market”? Where does employment mismatches come into it?

  3. Pai Gia

    Hi Andy, reference for the chart?

  4. Kristjan Ragnarrson

    Most countries try for economic growth but perhaps not to the extent that Singapore does. Other countries (democracies) also concern themselves with social justice and a fair distribution of the proceeds of economic growth, partly because they want to get re-elected, and partly because they recognize that the state’s primary role is to look after the interests of all of it’s citizens, not just the rich ones.

    The Scandinavian model of capitalism is a perfect example. Scandinavians have the highest standard of living in the world, free health, child and elder care, and of course relatively high taxes. But that is how they choose to run their economies because they care about the well-being of all of their citizens, and no-one can claim that Scandinavian economies are not successful. It is possible for a country to be rich and equitable.

    • VTO2016

      in this country they don’t need to worry about getting reelected due to all the propaganda poisoning our minds since young. also why do we strive for growth so much? cos their pay is linked to it!

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  9. Bs

    Hi Andy,

    The government is indeed tightening the labor market by implement foreign worker levy, which earns them several hundred millions more. With increased amount of foreign workers and levies, no wonder the wage standard is dropping. Even the employers are hard to make both ends meet.

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