07 February 2013

Businesses And The Foreign Worker Bubble

Few people were surprised when Singapore Business Federation, in its Position Paper on Population, expressed dismay at the slowdown in immigrant labour in Population White Paper 2013 — A Sustainable Population For A Dynamic Singapore.

SBF's CEO Ho Meng Kit said:
The reduction in workforce growth has very serious consequences for businesses.  Some Singaporeans do not realise its impact but are seized with the prospect of an over-crowded island with 6.9 million people.  We must explain to Singaporeans that many businesses will be in jeopardy if they cannot adjust to this demographic tsunami that will hit us.  If businesses go under, jobs will be lost, Singaporeans will be affected.  If businesses cannot raise productivity and sustain profits, they cannot afford to pay Singaporeans higher salaries.  The population projections in the Population White Paper are already tough for companies.  It is unthinkable if Singaporeans choose to further limit immigration and the number of foreign workers.  This will damage our competitiveness and Singapore will lose its shine.  We do not want to see our children working overseas because there are no more good opportunities here.
SME committee chairman Lawrence Leow said:
The population paper has painted the harsh realities of Singapore's population statistics and their implications.  Unfortunately it is the SMEs that will be hardest hit.  SMEs currently employ some 70 per cent of the local workforce.  They are more than economic contributors as their sustained presence has impact on the lives of Singaporeans.  Many SMEs operate as subcontractors or across labour-dependent service sectors.  The shift towards two-thirds of local workforce to PMET jobs and only one-third to non-PMET jobs is unimaginable for many SMEs' business model.  A lot of SMEs whose operations cannot be moved offshore will be rendered out of business.  This in turn has an even wider implication as many multinational corporations here rely on SMEs for services and as part of their supply chain.  The net effect is that many more jobs could be lost.  We urge Government to delay further tightening of foreign workers restrictions until there are clear evidence of small businesses succeeding in business restructuring and productivity increment.
Few people were surprised when various chambers of commerce endorsed SBF's Position Paper on Population.

The concerns of businesses are real because labour is one of the main factors of production.

But the problem does not lie with the people who, as SBF's Mr Ho bluntly puts it, do not realise its impact but are seized with the prospect of an over-crowded island with 6.9 million people.  Mr Ho, a former managing director at Economic Development Board, lacked empathy for, and was extremely dismissive of, the common people's concern about the future of their over-crowded country for their children and their grandchildren..

The problem lies with the Government of the past decade, which opened the foreign worker floodgates, and allowed the non-resident population to double from 0.75 million in mid-2000 to 1.49 million in mid-2012, and the permanent resident population to double from 0.29 million to 0.53 million over the same period.

It was good for the economy and good for businesses, while it lasted.  Plenty of foreign workers at low wages and who had no National Service obligations.

But it was unsustainable and the party had to come to an end.  Almost everyone, though probably not everyone, could see it.  Unfortunately, the end is messy.

On the one hand, there are new businesses and expanding businesses.  EDB secured fixed asset investment commitments of $16.0 billion last year and $13.7 billion in 2011.  If and when fully implemented, they will create 18,600 and 20,300 skilled jobs, respectively.

These skilled jobs will create skilled jobs in related sectors e.g., sub-contractors and providers of ancillary services.

Even so, all these skilled workers also need other workers to support them, simply by their being present in Singapore.  So they need more civil servants, educators, law enforcement officers, health care workers, environment workers, cleaners, retail service workers, food and beverage workers, private and public transport drivers, construction workers, security guards etc. and this group of workers, to the extent that they are not native Singaporeans, will need one another to support their presence.  More foreign workers!

On the other hand, there are the many businesses that were started and/or expanded based on the availability of immigrant labour and the resulting growth of the domestic consumer market.  Many of them will be unable to cope and some (probably many) will not survive.  It's unfortunate, but their plans were based on faulty assumptions.

Could the businessmen have been so myopic that they did not see what was coming?  Did they think that it was sustainable to keep the immigrant floodgates open?

Or did they think that the Government was bluffing when it said repeatedly that the foreign worker inflow would be calibrated?

Population White Paper 2013 — A Sustainable Population For A Dynamic Singapore is businesses' great opportunity to pressure the Government to recalibrate the foreign worker inflow for their benefit, their profitability and their viability.

1 comment:

  1. Ho Meng Kit was the Principal Private Secretary of Lee Kuan Yew.