Response to Mr Lim’s Comment That Curbs on Foreign Workers Will Crimp GrowthPublished: 5th May 2011
We were at a loss to understand the rationale in Mr. Lim Hng Kiang’s statement in the Straits Times* on the 2nd May 2011 when he urged Singaporeans to understand the need for foreign labour. He said that:
“We will keep foreign workers to one-third of the workforce but I can tell you that one-third of the workforce is a very severe limitation to us.”
Later on in the report he is quoted as saying:
But with the current limits on foreign worker numbers, Singapore will have to aim for lower growth of 3 to 5 per cent.
Mr. Lim clearly does not get it. Productivity growth is the key to higher incomes. Economic growth achieved merely by increasing inputs rather using those inputs more productively is of little benefit to Singaporeans.
The Reform Party has since 2009 been pointing out that most of Singapore’s economic growth over the last decade has been achieved through higher inputs of labour rather than by achieving a higher output from the existing labour. In fact over the period from 2000 to 2009 Singapore’s real GDP per hour worked only grew by 1% whereas that of the US grew by 2.1%. Both Taiwan and South Korea achieved much higher growth rates.
The poor productivity performance coupled with the competition from cheaper foreign workers for jobs has led to stagnant median real incomes for Singaporeans over the last decade. For the bottom 20% real household incomes have fallen.
The continuing growth in the foreign workforce has also put enormous upward pressure on property prices**. All those additional workers have to be housed somewhere. The PAP have admitted that they have an Asset Enhancement (coded euphemism for Inflation) Strategy for HDB and allowing in more foreign workers is one way of keeping the housing bubble going. The pressure on land prices has been the primary driver of inflation which rose to 5% on a year on year basis in February 2011. The government often claims that inflation is imported and due to higher commodity prices. However the import price index measured in S$ has been falling as the S$ appreciates.
The influx of foreign labour also imposes other negative externalities on Singaporeans, including crowded public transport and other overloaded public infrastructure.
We would like Mr Lim to clarify exactly what tax holidays or subsidies, including cheap land, were given to the MNCs mentioned in the report. Taking these factors into account the additional foreign investments that used principally foreign labour may have been of little benefit to Singapore if assessed on a rational cost-benefit analysis.
Minister Lim’s comments suggest the PAP will open the floodgates to foreign labour if they are returned to power. They illustrate that the PAP have no ideas beyond following what worked in the past. Its ideas are rooted in the 1970s when they were first implemented by Dr. Goh Keng Swee, who was the mastermind behind Singapore’s early success. The Stalinist model of just adding more inputs rather than combining more productively no longer worked once Singapore had achieved full employment. The way out was to bring in foreign workers from low-wage countries like China and India. As wages rise in these countries they have moved on to even poorer countries like Bangladesh and Burma.
The Reform Party would refocus our economy on raising the productivity and real incomes of our Singaporean workforce. Singaporeans should not be taken in by the government’s argument that they are growing the size of the economic cake when their individual slice is getting smaller.
The PAP has locked the country into failed policies that they seem unable to change.
But you can do something about it. On May 7th Vote for the Reform Party.