Andrew Michael Teo
Whenever someone talks to me about economic development and economic growth, it never fails to remind me of the chicken and egg story. Economic growth spurs economic development which, rightfully speaking, should spur future growth and again future development.
However, one has to distinguish carefully the difference between economic development and economic growth since these two terms appear to have been used interchangeably sometimes, more so recently. While economic development may refer to the modernization, and perhaps urbanization, of an economy, economic growth refers to the health of the economy as a whole.
Economic development requires capital investments as well as the necessary human resources to undertake those development projects. Human resource, as we know, is just about the only resource we have in Singapore. Coupled with a high literacy rate, good exposure and continued education and training especially among the post baby-boomer; I am convinced that Singaporeans do have the necessary talents, and skills, to contribute positively and productively towards our growth and development.
Why then is there a need for Singapore to open her doors wide to attract more than is necessary the number of migrant workers and professionals to be engaged in jobs that can be performed by our local workforce? Are we saying that our local workers and professionals are very lacking in the required skills to be able to perform in their respective jobs? Or is it because employers, thinking that it would be cheaper to employ foreigners, are not prepared to pay a market rated wage to our local workers so that by employing these migrant workers, wages could be depressed? Is a local Chinese restaurant captain more inferior to one from China? Does it take higher academic qualification to be able to sell local properties that locals cannot perform but to engage sales executives from China to do the job? What values do these migrant workers really add to those goods and services for which they are selling?
Many of these migrant workers, especially those in the construction, and cleaning services industries, are commonly exploited and “deprived” of their rest days so as enable them to work beyond the legally stipulated working hours citing manpower shortages as the common reason. These migrant workers, in order to earn more, will uncomplainingly comply until accidents occur at the workplace due to fatigue. This lack of foresight on the part of the employers, in effect, increases the chances of workplace accidents and higher cost for the employers. It also decreases overall productivity for the respective industry.
Some employers may argue that their local workers are paid higher than their foreign colleagues for doing the same job. But by looking into how salaries for local employees are packaged compared to their foreign colleagues, one can see that the difference is only about the amount of the employer’s contribution to the local employees’ Central Provident Fund and the migrant worker’s levy, which some migrant workers were even asked to absorb for being offered employment.
However, what many employers (and perhaps even the government) fail or do not want to realize is while it may be “cheaper” to engage migrant workers, do these migrant workers add to present economic growth basing on the wages they are paid, and the fact that a significant portion of their earnings is remitted to their families overseas?
On the one hand, migrant workers on the low wage scale, have much of their earnings remitted to their families overseas and for payment of debts for which they could have incurred for traveling to this country, leaving enough for themselves to meet their daily living expenses. Hence their spending powers and consumption are greatly reduced.
On the other hand, single migrant professionals on the higher wage scale, tend to spend part of their income on rentals and remittances as well, leaving them with, perhaps, more than sufficient to maintain their standard of living and for meeting emergency needs. This could be the group of migrant professionals who will contribute to present economic growth due to their ability to consume more goods and services as compared to their fellow migrant workers.
However, due to their needs for better accommodation and better living condition, their demand, which is not the sole determining factor but surely a contributing one, leads to higher rents and property prices.
The remittance of earnings by these migrant workers and professionals to their families overseas have a significant impact on local businesses and the economy since consumption by this category of migrants is greatly reduced. And this should not be ignored or even brushed aside by anyone who is very concerned with economic growth. Had the jobs of those migrant professionals be undertaken by our very own local professionals, the portion of remittances by these migrant professionals would have been translated into higher domestic consumption, and thus better prospects for our local businesses.
According to the Ministry of Manpower Labour Market Report 2010, migrant workers and professionals employed, excluding domestic helpers, increased by 54,400. As at December 2010, there were 1,113, 200 migrant workers and professionals employed in Singapore, forming 35.8% of total employment.
Given the high number of migrant workers and professionals here, the monthly total remittance could have easily exceeded S$445,280,000 basing on a conservative average remittance of S$400 per month per migrant worker and professional. This effectively means S$ 445 million, which is more than 50% of our historical trade surplus of $8.2 billion for fiscal year 2007, are withdrawn from monthly local consumption.
The influx of migrant professionals has indeed forced our local professionals to be more competitive not only in terms of skills, but also in terms of salaries. Given that experiences and skills are gained and upgraded through the course of one’s employment, it has become a norm that salaries are no longer dependable on and commensurate with experience and skill qualifications, but rather on whether one is prepared to accept the job at a lower salary, which is depressed to the extent that a migrant professional would find it acceptable since he is not liable to contribute to any Central Provident Fund, and that he is taxed at the same income bracket as his local counter-part.
Given that scenario, if local household incomes are weak, local consumers’ spending will be weak. How much these migrants workers and professionals can consume to spur present economic growth has its limitations. This will translate into slow business, which will affect business profits and thus, business spending.
In any economy, consumption, mainly business, household and tourists’ spending, is vital in driving the economy towards growth. Without consumption, businesses will shrink which would ultimately result in retrenchment of workers as a solution to cost cutting. Whenever retrenchment takes place, consumption will be weakened further since household and individual spending will be greatly reduced, and this in turns will, again, affects businesses. On the whole, present economic growth will be affected.
While I do not deny that these migrant workers and professionals do contribute to our future economic growth, it is the present rate of consumption that will spur present economic growth, which will in turn spurs future economic development and growth. No economy can move forward without growth. And no growth can be achieved without consumption.
Recently, there have been renewed calls for Singaporeans to be tolerant towards migrant workers and professionals, citing their contributions as reasons towards our economic development. Singaporeans are generally very tolerant towards migrant workers and professionals. However, the immediate question is: What percentage of economic contribution from these migrant workers and professionals have on Singapore in this present age that kept our government relentlessly saying that we need them in every sector of the industries and in every management level? Harping on how migrant workers had in the past, decades or centuries ago, helped Singapore to grow and to develop to her present status with the present population that is bigger, highly skilled and highly educated since then, is of no use to our future economic growth.
Since the government has taken steps to “curb” on the inflow of migrant professionals with higher minimum qualified salaries and academic qualifications, to be effective January 2012, how will this affect our local professionals, especially those who are experienced and qualified and had been displaced from their profession for reasons beyond their control? How will potential employers rate this category of local professionals?
More importantly, with a higher minimum income as a qualification, will this higher income translates into higher domestic consumption from this category of migrants professionals or will it simply means higher remittance to their overseas families?
In this aspect, I will let our local businesses and local labour union leaders, or even the government, to ponder over the issue.
Photo courtesy of Bryan Kam.