Hard Choices: Challenging the Singapore Consensus

6 What's wrong with Singaporeans?

6 6 WHAT’S WRONG WHAT’S WRONG WITH WITH SINGAPOREANS? SINGAPOREANS? Linda Lim The recent population policy debate has thrown up a number of references to the inadequacy of Singaporeans—by quantity or quality—for many jobs in the country, resulting in the heavy dependence on foreign workers (both labour and talent) that has caused such controversy . In this essay I focus narrowly on examining the common assertion that Singaporeans’ deficient labour market behaviour is partly to blame for our population conundrum: while not assuming that this is accurate, I consider what the causes might be if it were, and suggest some potential policy solutions. “Low-Skill” Jobs The standard economic rebuttal to the complaint that Singaporeans do not want to work in low-skilled jobs in sectors such as construction, retail, F&B, cleaning and domestic service, is that the jobs pay too little to compensate for their perceived low status and difficult working conditions, including being physically arduous and often requiring long working hours. In other rich countries, wages for these labourintensive jobs are much higher than they are in Singapore—in both absolute terms and relative to local median wages—their status is not so low, and technologies, business processes, and customer as well as worker behaviour have evolved such that locals are found in these jobs. They also attract foreign-born workers, but these are almost always permanent immigrants with an incentive to assimilate, not transients holding temporary work permits with no possibility of permanent settlement. There are two major economic reasons for why wages, working conditions, and worker and consumer behaviour in Singapore have not evolved as they have in other countries at a similar income level. First, wages at the low end of the labour market have been depressed by massive inflows of foreign workers from much poorer neighbouring countries in South Asia, Southeast Asia, and China. Second, housing and living costs in Singapore have risen much more rapidly than median and below-median wages, in part due to a similar influx of medium- and high-skilled foreign workers as well as foreign investment in the property market. Singaporeans at the lower end of the income distribution have to bear much higher living costs than temporary foreign workers whose housing and other costs are “subsidised” (i.e., provided free) at on-site workplaces (for construction and domestic service workers) or dormitories (for factory workers); in the case of Malaysians, they can commute daily from lower-cost Johor. For Singaporeans, housing prices as a multiple of annual income is one of the world’s highest, even for “public” housing in government-built Housing and Development Board (HDB) flats. There are also social reasons for Singaporeans’ reluctance to take such jobs. For one thing, they are associated with lowly skilled transient foreigners, and for another, the whole social development of the nation has led youth and their families to despise manual and menial jobs. Given the vast income disparity between Singapore and its neighbours, and the well-known migrant self-selection bias, it is also likely that many of the foreign workers—especially in retail, food80 WHAT’S WRONG WITH SINGAPOREANS? and-beverages, and domestic service—have higher educational and social backgrounds in their home countries than Singaporeans who must compete with them at the low end of the skill ladder. Thus, a Singaporean at the 10th percentile distribution of “talent”, education, and skills may be competing with a Chinese or Filipino at the 70th percentile distribution of a much larger home population; he or she is also much cheaper. The persistent labour-intensity of these “low-skill” jobs also depresses productivity, preventing wages from rising. For instance construction, which is a “medium-skill” and medium or high wage job in other rich countries, is an extremely low wage and low skill job in Singapore. Construction sites are populated entirely by temporary foreign workers from the poorest countries, mainly Bangladesh; like Singaporeans, Filipinos, Malaysians and even Indonesians disdain such jobs. Given low wages and high rents, it is the private and government-linked property developers who benefit from the cheap foreign worker policy are. This aggravates already widening income and wealth disparities in Singapore (by International Monetary Fund estimates, the richest country in the world with a per capita GDP of US$61,567 in 2013). In all high income societies, and particularly their large cities, services account for the vast majority of GDP, income...