Strong case for Singapore to continue with calibrated immigration policy: Ministry of Trade and Industry Occasional Paper on Population and Economy 2012

By Imelda Saad, Tan Qiuyi, Channel NewsAsia, 25 Sep 2012

The Ministry of Trade and Industry (MTI) has made a strong case for Singapore to continue to make fine adjustments to the inflow of foreigners as the country faces an ageing population and dwindling workforce.

It also stressed that the days of high economic growth are over.

The time now, it said, is for Singaporeans to come to a consensus on the appropriate level of growth for the next 10 to 30 years.

Based on the country's stage of development, Singapore's Economic Strategies Committee has said that a GDP growth of between three and five per cent a year is a healthy target to aim for.

It exceeds those of most advanced countries that typically grow by two to three per cent.

But to achieve this, there needs to be rethink of growth strategies, especially against the backdrop of a shrinking workforce.

The ministry outlined three broad approaches in a paper on population and the economy, released on Tuesday.

Firstly, MTI said Singapore should continue to raise productivity through business restructuring and retraining of the workforce.

Secondly, the country should also work towards raising the resident labour force participation rate. However, the ministry said there is a limit to this.

The third strategy is to have a calibrated level of immigration and foreign manpower -- both for high-skilled and low-skilled workers.

While Singapore can strive to raise its resident work force participation for example, getting more women to work and keeping the elderly employed, there are limits to this.

For example, Singapore's male labour force participation rate is already one of the highest in the world, at 92.1 per cent for those aged 25 to 64.

While a percentage point increase in the labour force participation rate will add about 30,000 resident workers to Singapore's labour force of 3.2 million, it is not possible to continually increase the figure by one percentage point every year.

Then there are those who will not enter the workforce due to family and other care-giving priorities.

"Nonetheless, we should continue to strive to ensure that those who wish to work can do so, and to introduce suitable policies that can help residents to remain economically productive, no matter what their personal circumstances may be," said MTI.

So, the need to turn to foreign manpower which is needed in sectors where locals cannot fill.

Hudson's executive general manager, Andrew Tomich, said: "All organisations actually ask for local talents but unfortunately, in Singapore, it's really tough to find local talents that can move into these roles. So we do need to go outside of Singapore to find that talent and bring them in. Obviously, the local talent is the key but obviously we can't always find that so we need to be investing in, bringing in that high calibre talent to Singapore, to really pass that skills and knowledge to organisations and that country itself."

Trade and Industry Minister Lim Hng Kiang said: "If you take away the foreigners, if you take them away from starting of new sectors, you lose that sector. You don't get the jobs.

"If I don't allow the foreigner to come in, to start the BMS (bio medical science) sector, the aerospace sector, and I say look I must have 100 per cent Singaporeans before I introduce a new sector, then my response to you is it's very difficult and you may never have that sector.

"Second, complementing Singaporeans, talk to your SME bosses. They hire 30 to 40 per cent workers, it brings their cost down, let's be realistic, it helps them to compete. You say no, you cut it back, and if you do so sharply, then many of them will just have to close their business or relocate somewhere where they can continue to be cost competitive. So the local workers that they employ right now, will have to lose their jobs and have to find jobs elsewhere."

For the first time, authorities have revealed the distribution of foreign workers in the economy.

While many go to construction and manufacturing, the bulk - 41 per cent or more than 400,000 foreign workers - go to the services sector like F&B, retail, finance, landscaping and security.

The ministry said most are transient workers.

And while some Singaporeans may have expressed concerns about the presence of foreigners depressing wages, taking away jobs and even encroaching on space, Mr Lim noted that it's a different argument when you look at the sectors which these foreign workers are contributing to.

"So it depends which sector you talking about. So I think what this paper tries to address is instead of this generality that I am unhappy with foreign workers, well, talk about your sector. Which sector are you in, are you in the healthcare sector? Are you receiving services from the healthcare sector? Well, if you got no foreign workers, be prepared to pay higher cost."

The ministry also estimates that by 2030, the number of Singaporeans who are professionals, managers, and executives (PMEs), as well as technicians and associate professionals (TAP) will rise.

So, there will be a continued need for foreign workers in low-skilled jobs, to complement the resident workforce.

High skilled foreign manpower will also help companies as they restructure to meet the needs of the new economy.

The ministry said that is because the skills and capabilities that new industries need may not always be immediately available in the Singaporean workforce.

"As there is often a minimum of three to four years from course commencement to graduation, it will take that long before we have graduates with the necessary skills for these industries. An even longer time is required to train experienced supervisors and managers in these fields," said MTI.

The paper said having a "readily-available foreign manpower with the necessary skill sets" allows Singapore to anchor these emerging industries, while the country develops the pipeline of Singaporean workers.

MTI added that foreign manpower also helps to cushion Singaporeans from unemployment during downturns. This was seen during the recession years of 2008-2009, as well as post-911 and the SARS period.

The foreign workforce also contributes to Singapore's taxes. The ministry said while foreigners currently account for about 20 per cent of all income taxpayers, they contribute more than 25 per cent of Singapore's total personal income taxes.

Foreigners living and working in Singapore also add to the GST tax base. "Their tax contributions increase the fiscal resources for government to meet various public expenditure needs, including social programmes and transfers to maintain a progressive fiscal system," said MTI.

Mr Lim also warned of the consequences should Singaporeans choose the path of even slower growth.

"At the end, this is a national conversation, if Singaporeans say no, we are not interested in three to five per cent growth, we want one per cent, well that's the outcome of the exercise, then we just have to be sure that everyone goes into it with a clear mind, we understand the trade-offs and you're taking that trajectory. I'm explaining that managing slower growth is far, far more difficult than managing a decent, appropriate sustainable growth. When you are doing that one per cent or one-and-a-half per cent, you are playing around with stalled speeds most of the time," he said.

The National Population and Talent Division is also putting together a white paper on population policies, due out early next year.

What foreigners have done for Singapore
Ministry lists their key contributions in a paper on population and the economy

By Toh Yong Chuan, The Straits Times, 26 Sep 2012

EVEN as the Government is reining in the number of foreigners that local firms can employ, the Ministry of Trade and Industry has emphasised that they are important to the Singapore economy.

Yesterday, it outlined five key contributions of this group in its paper on population and the economy. There are currently close to a million foreign workers here.

Foreigners pave the way for new industry sectors

They allowed Singapore to rapidly grow new sectors even when there were not enough Singaporeans with skills in these areas. As more local staff were trained, they took up the jobs held previously by foreigners.

Examples: Biomedical sciences and aerospace engineering sectors.

Foreigners provide the buffer for firms to grow or downsize quickly

Local companies were able to seize opportunities from business cycles by hiring foreigners when they were needed, and letting them go during downturns.

Examples: Local shipyards captured up to 70 per cent of the global orders for oil rigs between 2007 and last year, only because they could grow their mostly foreign workforce.

During the downturn in 2008 and 2009, foreign worker employment plummeted while local hiring continued to grow, although at a slower pace.

Foreigners complement the domestic workforce

In jobs shunned by local workers, foreigners pick up the slack and help companies stay viable.

Example: In retail and food and beverage sectors where profit margins are typically lower than 7 per cent, consumers can end up paying more should the firms have to raise wages to hire Singaporeans if they cannot take on foreigners.

Foreigners add diversity to the workforce

When multinationals bring their research and development functions to Singapore, they boost innovation here.

Examples: P&G is opening a $250 million research facility in beauty and male grooming at Biopolis next year.

A*Star has set up a Centre of Excellence in Advanced Packaging with American company Applied Materials.

Foreigners build Singapore's physical and social infrastructures

Besides paying more than 25 per cent of total personal income taxes which help the Government fund social spending, foreigners also build roads and Housing Board flats, and care for the elderly and sick.

Example: There are now 19,500 foreigners working in nursing homes and community hospitals. The number is set to grow as caregiver jobs do not appeal to Singaporeans.

Trying to get the message across
This is an excerpt from a 14-minute Q&A session Trade and Industry Minister Lim Hng Kiang had with reporters yesterday, before the Ministry of Trade and Industry released its paper to explain the trade-offs between population policies and economic growth:

This is not the first time the Government has tried to explain the trade-offs. How is this any different from previous attempts?

Well, we've got to keep trying and we've got to have more dialogues and, with the help of the media, get the message across.

How will you know whether the explanation this time round will sink in?

When we get feedback, when we get post-dialogue surveys, you will have to get a sense of whether people understand it. And in the end, this is a national conversation, right? I mean if Singaporeans say, "No, we're no longer in 3 to 5 per cent, we want 1 per cent (growth)," well (if) that's the outcome of the exercise, then we just have to be sure that everybody goes into it with a clear mind, that they understand the trade-offs.

What do you say to the comment that the paper still follows rational economic arguments, that it does not strike to the very core of how Singaporeans feel about foreigners and economic growth, that foreigners take away jobs and compete for space, etc?

If you take away the foreigners, if you take them away from starting of new sectors, you lose the sector. You talk to the SME bosses. They hire 30, 40 per cent foreign workers and it brings their costs down. It helps them to compete. If you say no, you cut it back sharply, many of them will just have to close their businesses or relocate somewhere where they can continue to be cost-competitive. So the local workers that they employ right now will have to lose their jobs and will have to find jobs elsewhere.

Is this a prelude or do you see a possibility that we may reverse the tightening of the inflow of foreign workers?

No, I don't want to go into that. If every Singaporean says, "Look, we have gotten over it, we now must be more flexible," then we are in a different agenda. Let's be realistic.

Foreign workers and the voice of business
By Janice Heng, The Straits Times, 28 Sep 2012

THE Ministry of Trade and Industry's (MTI) Occasional Paper on Population and Economy, released on Tuesday, seemed slightly out of character for the economic agency.

That is because the 23-page paper, which looks at the interplay between economic growth and foreign workers, was curiously light on fresh data analysis.

In contrast, an MTI article released in May was built around an econometric model and a data set covering thousands of firms. Researchers crunched the numbers to figure out if foreign firms in Singapore's manufacturing sector led to "productivity spillovers" in local firms. (Conclusion: No clear productivity impact.)

Another released in February breaks down the link between productivity and wages via a mathematical equation.

Compared with them, Tuesday's paper shed no new light on the current public debate on labour shortages and foreign workers, economists noted. "I expected them to give some sort of projection," said DBS economist Irvin Seah.

Minister for Trade and Industry Lim Hng Kiang has said, however, that the paper's aim is relatively modest. That is to merely to lay out the facts and explain to Singaporeans "the trade-offs between population and the economy".

To recap, the paper gets its starting point from the two main components of economic growth: growth in labour force, and productivity.

Singapore is already working on raising productivity growth, but it is labour force growth that poses a bigger challenge. The country's labour force participation rates are already very high and the population is ageing.

This is why foreign workers are needed to complement the labour pool, argues MTI. If Singaporeans decide against the import of foreign labour, they will have to contend with lower growth, which means lower real wages for workers. It will also mean costlier public services like health care, which will be hit by a shortage of labour.

Singaporeans have to choose which outcome they prefer, the paper suggests.

But since it didn't include robust analysis on real wage projections, or have data showing how slower growth would result in higher health-care prices, the paper came across less like economic analysis and more like an essay stating a point of view.

Perhaps the right way to view the paper, therefore, is to understand the context in which it is released.

The country is engaged in a wholesale review of public policy as it tries to figure out what sort of future it wants to have.

The issue of foreign labour has become particularly fraught in the last two years, with debate becoming politicised and dominated by the voices of those who oppose higher levels of inflows.

This might of course be a pushback from those who felt the last decade's pro-immigration and pro-foreign labour policies have gone too far in favouring business interests, leaving citizens to suffer the social impact of overcrowding and stiff job competition.

But there is every danger of the debate moving to the other extreme to ignore economic concerns. This prompted former Straits Times editor Leslie Fong to make a call in these pages for employers to speak up on the impact of a dwindling foreign labour force.

Seen in that light, the MTI paper provided a welcome balance in reiterating the economic imperative for foreign workers.

The Ministry of Trade and Industry is, after all, the champion of, well, trade and industry, and the ministry most seized by the need to spur growth.

There is thus merit in the ministry being open about taking a pro-business stance, and framing its paper as the economic case for continued, controlled foreign worker inflows. This is more candid than positioning the paper as a neutral background paper or mere "explanation" of trade-offs.

Businesses are already feeling the impact of a tightened flow of foreign workers. The shortage will bite deeper, given the Government's plans to build more train lines, flats, hospitals, nursing homes and eldercare centres, all of which will add to demand for more workers.

The MTI paper can thus be seen as the voice of business. Does this then mean the Government is too pro-business?

Here, it is important to understand that the Government consists of 15 ministries, each of which can be expected to have its own views and concerns on an issue, even as they all work for the good of the whole.

In a National Conversation meant for many voices, there might also be room for varied concerns within the Government itself.

As Second Minister for Trade and Industry S. Iswaran told reporters on Wednesday night, MTI is not "being prescriptive" about the population issue. "At the end of the day, it is a choice we have to make collectively, try and build a consensus around the path that we think is most suitable for Singapore looking ahead," he said.

Ultimately, a decision must be reached at the highest levels of government, in concert with the people, about the future of Singapore, including the foreign worker issue.

And MTI's paper is part of an engagement process that ensures all voices are heard.