Singapore's Achilles heel: foreign workers?

Singapore's foreign workforce has been in the news lately. It seems to happen every so often – generally for the wrong reasons.

The last time Singapore's foreign worker presence hit the headlines was in December 2013 with the infamous Little India Riot. (Yes, riots in Singapore and that too within the last decade!)

Today I would like to shed some light on Singapore's foreign worker presence and put forward some ideas for managing the situation in the coming years.

Let's start by putting the situation in context.

Modern Singapore's skyline (Photo: Wikipedia)

Size wise Singapore is about ten percent smaller than New York City at approx. 720 square kilometers versus NY's 780 sq. kms.

Singapore – though small in size – is an economic powerhouse. According to the recent estimates by the IMF, Singapore's GDP per capita on a Purchasing Power Parity (PPP) basis is equivalent to USD 105,700 which makes Singaporeans the third wealthiest people on earth.

In 2019, the World Bank also ranked Singapore at number three with a GDP per capital on a PPP basis of USD 101,500.

In case you are not aware, Purchasing Power Parity is a method which converts a country's local currency using "a theoretical exchange rate that allows you to buy the same amount of goods and services in every country." In other words, PPP allows one to measure and compare a citizen's ability to purchase goods and services across different countries using the same yardstick.

Because of its wealth Singapore has been a magnet for foreign labor – at least in during the last few decades. Consider the island's population.

In 2019, Singapore's population was 5.7 million with 1.7 million people or almost 30 percent being foreigners. By contrast, in 1990, Singapore's total population was three million of which 300,000 or ten percent were foreigners. By 2010, Singapore's total population was 5.1 million with a full one quarter or 1.3 million being foreign residents.

In other words, we've seen Singapore's population grow from 3.0 million (three million) with a ten percent foreign participation rate in 1990 to 5.7 million with a 30 percent foreign participation rate today.

It was in the 1990s that total population and foreigner numbers increased dramatically.

These are staggering numbers and come at a time when Singapore's own fertility rate has been falling from approx. 1.8 in 1990 to 1.14 in 2019. Only 35,300 babies were born in Singapore versus 49,800 in 1990. 

Singapore had more natural deaths than live births in 2019.

Singapore's subway system built with extensive participation of foreign workers (Photo: WIkipedia)

Unlike many other developed countries, Singapore's foreign worker population does not for the most part comprise of illegal immigrants. Foreign workers are tightly controlled by the government based on a complex quota system.

Singapore's system works well because employers of illegal workers face a fine of SGD 5,000 – SGD 30,000, or twelve months imprisonment, or both.

As at 2019, there were a total of 999,000 foreign workers on Work Permits in Singapore. Included in this one million number are 262,000 Foreign Domestic Workers or maids and 293,000 construction workers. Add in approximately 300,000 foreign professionals, management and other higher skilled foreign employees from the Employment and S-Pass permit categories and one gets a clearer picture.

Singapore has approximately 1.3 million foreign residents, including 300,000 foreign construction workers (Photo: Wikipedia)

Foreign workers are not only tightly controlled but also a healthy source of revenue for the government by means of an employment tax called the Foreign Workers Levy (FWL). 

For each foreigner employed in Singapore, employers must pay a Foreign Worker Levy. The amount of the levy varies depending on the skill level and category of the employee but generally ranges between SGD 300 – 700.

While it is not possible to obtain an exact revenue number for the FWL, Singapore's 2017 budget data stated SGD six billion (or USD 4.2 billion at present exchange rates) was raised under the following four heads: Foreign Workers Levy, Annual Tonnage Tax, Water Conservation Tax and (land) Development Surcharge.

Using only the figure of 293,000 construction workers one may guesstimate the amount raised (only for construction workers) to be in the range of SGD 1 – 2.5 billion (or USD 700 million – 1.8 billion); one billion if the levy was to be SGD 300 on each worker or SGD 2.5 billion if the levy was SGD 700 per worker.

Once levies from the other one million foreign workers are included it is safe to conclude the FWL is a nice source of income for the state – possibly SGD 3 billion or more annually (USD 2.1 billion).

By comparison, in the same year (2017) Singapore raised SGD 1.8 billion in liquor and tobacco taxes; SGD 2.7 billion in betting taxes from the local casinos; SGD 4.4 billion in property taxes; and 10.7 billion in personal income taxes.

Singapore's foreign workers are here voluntarily. Most will speak positively of their experiences in Singapore. Nonetheless, low skilled foreign workers are not paid generously.

Based on data collected in 2018 by a Singaporean NGO, Transient Workers Count Too (TWC2), the average monthly starting salary for a Bangladeshi or Indian foreign worker was SGD 400 – 465 (USD 282 – 328) versus the average Singapore monthly salary of SGD 3,100 (USD 2,200). To be sure, foreign workers are provided with basic accommodation and medical coverage by their local employers.

To be sure, one is not suggesting a cleaner be paid the same as bank manager. However, there are dangers to keeping the foreign worker community on the margins of Singapore's society – not marginalized but on the margins.

Presently, foreign workers are seen but not heard. They do but cannot say.

The quality of life of Singaporeans is dependent on the continued stable supply of cheap labor. As the Singapore Minister Minister for Home Affairs recently said, "They clean Singapore, they build our HDB flats ... they handle our waste management... they are helping us build our prosperity."

In other words, Singapore's wealth and competitive advantage are to some degree based on the availability of a steady and uninterrupted supply of cheap labor. For example, high quality public housing -  85 percent of Singaporeans live in owner occupied public housing – are not only constructed but also maintained on an ongoing basis by foreign workers.

Likewise, Singapore's world class public transport subway system is constructed by foreign workers. Additionally, some of those qualities which we tout as being intrinsic to Singapore's identity, e.g. clean public spaces and well maintained green spaces are in reality a result of foreign labor.

The dangers of dependency on foreign workers came to the fore in 2013 during the Little India riot and again during the present Covid-19 pandemic crisis.

Singapore's iconic structures such as the Marina Bay Sands rely heavily on foreign construction workers (Photo: Wikipedia)

During the present crisis, the authorities were so focused on maintaining the health of Singapore citizens and Permanent Residents that the almost one million foreigners on Work Passes were virtually overlooked.

It was a costly oversight which has affected the Singapore brand which prides itself on good governance and typically places the country on the top of most ranking lists. Additionally, it has set back the island's efforts to restart and normalize its economy by at least several weeks.

As an aside, by publicizing Singapore's one of Singapore's not normally talked about open secrets, its large foreign worker community, there is a feeling Singapore's dirty laundry is being aired in public!

Surely, Singapore has at least partly redeemed itself by ensuring there is sufficient testing available for all foreign workers. Additionally, the government has committed and continues to provide quality health care to all foreign workers in need, including world class Intensive Care health facilities all at taxpayer expense.

Singapore's dependence on foreign labor is at best an irritant and at worst a national security risk. Hence, there is ample reason to reduce the country's reliance on this demographic (dare one call labor a commodity?).

Innovation and adoption of new technologies are two ways forward; replacing human activity with robots and / or artificial intelligence makes a difference. For example, consider certain factory production lines where humans have been replaced with robots for many functions.

Simultaneously, Singapore must improve living conditions of foreign workers. Improving living conditions is a social responsibility. It cannot simply be left to the authorities by building new and better dormitories, etc. It requires a broad understanding by Singaporeans of the critical role foreign workers play in keeping the city-state functioning.

Implicit in this understanding is the need to more equitably compensate foreign workers. Surely, higher pay will necessitate a general increase in Singapore's price level as the cost of construction, waste disposal, cleaning, gardening, etc. (the list is long!) is directly linked to foreign workers wage levels. Pay more and Singaporeans must pick up the bill. No escaping that fact.

Singapore's treatment of foreign workers is a reflection of Singapore society and its people's values. Singapore must do better for its foreign worker community in the coming months and years. The country's excuses for not doing so are wearing thin.

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Imran is a Singapore based Tour Guide with a special interest in arts and history. Imran has lived and worked in several countries during his past career as an international banker. He enjoys traveling, especially by train, as a way to feed his curiosity about the world and nurture his interest in photography. He is available on Instagram (@imranahmedsg); twitter (@grandmoofti) and can be contacted at imran.ahmed.sg@gmail.com.

Why Malaysian bus drivers should earn more than Chinese ... and get preference over other foreigners for Singapore's jobs

The recent strike by SMRT’s Chinese bus drivers has started a debate about wage levels and working conditions for foreign contract workers in Singapore. Yet a couple of questions remain untouched by the debate:

1. Should salaries vary based on a workers country of origin? Yes, absolutely, as long as the wage premium / discount is based on solid reasons.

2. Do Malaysian workers deserve a wage ‘premium’ relative to their Chinese counterparts? Yes, absolutely. Malaysia is Singapore’s neighbor and Malaysians integrate better than most into the Republic’s workforce.

Singapore's foreign labor pool encompasses the entire spectrum of jobs - from the low end street cleaner to the highly paid senior executive

Labor activists and human rights purists adhering to the principle of ‘equal pay for equal work’ might disagree. Certainly the principle applies to people working in their home country. However, when labor moves across national jurisdictions then different factors come into play. Amongst others, these factors include language, education levels and cultural norms. Collectively, these factors affect an individual’s ability to live and work within a foreign society.

Let’s call that concept integration.

During the last few years, Singapore has witnessed disruptive repercussions of varying degrees from foreign workers who are not easily fitting into local society. Yes, these foreign workers drive buses, clean streets or man stalls satisfactorily, in line with their employment contracts and job requirements. However, they also bring with them local customs and practices. Many of these behaviors: riding bicycles on pavements, spitting, not speaking English and sometimes indulging in (petty and serious) crimes to list a few, have created discontent within Singaporeans.

Moreover, as the numbers of a particular nationality grows to ‘critical mass’ levels, particularly within a specific occupation or organization, its citizens feel more emboldened to challenge the status quo in a manner detrimental to Singapore’s interests. That striking Chinese bus drivers’ have forced a political review of established labor management practices demonstrates the strength (and dangers) of such concentrations.

So, how does all this relate to paying Malaysian bus drivers more than their Chinese counterparts? The answer lies in Singapore’s recent history.

Malaysians have more in common with Singaporeans than the traumatic events of 1965 may suggest. Despite the obvious religious differences between certain segments of the two populations, being geographically contiguous and a part of the same ‘civilization’ for centuries has welded the two peoples into sharing many important cultural and social traits. Consider the continuing deep economic linkages between Singapore and Malaysia.

The commercial relationship is no accident. It is a byproduct of the cultural ease of carrying on business in either society as well as the geographical reality of being neighbors.

The two nations are not alien to each other. There is a natural cultural and social fit between the two nations. A large number of Malaysians already live and work in Singapore. They have done so for many years, and without the social disruptions associated with people of other nationalities. Likewise, droves of Singaporeans regularly visit, own properties, businesses and even retire in Malaysia.

It is this relatively seamless social integration of Malaysian workers into Singaporean society which justifies their wage premium. Maintaining social stability through a cohesive work force is worth that little bit extra.  

As a sovereign country, Singapore’s human resource policies must cater to the Republic’s unique characteristics. Political pressures from regional economic giants – an unintended consequence of hiring large numbers of people from one nation – can be minimized by pursuing a more balanced foreign labor policy. To this end, Singaporean businesses might benefit from additional government incentives to employ Malaysian citizens over other nationalities. Implementing policies to encourage a more balanced pool of foreign workers must be a strategic priority for public officials.

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Imran is a business and management consultant. Through his work at Deodar Advisors and the Deodar Diagnostic, Imran improves profits of businesses operating in Singapore and the region. He can be reached at imran@deodaradvisors.com.