REACTIONS TO SINGAPORE BUDGET 2013
By Tan Khee Giap For The Straits Times
BUDGET 2013 is best understood in tandem with the Population White Paper.
The latter spelt out the underlying population trajectory for Singapore. In fact, what the White Paper did not say, but which is clear to me, is that a larger population is not a target; it is an inevitable outcome if Singapore is to aim to remain a thriving city despite its ageing and shrinking workforce.
This is because Singapore's economy is well on the restructuring path towards a more labour-intensive services economy.
Over the last decade (2003- 2012), value-added in goods-producing industries has been declining from 33 per cent to 29 per cent, while value-added in services-providing industries has steadily increased from 63 per cent to 69 per cent.
The services sector is less amenable to automation and other labour-saving technological improvements. As a result, Singapore needs a relatively bigger labour force over time, comprising both resident and non-resident blue- and white-collar workers.
Such a trend of restructuring from manufacturing to services is irreversible in the longer run as the experiences of developed economies have shown, especially when citizens desire higher wages, which have to be supported by higher value-added industries.
Budget 2013 is full of measures such as productivity incentives to help companies continue on this restructuring path, especially those targeted at small and medium-sized enterprises (SMEs). It also gives incentives to employers to favour locals over foreigners as employers will have to pay higher levies and face stricter quotas if they want to hire foreigners, but will enjoy subsidies for wage increases if they hire locals.
The move to give incentives to companies to hire locals is in line with the push by the Government to attract more female and older Singaporeans back to work. This is a good initiative, but there is a mismatch between available jobs and workers' expectations. More can be done to reduce that gap.
For example, the Government can make it a policy to regularise a part-time Singaporean workforce by incentivising or even mandating companies to give decent pay commensurate with productivity to part-timers and to adopt flexible work scheduling.
This is one way to mitigate the rapid rise in the number of blue- collar foreign workers. Such a regularised part-time Singaporean workforce can boost additional household incomes and reduce income disparity.
In fact, the Workfare Income Supplement (WIS) scheme can be expanded to cover part-time work. Rather than calculate wages on a per month or pro-rated basis, wage supplements can be linked to an hourly living wage. The Government can then augment part-time workers' hourly wage, once the part-time Singaporean worker is certified by the Workforce Development Agency (WDA) as productive, with feedback by employers on good performance track records.
Some large and multinational corporations are able to attract consistent and productive part-timers thanks to their work environment and scheduling. Preliminary industry survey findings by the Asia Competitiveness Institute at the Lee Kuan Yew School of Public Policy suggest that raising hourly wages to certain levels can help other companies such as SMEs do likewise.
A regularised part-time worker scheme can also be justified or perceived as an internship or on-the-job training, which should be encouraged especially in services sectors among university, polytechnic and the Institute of Technical Education students.
Efforts to tighten the foreign labour market must be undertaken together with measures to raise employment rates of locals by creative measures to draw out potential workers such as housewives, retirees and students, who may be willing to take up part-time work.
There have been suggestions that the Government cap the number of foreigners at present levels. As business associations have warned, this will have an impact on business growth. Job creation for Singaporeans and the vibrancy of Singapore would be affected as SMEs and MNCs plan to relocate in anticipation of a severe labour crunch. Infrastructure build-up would be delayed, timelines for the additional 200,000 units of public housing may not be met and prolonged low gross domestic product (GDP) growth would mean a Government Budget revenue squeeze.
The Population White Paper warned that a stagnating economy would lead to migration of younger Singaporeans. The more educated and wealthier may indeed migrate. But my concern is that in a stagnating economy, the vast majority of Singaporeans would be trapped at home with mediocre jobs as most have only one effective business language: English, or worse, Singlish.
They would not be effective or competitive in emerging economies which are Chinese-speaking, including mainland China and Taiwan. Neither would they be effective in Indonesia or Malaysia, or be able to compete with Europeans and Americans, who have a much better command of English.
The best way to give the majority of monolingual Singaporeans a chance to make a good life is to give them home-ground advantage by making Singapore itself a vibrant cosmopolitan city. This requires modest workforce growth via greater use of indigenous labour and some immigration.
The writer is co-director at the Asia Competitiveness Institute, Lee Kuan Yew School of Public Policy, National University of Singapore.