Saturday, September 29, 2012

MTI and their "Foriegn Labour is Necessary" Report

Sep 28, 2012
Foreign workers and the voice of business

By janice heng

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".

[This may well be true, but the technocrats are again unable to speak the language of the masses. ]

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.

[Translation: Almost every Singaporean that can work is already working, and we are getting old, so we are not going to be able to have more Singaporeans working. So, we need foreign workers. Again, true. But again, not connecting with the general public.]

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.

Sep 26, 2012
Growth will stall without foreign labour: MTI

Local workforce is ageing and number will start to drop in 2020

By janice heng and toh yong chuan

THERE are limits to the growth of the local workforce in Singapore, and this will in turn hold back economic growth for the country unless foreign workers continue to be allowed in, the Ministry of Trade and Industry (MTI) has warned.

Its occasional paper, released yesterday, follows the National Population and Talent Division's July paper on population issues.

"What we're trying to do in this occasional paper is focus on the trade-off, or the relationship between population and economy," Minister for Trade and Industry Lim Hng Kiang told reporters ahead of the release yesterday.

According to the MTI paper, the local workforce will start to shrink in eight years, or 2020. This is because the number of working-age Singaporeans exiting the workforce will exceed those entering it.

One way to solve the problem is to get more locals to enter the workforce. A rise of one percentage point in the resident labour force participation rate - which is the proportion of working-age locals in jobs or looking for jobs - would add 30,000 workers.

But this cannot go on indefinitely, said MTI. Of local working-age men, for example, 92.1 per cent are already in the workforce - one of the highest participation rates in the world.

Moreover, Singapore's population is ageing, added the ministry. If not managed well, this could lead to lower innovation and productivity.

Singapore's current growth target is 3 to 5 per cent per year, of which 2 to 3 per cent is expected to come from productivity gains.

This means the local labour force must still grow 1 to 2 per cent, and attaining this with a shrinking local population means that foreigners are needed, said Mr Lim.

He noted that Singaporeans may well say that they do not need 3 to 5 per cent growth and would settle for 1 per cent. "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," he added.

[Stupid. Stupid. Stupid. Frame the question in this way and you can be sure that Singaporeans will say, "go slow, lah!"]

MTI also pointed out in its paper that the problem of how to deal with an ageing and shrinking workforce was not unique to Singapore. Germany is trying to attract skilled foreign workers and Japan is looking to relax foreign worker policy.

It set out five ways in which foreign workers are important to Singapore. These include filling the gap while locals are being trained for new and emerging industries, and doing jobs that locals do not want. MTI warned, however, that an overly liberal foreign worker policy could depress local wages, put stress on public infrastructure and leave Singaporeans feeling displaced.

[Stating the obvious. Or more precisely, re-stating the obvious and repeated complaints from the public. Again, stupid.]

DBS economist Irvin Seah said the MTI paper "lays out very clearly the ongoing debate" and Singapore's economic challenges, but did not shed much new light. With its technical expertise, MTI could have done a rigorous study and put numbers to scenarios.

National University of Singapore economist Hui Weng Tat felt the report did not quite prove that higher growth means better welfare for workers. He noted that some countries experienced the same real wage growth as Singapore, even though they had lower GDP growth. "The correlation is not very convincing," he said.

No comments: