Place Productivity First,
Re-tune Foreign Worker Policy for the Upturn
1. Early last year, I had said that my wish for Budget 2008 was for government to re-look our foreign worker quota. I had argued that the ready supply of many foreign workers, willing to take on poorly-designed jobs with low-productivity, did not give employers sufficient incentive to improve standards, quality and productivity.
2. Therefore, I am not surprised that in 1Q 2009, labour productivity declined 15.4% compared to the same period in 2008. In fact, if we look at productivity figures from 4Q 2007, the number has been on a steady decline. Every quarter, it appears that our workers are becoming more and more unproductive.
3. But before we start to blame the workers, let us pause to examine why the figures are so dismal. If you ask the average Singaporeans if they have been loosening up, taking it more easy so-to-speak, the answer is clearly “no”.
4. Singaporeans have been working as hard as they have in the past. In fact, when the economy was booming, many of them helped their employers by taking on overtime. Some went on extended shifts.
5. If our workers worked harder, why did productivity still fall?
6. One possible answer is that as the economy grew, we have not been working smarter. If a company’s order books double, the employer can do several things:
a. he can keep the same workforce, but make each worker work twice as hard. In theory, this can double the productivity. But in reality, it is unlikely to be the case. The employer has to pay overtime which means costs are higher. It is also hard for workers to keep up the same levels of output for long periods of time due to fatigue.
b. he can double the workforce; everyone will still produce the same amount of output, so broadly speaking there is no impact on productivity. Especially when the outlook was optimistic, employers were also keen to build up capacity in anticipation of even higher orders.
7. In Singapore, this second option of building headcount to keep up with orders has become easier to pursue because of our foreign worker policy.
8. To be fair, if an employer has maximised his foreign worker quota, he can only hire more foreigners if he also increase his Singaporean headcount. So, employers have had to hire Singaporeans first before they could expand their foreign workforce. (A small minority of errant employers tries to outsmart MOM by hiring phantom workers but most employers play by the rules.)
9. Each real Singaporean hired gives employers the option of hiring:
- 7 more foreigners in the construction and process industries
- 5 more foreigners in marine
- 2 more foreigners in manufacturing or services industries
10. With rare exceptions, these foreigners are paid lower total wages than their Singaporean counterparts. As a result, businesses are in fact incentivised to build up their headcount, because it lowers average wage costs. Orders where margins were poor could still be taken on because of the lower overall costs.
11. There is thus little or no attempt to review work processes to be more productive. There is also a tendency to stick to existing business models and strategies, with little or no thoughts on technology or innovation, or providing better value to customers, so as to get better prices for their goods and services.
12. As a result, businesses may earn more profits from increased orders but labour productivity has declined.
13. While the good times lasted, businesses were happy. So were the Singaporeans when they received their bonuses. Sadly, the viability of these businesses was being eroded, and our economy risked losing long-term competitiveness by becoming overly dependent on low-cost, low-skilled foreign workers. When the bad times came round and orders dried up, our labour productivity took a further beating.
14. What if we now completely cut off the supply of foreign workers? Would that force companies to focus on working smarter, getting more out of their businesses and each worker, therefore push up both profitability and productivity?
15. Well, if we do that, be prepared for upheaval in industries, the result of which is that many Singaporeans will suffer as well. The truth is that:
a. there are more jobs in Singapore than there are Singaporeans to do them, even in a downturn; cutting off foreign workers mean even viable business will be hurt
b. there are foreigners are skilled and productive, who add to the breadth and depth of our workforce and whom we should continue to welcome
16. We must resist the temptation of casting this issue as one of “foreign vs local”. The real issue is of productivity, standards and quality.
17. As we prepare for the upturn, let us not fall into the same old trap or just building up headcount to keep up with orders. Let’s try to work smarter. Let us insist on improving productivity, building up standards and enhancing quality.
18. Let us acknowledge, that all workers, whether Singaporean or non-Singaporean, have the potential to help keep Singapore the #1 workforce in the world.
19. Let us remain steadfast in our efforts to re-skill and up-skill our Singapore workers, to enhance their employability and to improve their job prospects. Let us strengthen our Continuing Education and Training framework so that lifelong learning becomes a reality for all Singaporeans. Let us press on with our efforts in job re-creation so that more Singaporeans can get better jobs with better pay.
20. At the same time, let us take re-tune our foreign worker policy to:
a. reduce dependency particularly in sectors where productivity levels have stagnated or declined
b. enhance standards and quality, so that the foreign worker lands in Singapore because of superior skills rather than superior ability to pay exorbitant agent’s fees
c. reward industries and companies whose productivity levels improve over time, so that they can continue to do more and make a bigger contribution to our economy
21. As we celebrate Singapore’s 44th birthday, let us pledge to put productivity back into the spotlight. Let us pledge to work together, whether we are the employers, the unions or the government, to remain one of the most competitive economies in the world, with superior capabilities and sustained growth for all.
22. Let us put our heads and hearts together to foster inclusive growth, so that Singapore businesses and workers can continue to prosper together, for many, many more years to come.
Happy Birthday, Singapore!
