Is raising foreign worker levy the answer? — Conrad Raj
MARCH 1 — The Government has decided to make it more expensive for companies to hire foreign workers by raising the levy for bringing them in.
Finance Minister Tharman Shanmugaratnam announced in his Budget speech that unless this was done, “it will be difficult for us to prevent the proportion of foreign workers from rising over time and exceeding our long-term target of one third of the workforce”.
The increases in the monthly levies, to be phased in at six-month intervals, range from S$130 for the manufacturing sector to over S$320 for the construction sector. The Foreign Worker Levy adjustments, including those announced last year, would add roughly 1.7 per cent to annual labour costs when fully implemented in July 2013, according to Mr Shanmugaratnam. The increase in employer contributions to the Central Provident Fund will add another 0.5 per cent.
The raises are hefty but are they punishing enough? As some have pointed out, all they are going to do is raise costs which are going to seep their way through the system to add to our already high inflation.
Furthermore, there are jobs such as cleaning tables, hauling rubbish, mainly construction and ship-repair or ship-building work, that cannot be done away with through upgrading or training and which Singaporeans do not want to take up.
Shanmugaratnam has said “the increases in foreign worker levies are not merely a cyclical response to current conditions”, but that “this is the direction we are setting for the long term, so as to provide clear and strong incentive for businesses to upgrade their operations, train up their workers and reduce their dependence on lower-skilled foreign workers”.
But increasing the levy is not going to solve the foreign labour problem, nor is it going to force most firms to upgrade. Levies have been in force for decades but most industries appear to have found it cheaper to just pay up rather than spend the money to upgrade. This, despite various incentives and encouragements to upgrade. So I have little faith that the new incentives will work too.
We have to separate the jobs that Singaporeans can do and those they will not.
For sure, the construction industry can further upgrade. But is it wise to impose levies on workers in those other industries where we face fierce competition from the likes of China, Vietnam and India?
For instance, in the ship-repair and rig-building industry where Singapore has built a reputation second to none — do we want to drive these businesses elsewhere?
Not only is the private sector affected by such costs but the public sector as well. We have mega projects in housing and transport. Add on the rising cost of oil, power, materials and now labour, total cost increases could be quite significant.
Separating the jobs that Singaporeans are loathe to do, and not imposing levies on such work, will help us remain competitive.
Why are Singaporeans not taking up some jobs? It is, at least in part, a question of expenses.
The foreigner is able to take up these jobs because he is not here for the long haul nor does he have a family to raise here. Their expenses overall are kept low. You cannot expect locals to live the same way or make the same sacrifices.
Even with the higher levies, most jobs involving foreign workers will pay no more than, say, S$1,500 a month. Can a Singaporean afford to raise a family on that? For most Bangladeshis, Indians and Myanmarese, S$1,000 is a fortune and so many companies will continue hiring them despite the higher levies.
Singaporeans, by and large, are not xenophobic. The recent concern over foreigners was more due to our infrastructure not being able to cope with the sudden large influx of foreign workers.
The bigger concern is over the higher paying jobs which Singaporeans are able to do but for one reason or other, companies prefer to hire foreigners.
It appears that all too often we rely on financial signals to solve our problems, be it the car population, smoking or the foreign workers issue. Perhaps there are other ways to skin the cat. — Today
* Conrad Raj is editor-at-large at Today.
* This is the personal opinion of the writer or publication. The Malaysian Insider does not endorse the view unless specified.