Foreign workers: How to strike that fine balance?
New restrictions on the flow of foreign workers have caused companies in the services sector to fret. Insight looks at whether they are over-reliant on foreigners and what can be done to help them.
By Goh Chin Lian, Senior Political Correspondent
At SL Global, seamstresses from China are hired to make prototypes of complex attires like running jackets with unseen pockets and cycling shorts padded with gel. Chief executive Mark Lee said he hired some local seamstresses who had been laid off earlier this year but they left after a week, saying the apparel was more complex than what they were used to. — ST PHOTO: BRYAN VAN DER BEEK
WHEN Mr Teo Siong Seng, chief of Singapore’s top Chinese business organisation, has lunch with head honchos these days, one topic never fails to surface – foreign workers. We need more of them, argue employers, who are in a huff over recent changes to tighten the inflow of foreign workers, especially those from China.
He rattles off their complaints.
Trucking companies get jittery when their China drivers head home, as they cannot find replacements and meet delivery deadlines.
Food manufacturers cannot fulfil orders because not enough locals want to work in their factories.
‘They are concerned that getting additional workers is difficult, and renewing foreign workers’ permits is difficult,’ says Mr Teo, president of the Singapore Chinese Chamber of Commerce and Industry and a Nominated MP.
Singapore International Chamber of Commerce (SICC) chief executive Phillip Overmyer says these same worries also trouble hotels, operators of convention facilities and retailers.
He believes the lack of foreign labour is expected to be a ‘significant problem’, especially when the two integrated resorts open early next year.
This will mean the calls for more foreign workers are likely to grow louder.
But the Government cannot simply give in to such business demands, Manpower Minister Gan Kim Yong had said, explaining that it needed to strike a balance between the clamour by businesses for foreign workers and the cry by locals for jobs.
It is a delicate balancing act, he told Parliament last month.
Companies, however, insist they have tried, but failed, to attract locals.
But have Singapore companies become over-reliant on foreign workers who are viewed as cheaper alternatives to locals?
Why are they unable to find locals to fill these jobs, despite the downturn?
Can policymakers give some leeway to specified companies that cannot overcome their need for foreign workers?
How numbers are controlled
THE Government keeps a lid on foreign worker numbers in two ways: Setting a quota on how many foreigners on work permits can be hired in each sector and getting bosses to pay a levy for hiring them.
The latest changes on June 1 involve tweaking the quota.
What bosses are unhappy with is the new way of computing the number of workers allowed from ‘non-traditional’ sources like China.
Previously, to hire one China worker in the services sector, an employer needed to have five locals on the payroll.
Now, he must have nine workers before he can hire one China worker – at least five must be locals and the rest can be foreigners from ‘traditional sources’ like Malaysia.
Another change is the stricter requirements for China workers to qualify as skilled workers. They must have at least a diploma verified by the Chinese authorities, when previously there was none.
The main argument for tightening the controls, amid the global economic crisis, is that local employment will go up.
The move follows a rise in the locals’ jobless rate to a five-year high of 4.8 per cent in March, which dipped to 4.6 per cent in June.
One assumption is bosses will be forced to consider Singaporeans when they cannot rely on foreign workers as an easier and cheaper alternative.
But is this sufficient to soak up more locals into the employment pool?
Some analysts believe the Government can go further to deter employers from hiring foreigners – by increasing the levy.
The monthly charge ranges from $150 per worker to $470, with employers paying a higher fee when hiring more of them or the less skilled.
Economist Choy Keen Meng feels the levy is not stiff enough.
‘Employers are well able to pay the levy in a booming market,’ says the Nanyang Technological University (NTU) don who is convinced this has led employers to hire them over locals.
He adds: ‘This over-reliance was built up over the boom years from late-2004 when the economy was growing at 7 per cent to 9 per cent, beyond its potential rate of 4 per cent to 6 per cent.
‘The Government has perhaps been a little too relaxed in terms of allowing foreign labour in, especially in the lower end of the skills scale.’
Addicted to foreign workers?
HAS this led to Singapore’s over-reliance on foreign workers?
Looking at foreign worker figures, their numbers shot up by more than 40 per cent from 2004 to last year – rising at a much faster pace than local workers.
There are around one million of them, including employment pass holders, and they form about one-third of the total workforce.
But it is tough to tell whether there is over-reliance by numbers alone, as a record number of jobs were also created during those boom years, with too many jobs for locals to fill.
Employers also cry foul over
such assertions, pinning some of the blame on locals who shun jobs which foreigners are willing to take.
At Suntec Convention Centre, the job of arranging chairs and cleaning dishes falls on a team of China workers.
In fact, all 21 workers in the banqueting team that prepares rooms for functions are from China.
Similarly, the 14-man team in the stewarding department, that sets the tableware and cleans them, has eight work permit holders from China.
As with many businesses that hire foreign workers, it insists it is not over- reliant on such workers.
‘We just cannot find locals for these jobs,’ says its human resource director Jacqueline Goh.
‘We even tried the Yellow Ribbon,’ she adds, referring to the campaign to give ex-offenders a second chance.
‘They, very interestingly, came back to say there are no career prospects for our kind of jobs in stewarding.’
The few that applied for the $900-a-month job left after the second day. This is why employers are increasingly turning to foreign workers, who are filling more jobs here.
Foreign workers form about 25 per cent of the nearly two million workers employed last year in the services sector, an increase from 22 per cent in 2006, according to latest official figures.
But the pool is greater in construction, where it rose from 61 per cent to 70 per cent, and manufacturing, where it climbed from 45 per cent to 51 per cent.
Most employers blame it on the inherently labour-intensive nature of their industries.
Hoteliers point to the need for personal service, from greeting guests at the front desk to tidying up the rooms and serving meals in a restaurant.
Says Mr Overmyer: ‘There are devices to raise the bed, but you still need the housekeeper to pick up dirty towels and rearrange things in the room.’
Some industries, however, have reduced their reliance on foreign workers.
In recent years, the cleaning, landscaping and security industries, for instance, show that automation and job redesign with higher pay can draw locals.
Driven by the labour movement, cleaning contractors were further encouraged to automate when the 14 town councils run by the People’s Action Party changed their way of awarding contracts, giving emphasis to quality instead of focusing only on price.
Their workers were trained and, with certified skills, were paid $1,000 a month – up from $750 – and given Central Provident Fund (CPF) contributions.
It helped raise the proportion of locals to foreigners from 50:50, to 60:40, says Mr Albert Teng, coordinating secretary for the 14 PAP-run town councils.
Picky locals, poor wages
HOWEVER, not all locals are as accepting, which is a headache for employers like apparel maker Mark Lee.
The chief executive officer of SL Global hires China seamstresses to make the prototypes of complex attires such as running jackets with many unseen pockets and cycling shorts padded with gel.
But earlier this year, he hired some local seamstresses who had been laid off.
‘They left after a week, saying the apparel is more complex than what they were used to,’ he says. Their monthly pay was between $1,000 and $1,200.
Another oft-cited obstacle is working hours, with few locals willing to work on weekends, night shifts and public holidays. But these are inevitable in such service sectors as hotels, retail, and food and beverage outlets.
Other deterrents are stuffy and non-air-conditioned production floors, distance from home, lack of career advancement and the perception that service jobs are menial. Even in this downturn, jobs such as waiters, housekeepers and factory packers are going a-begging.
Riverview Hotel advertised last month for 10 positions, including waiters, technicians, housekeeping staff and kitchen assistants. Their monthly pay: about $750 for kitchen assistants, $900 for waiters and housekeeping staff, and $1,200 to $1,400 for technicians.
About 90 per cent of the 300 that applied were Filipinos, 5 per cent were from India, Vietnam, Myanmar and China, and 3 to 4 per cent from Malaysia. ‘Only 1 to 2 per cent were Singaporeans,’ said its human resource manager Christine Chan.
In contrast, 80 per cent of the 7,800 applications Marina Bay Sands received last month were from Singaporeans eyeing the more than 1,000 dealer positions in its casino.Employers attribute it to the National Trades Union Congress (NTUC) and the Workforce Development Agency (WDA) drumming up support for the recruitment drive of the two integrated resorts (IRs).
They also maintain they strive hard to attract locals, including advertising on job portals, taking part in job fairs, and working with the WDA, community development councils and the labour movement to train and place workers.
Economists blame lousy wages as the chief culprit for locals’ lack of interest.
In the boom years of 2004 to 2007, wages as a share of Singapore’s gross domestic product fell to about 42 per cent from a high of 47 per cent in 2001, suggesting there was some under-paying of wages even though profits had risen.
Last year, the wage share rose to 44.9 per cent but it is an exception as profits tend to fall faster than wages in a downturn, notes Associate Professor Hui Weng Tat of the Lee Kuan Yew School of Public Policy.
One way to force wages up is to curb the supply of foreign workers, says NTU’s Associate Professor Choy.
‘Let the market do the job. Higher wages will attract some locals and prompt firms to think about automation.’
Turning off the tap
BUT curbing the flow of foreign workers can lead to the loss of those trained.
More importantly, it can cause a loss of business opportunities.
Demand for Bengawan Solo’s almond cookies and handmade pineapple tarts is high but the local bakery chain struggles to find locals to work as production operators in its factories for $900 a month.
Says its managing director Anastasia Liew: ‘I have factory space in Malaysia which used to be rented out, but is now vacant. I may have to move out.’
When companies move overseas, there is inevitably a knock-on effect on suppliers and other related businesses – and, in turn, their Singaporean workers.
Economists, however, argue that it may be good for the economy for some businesses to leave.
Says Prof Hui: ‘Then you can channel limited labour resources to higher value-added, more technologically advanced industries.’
Agreeing, Mr Overmyer notes the structural economic changes over the years and says: ‘We don’t assemble TVs any more. We do semiconductor wafer fabs, and now we are looking at wind machines and solar cells. We have to adjust constantly the level of support we give at the low end.’
But he argues that hotels, restaurants and retailers are in a different class. Singapore cannot ignore their needs given its ambitions to be an alluring global city. ‘It’s a question of whether we need so many first class, highly rated hotels and whether we need two IRs. The answer apparently is ‘yes’, for Singapore to thrive.’
But the surge in the service sector is significant, points out NTUC deputy secretary-general Halimah Yacob. ‘There is a clear need to calibrate the policy on foreign workers, particularly in the service sector where the influx is so apparent and obvious today compared to just one or two years ago.’
But, she adds: ‘In the manufacturing sector, where millions of dollars worth of investments are involved, foreign workers do fill the gaps in both numbers and skills that cannot be filled by our local workforce.’
Give special treatment
BUSINESSES hungry for manpower suggest that the Government set a more generous foreign worker quota for specified companies.
Such a targeted approach will iron out the wrinkles in the system of giving different quota entitlements to six sectors: manufacturing, services, construction, process, marine plus landscaping, agri-technology and incinerator plants.
Their proposed criteria for such special treatment would include the company’s efforts in redesigning jobs to pay reasonable wages, automating their processes and recruiting locals plus back-to-work women and older workers.
But such a policy could be unwieldy to implement and potentially contentious, says Prof Hui. ‘Almost every company will ask to be an exception.’
Another approach suggested by economists and businesses – and one that the Government is taking – is to be more discriminating on the supply side. Raise the skills bar continually, they urge, suggesting that qualifications, work experience and type of job be on the list of criteria for foreign workers. It would benefit employers of skilled workers in short supply but not those who rely on less-skilled workers in jobs shunned by locals.
Correspondingly, it would help achieve Singapore’s long-term strategy to raise the workforce quality while allowing some businesses to grow.
On the national level, economists say Singapore needs to relook its dependence on foreign workers before the economy recovers.
It is an issue being considered by the high-level Economic Strategies Committee, which will give its key recommendations in January.
Says Prof Hui: ‘Growth at any cost is not something we want.’
Likewise, NTU’s Prof Choy believes it is ‘good’ to have a more sustainable growth rate.
‘Automatically, the need for foreign workers will come down. As long as the policy is not changed, once the economy booms again, we are going to repeat all the mistakes,’ he adds.
chinlian@sph.com.sg
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