Singapore Population White Paper 2013: Exposing the Flaws of Policy Making

It is highly worrying how our politicians understand the concerns of Singaporeans, and how they are interpreting them. Being able to interpret the problems accurately is key to resolving the issues faced by the people, or if the resolution is not the right one, the problems will continue to spiral and the rifts that were created will continue to deepen.

Such is the case as how the government has handled the issue of the migrant workforce, which has resulted in the the huge disparity in understandings between the government and the people, and how it has also caused more dissent among the people and growing discriminatory attitudes among Singaporeans and the foreigners.

This is worrying because a strong social fabric and cohesion is also one of the key pillars of our infrastructure which enables Singapore to continue to attract foreign investment, and this needs to be managed well, which is why it is of high importance that the representatives in government need to have an acute understanding of how people feel, what the underlying emotions and beliefs are, and how best to manage them.

The current debate that we have on what the Singaporean core is, and how we view ourselves vis-a-vis foreigners, is one which has deeper roots. But where do these roots begin?

To identify the root of the problem, we would need to conduct a thorough analysis of the decision-making of the politicians, as well as their principles of governance, but for the purpose of this article, we will use the starting point of 2005 as the year in which our current problems started.

Root Problem 1: Overly-Loose Policy for Foreign Inflow

In 2005, the government swung the floodgates opened to allow an influx of migrants into Singapore. Due to the economic downturns of the late 1990s and the uncertainties of economic growth brought about by 911 in America, the government would have decided that the best way to grow the economy, was to increase the workforce. There were only two ways to increase the workforce and since the fertility rate among Singaporeans was low, and it would take at least another 20 years for fertility policies to come into effect, the decision was to increase the number of foreign workers to immediately. Some would say that the government’s want to increase the workforce to boost the economy was due to the losses that Temasek Holdings had made in bad investments and that is why the government is now trying to recover its loss.

The inherent flaw of this policy of increasing the rate of foreigners coming in, is only coming to light now, as we are discussing the optimal population of Singapore. It seems apparent now that in the 2000s, the government had at least two options to move our economy along – to either restructure the economy so that we could invite higher-skilled labour and industries into Singapore, or that we could continue to increase the population and drive the economy with low-skilled labour. I would suggest that the government had adopted both trajectories. For example, the government started to branch out into the biomedical science, educational and clean technology industries. However, whether it’s a mixture of bad policies, management or poor hindsight it seems that one of the trajectories has become more entrenched than the other.

To be fair, the government’s aim of growing the biomedical sector has seen some success. According to Contact Singapore, “Today, eight of the top 10 pharmaceutical and all of the top 10 medical technology companies have their regional HQs in Singapore.” Yet, at the same time, we have also heard of top researchers who have been invited into Singapore who have also decided to leave, citing reasons as to how they didn’t have free rein to decide the research projects that they want to do, as the government decides what is financially viable, and not what is scientifically challenging. We are also hearing some success in the education sector, where some educational institutions have set up in Singapore, because of the financial investments that EDB had pumped in the bring them into Singapore, but where some of them have also decided to leave. The University of New South Wales (UNSW) decided to close its campus in Singapore because, “it was facing a financial shortfall of $15 million a year due to lower-than-anticipated student enrolment numbers.” The New York University Tisch Asia’s Singapore campus had also announced early this year that it will close its Singapore campus because of “financial challenges in its Singapore operations.” We haven’t seen clear headway in the area of clean technology yet.

Yet, the government would have recognised that it would take time for the economy to restructure, and so while they wait for that trajectory of high-skilled industries to become a dominant force to drive the Singapore economy, it would seem that in the mid-2000s, that they had decided to further expand the workforce so as to also fuel the engine for the trajectory of low-skilled labour, to feed into the service industry. The underlying assumption that the government had would be that it would save costs on simply hiring more people for the service industry, instead of restructure this industry to increase the skills of the workers, and upscale this industry. Because they did not believe that there was a need to reinvent the workings of this industry, the development of this industry languished, where the hiring of cheap labour has resulted in chronic depression of the wages of these ‘low-skilled’ workers. This had a spill-over effect, which also resulted in the wages of Singaporeans in these industries to be depressed as well. While we pay the wages of these ‘low-skilled’ foreign workers, pegged to the cost of living of that between Singapore and their home countries, the wages of Singaporeans were also inadvertently pegged to the cost of living of the home countries of the foreigners, which means Singaporeans were thus not accorded a wage that is commensurate to their cost of living in Singapore.

And herein lies the first problem – because of the government’s lack of investment to grow the service industry, the businesses in this sector got used to hiring cheap labour as the way to increase their profit margin that they have learnt not to find new ways of improving themselves. There simply wasn’t impetus to do so, since the government didn’t believe in investing in this sector and felt that the way to go was by means of cheap labour. The efforts to restructure the Singapore economy was thus thwarted by the government’s dual growth strategy, which compromised the development of Singapore into the next stage of our economy. We thus became stuck in an economy, hinged by low-skilled workers at the bottom, whilst the efforts to restructure the economy with new high-skilled industries haven’t taken roots.

On top of that, to grow the wealth of the economy, the government also created a third trajectory, aimed at attracting individuals with high net worth, so that they could also increase the overall wealth and income of the country. However, add to the low wages paid to the ‘low-skilled’ workers, the problem of increasing income inequality thus further entrenched itself by the pace of which this third trajectory took. By the early 2010s, our efforts to restructure the economy had thus gone to nought as productivity continued to be very low, driven by large part because of an economy and businesses which didn’t have the impetus to invest in new technology, except to increase the number of relatively lowly-paid workers.

The problem was that we were hiring a third of the population on wage scales that were also pegged to the cost of living of the workers’ home countries, such that even as the cost of living for Singaporeans rose, wages increased not alongside the cost of living in Singapore but alongside the cost of living in China, India, Philippines, Malaysia and so forth. Yet, at the same time, the government continues to peg housing prices, COE premium and other increases in cost to Singapore’s cost of living when a group of Singaporeans, especially those in the low wage group, found it more and more difficult to afford a cost of living by Singapore’s standards with wages which grew by the standards of the other less wealthy countries. When we talk about a sandwich class in Singapore, it was a new sandwich class not trapped between the poor and the rich in Singapore alone, but trapped between the wealth disparity of the different countries.

What has become a problem was that the government’s policies of paying foreigners a lower-wage has created an unequal situation, which also marginalised Singaporeans down the road.

By 2011, the government realised that Singaporeans were very unhappy with their disparity between their wage growth and the cost of living. However, instead of realising that the problem was due to an unequal wage structure, everyone’s attention was diverted onto the stream of foreigners coming into Singapore. The main reason why it was so easy for foreigners to come in was because of an overly-relaxed policy by the Singapore government who believed that the service industry needs to continue to be low-skilled and thus to compensate for the lack of growth in skills, this has to be matched by an increase in manpower. The government thus allowed businesses to treat foreigners on an unequal level, because the policies that they had enacted allowed businesses to do so as well. The very treatment of workers at unequal levels was what drive the wage disparity and resulted in Singaporeans’ happiness.

Root Problem 2: Curbing Inflow of Foreign Workers Instead of Adjusting Costs and Wages

However, instead of realising that the problem was on unequal treatment, the government decided that the number of foreigners coming in was the problem. But it wasn’t – foreigners coming into Singapore, in itself, is not a problem. What the problem was, was with foreigners who were coming but paid low wages. Given a demand-supply dynamics, when businesses are able to pay foreigners low wages, their demand for workers will increase, and with an overly-loose policy, it was easy to bring in more and more foreigners.

And what did the government decide to do? Last year, the government decided to reduce the number of foreigners coming into Singapore. However, foreigners were still being paid low wages. The government had also refused to institute a minimum wage policy or encourage companies to increase the base wages of workers. The government went further by saying that wage increase should be pegged to an increase in productivity, knowing that productivity was unlikely to increase in the near term, because of their lack of investment in productivity growth, especially in the service industry, where they had doomed to be low-skilled.

It didn’t make sense to restrict the flow of foreigners when there wasn’t a boost in investment for technology, so as to improve productivity, and increase in wages, to match the reduced workforce. First, businesses did not have the impetus to improve productivity, due in part to high costs, such as rent and transportation put in place by the government. Second, there wasn’t an impetus to improve productivity on the worker’s part, because they weren’t compensated on a fair basis. Thus the government’s policy of restricting the flow of workers’ failed because of a confluence of these factors.

What would have been an effective policy? The government should have adjusted wages to ensure that workers are paid fair wages on a fair wage structure. At the same time, as wages take time to come into parity, the government should also ensure that locals are paid a minimum wage which allows them to afford the cost of living in Singapore, and not have to live a wage pegged to the cost of living of another less wealthy country. At the same time, the government should ramp up on investments to improve productivity. There wouldn’t be a need to artificially curb the inflow of foreigners, if the government had increased wages and improved productivity, because demand-supply economics will ensure that downstream, businesses will hire less workers and reduce our reliance on cheap foreign labour. At the same time, the increased productivity from technological investment and a more motivated workforce would compensate for the reduction in manpower.

Question is, why did the government curb the number of workers instead of implementing the solutions above? The government has always been a believer of leaving businesses decisions to market forces, and yet they had imposed an artificial solution. In the first place, the government was the one who had allowed market forces to run free and rampaged the Singapore economy with low-skilled workers. The solution shouldn’t to be then regulate the flow but regulate the dynamics that cause the flow – wages and productivity.

So, why did the government decide to (over-)regulate and curbed the flow? Two things come to mind – first, the government had just emerged from their worst election results since Singapore’s independence in 1965, and this was a knee-jerk reaction to pacify the people. For a government which claims that it doesn’t pander to populist policies, it has indeed not mastered the art of responding to the demands of the masses, and has instead over-reacted to the situation. The other thing that comes into mind is this – is our government so profit-oriented and so money-minded that it stridently insists on not increasing the wages of workers, so that they can continue to profit? One reason why they couldn’t simply ask businesses to raise wages was also because of the other costs that they have strapped businesses with – high rents, transportation costs etc, so much so that wage costs was the only oasis with which businesses had any flexibility in adjusting, and the government simply couldn’t touch this, because of the various reasons.

Then, if this is the case, what would be the most obvious solution? The government could give corporate tax breaks, reduce costs such as rents, to reduce the overall costs of businesses and allow businesses to have more flexibility to restructure. Yet, the government might worry that this will reduce their profit-margin, and also if businesses were to rely on these measures to be permanent, this would represent a long term loss. Already, the government has allowed businesses to run amok with the paying of workers low wages, due in part to their own policies. Were they ready to allow businesses to run amok with another round of loosening? But, yet, all these troubles came about because of an uneven wage policy fuelled by discriminatory policies and a profit-oriented government bent on increasing the costs of businesses. The government has a responsibility to undo its own mistakes and missteps.

Thus instead of curbing the flow of foreigners, the government should work to reduce their want to profit by reducing costs for businesses, so that businesses could be freed up to have the ability increase workers’ wages and invest in technology to improve productivity. This will be the first steps towards re-restructuring our economy.

Root Problem 3: Continuing on the Path of No Return

If we understand the above correctly, what the government should have done this year was to release a white paper to propose to restructure our industries, the job market as well as conduct a wage restructuring exercise. But instead, the government had decided to release a white paper aimed at increasing the number of workers. As mentioned, increasing the worker population is a myopic and short term solution, which will only further entrench the problem and will not resolve the long term problem at hand, and this is what the government has decided to do, which is both perplexing and dangerous.

It is apparent at this point that if we do not manage the current issue properly, this will cause further tensions and tears in our economy and society. The missteps of the policies of the past decade has exposed the urgent need for the government to refocus itself on restructuring the economy, because our current mode of working is unsustainable and has already upset the balance between an optimal population and economic growth, spurred by low-skilled labour.

You can already see that there are now new problems that are being created. In parliament and all over Singapore, everyone had started discussing about what the Singaporean core is and how we need to protect it. Some people proposed that being Singaporean means to serve National Service and one MP suggested levying a National Defence Duty. None of these discussions go to the root of the problem. The main reason why we are discussing about the idea of a Singaporean core is because we feel threatened by over-population, and thus we are trying to latch onto new ideas of framing the issue of over-population, by thinking that if are able to define a Singaporean core, we would then be able to propose that because of the need to protect this core, we need to reduce the number of foreigners coming in. But this discussion is not meaningful nor useful because the current problem is a demand-supply problem which needs to be resolved by reducing the costs of businesses to free up space and money for wage and productivity growth. This essentially means policy-making which does not over-regulate but also ensure equal treatment of the people.

The positive side-effect of this discussion was that it has finally allowed Singaporeans to think about the Singaporean identity, which has been long overdue and postponed, but to tie it to the issue of policy towards foreign workers is misplaced and dangerous, because of how it can stroke unnecessary tensions and discriminatory sentiments.

Conclusion

It is obvious what this government needs to do to set things right. This government needs to admit the flaws in their policy making and embark on a new direction of consulting with the people – the current debate has shown that this government does not have all the solutions to an increasingly dynamic and complex global economic situation, which would require the participation and support of everyone in Singapore. This government has invested heavily in the education of its people, and through and after the debate of the white paper, the people have helped identify what the problems are that are inherent to our economic trajectory and have helped identify the many solutions that we could move towards. This government needs to change its tack and undo its own fears by consulting sincerely with the people, and working together with them to chart Singapore into new territories.

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19 comments

  1. ABC

    I doubt this govt in its arrogance, will ever sincerely consult the people and have constructive discussions to reach a well-thought through solution. Can call me a cynic….but I seriously don’t think the Our Singapore Conversation is going anywhere, neither is it a sincere approach from the govt to really want to make lives better. I think it’s more for “show”, keeping up with appearance since in the last GE, they were flanked with negative comments about how they do not consult the people before major decisions were made. Yet again, another knee-jerk reaction.

    From what I’ve been reading and watching, I don’t think this govt is capable of coming up with sustainable long-term solutions to anything! Most solutions are probably just going to work for as long as their term in the office is.

    • My Right to Love

      Hi ABC,

      I have the same sentiments as you. They feel that their current position is so precarious that they will do what they can to protect it. It’s a real pity that they think that people who have different viewpoints to it for the sake of opposing, instead of realise that people simply want to offer alternative solutions to better Singapore.

      This just means that in 2016, all of us needs to exercise our rights appropriately and vote to respect ourselves and vote to do what is right for ourselves.

      Thanks!

      Roy

  2. MissyLurvnia

    High asset price is another reason why SME cannot survive in Singapore.
    Even though the housing / commerical / industrial properties are in free market. The big players like govt / big land developers are the ones who set the benchmark of how much the property prices to be.
    There will be pain if asset prices come down, but for Singapore to be more competitive, is not just labor to be cheaper, operating cost like rental can be cheaper too.

  3. Eugene Eddison Yin

    Hi Roy, your articles have never stopped making people think. Singapore is a great country, but it is time Singaporeans need to come together to make this an even better place. Our government has not been focusing on the needs of the people, but the need for a profitable nation, and where “nothing gets you nothing” and everything has to be profits. Thank you for your wonderful insights!

    Regards,
    Eddison
    http://eddify.net/2013/02/15/singapore-population-white-paper-2013-exposing-the-flaws-of-policy-making

  4. Anthony Sim

    I personally feel the government is correcting a wrong by implementing another wrong. The population in its current state is already a problem which the government cannot rectify.

    Having 7 million people in a “well” will certainly suffocate everyone. It looks like the government is buying time on to 2030, then what next. When everything collapsed, will they say sorry? I doubt so.

    In a point of no return the people will be left on the lurch. By then those aligned with the current government and the cronies of PAP would no longer be in Singapore.They would have accumulated more than enough wealth and will have the mobility to reside in almost anywhere in the world. The poor hard working Singaporeans, who will they depend on? They will be the ones cleaning up the shits that were left behind.

    In the quest for wealth, the government must always think of people first. Make sure the citizens a not left behind by supporting them more. Surely, not everyone is like them. Some will be left behind in the quest for wealth. That does not mean they are expendable. They are the ones that should be first taken care of.

    Certainly, there should be a fair distribution of wealth amongst the citizens. PAP claims in our Nation Building, it is for the good of its people. Surely they have forgotten the people were the driving force. Now it looks like they have only accumulated wealth for themselves. They have created a class in their rein, they are the well educated, they are the wealthy and they are the bureaucrats.. Or may I add, they are “select” breed of people.

    By artificially populating people in a small little island is ridiculous. Even worse, when they are inviting foreigners as justice cause because Singaporeans are not try to do so. What load of bull crap.

    This pompous government must need to stop what they are doing now. Just do nothing and chill out and maybe they can experience an epiphany and say “Look, this country is a beautiful little island. In a beautiful island, we need to have happy people. The people who strives all those years to be what it is today are the people who should be respected and be mindful of their existence. They should be the priority of any policy designed by them as trustworthy government.

    So where do we go from here until 2030 and beyond? Or will there be a beyond?

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  10. freelinuxvps.us

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