What Do You Think Of The New Fair Consideration Framework?

The Ministry of Manpower (MOM) announced a new “framework” yesterday, called the “Fair Consideration Framework”, to “consider Singaporeans fairly before hiring Employment Pass (EP) holders”. Firms which want to employ E Pass holders would be required to advertise on a new jobs bank for 14 days. This will come into effect next year on 1 August 2014.

What do you think of this “framework”? Try this interactive article to find out more!

“Framework” Doesn’t Protect All Singaporeans

What you have to take note of is that this “framework” applies only to E Pass holders.

According to the MOM, the qualifying salary for the E Pass will be $3,300 from January 2014. In 2012, “university graduates who landed full-time jobs … earned a median gross monthly salary of $3,050,” which means that it can be considered that the E Pass wage level is pegged to the starting pay of a degree holder. Thus on first glance, this “framework” might be more useful for degree holders.

In 2012, there were 29% of Singapore residents who were degree holders (Chart 1).

Slide1

Chart 1: Singapore Yearbook of Manpower Statistics, 2013

There are another 71% of Singapore residents who do not possess a degree and would thus not be protected by this new “framework” (Chart 2).

Slide2

Chart 2: Singapore Yearbook of Manpower Statistics, 2013

Also, “jobs which pay a fixed monthly salary of $12,000 and above” are exempted from this “framework”. This means that Singaporeans who would quality for jobs in this income range would not be protected as well. There are more than 100,000 Singapore residents who earn more than $12,000.

If you look at the proportion of Singaporeans who earn between $3,000 to $12,000, they make up about 42% of the Singapore resident population.

This means that if you look at it in terms of income, about 60% of Singapore residents will not protected by this “framework” (Chart 3) – which means that the lower-income Singaporeans will not be protected as well.

Slide3

Chart 3: Singapore Yearbook of Manpower Statistics, 2013

In Britain, “visas (for migrant workers) have been streamlined into five “tiers“. Also, “In each case, the employer must prove that, despite making every reasonable effort, he has found no British or European Union citizen willing to fill the required job, and that the importation of a foreign worker is the only possible course.”

So, you can see that in Britain, all British workers are protected, and not just some.

If this is the case, do you think that this framework should cover all Singaporeans, and not just 30% to 40% of Singaporeans?

But The Fair Consideration Framework Is Not An Act Or Law

Also, do you know that this new Fair Consideration Framework is, well, a “framework”. It is not an “Act” or a “law”, which means that there are no legal penalties if the employers go foul of this “framework”.

Acting Minister Tan Chuan-Jin had said that, “But fair consideration is fundamentally about attitudes and mindsets. It is neither possible to change mindsets overnight nor legislate the problem away. We must set expectations about what is acceptable and what is not. It requires persuasion, explanation, and leading by example. The worst employers must be taken to task. This is the context for the Fair Consideration Framework.”

However, according to how the “worst employers” will be “taken to task”, the government had said that if “firms are not responsive”, they will be “subject to additional scrutiny and may have their work pass privileges curtailed”.

Will a “framework” thus be enough if employers would only be reprimanded? That this is only a “framework”, there is nothing that is legally binding or that would hold employers accountable for their actions. If employers flout the “framework”, there is no legal teeth for the MOM to act on the employer. Also, the MOM isn’t known for its ability to enforce its policies, and if so, how effective would the “framework” be without strong enforcement?

Thus the question is, do you think the framework should be made into an Act or a law, to give better protection to Singaporeans?

The Fair Consideration Framework Is Just A “Jobs Bank” Website

But it would be an illusion to think that the “framework” does even protect degree holders and higher-income Singaporeans.

Do you know what else is not said? Truly, the only new requirement is that firms need to “advertise the job vacancy on a new jobs bank” for 14 calendar days (not work days). Not only that, “firms can continue to advertise job vacancies on other platforms and websites, to extend their outreach to Singaporean job seekers.”

Take note of this – there is no requirement that the employer would need to first invite Singaporean candidates for interview. In Hong Kong, it is only when employers are not able to find suitable local candidates which is that, “the firm can apply to bring in foreigners. The application will be considered first by the Labour Advisory Board and then approved by the Labour Department.

Also, there are no guidelines set out as to how the firm would consider whether the Singaporean worker is suitable or not for the job. In fact, the MOM said that, “MOM does not review the merits of a firm’s hiring decision, as the firm is best placed to decide on which candidate can do the job.”

Firms are not bound to consider their hiring decision according by any guidelines. Firms won’t be taken to task if they don’t abide by the “framework”.

In Australia, “the employer must be able to explain how the worker’s salary has been determined, including details of wages paid by the employer to foreign and local workers“. In Thailand, “to get a work permit and visa for a foreign employee, companies have to show that the foreigner is needed for the job through the submission of documents on his background and educational and professional qualifications“. And as mentioned, in Britain, “the employer must prove that, despite making every reasonable effort, he has found no British or European Union citizen willing to fill the required job, and that the importation of a foreign worker is the only possible course”.

You know what this means? This means nothing has changed. You know what the Fair Consideration Framework is – it’s just the creation of a “jobs bank”. That’s all there is. This whole framework is about spending money to create a new job openings website. That’s all. At best, this is a PR exercise.

In other words, the only new thing a firm which wants to hire an E Pass holder has to do is to advertise on this new jobs bank. But everything else remains the same – they can still advertise on other platforms and websites. They can still interview all applicants, be it Singaporean or foreigner, and they can still employ a foreigner without needing to provide additional justification. There are no new guidelines which the firms have to consider the Singaporean worker by and there are no penalties if the firm doesn’t hire the Singaporean worker.

The Fair Consideration Framework is just the jobs bank. It’s only to make Singaporeans happy.

But There Is No Foreign Worker Levy for Hiring of E Pass Holders

What’s more, do you know that to hire foreign workers, employers have to pay a foreign worker levy. However, this is not necessary for E Pass holders. Thus if a foreign worker is hired on a “fixed monthly salary” of $3,300, the whole $3,300 goes to him/her.

But for a Singaporean worker, there are additional costs to hire him/her. Assuming that the $3,300 which would be paid to a Singapore worker is the gross monthly salary, this means that the employer would need to pay an additional 16% of the Employer’s CPF Contribution, or $528, to hire the Singaporean worker. (Also, the Singaporean worker would only take home $2,640.)

As such, it would be more expensive to hire the Singaporean worker over a foreign worker (Chart 4).

Slide4

Chart 4

The way to resolve it would be to impose a 16% levy to hire the E Pass holder, to allow the Singaporean worker to be at the same cost (Chart 5).

Slide5

Chart 5

Thus even with the Fair Consideration Framework, it might still give employers lesser incentive to hire a Singaporean worker because of the additional Employer’s CPF Contribution, which leads to higher costs. To allow a Singaporean and foreign worker to stand on the same stead, both should be hired at the same cost to the employer.

If so, other than the Fair Consideration Framework to protect workers, do you think that a 16% levy should be imposed on hiring an E Pass holder?

Already, a levy is imposed on the hiring of workers on the Work Permit and the S Pass. Also, for Britain, “A minimum fee of S$1,000 is levied on a Tier 2 application, but some employers can pay five times that amount if they use immigration lawyers.”

So, for the other work passes (Work Permit and S Pass) and in other countries, there are further protection mechanisms to make the Singaporean worker more attractive and employable.

Thus in order to make the Singaporean worker more attractive,

But this is only one way to do it. Some of us might not agree with further imposing on costs on the employers. Indeed, the levy system that the government has created has only created more hurdles for employers and workers alike to have to cross.

There are other ways to do it.  For example, in Australia, “the government requires that foreign workers on temporary, short-term visas are paid proper market rates, in part to make them less appealing to employers hoping to avoid paying more for locals.” However, this also means that if there are additional costs, the employer would pay the same cost to the local or foreign worker, and would not favour one over the other.

If so, the government would need to look into how to make the Singaporean worker and the foreign worker cost the same.

Thus,

Essentially, the idea is that even with the introduction of the “Fair Consideration Framework”, when Singaporean workers continue to be more expensive, they would start off on a disadvantage anyway as compared to the foreign worker. Furthermore, if the $3,300 were to also include the Employer’s CPF Contribution, so that costs of both workers would be equal, this would mean that the Singaporean worker would only take home $2,112, after deducting 36% off for the Employer and Employee’s CPF contributions.

Singaporean Wages Remained Stagnant Because Of Fixed E and S Pass Wage Levels

Do you also know that the wage level for the E Pass and the S Pass had remained the same from 2004 to 2011. It was only in 2011 that they were finally increased.

For the S Pass, the wage level remained the same for 8 years, even when prices increased. It was only in 2011 that the S Pass wage level was increased from $1,800 to $2,000, and to $2,200 in 2013.

Similarly, the wage level for the E Pass remained stagnant at $2,500 for more than 8 years, before it was increased to $2,800 and $3,000 in 2011, and then to $3,300 in 2014.

You can see that the E Pass wage level is somewhat pegged to the starting pay of the degree holder and the S Pass wage level pegged to the starting pay of the diploma holder.

So, from 2004 to 2011, if the Singaporean degree or diploma holder would want to ask for higher starting pay, they would be put at a disadvantage because they would be competing with workers who would be willing to take a lower pay, at the low E Pass and S Pass wage levels of $2,500 and $1,800. In fact, Acting Manpower Minister Tan Chuan-Jin had also admitted that “entry-level salaries for Singaporeans have been stagnant over the past give year“.

Thus the wages of Singaporeans were depressed and had remained stagnant from more than 8 years because of the fixed wage level of the E Pass and S Pass which had remained unchanged, even when prices had increased.

If this is so, do you think that the wage levels of the E Pass and S Pass should be adjusted every year, according to the cost of living, so that Singaporean workers can earn a wage compatible to the increasing cost of living in Singapore?

Low Income Earners In Singapore Are Not Protected

But, so far, from what we have discussed, we have only discussed Singaporean workers who are degree or diploma holders, and who earn above $2,500.

But what about the low-income Singaporeans? There doesn’t seem to be any law which protects them?

According to the MOM, do you know that there are 45% of Singapore residents earning less than $2,500 (Chart 6)?

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Chart 6: Singapore Yearbook of Manpower Statistics, 2013

According to the CPF Board, there are 47% of Singaporeans earning less than $2,500 (Chart 7).

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Chart 7: CPF Board Annual Report 2011

If the E Pass and S Pass wage levels can be seen as the “de facto” minimum wages of for new degree and diploma holders respectively, this means that for degree and diploma holders, they are somewhat protected (but whether $3,300 and $2,200 is enough to be considered as minimum is contestable). But for workers who earn below $2,200, there isn’t a minimum wage to protect them – and this would also include many diploma holders as well.

  • If so, as shown above, this means that about 60% to 70% of Singaporeans won’t be protected by the “Fair Consideration Framework” (Chart 2 and 3).
  • Another nearly 50%, or 800,000 Singaporeans do not have any “minimum wage” to protect them as well (Chart 6 and 7).

To break it down further, there are about 17%, or nearly 300,000 Singaporeans who earn below $1,000. Would they even be earning enough to have a basic standard of living in Singapore?

According to a poll that you had done last week, more than 60% of the respondents felt that Singaporeans would need about $2,000 to $2,500 to have a basic standard of living in Singapore (Chart 8).

Slide8

Chart 8: The Heart Truths

Nearly 20% of Singaporeans earn less than $1,000 and nearly 50% earn less than $2,500.

If so, how can we protect these workers? They are not protected by the “Fair Consideration Framework”. Neither is there any minimum wage to protect their livelihoods.

As such, they continue to earn low and depressed wages.

In fact, from 2000, the poorest in Singapore have seen their real wages drop since 2000 (Chart 9).

Uneven Real Income Growth

Chart 9: The Straits Times

So, having know all these:

Also,

But what we are discussing here isn’t anything new.

Singaporeans have been asking the PAP government to implement minimum wage for several years now. In fact, countries like Japan, South Korea, Hong Kong, Taiwan, Malaysia and Indonesia already have minimum wage.

And actually, 90% of the countries in the world have minimum wage. Singapore is the only developed and high-income country in the world without a minimum wage.

I had also previously written about how the ideas about how minimum wage will have adverse effects to an economy are fallacies. Indeed, countries with minimum wages and countries with the highest wages also have one of the highest GDP per capita, lowest income inequalities, highest productivity, competitiveness and innovation. Clearly, the case for minimum wage is a good one. The question is, whether there is political will to implement minimum wage in Singapore.

The PAP government has refused to implement minimum wage but had instead came out with a Progressive Wage Model, which I had shown is nothing other than a promotion pay scale that every company already has.

It is thus peculiar why the PAP government has decided to introduce this Fair Consideration Framework which protects only a select group of Singaporeans but leave the rest to fend for themselves. Why would the government once again create policies which are based on creating an uneven society?

To look at it fairly, the low-income Singaporeans are the most un-protected worker population in Singapore. Yet, there continues to be next to little protection for them. And even when the PAP government creates this new “framework”, it doesn’t seek to protect the low-income workers.

We have to ask ourselves why this is the case. Are the low-income Singaporeans not worthy or deserving of protection? We are talking about nearly 50% of the Singaporean population in Singapore.

For many Singaporeans, they are concerned that the PAP might have come to a point where when they create policies, they would be more willing to protect a certain class of Singaporeans over another. But a society where there is disparity and favouritism can result in a very uneven one, where down the road, Singapore would become divided, if it is not already divided.

From your perspective, is a country divided along class lines healthy? If our country is to continue growing, would it not be in all our interests for the country to grow together?

If this is so,

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19 comments

  1. Jasmine

    Roy, this Question is too simple:

    Do you think the government should create policies that make the Singapore and foreign worker cost the same to businesses

    A candidate should paid according to the value of the job and the value-add the candidate brings to the table. It’s quite discriminatory to pay according to nationality.

    • Roy Ngerng

      Hi Jasmine,

      I agree with you completely – I believe that regardless of whether a worker is Singaporean or foreigner, they should be paid the same wage – just as in Australia.

      But this is a big topic, and I am not able to squeeze it in here.

      Because this concerns other discussions – how do we uplift the wages of the poor, how do we pay domestic workers and construction workers?

      This is a complex question, for which I am sure we have the answers. But I am not able to deal with this in this article. The purpose of this article is to allow us to question, from the context of the current policies that are in place.

      I am uncomfortable discussing this from a E Pass, S Pass or work permit perspective, because I believe in equal wages but for the context of this discussion, the questions have been framed as such.

      Roy

    • Roy Ngerng

      Hi,

      Maybe I should just clarify to everyone.

      I do the believe in the system of work passes (E Pass, S Pass and Work Permit) and levies. They impose an artificial wage level at each pass level, which depresses wages. Also, the levies impose additional costs on the businesses.

      I also do not believe in artificial curbs to the labour flow, because it artificially imposes limits on labour, which should be determined by market demand, and wages by market supply. They also have the effect of discriminating against foreigners.

      Thus I believe in minimum wage because a minimum wage law would allow wages to be priced at the optimal level, based on the interaction between demand and supply. It will also allow the market to adjust its workings to develop an optimal working mode for the economy.

      We would then achieve an optimal level of labour flow and wage rate.

      The discussion in this article is framed in terms of the work passes and levies because of the existing conditions in Singapore, and I have thus asked the questions according to the prevailing operating system. However, a larger question would be how we should overhaul the current system to develop one which is fairer.

      Roy

    • Ang Teck Huat

      Jasmine, are you willing to pay your maid $1,800.00 per month?

      Also, Roy, I have previously explained to you how Progressive Wage is not the what you think. He agreed there and then and now you went back to play back the old record. You also mentioned “In fact, countries like Japan, South Korea, Hong Kong, Taiwan, Malaysia and Indonesia already have minimum wage” and “Indeed, countries with minimum wages and countries with the highest wages also have one of the highest GDP per capita” – this is furthest from the truth. Singapore GDP per capita is definitely higher than all these countries.

      • Roy Ngerng

        Huh? When did I agree with you? I’ve never been a proponent of the Progressive Wage Model.

        And please read my previous articles before you comment. Now try putting all the rich countries together and let’s see what you get, shall we?

  2. sally

    Hi Roy, thanks for putting up such a clear article. But I have to disagree with you regarding your stance on labour curb. Either control minimum pay or control labour. I think labour curb should be implemented so that our economic growth is sustainable. Currently there are just too many foreigners. Even our infrastructure cannot cope. We can’t grow our economy by simply importing more people as our land is limited. Curb labour solves our overcrowding problem and wage problem at the same time. One stone two birds. Those labour intensive companies should consider relocating. The rest should automate and improve productivity.

  3. Pingback: Daily SG: 25 Sep 2013 | The Singapore Daily
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  6. Roy Ngerng

    Hi to all readers,

    To also clarify and be clear, I had written this set of articles on the ‘Fair Employment Framework’, because my aim is to show the loopholes that this “framework” has.

    Also, if the government is sincere about encouraging employers to employ Singaporeans “fairly”,
    (1) There needs to be much more defined and clearer articulation of what the guidelines and proof of workings are.
    (2) The “framework” should also not be discriminatory. It’s current format harks back to policies of “eugenics” that the PAP had created before. (Old habits die hard, eh?)

    To have a complete idea of what the “framework” is about, or not, you can see the links below:
    https://thehearttruths.com/2013/09/25/the-truth-about-the-fair-consideration-framework/
    https://thehearttruths.com/2013/09/26/the-fair-consideration-framework-is-just-a-new-job-recruitment-website/
    https://thehearttruths.com/2013/09/24/what-do-you-think-of-the-new-fair-consideration-framework/
    https://thehearttruths.com/2013/09/26/why-did-the-fair-consideration-framework-only-cover-degree-holders/

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