The short answer is, yes. But how?
In this article, we will look at the workers’ wages vs the foreign worker levies.
In the chart below, you can see the wages of selected low-wage jobs in Singapore, based on the latest available data – low-wage earners earn below $1,500 in Singapore. Cleaners and construction workers earn about $800 to $850.
If companies would like to hire foreigners for these job positions, they would need to pay an additional foreign worker levy for each worker.
If we add on the top-tier levy for each of these job positions, Chart 2 shows you how much an employer would have to pay for each foreign worker in 2013.
You can see that for a cleaner, the employer would have to pay a total of $1,415 for the worker and not the actual wage of $800. This means that of the total cost of the foreign worker, 42% of the cost actually goes to the government. Similarly, for a construction worker, the employer would actually pay 47% of the cost of the foreign worker to the government.
The other way to look at it is this – for a cleaner, the employer has to pay 74% of the wages to the government for the foreign worker levy. For the construction worker, the employer has to pay 88% of the wages to the government for the foreign worker levy.
But the question is – is this a sound policy?
According to the Ministry of Manpower, the wages of low-wage Singaporean workers have remained stagnant over the past few years (Chart 3).
Chart 3: Ministry of Manpower Report on Wages in Singapore 2007, Ministry of Manpower Report on Wages in Singapore 2008, Ministry of Manpower Report on Wages in Singapore 2009, Ministry of Manpower Report on Wages in Singapore 2010, Ministry of Manpower Report on Wages in Singapore 2011
Thus you can see that over the past few years, because it is cheaper to hire foreign workers, companies would hire foreign workers at low wages and wages have thus been kept at a depressed low level. As such, Singaporeans have to also accept low wages in order to have a job.
And if you look at the proportion of Singaporeans who earn below $1,500, there are 26% who are in low-wage jobs (Chart 4), which is a significant amount. Are the wages of these Singaporeans depressed because of the low-wage situation?
Chart 4: CPF Annual Report 2011
What does the foreign worker levy have to do with the low wages of Singaporeans, you say?
You see – the foreign worker levy has been increasing over the past few years.
In fact, in 2015, the foreign worker levy would have increased to $1,050 for a construction worker.
Thus in Chart 5, you can see that in 2015, for a cleaner, the cost of a cleaner is actually $1,615 and not the $800 that would be paid to the worker. Of the cost, 50% would actually go to the government. For a construction worker, 55% of the cost would actually go to the government!
This means that the employer has to pay 98% of the wage of a cleaner and 124% of the wage of a construction worker to the government as the foreign worker levy. Why is it that the workers are doing the job but the government takes in the chunk of the workers’ wages for doing nothing?
So, why is this worrying? For each worker, instead of the worker benefitting from higher wages over the years for the work that he/she is actually doing, it is the government which is actually benefitting from increasing revenue from the levies by doing nothing and waiting for the money to come in.
Maybe the charts below will make things clearer for you.
If you look at the foreign levy for a cleaner, the levy has increased from $450 to $800 – or 78% (Chart 6).
But when you look at the wages of a cleaner, wages have remained stagnant – or with an overall increase of 7% (Chart 7).
Chart 7: Ministry of Manpower Report on Wages in Singapore 2007, Ministry of Manpower Report on Wages in Singapore 2008, Ministry of Manpower Report on Wages in Singapore 2009, Ministry of Manpower Report on Wages in Singapore 2010, Ministry of Manpower Report on Wages in Singapore 2011
And if you look at the foreign worker levy for a construction worker, it has increased from $310 to $1,050, or 239% (Chart 8).
But for the wages of a construction worker, it has also remained stagnant – or with an overall increase of 6% (Chart 9).
Chart 9: Ministry of Manpower Report on Wages in Singapore 2007, Ministry of Manpower Report on Wages in Singapore 2008, Ministry of Manpower Report on Wages in Singapore 2009, Ministry of Manpower Report on Wages in Singapore 2010, Ministry of Manpower Report on Wages in Singapore 2011
Do you see the discrepancy? The foreign worker levy for a cleaner went up by 78% but the wages of a cleaner only went up by 7%. For a construction worker, the foreign worker levy went up for 239% but wages only went up by 6%.
And do you know how much the government is collecting from the levies? According to the Ministry of Manpower, “the total foreign worker levies collected were S$2.5 billion for the Financial Year 2011 and S$1.9 billion for the Financial Year 2010“. So, the government is seeing higher and higher revenues from higher and higher foreign worker levies, while the workers see declining real wages.
So, the government might say that the foreign worker levies is “a pricing mechanism to regulate the number of foreign manpower in Singapore”. But, has the foreign worker levies really helped to “regulate the number of foreign workers in Singapore”?
In fact, the number of workers on S Pass has kept increasing (Chart 10).
The number of construction workers on work permits has also kept increasing (Chart 11).
Not only that, the Singapore Population White Paper projects that the increase in the number of foreign workers will also go unabated (Chart 12).
As such, it is clear that the foreign worker levies do not actually “regulate the number of foreign workers in Singapore”. What is clear is that the foreign worker levies do bring in more and more revenue for the government – from $1.9 billion in 2010 to $2.5 billion in 2011 – and to more than $3 billion now?
What is also clear is that while the government is collecting more revenue from employers, the wages that employers pay to workers have remained stagnant – at around $800 for cleaners and $850 for construction workers.
The question you have to ask is this – why has the government been so resistant towards implementing a minimum wage but has not at all been hesitant to increase the foreign worker levies on companies? If the explanation given to not implementing a minimum wage is that this will add to the cost of companies, then why has the government increased levies by up to 240%? Doesn’t this still add to the cost of the companies anyway?
Now, imagine this – instead of the government asking companies to pay foreign worker levies, these foreign worker levies are given to the workers as wages.
Immediately, you will see that in 2015, instead of workers earning $815, they will earn $1,615. For construction workers, instead of $850, they will earn $1,900. For waiters, instead of $1,300, their wage will cross the $2,000 mark (Chart 13).
For the lowest wage workers, they will immediately see a doubling of their wages!
How will this benefit Singaporeans? When foreign workers are paid higher wages, Singaporeans will not be forced to accept lower wages as well. Singaporeans will be able to receive higher wages. So a Singaporean who works as a cleaner will be able to earn $1,615, a waiter will be able to earn $1,300 and a bus driver would be able to receive a basic salary of $2,300 – all the low wages workers would be able to receive a wage of above $1,500! And this is done without any additional cost – we are simply transferring what is paid to the government back to the worker, who should be rightfully receiving his/her wage. Will we be able to reduce the proportion of Singaporeans earning below $1,500 from the 26% now to less than 10%, or even less than 5%? It is quite likely.
This is definitely better than the “progressive wage model” propounded by Minister without portfolio Lim Swee Say. While as a cleaner under the progressive wage model, you would need to be promoted before you can earn a paltry increase of $100, but if the foreign worker levies are returned to workers as wages, they would immediately see an increase of $800, without the excuse of a promotion.
So, when the government “explains” that they cannot implement a minimum wage because it will suddenly increase costs, is this a logical reasoning or is it really an “excuse”? Certainly, if the government has no qualms increasing the foreign levies by up to 240%, cost isn’t a factor that they are concerned for the companies, is it? If the foreign worker levies have no intended effect of reducing foreign worker numbers, but has the very clear effect of increasing government revenue, then quite clearly, increasing government revenue seems to be the more overt intent of the foreign worker levies than to curb foreign worker numbers – which the government clearly has no want to do so anyway, as illustrated by the population white paper.
By artificially imposing the foreign worker levies as a “pricing mechanism”, hasn’t the PAP government intervened in the free market dynamics and upset demand-supply economics? If the government has allowed for demand and supply to determine wages, instead of artificially imposing a “pricing mechanism” in the form of foreign worker levies, would demand-supply have been better able to determine the equilibrium wage to be paid in each job sector, and push wages upwards to benefit workers?
In imposing the foreign worker levies and artificially depressing the wages of workers, while increasing the levies and the revenues collected by the government, has the government acted to “rob” the wages that should have rightfully gone to the workers? Is such direct government intervention a key reason why the wages of Singaporeans have remained stagnant, and why the real wages have in fact declined?
It would seem quite clear at this point that if the government doesn’t seem to be too concerned about the cost constraints of companies, that implementing a minimum wage isn’t something too difficult for them to do. The question then isn’t about whether there are practical difficulties to do so, but whether the PAP government has the political will to do so and to help Singaporeans, or whether the government is more keen to restructure the policies to increase revenue to their own coffers.
I think the fact that the PAP government has allowed wages to remain stagnant while increasing foreign worker levies (and government revenue) even to amounts over and above what would be paid to the worker is a very clear indicator as to where their priority lies. Perhaps the PAP government has forgotten this – they can continue to treat workers as singular digits to be used and discarded, but don’t forget who is doing the work for you. Don’t forget who is helping you build and clean the buildings and train lines you earn the money from. Without the workers, you will have no money to earn. It would bode well for the PAP to learn to respect those who have helped them, and not cast them aside once they are no longer of use to the PAP.
Empowering Singaporeans had just organised our first workshop – Towards a Better Education System – last week. We will be holding the next workshop to discuss about the jobs, wages and employment situation in early 2014.
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