Extended essay
Name:
Brandon Sioeng Dinata
Candidate number:
003071-026
School:
Anglo Chinese School International
Topic:
Geography
Title:
Foreign workers: a social discomfort, or an economic necessity?
Word count:
3991
Abstract
Are foreign workers in Singapore a social discomfort, or an economic necessity? This debate has been going on for a long time. Thus the aim of this essay investigates the effects of foreign workers on Singapore positively and negatively both economically and socially.
In examining the effect of foreign workers on the economy of Singapore, I have firstly found data on the value of GDP over a period of years and correlated the information with the population of Singapore including the foreign workers over the same period of years. Secondly, I gathered data on the property rent price over a period of years and correlated it with the amount of foreign workers that had entered Singapore during the same period of time. Thirdly I amassed data on the total tax revenue the government receives over a period of time and correlated the information to the amount of foreign workers that arrived in Singapore during the same period of time.
The effects Singapore face socially has been investigated by collecting information on complains and rants about the foreign workers. The government’s outlook of social tension was also collected. From the information collected, it was found that Singaporeans are not happy with the foreign workers. Singaporeans are voicing out their complaints on the Internet and on the newspaper.
From the relation of foreign workers in affecting Singapore socially, there is strong evidence that it is a problem for the locals and will persist in the future. However for the relation of foreign workers in effecting the economy of Singapore, there is strong evidence that foreign workers are necessary for the survival of the economy.
Acknowledgments
I would like to thank Mr Chia Choong Kiat for guiding and continually challenging me throughout this extended essay. I could not have done it without him.
Table of contents
Abstract I
Acknowledgments II
Table of contents III
Essay 4
1. Introduction 4
2. Analysis of economic advantages and disadvantages 6
Advantages
o 2.1 Singapore employing experienced workers 6
o 2.2 Reducing labour shortage 7
o 2.3 New work practices brought in by foreign talent 9 2.4 Government tax revenue increases 10
o 2.5 Economic growth 12
Disadvantages
o 2.6 Property price increases 14
o 2.7 Highly skilled foreign workers taking best jobs 15
3. Analysis of social advantages and disadvantages 16
Advantages
o 3.1 Dependency ratio decreases 16
Disadvantages
o 3.2 Social disturbance 18
o 3.3 Social uproar 19
o 3.4 Overcrowding 20
4. Evaluation 21
o 4.1 Economic measures 22
o 4.2 Social measures 23
5. Conclusion 24
Bibliography 25
1. INTRODUCTION
In 2010, the total population of Singapore was at 5,076,700 million, of which 1,088,600 million were foreign workers. This is about 21% of the population, in other words, close to 1 in every 5 people in Singapore, is a foreign worker. Although the country of Singapore is small, its economy does not match its size at all. Due to the fact that Singapore has developed really quickly over the past years, foreign workers are starting to take notice of the opportunities they may have if they move to Singapore.
One of the reasons why before, the government encouraged foreign labour was because of the lack of resources the county has. Singapore is a small country and it lacks resources. The only resource we can expand on is enterprise, capital, and manpower. By doing this, Singapore loosened their immigration policies and made them more lenient allowing more immigrants to come in to the county.
With the increase in numbers foreign workers in Singapore, the number ofcomplaints by Singaporeans has also increased. It has been a high-strung issue in recent times, which has been bothering the nation. The government has been gaining much criticism for letting in too many foreign workers in such a short period. Surprisingly, it has come to my attention that this 'foreign workers' issue has escalated to the point where it may even threaten Singapore's political stability.
Foreign workers: a social discomfort or an economic necessity for the country of Singapore? This essay investigates the different advantages and disadvantages of the economy and the various effects that foreign workers have on Singaporeans socially.
Table 1 shows the number of foreign workers and the percentage of the total labour force from 1970 to 2010.
Graph 1 shows the number of non-resident, resident and total workforce in Singapore from 1970 to 2010.
2. ANALYSIS – Economic Advantages and disadvantages
Advantages
2.1 Singapore employing experienced workers
Singapore has a goal of becoming a ‘talent capital’. This means that the encouragement of introducing highly skilled foreign workers into the society is apparent. Singapore has liberated its immigration policies to facilitate the entrance of skilled migrants. However, to ensure the quality of skilled workers, Singapore has developed a Personalised Employment Pass scheme (PEP). The scheme rules that a ‘minimum of S$ 7000’ last drawn fixed monthly salary is a required. The strict requirements of the PEP scheme do not even allow foreign graduating students to obtain the pass.[1]
Table 2: Personalised employment pass scheme
The criteria of the scheme is broken down into 3 factors, salary, experience and educational qualifications, which show that Singapore is only looking for foreign workers that have good track record from their previous jobs. The applicants must have attained sufficient experience in either professional, managerial, executive or specialized positions. The reason for this is that with an increasing level of skilled workers, there would be an increase in productivity of the economy leading to economic growth.
2.2 Reducing labour shortage
Since the Republic of Singapore gained independence from Malaysia in the mid 19th century, Peoples Action Party came into political power and they have done a tremendous job in developing the country’s economy to date. It is undeniable that the pace of which the economy has expanded was impressively quick. But such a feat do has its shortcomings. As society improves, labourious jobs become undesirable.
Singapore has been facing an on going problem of labour shortage. In the year 2010, Singapore hit a four-year high record level of job vacancies. A total of 50,200 jobs were available with no takers[2]. In 2011, ‘Two in three jobs created, or 79,800, went to foreigners in response to strong manpower demand’. This is where the influx of foreign workers becomes advantageous to Singapore.
From the figures mentioned above, foreign workers have filled in a significant amount of jobs that Singaporeans do not want to take. ‘They often do the dirty, difficult and dangerous jobs that Singaporeans shun, toiling as maids, construction hands, street sweepers, garbage collectors, cooks and dishwashers as well as lower-end factory workers.’[3] The filling up of these jobs will contribute to the increase in total production levels for the country of Singapore. An increase in production would cause the level of GDP to increase and therefore increase in economic welfare for the country of Singapore.
An example of a job that is experiencing excess demand is nursing. The medical industry in Singapore is a flourishing one and hospitals here are very popular as Singapore produces a lot of doctors. This would mean that the demand for nursing is high as well. However, Singapore has a shortage of nursing graduates while the county of Philippines has thousands of graduates every year. Therefore taking advantage of their talent and hiring them to work in Singapore would close a gap in the issue of Singapore’s labour shortage.[4]
However, the hospitals in Singapore do not just accept nurses without rules to follow. Each person has to meet a number of strict requirements before being hired. An example of a requirement is that they had to have ‘A minimum of 3 years work experience’. This furthers proves my previous point that Singapore makes sure that it achieves only quality workers.
Another example of a job that Singaporeans do not want to take is in the construction industry. ‘Construction is a tough sell for the average Singaporean diploma or degree holder’[5]. As few Singaporeans are willing to come on board, foreign workers have to be shipped in by the truckload to keep the industry growing’[6] Workers from the construction sector are prepared to work long hours because they will earn a higher income than back in their country. Ultimately, these foreign workers close the gap of labour shortage even further, boosting the economy of Singapore.
2.3 New work practices brought in by foreign talent
High skilled workers bring in new innovation, skills and work practices to the host country, which will increase productivity increasing economic growth.
Former Prime Minister Lee Kuan Yew stated in a South Asian Diaspora convention that ‘If Singapore depends on the talent it can produce out of three million people, it's not going to punch above its weight.’ The fact that Singapore is a small country the three million people employed in Singapore is not enough for the economy to grow even further. However with foreign workers, Mr. Lee also exclaimed that ‘It's because we have been drawing talent from across the globe - South Asia, Northeast Asia, China, India and beyond that - you have a vibrant economy’[7].
‘The big expat employers in Singapore are in Banking and finance, Shipping’, ‘and the IT sector (Singapore is fast becoming a telecommunications hub for Asia and is a major investor in new technologies. Singapore universities cannot fill all of the vacancies created).’[8]
For instance, 2 out of 3 local bank, DBS and OCBC is currently run by foreign CEOs. Piyush Gupta from India is the current CEO of DBS.[9] OCBC’s CEO is also a foreigner, Samuel N. Tsien, a Chinese national.[10]
Reasons why they may have been chosen could be that foreign trained CEOs are more charismatic and bring about more style and public relations skill to the table. A foreign CEO would have his or her own way of running things that may be different from how Singaporean CEOs run things. This will lead to the company or firm becoming more versatile and internationally competitive, to tackle the economy of Singapore.
2.4 Government tax revenue increases
Foreign talents who are employed in the country of Singapore also have to contribute tax. This contribution may come in the from of direct and indirect tax. In either case, an increase in the working population increases the amount of tax revenue for the government. This provides the government with more budgets for other micro and macro aims. The government can use the expenditure to upgrade the infrastructure of Singapore and reinvest in the economy.
Table 3: The amount of total tax revenue (millions) the government receives at years 2005, 2009 and 2010.
The table above shows that from 2005 to 2010, almost every form of tax has increased. In 2010, there were already over a million foreign workers present in Singapore (Table 1). As every employed person needs to pay taxes to the government, the foreign workers, either skilled or unskilled, have definitely contributed to the increase in total tax revenue.
Table 4: The amount of expenditure the government uses on Singapore
The table above shows that the government has been increasing expenditure for almost all the factors shown. As I stated previously, foreign workers also have to pay taxes. Therefore, part of their money is taken by the government and combined with all the other taxes that local Singaporeans pay. The increase in tax revenue grants the government more budgets allowing them to use it and upgrade the standard of Singapore. Public goods such as ‘Transport’ and ‘Health’, which are essential, have been more focused on. Ultimately due to the government having more expenditure, they can spend more on Singapore to benefit the countries social welfare as proven from table 3 and 4.
2.5 Economic growth
Table 3: The total population of Singapore citizens, permanent residents and non-residents per year
From the year 2000 to the year 2010, the population of Singapore has increased from 4,027,900 million to 5,076,700 million. This is an increase of 1,048,800 people, which is a 20.6% increase. Statistics also show that during 2000 to 2010, there was an increase of 472900 foreign workers (table 1).
Table 4: The overall GDP (S$m) and percentage of economic growth from the years 1999 to 2011
Year / Overall GDP (S$m) / % Growth2000 / 165,358.9 / 9.0
2001 / 163,450.0 / -1.2
2002 / 170,318.1 / 4.2
2003 / 178,119.1 / 4.6
2004 / 194,433.2 / 9.2
2005 / 208,763.7 / 7.4
2006 / 227,059.0 / 8.8
2007 / 247,169.5 / 8.9
2008 / 251,374.0 / 1.7
2009 / 248,911.2 / -1.0
2010 / 285,658.5 / 14.8
Statistics show that during the years of 2000 to 2010, GDP has increased from $165,358,900 to $285,658,500. This is an increase of $120,299,600, which is a 42% increase of the value of GDP. Since labour is one of the 4 factors of production, increase in population causes increase in labour leading to economic growth.
Disadvantages
2.6 Property price increases
As mentioned previously, Singapore has scarce resources and one of the main ones are land. With the increase of foreign talent there will be an increase in strain of local resources. Overall population size increases which leads to an increase in aggregate demand of goods and services. This puts pressure on suppliers to meet the increasing demand. The scarce resource of land produces an excess demand, as it cannot meet the demands of an increasing population. This leads to an increase in the price of housing. ‘home prices increased by 50.5 per cent over the last five years, the fourth highest increase globally.’
From 2007 to 2009 the influx of foreign workers significantly increased the total population as shown in table 3. This can be compared to rent the prices as it has also increased significantly during that period.
Graph 2: Graph showing average rents of High end, non-landed residential homes from years 2000 to 2012.