Ravi Menon: How to reclaim jobs for locals

PikaPika33

PikaPika33

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We need to be more deliberate in reducing the number of foreign workers in domestic non-tradable sectors and freeing up these jobs for Singaporeans. This cannot be done in one step without creating large disruptions. But if we tighten the intake of low-skilled foreign labour in a determined and progressive manner over a few years, it would help drive restructuring in these industries, promote the adoption of technology and increase productivity, and help to sustain wage gains across a wider range of occupations.


There are about 620,000 resident workers in so-called "blue-collar" jobs - that is, service and sales workers, craftsmen, operators and labourers, but excluding clerical workers. The median wage of these occupations, including employer CPF, ranges from $1,500 to $2,350. Stripping out foreign work permit holders in the construction, marine shipyard and process sectors as well as migrant domestic workers, there are about 290,000 work permit holders in the rest of the economy - a majority of them working in similar "blue collar" jobs as the 620,000 resident workers. As a rough estimate, one out of three low-wage service jobs are taken up by cheap foreign labour. This cannot be good for local wages.


The demand for many domestic services like cleaning, maintenance and cooking is inelastic, and wages will have to go up if the number of foreign workers is reduced. The increase in wages, coupled with improvements in work conditions and prospects for a meaningful career, should gradually attract Singaporeans into these domestic services.


The transition will no doubt be challenging. Firms whose business models rely excessively on low-cost labour will have to exit. There may have to be some consolidation in these industries, such as retail and food and beverage.


It is likely that there would be local job losses in the initial phase. Moving from a low-wage equilibrium, such as the one we are in now, to a high-wage equilibrium, such as the one we aspire to, is always a tricky business.


The reclaiming of local jobs should extend beyond low-wage workers to the broad middle as well. I asked in my last lecture whether we should consider gradually raising the minimum qualifying salary for S Pass holders closer to the median wage of $4,500 from the current $2,500.







The reason is this: S Pass holders would be in mid-tier Associate Professional and Technician (APT) jobs. At $2,500 today, the minimum qualifying salary for S Pass holders is still significantly lower than the median gross income from work of APTs, which is $4,150 (including employer CPF).


I am not suggesting that S Pass workers should be drastically curtailed. Many of them are making valuable contributions to our economy and society. How could we have coped with Covid-19 last year if we did not have the many nurses here on S Pass? But when S Pass holders are available in such large numbers and paid around 30 per cent less than locals, there are two possible effects.


One, local wages are likely being depressed; and two, some of our ITE and polytechnic graduates are probably being competed out of these jobs.


Why not pay S Pass workers closer to the local median and let the market settle the employment profile? In some occupations, we might see an increase in local employment at better wages; in other occupations, where Singaporeans are unable or unwilling to enter, we will continue to employ the S Pass holders.




The scope for reclaiming local jobs at good wages is probably quite significant in the education and healthcare sectors.


These are two sectors that I cited in my last lecture as good candidates for becoming more exportable. According to MAS estimates, the health and education sector has an elasticity of substitution of 1.5, the highest among services industries. This means that if the wages of foreign workers in healthcare or education increase by 10 per cent, the demand for local workers as substitutes will increase by 15 per cent.


Not all jobs can benefit from technologically driven productivity growth but that does not mean that they cannot enjoy positive wage growth. Faster productivity growth in the tradable sectors, such as manufacturing and financial services, implies faster wage growth in those sectors. This increases demand for non-tradable services in the economy - such as food and beverage, healthcare and wellness, recreation and entertainment - which in turn means higher labour demand in these non-tradable sectors and higher wages.


Economists call this the Balassa-Samuelson effect - the mechanism through which higher wages in the tradable sectors lead to higher wages in the non-tradable sectors as well. As the American economist Richard Baldwin puts it, the Balassa-Samuelson effect is one of the best forms of redistribution. It is market-driven.


But in Singapore, we have blunted the Balassa-Samuelson effect through a large foreign worker intake in the non-tradable sector. A strategy of tightening foreign labour supply to reclaim local jobs will likely have cost implications across society. If there is consolidation in the industry to achieve greater cost efficiencies, then it would not be inflationary. If there are productivity improvements through technology, the cost pass-through would be limited.
 
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fishbuff

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should the million dollars ministers be concerned with this sort of issue instead of ordinary folks?
 
Lchlch

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can summaries what he want to tell the public?
too long to read.
 
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kyo_465

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we
PikaPika33 said:
We need to be more deliberate in reducing the number of foreign workers in domestic non-tradable sectors and freeing up these jobs for Singaporeans. This cannot be done in one step without creating large disruptions. But if we tighten the intake of low-skilled foreign labour in a determined and progressive manner over a few years, it would help drive restructuring in these industries, promote the adoption of technology and increase productivity, and help to sustain wage gains across a wider range of occupations.


There are about 620,000 resident workers in so-called "blue-collar" jobs - that is, service and sales workers, craftsmen, operators and labourers, but excluding clerical workers. The median wage of these occupations, including employer CPF, ranges from $1,500 to $2,350. Stripping out foreign work permit holders in the construction, marine shipyard and process sectors as well as migrant domestic workers, there are about 290,000 work permit holders in the rest of the economy - a majority of them working in similar "blue collar" jobs as the 620,000 resident workers. As a rough estimate, one out of three low-wage service jobs are taken up by cheap foreign labour. This cannot be good for local wages.


The demand for many domestic services like cleaning, maintenance and cooking is inelastic, and wages will have to go up if the number of foreign workers is reduced. The increase in wages, coupled with improvements in work conditions and prospects for a meaningful career, should gradually attract Singaporeans into these domestic services.


The transition will no doubt be challenging. Firms whose business models rely excessively on low-cost labour will have to exit. There may have to be some consolidation in these industries, such as retail and food and beverage.


It is likely that there would be local job losses in the initial phase. Moving from a low-wage equilibrium, such as the one we are in now, to a high-wage equilibrium, such as the one we aspire to, is always a tricky business.


The reclaiming of local jobs should extend beyond low-wage workers to the broad middle as well. I asked in my last lecture whether we should consider gradually raising the minimum qualifying salary for S Pass holders closer to the median wage of $4,500 from the current $2,500.







The reason is this: S Pass holders would be in mid-tier Associate Professional and Technician (APT) jobs. At $2,500 today, the minimum qualifying salary for S Pass holders is still significantly lower than the median gross income from work of APTs, which is $4,150 (including employer CPF).


I am not suggesting that S Pass workers should be drastically curtailed. Many of them are making valuable contributions to our economy and society. How could we have coped with Covid-19 last year if we did not have the many nurses here on S Pass? But when S Pass holders are available in such large numbers and paid around 30 per cent less than locals, there are two possible effects.


One, local wages are likely being depressed; and two, some of our ITE and polytechnic graduates are probably being competed out of these jobs.


Why not pay S Pass workers closer to the local median and let the market settle the employment profile? In some occupations, we might see an increase in local employment at better wages; in other occupations, where Singaporeans are unable or unwilling to enter, we will continue to employ the S Pass holders.




The scope for reclaiming local jobs at good wages is probably quite significant in the education and healthcare sectors.


These are two sectors that I cited in my last lecture as good candidates for becoming more exportable. According to MAS estimates, the health and education sector has an elasticity of substitution of 1.5, the highest among services industries. This means that if the wages of foreign workers in healthcare or education increase by 10 per cent, the demand for local workers as substitutes will increase by 15 per cent.


Not all jobs can benefit from technologically driven productivity growth but that does not mean that they cannot enjoy positive wage growth. Faster productivity growth in the tradable sectors, such as manufacturing and financial services, implies faster wage growth in those sectors. This increases demand for non-tradable services in the economy - such as food and beverage, healthcare and wellness, recreation and entertainment - which in turn means higher labour demand in these non-tradable sectors and higher wages.


Economists call this the Balassa-Samuelson effect - the mechanism through which higher wages in the tradable sectors lead to higher wages in the non-tradable sectors as well. As the American economist Richard Baldwin puts it, the Balassa-Samuelson effect is one of the best forms of redistribution. It is market-driven.


But in Singapore, we have blunted the Balassa-Samuelson effect through a large foreign worker intake in the non-tradable sector. A strategy of tightening foreign labour supply to reclaim local jobs will likely have cost implications across society. If there is consolidation in the industry to achieve greater cost efficiencies, then it would not be inflationary. If there are productivity improvements through technology, the cost pass-through would be limited.
Click to expand...

Great piece. But Leong's CECA speech better
 
8

808180579

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Lchlch said:
can summaries what he want to tell the public?
too long to read.
Click to expand...
in summary people complaining about PMETs losing jobs to foreigner, he tell you we must reclaim jobs for cleaners and technicians

edit: oh sorry i think they renaming PMET to only PME now
 
C

crazycow

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Restrict blue collar workers, end up projects delay and costs go up, you think sinkie sme bosses will innovate?
 
Acetone

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Dont think this is acceptable to the CECA loving folks in HR and Executive positions.
 
Lchlch

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808180579 said:
in summary people complaining about PMETs losing jobs to foreigner, he tell you we must reclaim jobs for cleaners and technicians

edit: oh sorry i think they renaming PMET to only PME now
Click to expand...
oh thanks...so meaning low end jobs taken care by the locals.
Higher end jobs taken care by the FTs. sob sob sob...
 
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BernardWYF

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Write what also no use one. U think the bosses will slap themselves and change their decree just like that?? :ROFLMAO:
 
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