Raising productivity needs direct intervention; lengthening maximum employment period too indirect

Posted by on March 28, 2012 in News, Press Releases

The Ministry of Manpower’s extension of the maximum period of employment of work permit holders from six to ten years is a move in the right direction (See http://www.mom.gov.sg/newsroom/Pages/PressReleasesDetail.aspx?listid=415). Like the ministry, Transient Workers Count Too (TWC2) believes that improving the skill levels and productivity of foreign workers should be a key aim.

This move, however, may be quite insufficient by itself to achieve that aim. Extending the maximum period makes lengthier employment possible, but not probable. This is especially so when, by TWC2’s observation, the typical work permit duration for male workers has fallen from 24 months just three or four years ago, to merely 12 months currently. Employers seem to be more interested in turnover and churn than retention.

Kickbacks from new hiring appear to be a common practice, with the result that many employers see more benefit from rapid turnover of staff than from retention.

TWC2 has been urging the Ministry of Manpower to take a greater interest in this aspect, and to enforce the law against kickbacks rigourously.

We are also unconvinced that the route being taken by the ministry to reduce dependency ratios and increase the levies will necessarily lead to employers investing in their workers. The hope that if workers become a little more scarce and more expensive, employers would seek to improve their productivity, is easily circumvented.

As Associate Professor Hui Weng Tat speculated recently (Straits Times, 21 March 2012, Retire on CPF savings? Think again, by Radha Basu):

“A higher wage levy may not drive productivity increases, if the higher wage cost is passed on by employers to the workers in the form of lower wages. This could deter qualified and experienced foreign workers from coming. Instead, less productive foreign workers will be recruited here, resulting in lower labour productivity.”

TWC2 urges the ministry to use a more direct approach.

Firstly, a minimum basic salary may have to be considered for work permit holders, to stop employers from reducing wages in order to make up for levy increases.

Secondly, specific measures must be put in place to combat churn. It is in Singapore’s interest to have workers stay here longer, so that the training and experience they have gained are not lost. As TWC2 has proposed previously,

1. The minimum work permit duration should be two years, and early cancellation of a work permit by the employer should attract a penalty payment. This should incentivize employers to invest in upgrading workers when they know it is not so easy to just replace them.

2. Employers wanting workers should be incentivized to hire from those who have been laid off by other Singapore employers, rather than bring in fresh batches from abroad. This ensures that the training and experience these workers have gained are retained here.

It is also important to bear in mind that not only is retention and a longer period of employment — which the above measures will promote — good for Singapore, it makes for happier workers, since they will feel more secure about their future and their ability to provide for their families. Happier workers tend to deliver better quality work, which can only be a desirable outcome.

TWC2 would also wish to highlight that workers often report to us that employers expect employees to pay the cost of their own training. Sometimes a promise is made to reimburse the worker, but just as often that promise is reneged upon soon after.

The new push to upgrade workers’ skills may therefore have unintended consequences, offering employers and training agents more opportunities to make money off migrant workers, leading to an even more unhappy workforce and more employer-employee disputes. It will ultimately defeat the aim of raising productivity when workers get wise to it and refuse training.

New rules are needed to prevent this from happening.

No doubt there will be the argument that the measures proposed by TWC2 will fetter the freedom of employers and raise their costs. We will argue that it is precisely the excessive latitude we have given to employers to abuse their freedoms and cut their costs at the expense of workers that has led to the present situation of dismal productivity and widespread exploitation. It is time to seize the bull by the horns.

TWC2 is an organization that is dedicated to assisting low-wage migrant workers when they are in difficulty. We are motivated by a sense of fairness and humanity, though our caseload often exceeds our
means.

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