In a lecture delivered at the Institute of Policy Studies, National University of Singapore, on 12 November 2014, Ho Kwon Ping, executive chairman of Banyan Tree Holdings and IPS-Nathan Fellow for the Study of Singapore, made a few proposals with respect to migrant workers in Singapore. The relevant part is here:

First, we can perhaps devise a more innovative immigration program where foreign workers are seen less as a necessary evil but more as one element, and a positive one, in an overall population strategy which does not distinguish so much between foreigner and Singaporean, but recognises their mutual dependency. Instead of just drastically curtailing their influx, the focus could be on finding ways to drastically increase their wages, skills and productivity. And very importantly, to provide economic incentives to create desired outcomes.

Current immigration policy with its punitive foreign worker levy may be simply counter-productive. It raises the cost of employing them but does not reduce the demand, and furthermore attracts lower-skilled workers because the better ones prefer to go to countries where the take home pay is higher.

The levy could instead be converted into each worker’s deferred savings account – similar to a CPF — to be withdrawn upon his permanent repatriation so as to ensure good behaviour whilst in Singapore. Immediately and without an increase in cost to employers, the quality of foreign workers will go up since the higher-skilled will be attracted here. Manipulation of both levers – the immediate wage and the levy – will provide instruments for policy adjustments.

The two-year “use and discard” approach to foreign workers, besides being socially inhumane, is also simply bad economics. It will be far more productive to institute a philosophy of “in-country” skills upgrading for foreign workers, with the reward being a longer work residency and even higher payments into their savings accounts.

The conversion of levies into CPF look-alike for foreign workers is also the most effective way to ensure voluntary repatriation after the long-term residency has expired.

After each round of economic restructuring, the foreign worker community in our midst should correspondingly, be more skilled – perhaps all will even have a minimum high school education and certified skills. When that happens, we can perhaps see foreign workers as a potential talent pool.

We can sieve through this pool to find a small minority who are self-motivated to attain measurably higher skills through training programs and employer certification, and we reward them by longer-stay residency permits of say 5, 10, even 15 years.


TWC2’s response

Mr Ho Kwon Ping’s lecture has contributed to much-needed debate on overhauling the whole system of migrant labour in Singapore, rather than just tinkering with it here and there. This is especially important in the context of wider economic and social changes that Singapore has seen and will see in the years ahead.

However, we would question some of the assumptions Ho makes. He seems to attribute churn to the workers choosing to go home after only about two years. Our observation is that workers very much want to stay; too often it is employers who choose to send them home early or employers who refuse to hire from the local pool of migrant workers. The latter leaves workers laid-off by other employers with no choice but to go home. Hence the pertinent question is not how to incentivise workers to stay on, but how to disincentivise employers from their present wasteful behaviour, which may be to the advantage of some individual employers, but is to the disadvantage of a Singaporean economy striving for higher productivity, as well as the workers themselves.

That said, employers run the gamut from the very bad to the very good. We have seen workers happy to stay with their employers for six to ten years, though rarely with any significant increase in salary. It would be good that the workers are better rewarded for their loyalty and experience gained, and if they had more opportunities for upgrading their skills, as Ho is suggesting.

In this connection, the ideas outlined in the lecture are useful, because they would have more money to bring home at the end of their stay in Singapore. However, worker’s money needs aren’t all in the far future. They have huge agent’s fees and high-interest debts to pay off quite early in their work period, and this really needs to be addressed as well. Especially when we are hoping that workers stay ten or even fifteen years, there is a mismatch between the way such a savings scheme will operate and the needs of the workers themselves. The scheme may need to be tweaked and explained carefully to workers. They need to understand it and see its benefits clearly, or otherwise, all they will know of it is that this is money that they think they should have but that they can’t access. Unless the explaining is done well, this will not be an effective mechanism for retaining workers.

Then there is also a bit of balancing to do because, as the levy system works at the moment, employers pay a higher levy for less skilled workers than more skilled ones, so workers would actually accrue less in their “CPF” as their skill level rose! The remedy may be to ensure a compensating rise in disposable income for more skilled workers, but this needs more thought.

Addressing some employers’ wasteful behaviour

However modified, the above plan applies only if employers are keen on retaining workers. Unfortunately, too many employers are found at the “not good” end of the spectrum. Their workers leave Singapore after just one or two years, not because the workers don’t want to stay, but because employers’ own business is poor or unstable, and they treat workers poorly, even abusively. The result is a high rate of worker turnover, or ‘churn’. There seem to be two underlying reasons for this: Employers want highly obedient, unquestioning employees — to the point where they are too scared to complain to the authorities even when employment laws are broken in underpaying them. This keeps payroll costs low — a key motive for companies with unstable fortunes, even if it means breaking the law. Consequently, there is a strong preference for ‘fresh’, uninformed, economically vulnerable workers. Economically vulnerable ones are much less likely to complain. Secondly, these employers rely on a cut of the placement fees extracted from newly-recruited workers in their home countries. Those fees typically total $8,000 – $10,000 per new worker. The greater the churn, the more profitable it is for these unscrupulous employers.

To begin with, there is a real need for better enforcement and for closer tracking of salary payment. TWC2 has long argued for making salary slips mandatory and payment through bank. Documenting payment systematically provides workers with an assurance of reliable income month on month, without irregular deductions or kickbacks for renewal of contract.

At the same time, the present policy of requiring that all Work Permit holders be repatriated by the employers acts as a barrier against workers staying on. MOM however recently announced that starting mid 2015, those in the construction sector (not other sectors) will be able to stay on to switch employers, and this is a welcome change. TWC2 however is concerned that just extending to them the right to stay on may mean little in actual practice, because employers may still resist hiring from the local pool, given their preference for ‘fresh’ workers and their handsome agent fees.

TWC2 has made several proposals to the Ministry of Manpower to address the behavioural defects mentioned above. Unlike Ho’s proposals, they focus on changing employer behaviour. We have suggested administrative measures to make it more difficult for employers to bring in fresh workers, so that bosses become more receptive to hiring workers who are already here. There is also a need to revamp the recruitment system altogether to cut out avaricious middlemen who offer a cut of agent fees to employers. For example, have a central clearing house to match job-seekers and companies wishing to recruit: Companies must first seek recruits through this and only then, if they can’t find them, will they be allowed to take new ones from abroad.

Unless the above is done, even if Ho’s proposal of converting the foreign worker levy into CPF-like savings become a reality, workers may not find the jobs to stay on, and simply have to take two years’ worth of savings and go home when they cannot find a subsequent job due to employer resistance. Once they take the savings out, they would presumably be barred from coming back here to work, and this might actually make things worse for Singapore, barring the return of experienced workers. It is therefore important to address employer behaviour, to eliminate the primary obstacles.

Training and social safety net

Unlike what Ho is implying, nearly all the thousands of workers TWC2 comes across in our work have finished high school. A significant number have some college education, yet in Singapore, they are tasked merely to do menial work such as carrying steel bars and hacking concrete. But what this also means is that the potential for upgrading their knowledge and technical skills is certainly there. To realise this, we will need training infrastructure. Perhaps the ITC colleges can expand their curricula to provide short (e.g. three month) courses that help foreign workers move up the skills ladder. Naturally, the visa system must also be tweaked to allow workers to stay in Singapore for the duration of the courses they sign up for.

Ho’s concern about the need to raise the economic reward of working in Singapore is laudable. His comment that we need “an overall population strategy which does not distinguish so much between foreigner and Singaporean, but recognises their mutual dependency” is certainly germane.

But it may be more important to use part of the levy money to create a social safety net for foreign workers — an idea that TWC2 has proposed to MOM. We see heartbreaking cases of illness and injuries where no one is responsible for medical treatment; we see workers left destitute and homeless because they fall through the regulatory cracks; or their employer has gone bankrupt with thousands of dollars of unpaid salaries per worker. All it needs is a comprehensive insurance scheme which a fraction of the levy pays into and which automatically covers all Work Permit and S Pass holders, or a general workers’ welfare fund, that could be drawn on to assist in such situations.