In a State address to a 800-strong audience including former presidents, cabinet ministers, members of the diplomatic corps, government officials, etc, Pope Francis highlighted the issue of a fair wage for migrant workers, as can be seen from the video clip above. The Pope was visiting Singapore in the second week of September 2024.
He spoke in Italian and the translation of his speech was provided by the Vatican. The fuller paragraph in which he mentioned migrant workers was this:
“In this regard, I would like to highlight the risk entailed in focussing solely on pragmatism or placing merit above all things, namely the unintended consequence of justifying the exclusion of those on the margins from benefitting from progress. Here, I recognise and commend the various policies and initiatives put in place to support the most vulnerable, and I hope that special attention will be paid to the poor and the elderly whose labours have laid the foundations for the Singapore we see today, as well as protecting the dignity of migrant workers. These workers contribute a great deal to society and should be guaranteed a fair wage.”
The full video of his speech can be seen at https://youtu.be/
Reuters reported a response from the Ministry of Manpower to this veiled criticism of Singapore’s migrant labour situation.
Singapore’s Ministry of Manpower said in emailed comments that wages were set by the free market and the government did not prescribe minimum wages for workers in the country. “Our employment laws are complemented by rigorous enforcement to ensure that our migrant workers are properly and fairly treated, and their employment rights and well-being protected,” the ministry said.
Will not withstand scrutiny
We don’t think MOM’s assertion that wages of migrant workers are set by the free market will withstand scrutiny.
A free market is when prices for goods and services are determined by open competition between private actors, without significant government control or intervention. In a free market, supply and demand are the main factors driving the economic activity, and individuals have the freedom to buy, sell, and negotiate prices based on mutual agreement.
In the case of migrant workers, three significant non-market factors impact the interaction between supply and demand. Two are traceable to rules set down by the government, and the other is due to lack of action when action is needed.
The first is that the government imposes a substantial levy – employers have to pay a monthly “tax” for each foreign worker employed – and the levy can be very high. For example, starting 1 January 2024, the levy rate for basic-skilled construction workers from non-traditional source countries such as India and Bangladesh is $900 per month (see here, accessed 17 Sept 2024). Basic-skilled construction workers from these countries form the vast majority of migrant workers in Singapore’s construction and engineering industries. A levy of $900 per month is 1.5 to 2 times the typical basic monthly salary for such workers. Naturally, the levy takes a huge bite off what employers are willing and able to pay as wages, and acts as a suppressant to wage levels.
The second is the general rule that migrant workers coming out of one job have to be repatriated. Whilst there is the possibility of transfer to a new job without having to leave Singapore if the employer consents to the transfer (rare) or if the worker utilises the 40/21-day transfer window (see our research study The 20-day obstacle course) which isn’t all that effective a mechanism, most workers find themselves having to go home when a job comes to an end. The worker then faces a period of unemployment (several months to over a year) before he or she is likely to be back in Singapore in a new job. Unemployment and loss of income is a frictional cost, and workers would naturally want to avoid it. The result is a lowering of their bargaining power vis-à-vis their employers when workers see the loss of job and consequent unemployment as outcomes to be strenuously avoided.
The third factor compounds the frictional cost of the second factor. In the construction and marine engineering sectors (and often in other sectors too), workers find themselves having to pay huge sums to intermediaries to get jobs in Singapore. This is especially the case when the worker is already back home. Such an unwelcome prospect further diminishes their bargaining power. The Singapore government’s approach to such a rampant practice is best described as one of neglect.
It is therefore misleading to say that wages of migrant workers are set in a free market. Both employers and employees face serious limitations when trying to respond to market signals.