Singapore’s Budget 2012 seeks to reduce the dependence on foreign workers

In an effort to regulate the influx of foreign workers in Singapore, foreign worker levies will be increased in 2012, for the second year since 2010. This year’s Budget statement, read out in Parliament on 17 February 2012 by Deputy Prime Minister and Minister for Finance Mr Tharman Shanmugaratnam, also included measures to reduce Dependancy Ratio Ceilings (DPC) on foreign worker inflow. A 5% reduction in DPC will be implemented across all sectors with effect from 1 July 2012 for new workers, and 30 June 2014 for existing workers.

Foreign workers constituted about 31% of Singapore’s labour force in 2011. According to the Ministry of Manpower, dependence on foreign manpower has grown by 7.5% per annum over the last two years. Speaking in Parliament, Mr Tharman explained, “Last year, we accentuated the programme because we realised the foreign worker growth was very rapid. This year, we are taking a further step, a calibrated reduction of the dependency ratio ceiling, again because the growth of foreign workers continues to be rapid … much more rapid that our own local workforce”.

This is a move in reverse to the government’s open policy of foreign labour employment implemented over the past decade. Minister Mentor, Lee Kuan Yew recently warned against reducing the number of foreign workers drastically, warning of “low growth, maybe even zero growth” for Singapore as a result. Foreign workers are credited to be integral to Singapore’s rapid economic development, allowing for reduced labour costs and filling jobs in the construction and service sectors.

Foreign workers are primarily employed in the construction industry and come from Asian countries such as India, China and Bangladesh.

However, over the years, Singaporeans have aired their criticisms of this policy. Foreign workers have been named the cause of rising property prices, strain on the country’s infrastructure and increased competition for jobs. Local blogger, Deadpris, wrote in a blog post about the implications of companies employing more foreign workers that “All in all, we do need foreign workers in Singapore, but not at the expense of affecting the livelihood and quality of life of other Singaporeans living here like you and I.”

In view of the 2011 General Elections, where opposition parties like the Singapore Democratic Party used this issue as a point of criticism against the ruling party, it is increasingly important for the government to balance citizens’ sentiments and arguably, standard of living, with economic progress.

Deputy Prime Minister and Minister for Finance Mr Tharman Shanmugaratnam called for greater flexibility and efficiency in response to increased foreign worker levies.

The gradual reduction in dependency on foreign workers may be a way to placate the Singaporean public and encourage companies not to rely solely on lower operation costs, but to invest in productivity improvement measures such as training and upgrading. With the increase in levies and reduction of DPC, Mr Tharman also acknowledged that parliament members’ proposal to retain older, more experienced workers who have been trained for a longer period of time has merit as it help raises productivity, and this policy will be reviewed by the Ministry of Manpower.

Whether Singaporeans will feel the pinch from increased operations costs or be relieved of rising property inflation and competition remains to be seen as these measures are yet in their infancy. The next few years will be telling of the impact of less foreign workers on Singapore’s economy.