He said, “Maybe we should not allow a too free flow of very low value-added labour, very low-wage labour to Singapore.”
He added that such an “excessive supply would dampen the wage rate among the lower income people”.
“That will create another problem… it will contribute to the development of a very lowly paid sector in the economy, because we can get very cheap labour from the region.”
So, the government should “maybe be a little more careful in allowing cheap labour to move into Singapore in our pursuit of high growth”, he said. “Which means that we cannot aim for very high growth… because if you aim for very high growth, then you’d want to bring in a lot of labour from outside. Then only can you have very high growth.”
Unfortunately, this was precisely what the Government did in the next 6 years or so by opening the floodgates to bring in a lot of labour from outside stimulating “high growth” in Singapore.
This was in part due to the general success of the general election in 2006, which “emboldened” the PAP Government. In the 2006 GE, PAP won 82 of the 84 seats with a respectable 66.6% votes (37 seats were won through walkovers).
Furthermore, also for the first time, PAP lost a GRC with two full PAP cabinet ministers kicked out in an election. Not only that, three other PAP cabinet ministers were indirectly affected. Even though the 3 have won the election with low % votes, Raymond Lim, Wong Kan Seng and Mah Bow Tan, were forced to step down due to public anger at their missteps in their respective ministries. To appease the public, PM Lee even quickly formed a pay review committee after the 2011 GE to look into lowering the ministers’ pays.
7 years later, at yesterday’s (9 Apr 2012) lecture given at the Economic Society of Singapore, Prof Lim now made another observation and warned that the Singapore’s growing income inequality is approaching dangerous levels. He said that Singapore now ‘needs shock therapy to wake up its economy’ and ‘the only way out is to restructure again’, in the area of wages of low earners.
He said, “I have no intention to destroy the investment climate. But if a company is labour-intensive and needs to import cheap labour it may think twice.”
Tan Jee Say's view on Lim Chong Yah's proposed economic restructuring
TR Emeritus, April 12, 2012 (source)
Professor Lim Chong Yah’s “shock therapy” proposal brought back fond memories of my time at the heart of national economic and manpower planning in the Ministry of Trade and Industry. It was the early 1980’s. I was the secretary to the late Dr Albert Winsemius, Singapore’s economic adviser, who visited us about two times a year to review the economy. This was the time of the year when he would advise on the government’s position at the annual National Wages Council negotiations. I sat on the NWC as alternate member to my permanent secretary Mr Ngiam Tong Dow, providing economic inputs to the Council which had representatives from employers, trade unions and government. Prof Lim was the chairman then.
We were candid with our analysis of the serious problem of severe manpower shortages and the economy’s increasing reliance on lowly paid foreign workers. Prof Lim was completely supportive of the proposal to restructure the economy by raising wages substantially to dampen employers’ demand for lowly paid workers. He succeeded most admirably in rallying the Council’s members including employers’ representatives, behind the economic restructuring plan.
The high wages did not hamper economic growth as the GDP continued to grow at around 10 per cent a year in the subsequent few years. When the regional recession in 1985 hit Singapore badly, controls on the inflow of lowly paid foreign labour were eased, resulting in a steady increase in the non-resident workforce from 119,500 in 1980 representing a mere 7% of the total number of workers, to 1,157,000 in 2011, a proportion of 35% of the overall labour force. A whopping 5-fold increase in foreign worker dependency! Not surprising, wages of the bottom 10 to 20 per cent of Singaporean workers stagnated or even fell. As wages fell, profits went up, enabling companies to pay huge bonuses to their top executives, further widening the income gap and magnifying the economic inequality in society. What a double whammy – rising dependency on foreign labour and falling wages of Singaporean workers, the exact opposites of the twin objectives of economic restructuring that was started 33 years ago!
* Jee Say was a Presidential candidate in the 2011 Presidential Election. Reproduced from www.facebook.com/TanJeeSay
Related: Breaking out from the cycle of cheap labor and low productivity by Lucky Tan (here)