By Rachel Hui

Since the SMRT strike by 171 PRC bus captains on 26 and 27 November in protest of unfair wages and poor living conditions, many have called on employers to treat their foreign workers fairly and equitably. Yet, in a statement justifying why it would not be raising their PRC employees’ pay any further, SMRT explained that “taking into account the foreign worker levy and the provision of transport, accommodations and utilities, our remuneration packages for [service leaders] from China and Malaysia are equitable.”  Decrying the strike as unfortunate, Acting Manpower Minister Tan Chuan-Jin exhorted employers to re-evaluate the fairness of their hiring and remuneration practices: “…if there are differences and so on, how do you make sure that you explain to them so that they understand why those differences exist?”

But it is hard to explain why employers have to pay the government to hire their foreign workers at the expense of those workers. While it behooves employers to undertake and explain the costs they bear in hiring their foreign workers as a reason for pay disparities, it is also timely to question the implications of a policy tool that is partly responsible for why pay differences exist in the first place – the foreign worker levy. This levy, widely accepted as a “given” factor in companies’ hiring of foreign workers, in fact distorts the labour market at the expense of productivity. “Unequal pay for equal work” has inadvertently resulted from this policy mechanism aimed at curbing the inflow of foreign workers to reduce our economy’s dependence on them. Centred on this important agenda, our policy environment has been designed such that “equal pay for equal work” is no longer possible.

According to MOM, in tandem with the sector-specific quotas for foreign workers, the levy acts as a pricing mechanism to regulate the number of foreign workers in Singapore, and to encourage companies to invest in productivity instead of depending on foreign workers, who could be previously hired cheaply. The levy is essentially a “tax” that companies pay to the government for each foreign worker hired, making them more expensive so that companies are encouraged to hire Singaporeans instead. For the services sector, monthly foreign worker levies range from $240 to $500.

However, the result – as in the case of the SMRT bus drivers – is that the pay differential between Singaporeans and PRC bus drivers is very substantial. After the October 2012 salary adjustments, Singaporean drivers earn 170 percent of what PRC drivers earn – they are paid $1,775 and $1,075 respectively. It is reported that during the strike, PRC bus drivers only articulated their unhappiness over the pay difference between them and Malaysian drivers. But even if – as the PRC bus drivers conceded – Singaporean citizens should be entitled to receive higher salaries than foreigners on the simple basis of benefiting from citizenship, a 70 percent pay differential for the same work done is certainly a very difficult pill to swallow. It does not provide a positive incentive for any worker to do his job well, knowing that he is “shortchanged” by so much. This affects productivity – One can imagine that put in an SMRT’s PRC bus driver’s shoes, poorly accommodated and unequally paid, one would neither drive with the safety of bus passengers in mind, nor aim to arrive at each bus-stop on time, much less deliver service with a smile.

Looking at the policy direction undertaken by MOM, we can only expect this disparity between our one million plus foreign workers and Singapore residents to increase, since the government has also announced that levies will be raised incrementally every six months between January 2012 and July 2013. In the future, new hires may be offered a lower pay package than what bus drivers are presently offered, justified by the higher foreign worker levy. Under the law, it is illegal for employers to explicitly pass on the levy to their workers via salary deductions, but contractual agreements for lower pay are just a legal way of doing precisely that to save costs. The unintended consequence of this policy promotes business practices that precisely undo the idea of fair wages.

Nobody wants to work for unequal wages – it disincentivises hard work. Singaporeans should understand this. This concept of fairness is inherent in what Singapore prides itself on – a meritocratic system – which Prime Minister Lee Hsien Loong described recently as “a system where people succeed based on their effort and contributions”. It is un-meritocratic when some people receive disproportionately more than others for similar effort and contributions – it means they are succeeding based on means other than the value of their work. The desire to receive equal reward (monetary or otherwise) for equal work comes from a natural instinct of what justice, dignity and equality means – it is so primordially instinctive that even monkeys demonstrate it. Singaporeans would be equally disgruntled if they found that they were being paid less than their foreign counterparts for similar work – in fact, we already are, as we indignantly compare the wages of plumbers, cleaners, and construction workers in other developed countries in light of increasing income inequality at home. Like us, foreign workers consider their lower wages in the cold light of the conspicuous wealth widely flaunted by other foreigners and locals alike, not to mention multi-million paychecks for CEOs including that of SMRT’s, as well as SMRT’s corporate profits. As Prof Tommy Koh highlighted in an earlier article, bus drivers in Singapore also receive much lower compensation vis-à-vis their counterparts in many developed countries.

One could argue that the bus drivers should be happy about earning much more in Singapore than they could have back in China. We know that in the years to come, this may no longer be true, as the wage gap narrows between China and the developed world. In addition, the recent projection by the National Population and Talent Division (NPTD) that many more foreigners will be needed to fill positions in domestic care, healthcare, construction must be considered in tandem with the anticipation that Singapore will soon compete for labour with other rapidly developing countries. Already, there is some concern over the fact that some workers prefer other destinations to Singapore, and it remains to be seen what the effect of Singapore’s adverse publicity in the international media over the imprisonment of those who “instigated” the SMRT strike is. If Singapore is no longer a “first-choice” employment destination, we cannot expect to get the best workers there are and this has implications on the productivity of our economy. At present, given the huge fees that foreign workers typically pay recruitment agents for a job here (sometimes unsuccessfully), many may prefer to earn a little less in their home country instead or seek greener pastures elsewhere.

The “Singaporeans First” policy undertaken by the government is an important political message after the 2011 General Election to assuage the concerns of an electorate feeling squeezed by the influx of foreign labour. However, as long as the foreign worker levy and other policies discriminating between foreign and local workers are used as central policy instruments to restrict our foreign labour, we can expect productivity to be affected adversely by disgruntled workers.

We face a dilemma because of competing social and policy goals: priding ourselves on meritocracy, wanting fair labour practices, wanting to narrow inequality, and also demanding that the government apply policy tools to quickly dampen the inflow of foreign manpower. As a policy tool, the foreign worker levy puts us in the crossroads of our multiple policy goals, and in light of recent events, it perhaps requires a rethink. Rather than profiting from the levy at the expense of foreign workers, we should consider ways of rechannelling the revenue gained into improving their wages and welfare, which will encourage workers to be productive.

—————

Headline picture by TIB1218R, Creative Commons Licence.