Lim Swee Say and PAP are avoiding the hard truths

[Sammyboy RSS Feed]

An honorable member of the Coffee Shop Has Just Posted the Following:

http://www.tremeritus.com/2015/08/29...e-hard-truths/

Lim Swee Say and PAP are avoiding the hard truths


August 29th, 2015 |
Author: Contributions




Minister Lim Swee Say with his famous toothpick (Photo:
ST)


“Foreign workers” is a hot election issue and the PAP knows it. Hence
Minister Lim Swee Say has this to say to justify the PAP’s macro-economic
policies:


The Government came to the conclusion that one good way to protect the
Singaporean workers from (global economic volatility) was to expand the size of
the work force, to go for higher growth. The foreign manpower provided some
buffer to the local workforce from the fluctuation of the economy. But because
of our higher growth policy and more liberal intake of foreign manpower, we were
able to stay away from unemployment and wage stagnation. The gain for the
Singapore workforce: There were fewer retrenchments. Also, wages went up, not
just in nominal but real terms.
If only this is the truth, the whole truth, nothing but the truth. There is
no need to repeat the writer’s position on the government’s addiction to labour
but this is an opportunity to hear from academia in refuting Mr. Lim.

Growth with Equity

In 2014 Professor Hui Weng Tat and Associate Ruby Toh of the Lee Kuan Yew
School of Public Policy wrote “Growth with Equity: Challenges and Prospect” for
the International Labour Organisation (www.ilo.org/wcmsp5/groups/public/—ed_protect/—protrav/—travail/documents/publication/wcms_244819.pdf).
This is what they have to say about the higher growth strategy pursued by the
PAP to “protect Singaporean workers”:


With the prospect of increasing volatility in the economic environment, the
fear of acute financial hardship faced by the unemployed with no social
protection coverage was perhaps a key factor contributing to the aggressive
growth maximisation policy pursued by the government in the mid-2000s. Although
the growth policies adopted were successful in bringing down the unemployment
rate, it also led to other unplanned outcomes with negative social costs and
adverse effects on the welfare of workers. These included the surge in number of
low-skilled foreign worker population which resulted in depressed wages at the
lower end of the wage distribution, lower productivity growth, higher income
inequality and overcrowding of the public transport system. Escalating property
prices stemming the sharp rise in demand and increased shortages also reduced
the affordability of housing for many.
Hui and Toh note that Growth Maximisation failed to return unemployment to
the pre-Asian Crisis level of 2% and that significant structural changes
occurred in unemployment in particular among older workers. Refuting the PAP
ideology of minimal state funded social safety net, the paper states:


This absence of protection of temporary income loss could potentially be
inefficient (Mitra and Ranjan 2011) and is at odds with the need to sustain
quality growth through supporting increased risk-taking and entrepreneurship in
dynamic value-creating industries that generally experience higher turnover of
the workforce. However, the call for more robust social safety nets
incorporating unemployment credit scheme and wage insurance scheme without the
disincentive work effects has not gained traction. The presence of these social
protection schemes which provide income support for the jobless and those in
transition to new jobs would go a long way towards improving job matches and
mobility and ensure efficient allocation of labour to facilitate the necessary
restructuring efforts to sustain quality growth (Bertola 2009, Boeri and Macis
2010).
In other words, if the government wants to generate high quality growth,
social safety net that provide temporary relief to workers are absolutely
necessary in a dynamic economy.

Burdening the workers

Up next Professor Pang Eng Fong, former envoy to the European Union and the
United Kingdom and former Dean of the Singapore Management University, and
Professor Linda Lim, University of Michigan. In their recently published paper,
“Labour, Productivity and Singapore’s Development Model”:


Social policy — and the need for it — have been distorted by this development
model. On the one hand, macroeconomic stabilization policies have been
constrained. ‘The instruments most often deployed in recessions were direct cuts
in employers’ CPF contributions and reductions in government-controlled fees,
charges and rentals. However, econometric research suggests that such measures
entail painful adjustments for workers and are inefficacious since export demand
is not too responsive to them.’ (Choy, 2010, p. 134) on the other hand,
‘low-skilled foreign workers… depress earnings at the lower end of the nominal
wage scale because of their low productivity, thus impacting on income
distribution adversely.
If by now, one thinks this is looking like a mess, Pang and Lim put it
succinctly:


The long-established integration of industrial and social policy, while
effective in ‘creating competitiveness’ and maintaining the profitability of
business (especially for MNCs and GLCs), has created policy inter-connections
which are difficult to disentangle one from another. Thus, CPF employer
contributions provided for wage flexibility, and CPF savings enabled a very high
degree of home-ownership, including of publicly-provided HDB flats. But today
nearly half of Singaporeans lack sufficient savings at retirement, the high
share of income spent on housing reduces consumption in other sectors and limits
the stabilizing effect of domestic demand (Abeysinghe and Choy, 2004; Abeysinghe
and Gu, 2011), and the bottom quartile of wage-earners finds it increasingly
hard to make ends meet,38 even as some GLCs make record profits (including from
property) and Singapore’s world-leading sovereign wealth funds Temasek and the
Government of Singapore Investment Corporation (GIC) accumulate valuable assets
around the world.
Conclusion

If the government is truly “protecting Singapore workers”, its response to
increased global economic volatility ought to be a strengthening of the social
safety nets, not the wholesale use of cheap foreign labor to ramp up growth
rates. Strong social safety nets are a test of a government’s ability to handle
its social responsibilities effectively.

Instead, the government has gone for the soft option of foreign labour than
face a true test of governance. It may have avoided its own hard truths but the
socio-economic hard truths of its addiction to soft options have instead fallen
on Singapore workers. And Mr Lim says “this is a good way to protect
workers”?

Chris
Kuan

* Chris was regional head of capital
markets for Asia Pacific until his retirement. He writes opinions and
commentaries mostly on economic and financial matters.


Click here to view the whole thread at www.sammyboy.com.