Friday, January 05, 2007

Playing with the big boys

My family just had dinner with my uncle and his family and I had a nice chat with him. It has been a good year for him. My uncle work for a GLC that builds oil rigs in Singapore. Given the spike in oil prices over the last year, the shipbuilding sector has been extremely busy. According to him, the orders for oil rigs are filled all the way to 2010 and labour is extremely tight with overtime being the norm now. Hence, wages are rising very fast in the shipbuilding industry. According to him, most people in the company expect a 6-month bonus this year... at least. To control the labour costs, his company has brought in a large number of foreign workers from China.

It is actually not at all difficult to bring in workers from overseas and actually a lot cheaper. One may ask, aren't there levies and quotas to control the number of foreign workers a company may have? Actually, no. It is not at all difficult to circumvent these rules. You see, although there are quotas associated with work and employment permits, a company actually has the right to bring in as many workers as it wants provided that they are on training permits. This is how it works. Firstly, the parent company must own 100 percent of its overseas branch. In my uncle's case, its owns shipyards in China. MOM allows Singapore companies to bring in workers from their overseas operations for 'training' in Singapore for up to two years. There is no quota and no levy although one can easily imagine the sort of training they really do. Ultra-realistic OJT, I suppose. When I asked my uncle if MOM knew anything about this, his response was something about the downward motion of skinfolds over one of the ocular organs.

According to my uncle, his industry is not the only industry that exploits this loophole. It is very well-known, at least to him, that major companies, the big boys, in the electronics, the IT and the hotel industries with overseas operations also have been doing that for some time even before the current economic boom. I'll leave it to the interested reader to guess whom the 'big boys' are and what their relation to the powers-that-be is. Indeed, one can just go to the electronics factories in Jurong and count the percentage of locals coming out of the gates of the factories or check out which major restaurants employ unusually high percentages of nonlocals. Small-scale companies without overseas operations are disadvantaged and have difficulty competing in terms of labour cost since they have to play strictly by the rules. No wonder the SME's in Singapore complain about being disadvantaged.

On a totally unrelated note, there was this enlightening and sympathetic response from MOM in the Zaobao today, in response to a letter from a Mr Lai, reassuring the readers that the authorities are closely monitoring the number of foreign workers in Singapore. Since Zaobao's online archive goes back only one week, I'll reproduce the MOM letter here for future reference with English translation in paratheses.



(With regards to Mr Lai's misfortune, we express our utmost sympathy. MOM will get in touch with him to provide him assistance in seeking employment.)


(Foreign labour can increase Singapore's competitiveness and can also augment our labour force and thus maintain our economic prosperity. They also help to increase the employment opportunities for Singaporeans.)


(For the first 9 months of last year, Singapore added 124,500 jobs, which was the greatest absolute increase ever recorded. Half of the jobs went to Singaporeans.)

人力部一直密切注意外劳人数,也规定公司必须聘请足够的本地人后,才可以雇用S Pass或者工作准证的持有者。在必要的时候,我们也会调整劳工税。为了反映目前的经济状况,从今年1月1日起,人力部已经把熟练客工的劳工税从100元提高到150元。

(MOM has always closely monitored the size of the foreign labour population. It has required companies to hire enough locals before it can employ foreign workers on the S Pass or other work permits. When the need arises, MOM will adjust the levy. In keeping up with the current economic situation, from 1 Jan 2007, MOM has increased the levy on skilled workers from $100 to $150.)


(We sympathise with Mr Lai's anxieties. They reflect the challenges of globalisation and are ubiquitous to low-income workers. We will continue to provide job-matching services and help them to find jobs. Other measures like the progress package can also allow low-income workers to reap the benefits of Singapore's economic growth.)




Thursday, January 04, 2007

Tethering Students to Their States

Taken from Tethering Students to Their States:

New state scholarship programs proposed in Indiana and Wisconsin would offer funds to students attending in-state institutions, with strings attached — or, as the man behind the Wisconsin proposal puts it, “tethers.”

“If we can’t lure them here, let’s tether them here,” said Mark O’Connell, executive director of the Wisconsin Counties Association, a lobbying organization, and a member of the Commission on Enhancing the Mission of the Wisconsin Colleges, a group created to advise the network of 13 two-year colleges in the state.The commission, appointed by the chancellor of the University of Wisconsin Colleges in August, submitted a report late last month calling for an investment in new scholarships pegged to residency requirements post-graduation. “If we can’t lure people to our state, smart, young people, let’s give them education and then require them to stay here a certain number of years,” O’Connell said.


For those who do not know, similar schemes exists in Singapore. I have explained the working of such schemes here and also explained why it is a bad idea. The basic idea is that the government pays for some people's university education in return for the condition that they stay and work for a few years. In Singapore's case, the government offers subsidised or fully-sponsored university education to international students in return for a bond which obliges them to stay for 3 to 6 years after graduation in Singapore.

It's suppy-side economics in its purest form.