http://theonlinecitizen.com/2009/09/foreign-worker-buffer-is-not-working/
In an article in the Straits Times on Saturday, 12 September
2009, Professor Ivan Png makes an argument that data produced by
the Ministry of Manpower (MoM) confirms that the foreign worker
buffer is working as intended (“Foreign worker buffer is working”,
p. A34).
He argues that “when the economy booms, Singapore attracts more
foreign workers; when the economy weakens, foreign workers are laid
off and return to their home countries.” And, “to the extent that
this buffer works as intended, unemployment among foreign workers
would be lower than among Singaporeans.”
He then produces a chart that shows that Singapore resident
unemployment has always been higher than total unemployment from
1999 to 2009 and concludes “the resident unemployment rate is
always higher than the total unemployment rate, thus confirming
that the foreign worker buffer is working as intended.”
Does the evidence produced support his argument? If
foreign workers serve as a buffer through economic cycles, the most
direct measure of this would be the proportion of Singapore
residents as a fraction of total employment. That is, if
foreign workers serve as a buffer:
a) During good times, more Singaporeans
are employed, and more foreign workers are employed (because there
are too many jobs and not enough Singaporeans). Therefore,
the proportion of employed Singaporean residents as a fraction of
the total workforce would be lower since the total workforce base
has been enlarged.
b) During bad times, if many more foreigners
are sent home than Singaporean residents are retrenched, the
proportion of employed Singaporean residents would rise, since the
size of the total workforce is reduced, but more Singaporeans
retain their jobs.
All the data necessary to prove or disprove this is available to
the Ministry of Manpower, and MoM should analyse it and publish the
results to remove all doubt.
There is, in fact, some evidence that foreign workers do not
serve as a buffer. In the last year, the manufacturing sector
has been one of the most affected by the global slowdown. Yet
figures published by Ministry of Manpower show that the
manufacturing sector shed 4,600 local jobs while adding 24,100
foreign jobs in the year 2008 [1].
When asked in Parliament why this was the case, the Minister of
Manpower, Mr Gan Kim Yong replied:
In 2008, total employment in manufacturing grew by 19,500. The
growth came largely in the earlier part of the year. Although some
companies had cut their headcount, others were still growing and
expanding. Given the tight labour market then with record local
employment rate of 77.0%, manufacturing companies which were still
growing had to recruit foreign manpower to meet their needs.
However, as the economic downturn deepened, both foreign and local
employment in manufacturing fell towards the end of the year. Job
losses in the manufacturing sector were more than offset by jobs
created in other sectors as overall local employment grew by 64,700
in 2008.
Two statements, in particular, stand out: When the economy was
growing, manufacturing companies which were still growing had to
recruit foreign manpower to meet their needs. When the
economic downturn deepened, both local and foreign employment
fell.
Does this not show that foreign workers don’t serve as a
buffer? The data presented, that foreign jobs are added in
manufacturing while local jobs are lost, implies that the
proportion of locals in the manufacturing sector must decrease over
time. And this is indeed the case – figures published by the
MOM show that the proportion of Singaporean residents employed as a
fraction of total employment in manufacturing fell from 62% in
2003[2] to less than 50% in 2008[1].
Comparing resident unemployment rates against total unemployment
as a measure of the effectiveness of foreigners as an employment
buffer is probably requires a number of intermediate steps and
assumptions. Perhaps Prof. Png could publish his methodology,
so that an independent assessment of its soundness may be
obtained.
Astute readers would also note the contrapositive to Prof. Png’s
conclusion: “If the foreign worker buffer is not working as
intended, then the resident unemployment rate would always be lower
than the total unemployment rate.” If this is the case, most
Singaporean residents would probably want the foreign worker buffer
to not work as intended.
—–
[1] Labour Market 2008, March 2009, Ministry of Manpower,
Manpower Research and Statistics Department
[2] Derived from data pubslished in “Employment Trend and
Structure”, May 2004, Ministry of Manpower, Manpower Research and
Statistics Department (Paper 2/2004)
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