Wages and jobs: More or less?

Yvonne Ho and Leong Sze Hian /

Foreigners paid more than S’poreans?

It looked like any other job advertisement for service staff, but one funny thing stood out – foreigners are paid $7 per hour while locals are paid $6.40 per hour for the same job ^[1]. The buzz from the elections in recent months had highlighted that the influx of foreign labour was depressing wages, as foreigners were willing to be paid lower, but this advertisement seemed to show otherwise.

A higher listed pay for foreigners has a two-fold effect of attracting foreigners and keeping away locals due to the perceived unfairness of wages. Why would an employer try so hard to attract foreigners to work? Won’t a foreign worker levy be incurred? ^[2] The advertisement contains a clue – the foreigners the employer wants are students in government schools.

Foreign workers loophole?

The foreign worker levy does not apply to two groups  – dependents of Employment Pass holders ^[3][4] and foreign students studying in approved schools in Singapore ^[5]. Local staff are paid an additional 16% CPF contributed by the employer, not reflected in the contracted wage.

When emailed, the agent who posted the advertisement replied affirming that it was due to the employer’s contribution that the local staff’s pay was lower. 16% of $6.40 works out to $1, giving the local staff a $7.40 per hour wage, higher than what foreigners get.

Foreign students are a pool of potential employees that incur neither levies nor CPF. The employer can pay out less for hiring this group of foreigners, and will use such discriminatory advertising to attract them.

A search on the internet or on popular jobs websites with the keyword ‘dependents pass’ or ‘foreigners’ yields a long list of links. Some specifically ask for dependent’s pass holders ^[6], while some others try to attract foreigners with seemingly higher pay.

The Straits Times on 10 July 2011 ^[7] reported that there is a dire shortage of service staff and many restaurants are trying to deal with staff shortages, some having shorter operating hours or even closing sections of the restaurant on certain days. One of the restaurant operators’ laments was that the pool of service staff is finite, and the foreign worker quota is not helping as locals shun the profession.

Trying to ‘score’ foreign workers who don’t incur levies with discriminatory hiring will, of course, not attract locals. One way to increase the pool of service staff is to pay higher wages. Pay more than flyer distribution, telemarketing or retail and the pool of casual labour who would otherwise work in those jobs would naturally flow into the F&B service sector.

The pool of foreign labour from this two groups of foreigners is small compared to the number of foreigners working here who incur levies, and it is not worthwhile for MOM nor taxpayers to administer a separate levy for these workers. Market forces would regulate the flow of labour and we urge employers not to have employment practices that discriminate against locals.

Pay more, get more?

There are low levels of unemployement and employers face a tight labour market.  However, our labour force participation rate is 66.4% ^[8]. Paying higher wages can also attract more people into the workforce. The increased costs of staffing may be an investment generating handsome returns for a good restaurant operating at capacity. Higher wages will translate to increased labour participation and a larger pool of service staff.

Wages more or less?

If the wages and jobs for Singaporean service staff is an issue, what about the wages of all Singaporean workers?

Well, the latest data on wages of residents is in the MOM’s Report on wages in Singapore 2010 released on 30 June 2011. It states that “Total wages (comprising basic wages and bonuses) in the private sector grew by 5.5%, after contracting by 0.4% in 2009”.

“Taking into account inflation, real total wages rose by 2.7% in 2010, after declining by 1.0% in 2009”.

“Annualised over the three years from 2007 to 2010, real total wages declined by 0.3% p.a.”.

2 sets of data for the same periods?

However, prior to the above data, the last available MOM statistics were a real median wage increase of –1.2, -3.2 and 0.5 per cent, for 2008, 2009 and 2010, respectively.

Also, the real median wage increase over the last three years was –3.9 per cent.

So, why does the latest MOM data appear to be so much better, for the same periods?

The answer is that the latest report is based on data from the Survey on Annual Wage Changes carried out from December 2010 to March 2011 which effectively covered 4,338 private establishments each with at least 10 employees, which yielded a survey response rate of 90%.

In summary, an ad-hoc once-off survey of wages from a few thousand establishments, is very different from the regular annual wage reports of the MOM using data of the entire population.

Finally, if you compare the two different sets of data, you may like to ask whether the real wage growth over the last three years was –0.3 or –3.9%, and whether last year’s real wage growth was 2.7 or just 0.5%?

References:

Foreign students above 14 years in local tertiary schools and international schools are allowed to work during vacation;  students  on a list of approved institutions (like local universities and polytechnics) are allowed to work full time during vacation and part-time during term time.