S’poreans and foreigners both paying the price

On 4 December at a National Trades Union Congress (NTUC) forum for employers and unions, NTUC chief Lim Swee Say and Acting Manpower Minister Gan Kim Yong were both reduced to imploring employers to retrench foreign workers before Singaporean workers, in order to minimise job losses for the latter, who make up a sizeable bloc of voters in every general election. This is a truly sorry state of affairs in Singapore’s employment landscape.

Firstly, it appears the government has taken a cold, utilitarian attitude towards foreign workers. It is as if these workers are soulless machines, who should be simply discarded when they are no longer needed. In fact, each of these workers is probably the sole breadwinner whose remittances support a large extended family back home.

Secondly and more importantly for Singaporeans is the fact that if the government has to beg employers to retrench foreigners first, it implies that their policies so steeply favour foreigners, such that if left to market forces, employers would naturally want to shed Singaporeans first.

Mr Lim said it “makes business sense” to release foreigners first during a downturn if a Singaporean could do the same job equally well. His reasoning is that when the economy recovers, it will be easier to source for foreign labour than compete for local talents with business rivals.

The Minister evidently has never been a business owner himself. If both can do the job equally well, it will make better business sense to axe the Singaporeans first, since they carry the extra loaded costs of reservist duty (for men), maternity leave (for women), employer CPF contributions and paid childcare leave (for both). In addition, family responsibilities and higher costs of living compel Singaporeans to ask for higher wages to meet their living expenses. They will also be less willing to work overtime or commute to far flung factory locations as this will take away time from their families (or their second jobs, in many cases). Foreign workers, who are here without their families, have less reason to make such demands. It should therefore be the government’s duty to its citizens to ensure that the total cost of hiring a foreign worker is not lower than the cost of hiring a Singaporean.

The government’s argument is that foreigner workers — referring to blue collar workers, not “foreign talent” — provide low cost labour for our companies in good times, preventing these companies from uprooting and moving to lower cost countries like China and Vietnam, which will result in even more Singaporean job losses.

While this argument sounds good to the ears on the surface, it obscures the fact that no matter how lowly we pay our workers, the cost base of Singapore is still much higher than in China and Vietnam, or even Malaysia. Human resources firm ECA International Asia recently reported that Singapore has leapt 27 places up the global rankings of the world’s most expensive places to live in.

For most companies with operations here, the highest business expense after wages is office rentals. High rentals are caused in part by the government allowing “market forces” to run amok in the 1990s and property prices to rise so steeply that it has rendered our economy uncompetitive. Of course, the government will not admit that rentals make us uncompetitive — they will insist that our wages are the culprit. Nevertheless, even wages, while kept low for blue collar workers, have risen significantly over the past few years for senior managers and “foreign talent”, and this undoubtedly accounts for a large portion of companies’ wage bill.

The pittance paid to foreign workers has effectively suppressed the wages of Singaporean blue collar workers. At the end of the day, not only do Singaporeans lose out in wages and jobs, but so do foreign workers, whose living conditions and low salaries (after deducting the government levy) leave much to be desired for a developed country like Singapore which claims to uphold migrant worker rights.

The only ones who benefit are the corporations and their shareholders — and of course the people whose bonuses are tied to the country’s GDP growth rate, not the unemployment rate.

Billion dollar profits but still axing jobs

Update: DBS shares up $11.70 up 2.63% from previous close.

The stunning news blared out on Friday that Singapore’s largest bank, DBS, will be cutting 900 jobs by the end of this month. At least half of the job cuts will be from its 7,600 workforce in Singapore.

DBS CEO Richard Stanley said that the cuts will be “across all business units and functions, and at all levels of the organisation”.

When I first informed my editor of the news, his immediate reaction was, “Damn, the retrenchments have started.”

It is natural to assume that retrenchments point to an economy that is hitting the doldrums. After all, won’t companies only start retrenching staff after all other avenues of cost cutting have been exhausted and the company is starting to bleed? Continue reading “Billion dollar profits but still axing jobs”

How to deal with workplace discrimination

I’ve been reading Tough Choices, a memoir by Carly Fiorina, the former CEO of HP. She gives lots of good advice through the experiences she went through navigating the minefields of corporate politics and workplace prejudice. There’s one section which I found particularly instructional. It was a conversation she had during a dinner with a senior executive in AT&T, where she was a young manager who was about to make an important presentation for a multi-billion dollar contract with the US government:

“Carly…I was just wondering: maybe you shouldn’t be one of our presenters. I know some of you women can’t take the pressure. We don’t want you losing your cool in there. Why are you doing this anyway? Don’t you want to spend more time with your husband and have children?”

The executive wouldn’t get off it. He kept asking me about my husband, what he did for a living, how long we’d been married. He did not ask my male colleagues about their wives or their marriages. Finally, I excused myself from the table and walked outside. I found myself crying alone in the parking lot…I was demoralized that I was once again underestimated…

That night, after I’d cried long enough, I made a decision. I would not cry again over others’ prejudice…Life isn’t always fair, and it is different for women than for men. I decided to accept that reality and refuse to be diminished by it….

Since 1986, I have saved by tears for more important things: my family, the beauty of nature, Beethoven, a dear friend, the goodness of people, their wisdom, their tragedies or their triumphs.

I think this is good advice for anyone who is faced with discrimination. Although it is important to challenge the discrimination, what is more important is not to let that diminish oneself.

Is GST really a fairer tax for the poor and SMEs?

This is a first in a three-part series of commentaries about the impending GST hike. In this first part, I will examine the impact of GST on the lower income earners and small businesses. Part 2 will analyse the government’s and media’s “spin” accompanying the announcement of the hike. In Part 3, I will explore some of the alternative sources of revenue that can be used to increase social assistance to the poor yet balance the budget, as well as ways to cushion the impact of the GST hike for the poor.

On Monday, Prime Minister Lee Hsien Loong announced that Singapore’s Goods and Services Tax (GST) will be increased to 7 per cent in 2007, from the current 5 per cent.

The decision to increase in the GST requires much greater scrutiny by the public, consumer groups, small businesses and the Opposition. The government needs to stop its political spin and be fully transparent with Singaporeans on this issue. It needs to explain clearly why the GST hike is necessary, whether any alternative solutions have been explored, and outline exactly what it intends to do with the increased revenue from this tax increase.

So far Singaporeans have been told by the government and the media that the extra revenue will be used to fund increased social assistance programmes that will benefit the lower income groups.

While it is laudable that the government intends to increase public spending to help needy Singaporeans, it is disingenuous to put out a message that this tax increase will benefit the poor.

The GST, unlike income tax, is widely recognised as a regressive tax. This is because it taxes both rich and poor for all items, including essential goods and services such as clothing, food, utilities and transport. Since the poor have less disposable income, the GST effectively takes a higher percentage of income from the poor than the rich.

Impact on businesses and the economy

The GST hike will also negatively impact the bottom line of small businesses. Currently, businesses with less than $1 million in revenue a year cannot pass the GST costs of their goods purchases (their “input GST”) to their customers if they are not GST-registered (which most aren’t). So a mama shop owner (a small sundries retailer) will be paying 7 per cent tax for all the goods he purchases from wholesalers, but will not be able to collect any of it back from his customers.

An increase in consumption tax will also reduce consumer spending. While this may be good for individual savings, will be bad for many businesses and could impact the overall economy of the country.

The Singapore Chinese Chamber of Commerce & Industry (SCCCI) issued a statement yesterday expressing “great concern and disappointment” at the impending GST hike. SCCCI added that “the proposed hike is likely to have an immediate and detrimental effect on local spending, and add to the cost burden for many local companies. Our long-term competitiveness will also suffer.”

The GST has been pitched in the past as “a fairer tax”. But fairer to whom? If the government is really keen on improving the lot of the poor and small businesses, a GST hike is certainly not the best way to go.

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Coming up next…Putting the “spin” on the GST hike.