Singapore: 29% of the labor force is foreign

From Singapore’s Success: Engineering Economic Growth, by Henry Ghesquiere:

Like other countries, Singapore controls the income of foreign labor. Here, too, economic growth has benefited from openness. Augmenting the domestic labor supply is an integral part of the country’s overall development strategy.

Foreign manpower made a key contribution to Singapore’s economic growth. By 1970, full employment had been achieved and Singapore began to attract temporary foreign workers, then accounting for 3.2 percent of the labor force. Their number grew rapidly, reaching 7.4 percent of the workforce by 1980. By 2000, foreign workers made up an estimated 29 percent of Singapore’s labor force– 5 percent higher-skilled or professionals on an “employment pass” and 24 percent lower-skilled holders of a “work permit.” Expatriates filled half of the 600,000 new jobs that were created during the 1990s, with the other half filled by the domestic labor force. The upward trend has continued since.

Foreign workers now play a key role in Singapore’s economy. Low-income earners, mainly from the Philippines and Indonesia assist in households and with elderly care, while road and construction workers hail from all over South and East Asia. Professionals and highly skilled workers are being courted through an aggressive open-door policy to attract global talent. Foreigners on temporary work permits and employment passes are expected to leave at the expiry of their term, unless renewed. There are procedures to keep the lower skilled as a revolving pool on fixed employment terms to prevent them from establishing roots. Jail penalties await landlords and employers who house or employ illegal immigrants. Foreign labor and the Singaporean economy have become intertwined in mutual dependence.

In this area as well, Singapore relies on the price mechanism as a policy instrument to manage the total inflow and skill level of expatriate labor. Under the foreign work permit system, employers pay a levy to the government budget that differs according to the skill level of workers and sector of activity. Permits are renewable every two years. Levies are raised if demand from employers is strong. Levies are lower or nil for better-skilled workers. This differentiation has encouraged construction firms to invest in training their workers and to introduce labor-saving techniques. One consequence of improved skill levels is increased competition: during the downturn in 1998, some local employees were retrenched while stronger performing foreigners kept their jobs, unlike in 1985. Also, the inflow of one important category of less-skilled workers may have indirectly contributed to higher productivity. The increase in female labor force participation from 29 percent in 1970 to 53 percent in 1999 has provided more than 228,000 additional workers over the past three decades. This includes 130,000 maids, allowing many families to have a second income-earner. The government explains the beneficial impact of the foreign presence, even though such a policy has led to some concerns among Singaporeans about future job prospects and more intense competition for housing.

Of course, I don’t approve of all of this. In particular, to jail landlords and employers who house or employ illegal immigrants is a  violation of human rights. That said, it may be more tenable for a city to adopt such measures– jail is indefensible, but fines might be tolerable– than for a country to do so, since congestion and local externalities perhaps give people a more legitimate stake in their immediate physical neighbors than any citizen of a large territorial state has in anyone’s residence, or not, somewhere in the territory, including perhaps in wild and uninhabited parts of it.

Most impressive is the statistic: 29% of the labor force is foreign (as of, I think, 2007). This share is a little less than twice as high as the 16.6% in the US. To get to the Singaporean level, the US would need to let in about 30 million more immigrants. Singapore is wealth worth emulating, considering that Singapore is about 20% richer than the United States (per capita). Moreover, Singapore seems to be maintaining rapid rates of GDP growth even since they’ve overtaken the United States and supposedly should be bumping up against the “economic frontier.”

UPDATE: By the way, the idea that foreign nannies and maids could free high-skilled women from housework and childcare and facilitate their entry into the labor force is particularly interesting. The feminist case for open borders?

Nathan Smith

Nathan Smith is an assistant professor of economics at Fresno Pacific University. He did his Ph.D. in economics from George Mason University and has also worked for the World Bank. Smith proposed Don’t Restrict Immigration, Tax It, one of the more comprehensive keyhole solution proposals to address concerns surrounding open borders.

See also:

Page about Nathan Smith on Open Borders
All blog posts by Nathan Smith

One thought on “Singapore: 29% of the labor force is foreign”

  1. “By the way, the idea that foreign nannies and maids could free high-skilled women from housework and childcare and facilitate their entry into the labor force is particularly interesting. The feminist case for open borders?”

    I’ve mentioned this in EconLog comments before, “middle-class” and to a degree even working class people in Malaysia and Singapore benefit a great deal from being able to send their children to daycare centres staffed by Filipinos and Indonesians, or hiring an in-house maid to look after their children and run the household. And the typical low-income Filipino or Indonesian is a much more comparable substitute for the typical low-income Malaysian or Singaporean than the typical low-income Mexican is for the typical low-income American — yet hardly any Malaysian or Singaporean is up in arms complaining about foreigners stealing their construction or service sector jobs.

    Instead in both countries the resistance to greater levels of immigration hinges on social frictions. There’s quite a bit of racism — Malaysians complaining about “Banglas” or “Indons” without really bothering to give an explanation, beyond pure xenophobia. In Singapore you see something similar with people complaining about uncouth Chinese from mainland China. In Singapore the economic concerns about migration actually focus much more on the high-skilled — there’s not much concern about political externalities, but there’s a complaint that high-skilled foreigners are “stealing” Singaporean jobs. And of course the perennial “Our society is no longer what it once was because we have so many immigrants here” concern.

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