The Issue Of Foreign Workers Economics Essay

Nowadays in Singapore many immigrant workers work, and the term immigrant worker is divided in foreign workers and foreign talents. Foreign talents relegates to foreigners with acceptable degrees and professional qualifications, and foreign worker relegates to unskilled or semi-skilled workers who mostly work in domestic services, manufacturing or construction sectors.

By 2010, foreign workers formed 34.7 % of the manpower in Singapore. Foreign workers are required to increase the population, increase GDP and per capita GDP, reduce the population ageing, operate as a periodic buffer and comprise salary costs to provide international competitiveness and defray deficit in labor skills and supply. On the other hand, strongly trust on foreign workers has also decreased the economic reforming position, generated FDW-dependency syndrome amongst housekeepers, and disadvantageously involved productivity performance.

Different people with different religious live in Singapore, and it makes Singapore more inter-ethnic and inter-religious. And in last decade large amount of foreign workers settled in Singapore especially 2006-2009. This happen made some Singaporeans distempered. The economic growth slowdown and it led to internal unemployment especially white collar-workers. Employment of the foreign labor increased by 21.4% whereas citizen labor increased by 2.7% in 2008 and the unemployment rate of residents went up by 4.9% by 2009. And the social discontent turned more sounding when the white collar-workers were dismissed in 2009 decline and had some difficulties in finding alternative jobs, whereas foreign workers endured to be more visible. There were increased impressions of the foreign people crowding in a public spaces and places such as health services, MRT, bus transportation and affecting to increasing housing costs. And the dissatisfaction through crowding out foreign people is a trouble of accelerated demand for public places or services through inflow foreign people as it is problem unequal providing of these services.

Why in Singapore has so many workers, it is because of low cost for example for employers, the cost is the most important factor, when they run the business, and it could not be disputed. Therefore, when the government sets up a system where the owner can hire cheaper foreign imports on the base quota system, you can understand why he would grab it with both hands. Many are counting how many foreign workers they can bring to the base of the type of business they are in and the number of current local workers under their payroll.

For the employer, Singaporean workers, although clear and clever, sometimes talk too much. They usually claim back especially if they have a job for a long time and get a good reputation with the rest workers. It is not surprising that the Foreigner imports mainly from China and India. These two countries, as we know, the great powers in the near future. They will be the world’s dominant economy and Singapore wants to be in the right relationship with them now.

In august 2009 Prime Minister of Singapore Lee Hsien Loong declared that the government would reduce the rate of its inflow foreign workers, with social and physical conditions. Foreign workforce would be supported at about 30% of the labor force. In 2010 he again declared that the government would moderate and manage the intake of the foreign workforce so that Singapore citizens are not bemused by absolutely number.

In May 2011 the government declared main consideration of different government policies that had started voters’ opinions, involving that on immigration. In October 2011 at the opening of the new Parliament President’s Address highlighted the main issues and policies response while Ministry of Manpower (MOM) Addendum to the President’s address directed specifically issues that pertaining to the foreign workforce and Singapore citizen labor. The different policy responds to the problems of foreign workforce that summarized below.

• Toughening the needs for employment pass. In August 2011 MOM declared changes to the employment pass structure to get effect in 2012. It toughens admissibility needs for foreign people to entering mid-level, lower professional and skilled jobs. The tougher employment passes are aimed that Singapore citizen workers are not dissatisfied than foreigner who might be cheaper to recruit.
• Balancing the requirements for foreign workforce and the concerns and aspirations of Singapore citizens. The government has to step fine balancing in workforce policies of supporting a welcome foreign talents and business to make and support good jobs at the same time meeting increasing tendencies and abilities of Singapore citizens. The foreign labor will be hold at no more than one-third in the long term cause of physical, economic, infrastructural constraints and social. The government had started to toughen the rise of foreign workforce in June 2009, using the way of rising levies, qualifications criteria, tightening entry and increasing qualifying salaries.
• Accessing housing and public services. The new policy deleted foreign people from title to medical subsidies and decreased subsidies for PRs. Also government increased educational fees for foreigners. The employers and government are supporting recreational facilities and alternative housing for foreign people. To decrease the crowding out effect of foreign people on public services such as healthcare, housing and public transport.

Question 2: To what extent had the increasing use of foreign workers contributed to unemployment and income inequality in Singapore?

Nowadays, the numbers of foreigners who around the world come to Singapore to have jobs are increasing rapidly. Then the number of foreign workers in Singapore rose and it can be make the Singapore’s population over the limit resulting in increasing unemployment rate. Someone said that if in last year the foreign workers in Singapore are occupied 5% so that the unemployment rate in Singapore can be 5%, till to the next year the rate of foreign workers reach to 10% more so the rate of local unemployed workers in Singapore are threat to rise more 10% that is 15% unemployment in Singapore for local. It can be quite easy to calculate because Singapore which can be known as the small country with the high knowledge about technology so they cannot satisfy a lot of jobs for fitting to the whole people who come to Singapore to get job. So that if the foreign workers increase, the unemployed local people and their income will be decrease as well. Therefore, it just only by theory because this rate of unemployment which is rising is not only calculated for the local but it also calculated for foreign workers.

Since the mid-1970s Singapore has become increasingly dependent on foreign labor to fuel its high growth and competitive position

Source: Population Composition of Singapore in thousands and % over last 15 years; Chua, 2007 available in Asher and Nandy, 2008

On the table above, we can see that the foreign workers increased triple between 1990 and 2005 to constitute nearly 30% of the labor force. On the other hand, the local people decreased to 71.5% by the year 2005. Foreign workers who increased highly proportion in Singapore which can affect the rise of unemployment in this country.

Foreign labor is permitted towards the country under two schemes – employment passes for professionals and managers, and work permits for semi-skilled and unskilled employees in manufacturing, construction and services. The managers and professional personnel in MNCs located in Singapore derive from developed nations like Japan, The Europe and North America. They’re compensated out expatriate salaries which reflect their remuneration in their home countries. It provides a spill-over effect of raising the remuneration packages of local managers and professionals utilized in the MNCs and various other business firms. Inside the lower finish, the unskilled and semi-skilled foreign employees derive from developing or under-developed nations like India, Sri Lanka, Bangladesh and Philippines. They’re compensated out lower wages than their counterpart Singaporeans, although much greater compared to wage amounts of their less developed home nations. Thus, the big pool of foreign semi-skilled and unskilled employees has saved the salaries in the earnings segment low.

Researches also show that in December 2011, accounting for 67.2% of local people who have jobs in Singapore while foreigners accounted for 32.8%, an increase of 31.4% over the same period the previous year.

The 67.2% of local people who have jobs in Singapore is not the total of local workers in Singapore, so actually Singapore also has a few percent of unemployers for local people. So if the foreign workers increase, it also makes much more trouble for the local current’s job. I think there are have the reason which is the difference of knowledge. Unless the foreigners have more knowledge than local, foreigners can be hired. If they are have the same level of knowledge, the local people can be got more priority than foreigners.

Singapore is the developing countries and emerging economies. So they need to hire the people who do the job well and fit to the new economies that this people need to have the high level of knowledge to help the company growth up with high profit and more benefits. And the companies should mind to find out more talent people for their company including foreigners. With the same job, if the foreigners get more knowledge than local people, the boss is actually going to tent to hire foreigners and fire the local people at this moment.

For example: There are 2 workers, 1 Singaporean who just graduate university and 1 foreigner with 3 years working experience. They are together come to company to interview for the same job, the boss will mind to choose the foreigners because they have more knowledge and experience than the local. Let’s say, if the company choose the foreigners, they just only give them the job, they can work very well because they have done the same job in the last company and their experience tell them to know much things about it. Therefore, if the boss choose the local people who have less knowledge than the foreigner, company need to train them a lot to get this job well and of course the money and time to pay for it is not cheap.

So that’s why the foreigners can get jobs in Singapore and the rate of foreigners increase can be affected to the local employers in Singapore.

The increasing use of foreign workers is not only contributed to unemployment but it also affect to the income inequality in Singapore.

The number of non-resident (foreigners) rose immediately by more than 10 per cent from year 2005-2008. In this time, from 2005-2008, the total population growth also increased. At the same time, the GDP growth fall down and got the 0 per cent in the year 2008.

From year 2008-mid of 2009, the foreigners in Singapore dropped down until it rose again in 2010. And in this time, the GDP growth also reached to the peak at 14 per cent in 2009 before being decreased in 2010.

The foreigners can be the reasons which affect to Singapore GDP growth that means it also affect to local people’s income. Let’s say when the foreigner come to Singapore to work, their salaries can be lower than the local’s salaries, actually with the same job. So why does not the boss choose the foreign workers.

For example: You can image that the leaners in Singapore normally can get $1000 per month. When the foreigners come to Singapore to work, they mind to sign the contract and make negotiation to the boss that boss can only pay them $500-$600 per month for the same job (Cleaning). So actually the boss will decide to hire the people who accept with cheaper salary and of course they will choose the foreign workers whose salary only equal to the half of local people’s salary. However, if the local people want to get this job, they need to reduce their salary to fit with the foreigners. That’s why the foreigners affect the income inequality in Singapore.

It is possible because the price which foreigners can earn is the low price with the local but it can be the high price for foreigner when comparing the rate of money between Singapore and countries where foreigners live.

For example: Comparing with Vietnam, the salary of Vietnamese when work with the job is cleaning in Singapore is almost 5 times the Vietnamese worker in Vietnam with the same job and can be equal to the salary of people who work accounting with 2 years working experience in Vietnam.

Researches show that: Providing a review of an earnings distribution in Singapore and exactly how it had brought to widening earnings inequality. GDP growth and per capita figures were problematic measures beneficial to Singaporeans since they also incorporated work created by people off their nations instead of all output was presented with to local houses. The lower educational profile of Singapore’s resident worked pressure, because of an increase of lower-skilled people off their nations in jobs that compensated out low wages. Although dependence on this type of work had assisted Singaporean companies to accrue significant profits, it might be challenging for Singapore to give the requisite productivity growth essential to raise the overall wage share.

The proportion of total earnings of Singapore’s top decile had opted up from 27.4% of total earnings in 2000 to 29.4% this season, that is one of everyone else had dropped. People inside the lower earnings decile were facing the best difficulty with negative real earnings growth between 2000 and 2010, suggesting these employees were fighting to “find a foothold in the publish industrialized economy”, as much was lacking the very best capabilities or may be too old. Many such low-wage employees in addition to their families were thus “running on empty”, requiring to regulate with diminishing earnings and rising prices.

Between 2000 and 2010, there’s a substantial increase in the 30-39 age group among the permanent people in Singapore, lots of whom were tertiary educated. Such trends can make the utilization landscape a lot more competitive and earnings mobility might have harder for highly educated Singaporeans, who’ve had the most effective chance formerly. The issue of whether average Singaporeans in this particular generation might see their “fair chance” at success being eroded by competition with individuals using their company nations, as even professional mobility that they themselves accomplished good results from formerly.

Overall, in this assignment we have discussed that the increasing use of foreign workers contributed to unemployment and income inequality in Singapore. As a result income inequality has grown markedly in Singapore, far more than most developing and developed countries which also experienced long periods of high growth. Though, globalization and the largely open nature of the Singapore economy have played a key part in creating this inequity, strong commitment to meritocracy in education, recent adaptations to the tax structure and government’s manpower policies towards attracting foreign talent have further intensified the problem in recent years.

Question 3: Discuss the Singapore government’s strategies to deal with the problems highlighted in question 2.

Globalization and the largely open nature of the Singapore economy have played a key part in creating the inequity, strong commitment to meritocracy in education. Recent adaptations to the tax structure and government’s policies towards attracting foreign talents have further intensified the problem. The rising income inequality benefits those with higher skills and knowledge and increases competition for jobs which makes the unemployment rate rise. This situation creates price distortion which can push low income families into poor. It “produces” many civilians be “asset rich but cash poor”.

The GDP in Singapore is high comparing to other countries so even if the income is low (for Singaporeans), that amount of money will still be higher to other developing countries. This is the main reason why the Lion City attracts so many foreign labor powers.

By the financial crisis which hit Singapore in 2007, lowering cost of labor was a necessary thing to do. Some argue that the country might have become “hooked” on cheap labor from abroad to sustain growth however the productivity have been reduced.

So more and more foreigners were accepted and then the Foreign Workers’ Levy was in charged by the Government. This Levy was known as pricing mechanism to regulate the multiplicity of the Non-Domestic Workers. Employers are responsible to pay monthly levies to hire employees who hold Work Permits or Student Passes. Policies tries to reduce the reliance of companies on foreign talents and it will raise the cost of labor. This can be counted as one of the actions which is conquering the overpopulation from foreigners. It also raises the labor productivity in the long run because before having the levy, Singapore has one of the highest influxes of unskilled and semi-skilled workers.

When a foreigner arrives into Singapore, they have to have one of these belongings: S Pass (which Government plans to decrease from 25% to 20%), Work Permit or Employment Pass (P1, P2 or Q1), which the employer will pay to have it, to work or to stay more than 30 days. If not, an individual can only stay in Singapore for 30 days as a tourist.

According to the Report on Singapore Perspectives 2012, the host of measures accompanying the New Growth Model were aimed at differentiating the treatment of Singaporean, permanent resident and foreigners in areas of employment, housing and healthcare. For example: Dr Chua cited the scrapping of the job work scheme for foreign graduates (Employment Pass Eligibility Certificate) from 1 December, instead giving foreigners only three months to secure a job.

In addition there is a GST Voucher Plan (only for Singaporeans). Government gives money back to citizens in form of cash or vouchers or banking accounts to pay the GST. Citizens do not need to redeem or do anything except of signing up their names. This GST Voucher will help the lower- and middle-income households with their living expenses. It assures that the GST does not hurt the poor.

For instance: Jake’s family earns S$1,900/month, they are living in a 2 rooms HDB flat, so they will receive around S$500 in cash plus S$260 in the U-Save account. So in total they will get S$760/year which covers almost a half of their annual GST expenses.

The unemployment problem for citizens rises with the flow of the “unlimited” manpower source. Singaporeans claim about the huge inflow of outlandish and their negative impact on jobs and wages. That’s why policymakers want to achieve full employment for their citizens and have the wage level increase in an orderly manner, so the policy has the foreign labor which states that there are some restrictions which are based on a ratio of local workers per foreign employee and the foreign levy.

For example: company A wants to hire employers and also wants to reduce the cost by hiring non-domestic employee, so with five locals they can hire 1 foreigner; with four locals, A can hire 1 Chinese. Thus the productivity may rise and it does not depend on the outside workforce for future GDP growth.

In conclusion, the government attaches great importance to this problem. The Singapore Government can influence the supply of foreign workers through immigration regulations by requiring them to have a work permit. It can also impose a quota (known as dependency ceiling or ratio in Singapore) which specifies the maximum number of foreign workers that a company can employ. The other method is to impose a levy for employing foreign worker so that it becomes very expensive to employ too many foreign workers. The levy can be imposed with different rates for the various industries to control the supply and demand of workers in these industries.

Microeconomics Assignment:

Question 1: Describe the development of the e-commerce industry.

E-commerce (electronic commerce) is the selling or buying of certain product or service through electronic systems such as internet and other electronic networks. E-commerce describes on different technologies such as supply chain management, online transaction processing, inventory management system, internet marketing, automated data collection, electronic data interchange and electronic funds transfer. Current e-commerce usually uses WWW (World Web Wide) at least at one item in the life-cycle of the transaction, however it can involve a wider domain of the technologies such as mobile devices, e-mail and even telephones as well. Electronic commerce can be separated into the following groups: business to government, government to business, government to citizen, consumer to consumer, business to business, and business to consumer. Retail dealers that depend mainly on electronic commerce to sell services and goods are often known as e-tailers.

Internet retailers usually takes one of two forms:

First form is Individual web-sites, most of the major retailers now have their own web sites that complement their traditional “brick-and-mortar” points. Some vendors operate exclusively online.

Second form is Cybermalls, the most popular cybermall is eBay, which suggests approach to goods from different independent retailers.

Electronic commerce is most closely associated with the Internet, and are developed in tandem with the growth medium. In fact, e-commerce was initially made possible by the opening of the Internet to business users in the early 1990s. However, it was not until the second half of the decade, the company really started to use the commercial potential of the Internet.

In television sales, programs on devoted shopping channels usually have a presenter who presents the products on air. Viewers can purchase these products by phone order with their credit card, or, in the case of interactive TV services, using their remote control. In recent years we can see different types of selling methods, including on-air auctions.

The number of new companies from that era, such as Amazon and eBay, the Internet was used to appear as a giant retailer into its own rights. However, e-commerce has largely been developed to create the largest retailers, who see it as just another sales channel. Giant grocery retailers that have expanded away from food and in a wide range of other areas, such as clothing and electronic goods were particularly quick to evaluate its potential. And also created opportunities for very small businesses. It can now be purchased online wide range of specialized products that are not available in malls. Thus, the Internet has provided a lifeline for many small producers, and allow entrepreneurs to enter the retail sector without having to invest heavily in physical retail.

E-commerce has been so successful because it offers significant benefits to consumers and retailers. Consumers can compare a wide range of retail in a few minutes, something that would be physically impossible to do. Online stores often sell products and services at a significant discount to those offered by traditional markets, as well as shopping online is convenient: consumers can shop from the comfort of your own home, and have them delivered to their doors. In addition, online shopping appeals to environmentally conscious. In March 2009, researchers from the University of Heriot-Watt University in the UK found that online shopping is 24 times “greener” than taking the car in the stores, and seven times “greener” than the bus. The researchers compared the carbon footprint of a typical local delivery depot with an average carbon emission trading trips by car and bus, and found that home births involving lower carbon dioxide emissions. In June 2009, the study said Carnegie Mellon Green Design Institute in the U.S. have shown that online shopping can reduce the “impact on the environment by 66%.”

For businesses, the benefits of e-commerce are mainly in the low cost of creating and maintaining the business. Companies do not need to invest heavily in the physical presence or sales personnel. However, they need to organize distribution, returns and payment systems.

Question 2: Justify why you think this industry fits the characteristics of perfect competition.

A perfect competition is created when five criteria are met:

All firms are price takers:

All firms sell identical products.

All firms have small market share.

There are no barriers to entry into or exit out of the market.

Perfect competition describes an industry structure whose presumptions are very strong and highly unlikely to appear in most real-some time and real-world marketplaces. The truth is that many marketplaces are imperfectly competitive. Nevertheless, there’s some value to understand how cost, output and equilibrium is made both in rapid and also the long term inside a market that is true towards the tough presumptions of an enormous amount of perfect competition.

Economists have grown to be interested in pure competition partially due to the rapid development of e-commerce in domestic and worldwide marketplaces as a way of purchasing and selling products or services. As well as due to the recognition of auctions like a rationing device for allocating scarce assets among competing finishes.

Firms on the market produce homogeneous items which are perfect substitutes for one another. This can lead to each firms being cost takers and facing a wonderfully elastic demand curve for his or her product.

Each firm produces only a tiny proportion of total market output. Choice exercises no treatments for the marketplace cost. For instance it can’t restrict output with the hope of forcing in the existing market cost. Market supply is the sum results of each one of the firms in the market.

No individual buyer has any treatments for the marketplace cost – there’s no monopsony energy. The marketplace demand curve is the sum of the every individual consumer’s demand curve – basically purchasers are without anyone’s knowledge, applying no influence whatsoever on market cost.

Purchasers and retailers must regard the marketplace cost as beyond what they can control.

There’s perfect freedom of entry and exit in the industry. Firms face no sunk costs that may slow down movement interior and exterior the marketplace. This important assumption guarantees all firms make normal profits over time.

Capital for an on-line business is low so it is more facile to enter and it opens the door of opportunity to people who don’t have much money in their hands. The risk will decrease and it’s easier to set up this type of business. Economists also find that the online entrant chooses a lower quality of trade execution when faced with direct competition from the incumbent’s unbundled offering.

The online seller’s power have been reduced due to the price. It’s easier to compare those prices when a person don’t have to go from place to place. They can do it all on-line. This creates more demand and by that the supply (on-line sellers) rises. The competitiveness increases harshly. They are competing for every single cent.

At present, there are lots of sellers and they come not from one place but from all over the world. And the ecommerce industry is growing really fast. In 2012, United States took first place in global ranking with annual sales valued by $134.9 billion, followed by Japan with $51.2 billion and China with $36.6 billion. During that year India and Vietnam’s ecommerce industry grew up to 30.8% which is very high.

Perfect knowledge – with the power of Internet, a consumer increases their own ability to gather and analyze details about prices and items. Folks will find no externalities which lie outdoors the marketplace.

With all the above descriptions, ecommerce industry perfectly fits to all perfect competition criteria.

Question 3: Give 3 examples of products that are suitable for selling over the internet and three are not. Explain your answer.

In modern society, with the advancement of technology especially the internet everything become easy. Almost things every information, every product can be accessed online. And with application of internet widespread more and more people take in e-commerce industry. People prefer to trade with the internet. Internet make us life more convenient. The internet is seen as one huge marketplace wherein almost any product can be sold.

There have three examples of products that are suitable for selling over the internet.

First of all, digital and information products. Because the Internet can only use bit transmission, so the digital and information products more easily in the online sales. Such as all kinds of market project report, product dynamic, literature inquiry, software download, VCD, CD, books, etc. This kind of product in common is can be easily audition, and proved, trial, and can through the network transmission. At present the Internet sales of almost of the products are these.

The second is development of new product. Due to the spread of the Internet a wide range, speed, so the new product can spread faster. Such as SONY in China website and haier website is a new product release platform. Website shows a new products in the shop haven’t shop goods, the website the reason for this is mainly for the new product advertising, attract eyeball. The third is service products. Such as information service, interactive services, online booking service at present in the Internet like a raging fire development, the main reason is the online services to the consumer is convenient, fast. Like online banking services, if is the traditional remittance, transfer business, may we in the bank to stand in line for a long time and now we don’t even have to queue, login to the bank on the net, a few minutes to complete. Ago to buy a ticket to the boarding process is very complicated, there is the case of an electronic ticket, online a few minutes can make whole boarding, waiting process shorten hours. With the aid of the Internet, our life is more and more convenient.

However not all products are suitable for selling on the internet. In general, specific and specific product that are not offered in hundreds other stores or on the major e-commerce sites can be easily described in text and images and have an attractive price-performance ratio can be sold particularly well on the internet. If the product quality is also assured and the product can be delivered problem-free and inexpensively. Almost nothing stands in the way of success.

We also have three example about this problem that are not suitable for selling on the internet. Almost is customer cannot check the product.

Firstly, need reason comparison of the complex products. Such as car, large furniture. In general need to consumers in the market to see, touch, check whether the quality qualified then in online carefully comparison, find out function parameters, it will be possible to purchase, in order to meet consumer demand, general meeting on the website details function parameters, some website but also on the similar product functional comparison. The customer just need check by themselves can will buy.

Secondly is need to experience and sensory products cannot. When see the word what are “sensory”, always have a boiling passion. Because it can bring people desire and excited. And buyers because cannot try, touch and there is a big shopping risk, and at the same time, the price is expensive, such as obese clothes, reading glasses, the special equipment.

Last is illegal things or restricted in sales of goods, such as arms and ammunition, knives, cultural relics, obscene article and drugs. It is a government by law society, do what we observe law and discipline. In the network marketing, prohibited goods, fake and inferior products, manufacture in a rough way, is there safe hidden trouble and so on some other will break the laws of the state product is not on the network marketing.