Thursday, March 4, 2010

Substantial help for low-income, over a lifetime - Or is it?

Reading the article in 'today' titled :

'Substantial help for low-income, over a lifetime'
, Finance Minister Tharman Shanmugaratnam argued against some of the MPs and NMP views:

"By allowing in more foreign workers, Singaporeans at the lower end of the income ladder saw their wages being depressed, they argued.

This argument was "wrong and misleading", Mr Shanmugaatnam said. In fact, between 2006 and 2008, the earnings of lower-income households grow by about 16 per cent in real terms - this "corresponded to the period when the foreign workforce was growing most rapidly", which had allowed businesses to seize opportunities, grow and create more jobs for Singaporeans.

During the second half of the decade also, Singapore would have missed the boat had it not allowed businesses to invest and expand in Singapore, including leading investors like Shell or Exxon-Mobil. "We would have ended up with a decade of very weak income growth. In particular, low growth would have hit our low-income families the hardest, as it did in the first part of the decade.

Firstly, an interesting point Mr Tharman brought up was the correlation he presented on the period of rapid influx of foreign workers and the increase in earnings of lower-income households by 16 percent in real terms, between 2006 & 2008. A question i would like to raise is, what is the profile of the said 'lower-income households'? Are they citizens (new/old), PRs or foreigners? Since he mentioned this period coincided with the influx of foreign workers, it could well be this group of workers/ households who have 'benefited' from the said increase in 'earnings'. Also, If the wages of the 'lower-income households were already way below the means to pay for the living expenses(i.e relative to the cost of living; housing, transport, food etc) in 2006, a 16% increase (if that is true) would still not be able to help in lifting them out of poverty.

Then, he made a causation on the need for more foreign workers for the businesses to grow and the ability to attract ‘leading investors like Shell or Exxon-Mobil to invest and expand in Singapore’. I do wonder how do other countries who do not employ such strategy to attract these ‘leading investors’ still able to make these ‘leading investors’ continue to invest and expand in their countries? Go to these companies sites and one can find a long list of countries these companies are operating and how many of these countries employ the said policy/ strategy?

Even if he can prove that the foreign worker policy can help the economy to grow, he still can’t show that those ‘lower income households’ or individuals are benefitting equally from it compared to the higher income groups. The income gap between the two groups might have widen even greater over this period of ‘growth’. Yes, growth might be good if it benefits all and not more for a selected group as we have witnessed so far.

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