Wednesday, 24 February 2010

When too much good is bad

Economist doubtful over Singapore’s plan to scale back on foreign workers


Guanyu 道 said...

When too much good is bad

Economist doubtful over Singapore’s plan to scale back on foreign workers

By Susan Long
24 February 2010

Professor Philip Martin wants to state for the record that he is an avid admirer of Singapore’s ability to do just what it says it will do.

Yet he has grave doubts over the Singapore Government’s recent announcement that it plans to scale back on foreign workers, and has even imposed a concrete deadline to do this - within five years.

‘Managing migration is like taking a hike. You go with a rough plan and make adjustments as you go along.

‘But Singapore is different. It has a firm plan and full confidence in its administrative capacity. Its policy is, ‘Welcome the skilled, rotate the unskilled’. It is what many countries would like to do, just that nobody says it as explicitly as Singapore.’

However, in this delicate business of weaning itself off foreign workers - more of whom are almost always needed for longer and in larger numbers than expected - he fears Singapore may have met its match.

‘The Government may need to get humbled here. It could end up like your ‘Stop at two’ population policy, which later became ‘Have three or more, if you can afford it’,’ says the professor of Agricultural and Resource Economics at the University of California-Davis in the United States.

The labour economist, who has studied migration issues for more than 30 years, was in Singapore recently to address an Institute of Policy Studies roundtable on managing migration.

To illustrate his point, he cites the Taiwan example. During the Asian economic crisis, when unemployment reached a 10-year high, the Taiwanese government announced the ratio of foreign workers would be capped at 25 per cent.

But as the economy picked up, employers asked for new industries, sectors and occupations to be exempted from the quota, and the government caved in to business pressures.

The latest: The number of foreign workers allowed into Taiwan will now be based on its unemployment rate, opening the door wider for some industries to import even more labour.

This same quandary confronts Singapore today: Now that foreign labour is seen widely as a soft option and reflexively used to fuel growth, mind children while mothers go to work and shore up the short supply of menial workers for jobs that locals do not want, is it possible to shut the floodgates and go back to the way we were?

He is doubtful. As history has shown, there is nothing more permanent than temporary foreign workers, thanks to the distortions and dependencies they create.

‘Bottom line, too much of a good thing can be bad, whether it is wine or cheap labour,’ he says.

Despite the success of the US in attracting bright students who stay on after graduation to work, such a practice holds cautionary tales for Singapore, which has tried to replicate it to shore up its falling birth rate.

He warns there are perils to trying to cherry-pick the ‘right immigrants’.

‘For one thing, in a bid to get more, the definition of quality often slips. For another, just because you have a college degree does not mean you are skilled. In India, you can buy a degree pretty cheap, there are many ways to get around the system,’ he says.

Then, there are also unintended consequences that lead to long-term labour market distortions.

For example, young and hungry foreign students, mostly from India and China, now form the majority of graduate students enrolled in science, engineering and technology faculties in US universities.

Desperate to get sponsored for legal immigrant visas, they go on to serve as relatively poorly paid post-doctoral researchers for five to 10 years, holding down wages and, at the same time, discouraging Americans from studying and working in science and engineering.

This trend started during the 1990s IT boom, when Congress raised the limit for H-1B visas (given to foreigners with degrees filling degree-level jobs) several times, from 65,000 to 195,000 a year.

Guanyu 道 said...

Many employers, such as former Intel chairman Craig Barrett, even chimed in to suggest that the US ‘staple a green card’ to the diplomas of foreigners graduating from American universities with science and engineering degrees.

But Prof Martin asks: ‘Is what is good for Intel good for the US? We have crafted immigration law in the national interest. But since most immigrants now enter through the side door, they are being picked to come in by universities or employers. How does that square with the national interest?’

On the subject of quality control, what about the niggling fear among citizens here that Singapore is still hampered by its size and geography, and, try as it might, it can only get the No. 2s or the ‘also-rans’ to come here?

After all, India and China’s top students overwhelmingly still aspire to live in the US, attracted by notions of freedom and liberty, unlike the practical and non-ideological reasons they come here, because it is a safe place to bring up children or do business.

Prof Martin agrees: ‘America’s nationhood has been forged on being a beacon of opportunity. I do not think Singapore is going to emerge in my lifetime as an equal alternative for the best and brightest, though it is rich and will continue to prosper.

‘When you are young and ambitious, you want to be in the US, with its huge market and venture capital. At 25, your chances of becoming a millionaire are very small. But they are probably higher in the US than in Singapore.’

But he wonders: ‘If Singapore were to open up its system further to grant more freedom and individual rights, can it continue its tight control on low-skilled foreign workers?’

Similarly, he notes today’s biggest rural-urban migration story is happening in China, and the most obvious thing the Chinese government should do is to get rid of its hukou system (residence permits which tie every person to a locale).

‘However, the Chinese government says that if it did that, there might be slums and protests in cities. It may kill the goose that lays the golden egg. So there is no easy answer,’ he notes.

But while Prof Martin is sceptical about Singapore scaling down its foreign labour dependence to deadline, he has every confidence the Government’s recent housing quotas and education subsidy cuts for permanent residents (PRs) will achieve its intended effect - swaying PRs sitting on the fence to naturalise and become citizens.

He cites how similar US Immigration Act changes in 1996 rendered legal immigrants ineligible for the same welfare benefits as US citizens, and demanded they naturalise after five years in order to qualify.

‘Economic incentives worked,’ he acknowledges, ‘though there was a lot of gnashing of teeth. Many naturalised because the alternative was no access to federal safety net programmes.’

But the long-term consequences of each so-called successful policy, he warns, are impossible to second-guess.

That is why the thorny issue of migration, till today, remains so ‘easy to debate but hard to resolve’.

He concludes: ‘As the father of modern economics Adam Smith observed, people are the most difficult baggage to transport over borders.’

Jack Reylan said...

I will not deny that foreign students can be bright, but faculty exaggerate their brilliance because foreign students are servile in doing work and favors for faculty and not demanding that professors actually earn their tuition keep. Morevover, faculty like that foreign students are either afraid, complicit or morally ambivalent about the imoral behavior of professors. In many cases they are more likely to share the professors' anti-Americanism than American students. Foreign students are the least risk takers and the least innovative and the most likely to take bureaucratic "safe" jobs depending on grants instead of markets.