Written by Ng E-Jay
03 March 2010
PAP MPs raised concerns over proposed increases to foreign worker levies during the budget debate on Monday in Parliament. They held the view that businesses would be unduly affected in the short run.
Jessica Tan, an MP for East Coast GRC, said that some business leaders are worried that the increased levy could impede their ability to leverage and capture the opportunities of the recovery.
She also said: “This is further exacerbated by the fact that it is difficult, in the short term at least, to change the mindset of Singaporeans to take up certain jobs in industries like construction which are seen as strenuous and dirty, and some services jobs that require long hours of standing.” 
Inderjit Singh, an MP for Ang Mo Kio GRC, said that we should focus on bringing in foreign workers to the key sectors where they are most needed, so that we can finely balance between supplementing our workforce, yet calibrating the flow of foreigners and leaving some jobs aside only for Singaporeans.
In a previous article I wrote for The Online Citizen, I mentioned that it is not clear how raising the foreign worker levy, which is a blunt instrument that merely increases business costs for companies hiring foreign workers, would help very much in achieving the intended objective of raising productivity or of raising the overall standard of living of our workforce.
Fine-tuning business operations or investing in new technologies could be unrealistic in many situations, for example, in the case of a construction company that is already operating on a tight schedule, or in the case of a wholesaler that is constrained more by cost factors rather than lack of technological investment.
A higher foreign worker levy may also not be effective in making businesses look upon local workers more favourably because businesses do not have to make CPF contributions on behalf of foreign workers.
The Government has to make fundamental changes to its policies, such as controlling the overall rate of import of foreign workers from the top down, fine-tuning the criteria for awarding various employment passes, and paying more attention to attracting quality foreigners rather than indiscriminately importing foreigners who possess no special skills over and above those possessed by Singaporeans.
Indeed, an increased foreign worker levy would most probably only serve to fatten the Government coffers, but without inspiring companies to increase productivity or move up the value chain.
Opposition MP Low Thia Khiang went to the other extreme and suggested that the foreign worker levy be abolished altogether.
The MP for Hougang said: “My view is (that) the foreign worker levy … (has) becomes an opium; opium for the government because it collects money from the levy, opium for businesses because it is a soft option out for them, because instead of paying local workers with a higher salary, (or) raising productivity, they can bend on paying (the) levy and continue to have low productivity and lower labour costs to compete in the market.”
Mr Low Thia Khiang was of the view that the government should just use the dependency ratio to control the growth of foreign workers in Singapore.
He also said that the savings in foreign worker levy can then be used by companies to provide employment for local workers when the dependency ratio is reduced, upgrade the production process, or send workers for training to upgrade their skills.
Mr Low has got it absolutely right that the foreign worker levy has become an opium for the government.
However in his zeal at standing up for the needs of businesses, he has neglected to consider that erasing the foreign worker levy altogether would bring us back to square one, because businesses would be even more enticed to hire large numbers of cheap, unskilled foreign labour without feeling any push to improve their business operations or move up the value chain.
The point was not lost on PAP MP Josephine Teo, assistant secretary-general of the NTUC and an MP for Bishan-Toa Payoh GRC, who said: “I am puzzled by the member’s (Mr Low’s) description of the foreign worker levy and comparing it with opium. Because earlier he had said that there is no denying that our economy needs foreign workers. To try and introduce an alternative system to a pricing mechanism is a very dangerous suggestion to make. It opens up a whole pandora box of the difficulties we have to overcome.”
“I am quite shocked by Mr Low’s suggestion to remove the foreign worker levy altogether. How does Mr Low propose that the government allocate the foreign workers quota efficiently to businesses without a levy mechanism? Would it be right for civil servants to pretend to know all about market demand and supply? Removing a levy is turning a blind eye to the social disparities they create.”
Ms Teo also said that without the levy, jobs for Singaporeans would be affected as some businesses would find ways of getting around the quota system in their bid at securing the employment of cheap foreign labour.
All in all, both PAP MPs as well as opposition MPs have spoken out on behalf of businesses who feel they could be affected by the increased levy, but unfortunately none of them managed to point out that it is fundamental policies that have to be changed.
Merely raising the foreign worker levy will not help in undoing the disastrous policy of importing foreign workers too liberally, nor will it improve the lot of Singaporean workers who are suffering from the brunt of unregulated and unfettered competition.
What is sorely needed is an overhaul to the government’s labour and immigration polices from the bottom up, not just a cosmetic makeover that does nothing to address the underlying issues.
 Channel News Asia, “MPs express mixed views on raising foreign worker levy“, 02 March 2010.