Sunday, April 06, 2008

Foreign Talent - Why?

There has been a substantial undercurrent of discontent amongst the Singaporean public, particularly the working population who feel squeezed by the recent influx of foreign talent into the country. Namely, that they are able to work for lower wages, often able to subsist on that low wage while saving up enough to go back and spend in relative prosperity, and that their mere presence drives up the prices of daily necessities.

Just today, Samizdata had a post describing a similar phenomenon in the UK, that of foreign workers contributing to the unemployment of local labour. Other than the fact that while they have a welfare state to take care of them over there, and we have essentially nothing, the situations are remarkably similar.

A poster named Pa Annoyed has a very cogent post that I can easily apply to the situation facing relatively unskilled and semi-skilled labour in Singapore.
...there is also a legitimate boom in more skilled trades - bus drivers, builders, plumbers, etc. They work hard for the minimum wage, because it's four times what they'd earn back home, where unemployment is 20%. They can save up a small pile of cash and then go home, where it will be transformed into great wealth by the magic of post-Communist economic failure. For a young Briton hoping to raise a family and then retire, the minimum wage is an insufficient pittance that is not worth the long hours of labour demanded for it. It's enough to live on day to day, plus a bit, but you can't build a future.
Substitute the word Briton for Singaporean, and you get the reason behind the growing resentment towards FT. And we don't have a safety net.

There's more though.

So why work 45 hours a week for forty years for barely enough to live on and then die in geriatric poverty - when you can live the same for no work at all on benefits? They'd have to be daft to do anything else. But they're still not happy about it.

Overall, the good it does the Poles outweighs the bad it does the Brits, but there's no doubt that it's bad news for the poor of Britain. Thinking themselves near the top of the queue for emergence from poverty, they suddenly find themselves pushed to the back of the line again. They must wait for all of socialist Europe to catch up now before they have any market power again.

If we consider the collective good of Britain, or the poor of the world as a whole, then this is both generates more wealth and helps more of the poor more quickly, but you can certainly understand how many Britons might be upset by the whole affair.

So... a globalised market also means that the poor of any specific country are competing against the poor of other countries. Singaporean workers pushed out of their jobs by foreign workers who can work on less pay are essentially quite shafted.

I find myself disagreeing with Pa Annoyed on one point though. It's not quite apparent that the overall good has increased, though a study of comparative advantages probably would vindicate his point.

The most feasible solution would be my usual refrain: cut taxes. If possible, switch the consumption tax to a luxury tax. If that's too difficult, there's an idea supported by Milton Friedman called the negative income tax. (BTW, some form of the negative income tax is already in play here, in the form of ERS - Economic Restructuring Shares. Six of one, half a dozen of the other.) We apply it only to those who're working. Yes, it's progressive(dammit!), but any social/economic engineer has to always remember: the voters hold the strings. And when you rob Peter to pay Paul, Paul will vote for you every time. If you run out of Peters, you're SOL. The trick lies in convincing enough Peters to stick around.


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