Commentary on talk show “SME Bosses”

I refer to the youtube video https://www.youtube.com/watch?v=DUof4Cg-lCs, an extract from the talk show “SME Bosses”

Issue 1: Foreign workers are not cheap, so don’t blame foreign workers depressing local wages

The video extract starts with a purple shirted F&B boss saying that he pays frontline service jobs like chefs, waiters and managerial positions around $1800 which he claims is above average. Purple shirted boss wasn’t specific enough. Is $1800 an equally good salary for the job of a waiter and a restaurant manager? For all we know, $1800 could be above average for a waiter but below average for a restaurant manager.

Purple shirted boss then lamented that he spent $10,000 to $12,000 on job advertisements but only managed to recruit 4 Singaporeans out of 30-40 Singaporean applicants half of which did not turn up.

Some sort of spokesperson for labour wearing white shirt then pointed out that $1,800 is too low for a Singaporean to support his family and that cheap foreign labour has been depressing locals’ salaries. Michelle Saram then spoke up disagreeing with the notion of cheap foreign labour and cited high levies, security bond, payment for medical as reasons for expensive foreign labour. The purple shirted boss chipped in saying it costs more to hire a foreign worker than to hire a Singaporean worker. Minister Tan after making some not too relevant statements, concurred with Sarah that foreign workers are not cheap.

So the key message that the trio were trying to bring across is that foreign workers are not cheap, they do not depress Singaporean wages. But that message rests on the false premise that foreign wages must be lower than Singaporean wages in order for Singaporean wages to be depressed. That need not be true. Foreign wages can be higher than Singaporean wages and still depress Singaporean wages. We can use the same $1800 example.

Let’s say:

Singaporean wage: $1800
Foreign worker wage + levies and what not: $2000

If an employer can get a foreign worker for $2000, why would he pay $2500 for a Singaporean? Thus, a $2000 foreign worker wage which is higher than a $1800 Singaporen worker wage can prevent the Singaporean worker from getting $2500.

Suppose the foreign worker wage + levies and what not is increased to say $4000, you can bet Singaporen wage will correspondingly increase to say $3600.

Hence I would have to disagree with Michelle’s notion that foreign labour isn’t cheap. Without giving us the specifics, by just speaking in loose terms, it’s hard to derive anything meaningful from the discussions. Michelle may think that $2000 is not cheap for example. But $2000 is just $200 more than $1800. Maybe Michelle thinks that $1800 is also not cheap.

Furthermore, the wage difference between Singaporean and foreign worker can be due to the fact that it is easier to get a foreign worker to do more work for the same pay which may turn out cheaper for the employer on a per hour or per month basis.

Issue 2:

Purple shirted boss went on to say that the Singaporean consumer expects speedy and affordable service by Singaporean front desk personnel but while the Singaporean front desk wants to be paid a good wage, the Singaporean consumer doesn’t want to pay so much.

However, speedy and affordable service by locals earning good wages is the norm in First World nations especially in Europe.

Michelle then shared that she had to close down two businesses in Singapore because she couldn’t get Singaporean workers as her business was too small and unhip. Somehow, it never occurred to Michelle that perhaps pay was the reason why she couldn’t get Singaporean workers rather than smallness or unhipness. She ultimately blamed her business failure on the lack of foreign workers due to the S pass system.

Michelle then shared that she moved her business to Japan and for five years it has been wonderful with highly motivated staff happy to do the work that they do. Again, with no specifics, we are left to wonder what truly made the difference. There could be so many variables that can explain the difference between her business failure in Singapore and her business success in Japan. Just some possible explanations:

1) Dim sum is not a novelty to Singaporeans. Singaporean customers are spoilt for choice for good dim sum. So Michelle would not be able to command high dim sum prices if she was merely selling ordinary dim sum. But in Japan, dim sum can be a novelty. This would allow Michelle to charge a higher price that can support higher wages.

2) Japanese customers only understand Japanese, they don’t understand English. So there is almost no problem with English speaking Filipinos competing with Japanese workers for jobs in Japan which is why the Japanese feel a sense of job security and better pay protection.

3) Business costs are generally lower in Japan, perhaps due to lower rental, so a higher percentage of sales can go to wages to support higher wages.

Thus, while it is convenient for Michelle to blame her business failure on the lack of foreign workers, in reality, there could be more than meets the eye that Michelle would care to share.

Conclusion:

This is a talk show with little or no specifics which leads to nothing useful that can be concluded.

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