5 Myths about Foreign Workers

(This article was originally posted on the Facebook page of Calvin Cheng – https://www.facebook.com/calvinchengnmp)

foreign worker


1) Employers hire foreign workers because they don’t have to pay them CPF

Employers look at what goes out of the company’s bank account, not what you receive. So if a local’s wages are $2,000 per month, his take home is $1,280 per month, but the cost to the business is still $2,000 a month.

Therefore just because a local’s take-home is $1,280, it does not mean that an employer will hire an equivalent foreigner for $1,280. An equivalent foreigner would be one that also costs the employer $2,000, just that the foreigner takes home the entire $2,000 since he doesn’t have CPF.

But a local person can use his CPF to purchase property etc. This money isn’t ‘taxed’ away. It is still his.


2) Foreigners don’t need as much to survive so they cost less.

They may have a lower standard of living back home but their cost of living in Singapore is just the same as a local, if not more because they have to pay rent, whilst a Singaporean can either stay with his family, or purchase a HDB flat for himself. Rent in Singapore is not cheap.

If they save enough to go back to their home countries to ‘enjoy life’, it is because they have worked very hard, and lived very simply in Singapore to save that money.


3) Foreigners are preferred by businesses no matter what because they cost less.

A variant of (1) and (2), this assumes employers are idiots. Nobody will hire someone just because he costs less. If the worker costs less but is inferior, business will be affected. What Singaporeans should be scared of are being replaced by workers – foreign or local – who cost the same or less – but are equally as good or better.

Cost is only one factor in hiring people.


4) If fewer foreigners are allowed into Singapore, these jobs will go to Singaporeans.

Yes and no.

There are some jobs that will always be tied geographically to Singapore – but these tend to be low-end jobs.

A cleaning company that cannot hire foreigners will have to hire locals because he cannot shut up shop and move to another country – the business is tied physically to Singapore.

However, because these tend to be manual jobs, if labour costs and pressure go up by too much, it will make economic sense for machines to replace these workers and jobs are lost anyway.

The well-paid jobs in today’s economy are on the other hand, in high value-add, knowledge economy industries. These businesses don’t have to be physically tied in Singapore.

If Singapore cannot provide enough cost-efficient labour, they will move to another country which means that local AND foreign jobs are lost.

In these well-paid industries, Singaporeans already compete with the world whether we bring foreigners here or not.


5) If fewer foreigners are brought in, local wages will increase.

For those jobs that cannot relocate, because local labour has to be used, local wages will go up if overall supply is restricted.

BUT, companies need to be able to pay for these wage increases. Therefore either they have to make less profits (if they can), or they will have to pass on the costs to consumers.

Not all SME owners make huge profits – and they are Singaporeans too. Less profits means they have less income.

If on the other hand costs have to be passed on to consumers, this will cause inflation, meaning the wage increase is cancelled out. (your wage increases by $100, prices also increase by $100, then the real increase is zero).






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