What's keeping blue-collar wages low?

What's keeping blue-collar wages low?
Workers at Keppel Shipyard. Foreign workers are an important complement to our workforce, though it makes sense to monitor their quantity – and quality – more judiciously to avoid unintended socio-economic consequences.

SINGAPORE- The link between foreign workers and local wages has been a hot-button topic. It is also clearly an issue in which many Singaporeans feel they have a stake. Rightly or wrongly, the slow growth in blue-collar wages and the accompanying rise in inequality over the past decade have been pinned on the influx of foreign workers.

This "conventional wisdom" was recently challenged in an article written by Professor Hoon Hian Teck - entitled Relook Link Between Low Wages And Foreign Workers - published in The Straits Times on Nov 27 last year.

His argument can be summarised as follows: The stagnation of wages at the low end of the income distribution began between 2000 and 2004. This was the result of the Singapore economy being hit by the bursting of the dot.com bubble and the Sars crisis.

However, the growth in the non-resident workforce only accelerated after 2005. Given this timing, it is argued, the influx of foreign workers could not have been the root cause of our blue-collar wage woes.

So did the presence of foreign workers not matter at all? Or is there still some truth to the conventional wisdom? The reality, I believe, lies somewhere in between.

I agree with Prof Hoon's view that there are deeper forces at play that are not fully appreciated in the ongoing debate on wages in Singapore. These issues have to do with the underlying economic restructuring that Singapore has to undergo to stay relevant in the global economy. As Prof Hoon points out, this is a process that has favoured growth in our services sector at the expense of manufacturing.

The stark reality is that these structural changes have also favoured skilled workers over their less skilled counterparts. Being "skilled" now means possessing computer literacy, or being able to use IT tools (such as e-mail and Microsoft Word) that drive any modern workplace. A worker with such capabilities would inevitably be more nimble in making a job transition between sectors than, for example, someone whose primary skill set was working on a specific production line machine.

Consequently, less skilled workers are now in a more vulnerable position. Even if we had hypothetically held constant the number of foreign workers in Singapore, our less skilled resident workers would still have had to play catch-up.

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