Why It Matters: Costs of cheap outsourcing

Why It Matters: Costs of cheap outsourcing

Last week, labour MP Zainal Sapari created a stir when he blamed cheap outsourcing for depressing the pay of low-wage workers like cleaners, guards and carpark wardens.

Outsourcing has led to market failure, he charged. His comments resonated with some employers, but others disagreed.

The debate puts the spotlight on the direct link between costs and wages in labour-intensive, low-wage jobs. In these sectors, one man's cost is another man's wage - costs cannot be reduced without lowering wages. When firms award contracts to the cheapest bids, their contractors are pressured to cut their workers' pay to win the contracts. A downward spiral of wage depression sets in.

While one cannot blame companies for wanting to save money, the question is whether there is a limit to how far they can go.

There is first the moral question. Jobs like cleaning and guarding are usually done by lesser-educated, elderly Singaporeans who have few job options to begin with. And they will accept lower pay just to keep their jobs. It is distasteful when companies prey on workers' vulnerabilities to save money. It reeks of exploitation. If left unchecked and the ranks of disgruntled, low-wage workers swell, there will be wider political and social problems. This is why the Government is acting to narrow the widening rich-poor gap.

Cheap outsourcing hurts taxpayers, too. The Government tops up the wages of those earning $1,900 or less a month through Workfare. These top-ups are funded through tax dollars, so taxpayers are indirectly propping up the wages of low-wage workers that employers depress.

The issue could be more complex than Mr Zainal has painted it, but one ought to cheer him for speaking up. At the very least, it has sparked debate and, perhaps, pricked some consciences.


This article was first published on Feb 22, 2016.
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