Yahoo! News Singapore, 2 Mar 2013
Myth #1: If we don't have sufficiently large injections of foreign labour, business costs will rise, some businesses will shut down or move out of Singapore, and Singaporean workers will be laid off.
The first fallacy is a version of the misguided economic reasoning behind protectionism. The (flawed) argument for protectionism is that because our local firms cannot compete globally, they need to be subsidised by the state. By lowering costs for our firms, protectionism helps them compete against more efficient and productive foreign firms, thereby creating employment for citizens. Economists know this reasoning to be intuitively appealing, but wrong. The protection that is given to local firms does not raise their productivity; indeed, it explains their very lack of competitiveness. Meanwhile, the processes of creative destruction – the main source of dynamism in capitalist economies – are impeded, and the signals for the economy to adapt, innovate and move up the value chain are muted.
The business case for a liberal foreign worker policy rests on similarly flawed arguments. Businesses that rely on cheap foreign labour receive an implicit subsidy from the government. The low cost of labour encourages them to persist with low value-added production and discourages them from upgrading and improving their business processes. Meanwhile, cheap foreign labour discourages automation and holds down wages for citizen workers doing the same job. Full story
