Foxconn wage rise spells trouble for Singapore

The news that Foxconn is giving its assembly line workers in Shenzhen a 66-percent performance-based pay increase is not only significant for the future direction of China’s economy, but will also have implications for Singapore’s foreign labour and social policies.

Foxconn’s latest announcement comes on top of a 30-percent across-the-board increase in the cash component of wages announced last week, applicable to all twenty Foxconn locations in China. Performance-based pay increases for non-Shenzhen locations will be announced in a few weeks’ time. Together, the two increases will double wage levels for its Shenzhen employees to around 2,000 yuan a month. These moves were in response to a spate of worker suicides attributed to low pay, excessive overtime and cramped conditions in its dormitories.

Reported to be the world’s largest manufacturer of motherboards and other components for leading electronics brands such as Apple, Sony, Dell, HP and Motorola, Foxconn has 800,000 employees in total, so its move will not only affect a huge number of people, it will set a new benchmark and direction in the country’s labour market. It may even embolden Chinese workers already in Singapore to demand better pay and working conditions.

Japanese carmaker Honda also had to raise wages for its Chinese workers recently after being crippled by a strike at its Foshan, Guangdong, factory, which employs 1,800 workers. To settle the dispute, Honda offered wage increases ranging from 24 to 32 percent, bringing average monthly pay for assembly-line workers to about 1,900 yuan.

Meanwhile in Beijing, the government recently unveiled an increase in the monthly minimum wage to 960 yuan from 800 yuan, to take effect from July. Other provincial governments are also raising their minimum wage levels.

What was notable about the recent labour episodes has been the silence of the Chinese government on the matter. This was read by analysts as an indication that authorities preferred to see the issues settled through rising wages rather than through suppression of worker dissent, tying in with the realisation that the already wide and still-widening rich-poor gap in China risks formenting social unrest with all its implications for politics. Nudging the Chinese economy towards a more domestic consumption-driven one, away from an export-led model, may help blunt criticisms from the United States about China’s exchange rate policy.

The widely-drawn conclusion from these labour crises therefore is that wages in China are set to rise, perhaps dramatically, in years to come.

* * * * *

Earlier this year, when I was in Yunnan, we came across construction workers building a road. My friend Russell, who volunteers with Transient Workers Count Too, a non-governmental organisation concerned with migrant workers in Singapore, asked them how much they earned. I have forgotten what the precise answer was, but the impression we got was that their income was something like two-thirds of what Chinese construction workers were being paid in Singapore. If their remuneration was typical, then we are reaching a point where it will no longer make sense for Chinese workers to take jobs in Singapore. Is the premium they get by working here enough to compensate for separation from their families and the much higher cost of living?

While logically, the response might be that of sourcing low cost workers from other countries should the Chinese tap dry up, in reality, it is more complicated than that. Our foreign worker policies are also tied up with our domestic race policies. A recent feature in the Straits Times inadvertently highlighted the attitudinal factors. The first citation below is from an article about sourcing workers for their English-language competency, but go further down to the last sentence of the excerpt and you will see a ministry official declare that “the make-up of Singapore society should not be altered by the import of foreign workers”, code for saying the great majority should be Chinese and Indians.

Singapore employers usually rely on middleman agencies to recruit, vet and send workers here from source countries.

Agents would typically attest to the quality of their foreign workers, guaranteeing that they have been tested and found to have a basic grasp of English.

So when food and beverage industry veteran Cheong Hai Poh went to China to hire workers in 1997, he found out just what being conversant in English meant.

Every candidate he interviewed reeled off the same lines in English: ‘My name is xxx. I come from Hubei province. I like football.’

If he asked a question, there would be a confused pause. Then the candidate would repeat his memorised lines wholesale. These workers had no grasp of English. They had learnt – or been made to learn – a bare minimum designed to get them into Singapore.

According to Mr Cheong, who is now executive assistant manager of Conrad Centennial Hotel, the problem is not that Singapore has too many foreign workers but that it is getting the wrong kind.

One major reason, he argues, is the restrictions on the places from which industries can recruit.

The list differs from sector to sector. For the service sector, work permit holders can come only from Malaysia, Hong Kong, Macau, South Korea, Taiwan and China.

Of these, only those from Malaysia and China come in droves. As time goes by, ‘the cream is wiped off’, says Mr Cheong. English-speaking countries like the Philippines, he maintains, could yield better-quality workers.

His views were rebutted by the Ministry of Manpower. Ms Jacqueline Poh, divisional director of workplace policy and strategy, recalls that the suggestion was ‘If you have skills, why restrict which countries you come from?’. Such workers can come in on the S-Pass, she points out.

However, S-Pass holders must have certain tertiary educational qualifications. ‘A chef does not need to be a university graduate,’ Mr Cheong tells Insight.

From the Government’s point of view, there is a danger in granting work permits to all and sundry. The concern is social balance: The make-up of Singapore society should not be altered by the import of foreign workers.

— Straits Times, 5 June 2010, Poor English often a bane

You see the policy? Service workers, i.e. those with the most interaction with local consumers, must be yellow-skinned, even if no English is used in their home countries. Thus work permits for the service sector are only given to people from Malaysia, Hong Kong, Macau, South Korea, Taiwan and China. Chinese Singaporeans are believed by the government to hate having to receive change from cashiers or have food served by a waiter with a different skin colour. Dark-skinned hands = dirty. The government is happy to oblige by enshrining these racial attitudes in administrative policy.

(You also see another beautiful example of a bureaucrat giving a non-answer when she said employers could use the tertiary-qualified S-pass scheme if they are unhappy with work permit quotas for low-level jobs.)

Darker-complexioned people are however allowed to work in industries away from the public, e.g. shipyards and construction. And since they are dirty anyway, they can work in municipal and sanitation jobs. (In case readers read too literally, please note I am being sarcastic.)

There’s also the question whether working colleagues who are locals would take to working alongside foreigners of a different race. Thus:

After all, 70 per cent of Singaporeans work in services. This politically salient fact also explains why the services sector was not open to foreigners, besides Malaysians, until the 1990s.

As MOM’s divisional director of workplace policy and strategy Jacqueline Poh explains, a sustainable foreign workforce is one that, first and foremost, ‘does not strain the social compact’.

— Straits Times, 5 June 2010, Balancing social discontent and the bottom line

But what if we can no longer source migrant workers from China? How do we achieve that myopic “balance”? What if a decade or two from now, even India’s living standards and wages rise? Should we be looking at Subsaharan Africa next?

Our socio-economic model is based on the idea that the racial split in Singapore can/must be maintained even if we import foreigners to do the low wage jobs. The rise of China, specifically the rise of wage levels in China, will put this complacency to the test. We will have to choose: Either we enjoy the luxury of having foreigners (of a different race) doing the jobs we don’t want to do or we enjoy the luxury of living forever within our racial prejudices (but with no one to do our menial, dirty work). But not both. Given Singapore’s history of racism percolating all the way up  to government policy, I am not confident we will actually make the logical, colour-blind choice when the time comes.

14 Responses to “Foxconn wage rise spells trouble for Singapore”


  1. 1 anony 9 June 2010 at 10:51

    No worries that China workers won’t come to Spore to work. They are over the moon to do so as it comes with privileges, the ability to convert their Spore work permits to PR status. And yes, the Spore govt is still very generous in giving out PRs despite the recent propaganda that they are limit it in the press. A lot of BS I would say! This is their free pass to buy a resale HDB flat & make plentiful money when they sell their resale flat over the original purchase price when they have stayed in their resale flat for the prerequisite period stipulated by HDB. Thereafter, these China folks return to China to the 2nd or 3rd tier cities of north east China where they come from where they can easily buy 2 to 3 bungalows.

    Two incidents to highlight here why China folks will NOT stay permanently in Spore and we the native Sporeans are taken for a ride courtesy of our PAP govt:
    1) I just overhead a conversation between 2 Northern China women @Fairprice supermarket discussing their the amount they paid for their resale flat and how much they will make in the next 3 to 5 years down the road & head back to China for good. I wanted to whip up my mobile phone & record it & send it to one of those political blogs. Very temtping.
    2) Even those China turned Spore citizens who are of a relatively young adult age have also spurned Spore & have headed back home to pursue Uni studies. I read a Sporean NTU undergrad lady’s blog of her time spent in Nanjing Uni as an exchange student where she accidentally bumped into a “Spore citizen” holding a red Spore passport @Nanjing Uni’s Foreign Students Admin Depart & the “Spore citizen” turned out to be a former China National who has decided to return to China to study full time as an undergrad & later work there.

    So lets us not kid ourselves. PAP is not going to curb the inflow of China foreign labor on our shores and neither are China workers going to stop coming. Spore will be plundered whichever way it can to make money for these China folks.

  2. 2 yuen 9 June 2010 at 12:31

    the big salary hike Foxconn so “generously” offered to its workers only serves to show that it has been severely underpaying its workers in the past, and would have continued to do so if the system had not been shaken to the roots by the spate of suicides; it and its customers, Apple, Dell, HP and others, have been exploiting Chinese workers, and there is no reason why the situation should be allowed to continue

    as for Singapore, it too should reduce the reliance on cheap labour from other countries, and find creative solutions to enhance participation by local workers; what you see as “trouble” might be “opportunity” for the elite to produce new achievements

  3. 3 yawningbread 9 June 2010 at 19:34

    yuen – in fact I was having problems myself with the word “trouble”. What I intended to mean was that Singapore’s foreign worker sourcing model would be “in trouble”, not Singapore itself, but it was such a mouthful, I dropped the full expression.

  4. 4 Paul 9 June 2010 at 22:49

    Excellent post Alex!

    Finally someone has the guts to call the “foreign talent” policy out for its blatant racism.

    The urge to perpetuate the dominance of one ethnic group even to the level of every single HDB block has to be pathological!

  5. 5 Charles 9 June 2010 at 23:56

    Thanks to anony for showing again the level at which the debate is now in Singapore
    (I am surprised NS was not mentioned, but I am sure it will be soon)

    • 6 Bernie 19 June 2010 at 03:55

      Just two questions about this automatic reply:
      Why does relevant and fact-based anger against the government’s policies occasionally elicit sighs of boredom from some corners? Do they consider themselves perhaps unaffected by these concerns which real people face?

  6. 7 Charles 10 June 2010 at 00:00

    What will probably happen anyway is that the current Real Estate bubble will have exploded and Singapore will have no more need for those chinese workers for another 10 years
    By that many members of parliament will have retired, other policies will be in place (after all Lee Kuan Yew’s daughter helped shape new policies on Chinese language education, so in 10 years the grand-children, I am sure, will have new ideas)

  7. 8 Robox 10 June 2010 at 08:04

    Alex, you wrote: “Service workers, i.e. those with the most interaction with local consumers, must be yellow-skinned, even if no English is used in their home countries…Darker-complexioned people are however allowed to work in industries away from the public, e.g. shipyards and construction. And since they are dirty anyway, they can work in municipal and sanitation jobs.”

    You also wrote: “The government is happy to oblige by enshrining these racial attitudes in administrative policy.”

    However, what you qualified as ‘sarcastic’ actually does have a bearing in reality.

    The above is an example of phenomenon known in the study of race relations as the “hierarchy of skin colour”. Here are some of its characteristics:

    1. The hierarchy of skin colour ranks entire ethnic groups into a conceptual structure – a paradigm – with the lightest-skinned group/s at the top, the darkest -skinned ones at the bottom, and the groups with intermediate skin colours occupying positions in between. This is a global phenomenon.

    2. The power differential (or power imbalance) inherent in a hierarchical structure that ranks humans and their worth is commensurate with one’s position on this hierarchy.

    3. As a consequence, there are varying degrees of access to power and privilege for any one person depending on where she or he is perceived to belong in such a hierarchy.

    Notes:

    => The hierarchy of skin colour, is just that: a ranking based on skin colour. However, other markers of identity such as sex, gender identity, sexual orientation, class, dis/ability, country of origin, etc. can mitigate or worsen one’s position in a larger societal hierarchy.

    => The hierarchy of skin colour requires contextualization depending on where it is being considered. Thus in a context in which Caucasians – widely regarded globally as occupying the very top stratum of the hieracrchy – are absent, near-absent or irrelevant, the highest stratum is then occupied by the next ethnic group with the real or perceived lightest skin.

    => Because the power differential in the hierarchy is stacked up in a unilateral fashion, racism too is also only a unilateral phenomenon, namely by members perceiving themselves to be occupying a higher position in the ranking towards those in the lower ranks. There is no such thing as either
    a) racism by a person in one ranking towards others in a ranking above her or him; or,
    b) reverse racism.
    Such occurrences are understood only to be expressions of resentment or retaliation towards the power and privilege towards the ‘higher-ranking’ group/s; the power imbalance inherent in the hierarchical structure is never reversed by such occurrences.

  8. 9 Robox 10 June 2010 at 08:07

    In the ST article Rachel Chang write: “From the Government’s point of view…[the ethnic] make-up of Singapore society should not be altered by the import of foreign workers.”

    I write my response in two parts; this is Part 1.

    Ordinarily, when something is written into law as if it were a fact, and one that is true for all time, it is regarded as immutable until such time as it is deemed fit to make amendments.

    This is especially so if said fact is written in the Constitution because it is the Constitution that lays the very foundations of the State as further … See Moreevidenced by the fact that it requires a qualified majority of two-thirds of Parliament to make an amendment, something that in jurisdictions that practise bona fide governance is a near impossiblity most of the time.

    Article 39A, subclauses (1), (2)(a)(i), (2)(a)(ii), 2(b)(i) and (2)(b)(ii) reads as follows:

    (Note: This appears not to be the latest amendment of the Constitution providing for the maximum size of GRCs to be limited to four members because of subclause 1(a) which reads, “any constituency to be declared by the President, having regard to the number of electors in that constituency, as a group representation constituency to enable any election in that constituency to be held on a basis of a group of not less than 3 but not more than 6 candidates…” I would appreciate it if you or someone can provide the most recent amendment.)

    [start]

    39A. —(1) The Legislature may, in order to ensure the representation in Parliament of Members from the Malay, Indian and other minority communities, by law make provision for…

    [snip]

    (2) Any law made under clause (1) shall provide for —

    (a) the President to designate every group representation constituency —

    (i) as a constituency where at least one of the candidates in every group shall be a person belonging to the Malay community; or

    (ii) as a constituency where at least one of the candidates in every group shall be a person belonging to the Indian or other minority communities;

    (b) the establishment of —

    (i) a committee to determine whether a person desiring to be a candidate belongs to the Malay community; and

    (ii) a committee to determine whether a person desiring to be a candidate belongs to the Indian or other minority communities,

    for the purpose of any election in group representation constituencies;

    [end]

  9. 10 Robox 10 June 2010 at 08:08

    Part 2

    Note above the use especially in 39A(1) of “the Malay, Indian and other minority communities”; it entrenches into fact the status of Indians, Malays, and non-Chinese others as numerical minorities until such a time when a two-thirds majority of Parliament.

    That’s the very nature of the constitutional law.

    However, that is not what the original framers of the constitutional law that we have inherited in Singapore intended. Constitutional law is written in such a way that assumes that change can occur – certainly an unengineered change in the population composition can indeed occur, at least theoretically.

    (For the sake of greater completeness, I might add that “change” can encompass all other types of change that can be reasonably accomodated including changes in understanding of sopecific issues, such as the gradually modifying understanding of homosexuality as not constituting a crime.)

    Thus, assuming that the GRC system continues to be maintained – which I sure hope will not be the case – under bona fide governance, a constititutional article such Article 39 would never have made explicit mention of either Indians or Malays.

    Such legislation lends itself more greatly to “formula” type provisions.

    It appears evident that it has always been the PAP government’s intention to ensure that ethnic Chinese always constitute the numerical majority. The anecdotal evidence is mounting with the numbers being allowed in from China as compared to the numbers from elsewhere, as is the statement by Rachel Chang which is just a rehash of what we have always been hearing.

    (Note: While Indians from India are also being allowed in in unprecedented numbers, the absolute numbers make the eventuality of an Indian majority in Singapore a highly remote possibility.)

  10. 11 fievel 10 June 2010 at 15:07

    Singapore, by the fact that it is so small, is nimble enough to react quickly but alas it shall not do that and we will all pay for the failure.

    The real problem lies in the unchallenged political party and their overpaid bureaucrats. They are all birds of the same feather in terms of their thinking, education, mindsets.

    There’s no diversity, no independence in their thoughts on policies, and there is no bloody fool who wants to stand up and be counted for Singapore…every single one of them just sits there and nods off once in a while, letting whoever the minister-in-charge is do as he/she wishes with his area of responsibility.

    That is the legacy of the Lee-family power dominance for Singapore’s future.

  11. 12 Boboshoot 11 June 2010 at 00:59

    On the contrary, I find this good news. Cheap foreign labour has for many years depressed the wage rate here in Singapore such that the at the lower end of the spectrum, where substitution for foreign labour is very easy, and the bargaining power of workers are lowest, locals cannot even make enough to make ends meet. If the wages in China go up, it also naturally means that the base for labour wage will also go up.

    That is, with (in my view) the reasonable assumption that it will still be relatively cheaper to import foreign labour than it would’ve been to hire a local for the same job.

    Also, if wages in China goes up, so does its domestic consumption. This could possibly mean China will export less and import more. This will be good for Singapore exporters and not to mention, the tourism and the casino business in Singapore.

    • 13 Bernie 19 June 2010 at 03:51

      Yes I agree, this is fantastic news. We should clap our hands and applaud the Chinese workers for having the guts to raise their (and hence our base) salaries with a strike.

      A rising tide raises all boats.

  12. 14 yuen 11 June 2010 at 08:06

    those who think China is well off: the following GDP/capita figures might surprise

    2008 GDP/capita China rank 106,US$3315

    russia 11806
    taiwan 17040
    south korea 19504
    hong kong 30755
    japan 38559
    singapore 38972

    further, its ranking has been mostly dropping during the last 50 years

    1960 78
    1970 82
    1980 94
    1990 105
    2008 106

    no doubt some businessmen, officials, multinational employees, even professors, are doing very well, but the majority have not benefitted


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