Most Singaporeans will not have much idea of the economics of the foreign worker recruiting system, since our daily lives are far removed from this issue. What I can’t figure out is whether civil servants at the Ministry of Manpower know much about it. If they don’t, the question would be: But isn’t it part of your job to know? If they do, then: How have you managed to ignore the injustices, and social and economic consequences of such a dysfunctional system for so long?
This post will attempt to explain the typical path taken by male migrant workers to a job in Singapore, with a focus on money flows and consequential effects. It’s a summary of what I have learnt over the past few months talking to migrant workers and civil society experts on the matter. You will probably find it disturbing to see how loaded the dice is against the poor.
That said, it’s no use wishing the world to be some kind of Utopia. However, that doesn’t mean we should not bother and do nothing; we can put in place regulatory mechanisms that limit and mitigate the exploitation. As far as I can see, however, we’ve ignored the problem, allowing abuses to multiply. And then there are the social and economic consequences that impact all of us and our country. It is thus far from being an isolated issue.
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Almost all migrant workers report that they’ve had to pay money upfront to recruiters in their home countries to get a job in Singapore. Those coming from India, China and Bangladesh generally pay between S$3,000 and S$8,000. To raise this kind of money, they either have to sell their cows and pigs, or, not uncommonly, the entire farm.
If they have nothing to sell, they borrow from loan sharks, who of course take note where their families live. If a worker falls behind on his repayments, the family is harassed. I’ve even heard of one case where goons hired by a loan shark seized the worker’s daughter and sold her into a trade.
Against that payment, the worker is assured that he will be able to earn $1,000 to $2,500 a month while in Singapore, and that there would be “no problem” staying and working for at least two or three years. The worker calculates thus:
24 months x $1,000 = S$24,000 at a minimum
I should be able to pay off the loan and make a tidy income to support my family, the worker tells himself. And so the cows are sold. Or the farm.
Where does that money go? Follow the red line.
As you can see from the diagram above, the recruiter in India, China or Bangladesh passes some of that money to his counterpart in Singapore — the labour agent. In turn the labour agent, competing for business with other agents, offers a cut to employers in return for taking workers via his network. Thus the proceeds of the sale of the cows or farm, or borrowings from the loan shark filter down to the employer. This is actually illegal under Section 15 of the Employment Agencies Act, which says:
15.—(1) No licensee or employment agency personnel shall give or offer to give (whether directly or indirectly) to an employer or prospective employer, any sum or other benefit —
(a) as consideration or as inducement for employing a person as the employee of the employer or prospective employer;
(b) as consideration or as inducement for continuing to employ a person as the employee of the employer or prospective employer; or
(c) as a financial guarantee related, whether directly or indirectly, to the employment of a person as the employee of the employer or prospective employer.
(2) Any person who contravenes subsection (1) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $5,000 or to imprisonment for a term not exceeding 6 months or to both.
But we almost never hear of prosecutions.
As the diagram shows, the money that originated from the worker himself is ultimately used to fund his own salary and the government levy, at least for the first one or two months. In effect then, the employer gets free labour for a little while. Meanwhile, the recruiter and labour agent are laughing all the way to the bank.
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What happens after the first few months? If the employer isn’t making enough money, he won’t have the cash to pay the levies and salaries in full. Knowing that he’ll be prosecuted for not paying the levies, he stops paying the salaries instead. Yet, as far as the government is concerned, all is well — the levies are paid on time.
But how long can the situation continue? Before long, the temptation in the employer’s mind to send the worker back and replace him with a new hire becomes irresistible. A new hire is free labour for another one or two months as the cycle starts again. Labour agents also encourage employers to keep the churn rate high; it’s the only way they can make money.
From the worker’s perspective, however, it’s a disaster. He needs to work a continuous period of two or three years at a minimum to earn back his investment and put a little extra money aside for his family. Worse, some of them will have discovered by this point that the $1,000 to $2,000 per month earnings they had been led to expect were empty promises. Most construction workers are paid $18 -$22 a day. Over 30 days (yup, no break) they earn about $600, with a bit of overtime, perhaps $800. But accommodation costs are deducted, and then they’re set back to $600 a month (Chinese workers earn a bit more).
If the employer has not yet cooked up an excuse to send the worker back at the completion of the first year of work, the renewal of the Work Permit presents another opportunity to take a pound of flesh. I understand that the ministry charges an administrative fee of $60 to renew the Permit, but I’ve personally heard several reports that some employers demand $1,500 or $2,000 from the worker to process it. Why this amount? This the amount of new money that a new worker would have brought with him to the employer. The greedy employer wants to be compensated for this loss when retaining an existing worker. That there are many reports from workers of such demands for $1,500 to $2,000 for renewal of Work Permits confirms to us that the initial hiring was accompanied by financial inducement from labour agent to employer — which is an offence, but never investigated or prosecuted.
It should be no surprise that under threat of job termination, existing workers tolerate the deduction and not make a complaint to the authorities, so long as some salary keeps flowing in. This threat is wielded to silence workers on many other issues like delayed salaries, poor accommodation and excessive working hours. Because the ministry allows the employer full discretion when to terminate a Work Permit holder, the employer holds a veto over his life.
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Economic and social costs to Singapore
At this point, I need to stress that most employers of foreign labour act honourably. For example, in my short experience, I haven’t seen many complaints from workers from the shipyards and the municipal sanitation companies, which is probably because these employers have steady income streams and can afford to pay their workers and fulfill their side of the contract. Construction and small manufacturing are the industries that generate a disproportionate number of cases, probably because they are small companies with uncertain cash flow.
In fact, these small companies try to avoid having migrant workers on their payroll altogether. The workers remain employees of “construction companies” that are shell companies with no construction work. The workers are seconded on a day-by-day or week-by-week basis, to contractors who have projects.
Here is where the economic and social costs appear:
With respect to economic costs, when workers are shifted from site to site, reporting to different supervisors, they are unfamiliar with the work flow or the layout of the work site. They don’t know their co-workers and cannot read their supervisor’s style and intentions since they’ve not worked under him before. Particularly dangerous is the fact that they are unfamiliar with the machinery or the safety requirements at that site. The result is low productivity and a higher risk of conflict and accidents.
Because of low productivity, Singapore finds itself having to import more workers than we might need. Low productivity also means that employers find themselves unable to afford higher wages or better accommodation, which then creates workplace unhappiness. More workplace unhappiness means more cases swamping the Ministry of Manpower’s limited resources. As the public housing building program is revved up over the next few years, expect a deluge of workers and problems.
I am convinced that things would be much better if we had less churn and created a policy that rewarded holding on to workers for longer and that penalised employers for sending workers back after less than, say, four years. When employers realise that they have no choice but to rely on an existing set of workers for a longer period, they will value their employees more and treat them better. They may also feel it worthwhile to invest in training, thus improving productivity. But if due to unforeseen circumstances, an employer cannot afford to keep a worker, there should be an easy way to transfer him to another employer (without compelling the worker to fly home and wait for a new Work Permit as is currently the case) so that Singapore as a whole benefits from accumulated skills, including social skills.
As for social costs, there’s a world of difference, in my experience, between workers who have been here five years or more and new hires. Those who have stayed a longer time speak more English (actually Singlish), they are more aware of and sensitive to local culture, and generally fit in better. The social friction is less. For example, we are often irked by Indian workers playing music loudly from their speakerphones in buses and trains. These tend to be the new ones who don’t realise that what is normal in India is unacceptable in Singapore. When workers have been here a longer time, and if they are better paid (thus able to afford earphones), this social faux-pas will disappear.
Coupled with higher productivity and slightly fewer numbers of them, isn’t this — less social friction — a desirable state of affairs? Why isn’t any effort made to go in that direction?
But first, we have to see them as humans, not commodities — humans who can adapt, skill-up, and become a temporary Singaporean. Who deserve better treatment by employers and who ought to be better rewarded for the dirty and dangerous work they do. (And let’s not forget that slowly pushing up average wage levels for the less-skilled benefits Singaporeans too.)
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In summary, I think policies should be refined with the aim of
(a) putting in incentives to upskill;
(b) reducing churn and retaining experienced workers in Singapore;
(c) reducing employer-employee conflict at source (rather than deal with them after they have arisen as seems to be the case at present);
(d) regulating the “cut” taken by the labour agent, to reduce workers’ indebtedness and subsequent vulnerability.
For (a) and (b) we should consider Work Permits for a minimum four-year duration with penalties on employers who terminate early. We should make worker transfer easier in order to retain their experience for Singapore’s benefit. There should be schemes to promote training and automation.
For (c), given that salary non-payment is such a major source of conflict, I had previously proposed (see Neither law nor morality at Manpower Ministry) that employers with a history of conflict be blacklisted from getting new Work Permits, and a central salary payment system be set up. Either (i) all Work Permit employers have to pay through the centralised system, or (ii) selected industry sectors that have a history of problems or (iii) selected employers with a history of salary conflicts. We should also require all employers of Work Permit holders to lodge a copy of signed employment contracts (in both English and native languages) with the Manpower Ministry prior to the workers’ arrival in Singapore and make it an offence for the native language version to differ from the English version in any substantial way. Salary should be monthly-rated, not daily rated, to close the loophole by which employers refuse to pay a salary to the worker by simply not deploying him to any worksite.
For (d), we may need refinements to and better enforcement of the Employment Agencies Act. Section 14, for example, says:
14. —(1) It shall be lawful for a licensee to charge and receive such fees as may be prescribed from time to time.
(2) No licensee shall charge or receive any form of fees, remuneration, profit or compensation otherwise than as provided in this Act.
The details are provided within the subsidiary legislation Employment Agencies Rules 2011, whose Section 12 (1)(a) limits the fee payable by a foreign worker to a local employment agency to one-month’s salary for each year of the duration of the employment contract or Work Permit, whichever is shorter. We will probably need to reduce it to one month’s salary flat regardless of duration. And of course the law needs to be enforced — once again, the current reality is that we next to never hear of prosecutions even though the law is frequently flouted.
(Oddly enough, the Manpower Ministry’s EA Licence Conditions for Comprehensive Licence — which is an information sheet to employment agencies — makes no mention about fee limits.)
Payments received by the local labour agent from the recruiter in India, China or Bangladesh should also be taken into consideration for prosecution purposes.
These are just simple changes that go to improving the situation, not just for workers, but for Singapore as a whole. Unfortunately, I don’t see any desire by civil servants to rethink the regulatory framework — is it because they never want to admit that the present system is dysfunctional? — nor any political will by ministers either.