Are local PMEs better or worse off after MOM’s latest tightening of EPs?

TL;DR – So MOM is like walking a tight-rope.

I have a friend who’s a very successful businessman. I met up with him yesterday and we talked about how he became successful as a businessman. One thing that I realised was that he was very focussed. On what? On making money. He has his own philosophy about how to increase his revenue and reduce his costs. Some of the things he does are in the grey area that borders between what’s legal and what’s not so legal.

While I don’t agree with every thing he does, I must say that what he told me, to a very large extent, reflects certain harsh realities of life.

We talked about hiring foreign manpower

He hires quite a number of foreigners. Some are on Work Permits, some on S-Pass, some on Employment Permits (EPs). That’s one of the ways he reduces his business costs. I asked him if he felt bad that he’s giving jobs away to foreigners rather than employing Singaporeans.

He replied: “Eh… I’m running a business leh. Not a charity. The reason my company exists is to make money. Not to create jobs. I treat my staff well, but in return, I expect them to make money for me. If not, out they go. So I don’t care whether they are Singaporeans or foreigners, my workers must make money for me. Every $1, they better make $3 or $5 or better yet $10 for me.”

Hmmm… Not exactly politically correct. But I must say… if we were in his position, we would probably think the same way too.

via Channelnewsasia

via Channelnewsasia

I asked him what he thought about MOM’s latest announcement that they are raising the qualifying salary for EP from $3,300 to $3,600.

He said that it’s something he saw coming.

Unlike businesses, the government has to do its best to provide jobs for Singaporeans. And not just any jobs. But jobs that pay well. So definitely have to increase the qualifying salary.

As my friend explained to me, that qualifying salary is kind of like a “minimum salary” for PMETs. As the qualifying salary for EP increases, there comes a point where it becomes more affordable for businesses to hire Singaporeans than a foreigner. When that happens, then it’s more likely that businesses will hire Singaporeans instead of foreigners.

Incidentally, this was also what Labour MP Patrick Tay had to say when asked to comment on MOM’s announcement.

“This is a positive move to keep up with the rising median wages of PMEs and also ensure the quality of the foreign workforce, which is a complementary force, is maintained.

This, together with the series of other measures such as the FCF, ‘Triple Weak’ Scrutiny, Jobs Bank and also tightening/scrutiny of conditions/criteria for EP will help level the playing field for our local PMEs and also build a stronger Singaporean Core.”

But my friend cautioned: “上有政策,下有对策”. Which my friend explained as meaning that as much as the government can have policies, scheming and devious people (e.g. shrewd businessmen like my friend) will think of loopholes to exploit. And there are indeed a number of ways that businesses may use to “cope” with this increase in qualifying salary.

So for this move to be truly successful, MOM MUST step up its enforcement. Like how they caught and prosecuted the ex-director of Harry’s for false declaration of salaries.

As my friend said, if MOM really ramps up their enforcement efforts, then the cost of gaming the system outweighs the benefits. That is when fewer businesses will take the risk. Or as my friend puts it: “Bo hua lah…”

But my friend also added that MOM cannot raise the qualifying salary by too much at once:

“If they raise too much, two things will happen. One, businesses will pass the costs to customers. Cost of living go up. Or, two, businesses move out of Singapore. Singaporeans still lose their jobs.”

Patrick Tay summed it up quite neatly in his Facebook post, that the bottomline is that we should take care of our local PMEs. “Also important for MOM to be watchful of companies/employers who through ‘creative means’ artificially blow up the wages of these foreign PMEs to meet this new criteria. Bottomline is that local PMEs should be better off and not worse off.”

So MOM is like walking a tight-rope.

Balancing between creating more and better jobs for Singaporeans, while not driving businesses out of Singapore. As my friend puts it, “At the end of the day, if Singaporeans really want better paid jobs, they better be able to create more value. Otherwise, gahmen also cannot do much la.”



Author: Jake Koh

Recovering sushi addict, I'm a man of mystery and power, whose power is exceeded only by his mystery.


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