Construction as a Singapore Labour Market Safety Valve: First Steps

In the United States, the construction industry has traditionally served as a "safety valve" for the labour market in the sense that those with low educational attainments might (i) find gainful employment in that sector relatively easily, (ii) gradually build up a useful skill set as construction tasks vary greatly in complexity and skill requirements, thus (iii) giving them a meaningful way of moving up in the world through hard work and an active mind.

In Singapore we do not really have such a labour market "safety valve". The closest we might come to one is in the food and beverage industry. It does not make the cut as a "safety valve" as at the entry level, one needs skills and some capital. (Note: Skills are also needed for work in a restaurant kitchen in food preparation.)

I have been thinking of how we might simultaneously reduce our reliance on foreign labour and raise the productivity of the local construction by creating a core non-transient workforce that will be able to retain and grow their skills.

Amusingly, this thought first came to me some years ago after the 2nd or 3rd time I watched CJ7 during the Chinese New Year period at an uncle's home. In the movie, the protagonist's father was a construction worker (in Hong Kong), and there, it was clear that construction workers took pride in their work. The real Hong Kong construction industry is staffed by locals, and their achievements are recorded in the Hong Kong skyline. Their productivity, as an industry, is much higher than ours. The same is true of the construction sectors of the USA, Germany and many other countries. It is clear that retention of skills plays a major part, as do incentives to improve.

In Singapore, however, construction work is regarded as "undesirable". This is due, in large part, to the way current construction workers are treated and to the level of skills necessary to do the work. Restoring pride to the construction industry is alluded to in the Finance Minister's Budget Speech for FY 2012. (See paragraph C23.) While no concrete plan was mentioned or even the allusion to one was made, I do not take para. C23 to be a motherhood statement promising no substantive impact. I have a vague sense that some work is being done in this direction.

Now, it will take time to erase the perception of "undesirability". But the first step to doing that is to recognize that, at least today, it is accurate. Construction work in Singapore is a low-wage dead-end job. This has to change. The first step to this would be to uncover the full continuum of skills that construction work all around the world utilize. Our construction industry, due to its reliance on transient workers, is unable to access the full range of skills the mastery thereof can make a worker highly productive, a stake contrast with our "unskilled" foreign construction workers. (The same argument could be made for a transformation of our armed forces, as "transient workers" can only learn so much.)

I think the first step might be taken by the Building and Construction Authority (BCA). By framing the range of technical skills in construction in a "Competency Framework", and relating that framework to the various roles (some managerial) in construction, it would provide a skill-oriented (productivity oriented) guiding framework for career development in construction. Construction companies which are ready to move to higher levels of productivity could take this framework and run with it.

Naturally, it would be unlikely that we would be able to (even eventually) move to a local-only construction industry. Yet the core should be local in order to retain skills. Transient foreign workers would be used as a capacity management tool, with their numbers increasing when demand is high and falling when demand is low. (Thus, shielding the local workforce from cyclical unemployment.)

The crux of the approach recommended is the building of "depth" with respect to career development where none existed before. I would guess that a similar approach might be taken for other industries.

Ideas on Reforming the Institution of "Permanent Residency"

I recently read a lament on how the PR system has been abused ("Stop PRs from Gaming the System", The Online Citizen, 25 Nov 2011). Much anger has been generated recently by this aged and imperfect institution and I would like to offer some ideas on reforming Permanent Residency.

I take it as a fact that Singapore needs skilled workers and talented individuals from various fields. In order to make terms attractive for these individuals, they should be granted privileges similar to those Singaporeans enjoy. To me, it should not matter even if they skip out on NS. We do not need them to learn how to dig holes in the ground and fill them back up. Rather, we need them to contribute maximally. From this point of view, I would rather have freshman PAP MP Janil Puthucheary spending "the last 10 years saving kids' lives" as opposed to spending the last 7.5 years saving kids' lives and 2.5 years certifying the MCs of reasonably healthy NSFs.

The problem with the present implementation of the PR system is that there is a failure to verify. I, as a technical elitist, would argue that many PRs do not fit the description of "skilled workers" or "talented individuals". I believe that Singapore should grow in a controlled manner, taking in only those who advance our interests.

Verification cannot be entrusted to a central organization except as a rubber stamp to credible nominations. This is so clear and uncontroversial as to not require explicit supporting arguments. I believe that "enlightened self-interest" is the key to the verification of capability or talent. In particular, the "free market" will be able to judge effectively whether a potential PR can contribute sufficiently. Firms can, and will, put a dollar value on the benefit that an individual can generate. It is on this firm bedrock of rational self-interest that I propose we build our PR system.

Firms (private sector or public sector) should sponsor the Permanent Residency of their foreign staff, and those who are not deemed able to contribute should lose their PR status. Sponsorship of Permanent Residency should be expensive enough to provide a clear signal that the firm values the contribution of a PR. (For instance, it might cost, annually, some large fixed sum and plus some fixed percentage of the PR's total annual compensation.) As such, on top of a firm having to offer an attractive enough compensation (along with the promise of PR status) to attract talented foreign staff, it also has to pay a premium to certify its esteem of the capabilities of its foreign staff. This, to me, is credible verification.

Perhaps after at least 5 years of Permanent Residency, a PR might apply for citizenship contingent on continued sponsorship as a PR for a period of time (like 3 months). PRs, whose capabilities would have been credibly certified by then, would find it attractive to take it up at that point. Their employer might offer them a pay raise corresponding to a portion of what it formerly spent to certify them as skilled or talented individuals. A higher compensation package would be a material inducement. If they do not accept citizenship, they are welcome to remain PRs so long as they remain sponsored by some firm.

It is interesting how going back to fundamentals has brought us to something like the "Employment Pass" system. I believe that the intent behind that policy was to use salary as a credible signal. Unfortunately, the signals that the Ministry of Manpower decided on were less than credible as salary paybacks were used as a tool to game that system, which should also be corrected.

I would like to close by emphasizing that the privileges associated with being a PR should be attractive, but Permanent Residency should be a costly employment perk that firms offer to their foreign employees. The willingness to incur a high economic cost is a credible signal of the expectation to reap an even higher gain. Only credible signals should be used in the award of privileges like those of Permanent Residency. Economic signals like the aforementioned might be the default, but the judgment of eminent (not just qualified) figures in the relevant disciplines should be accepted as credible signals as well. All in all: credible signals, credible signals, credible signals.