CECA - the shocks of labour mobility

Singapore-India CECA was first mooted in 2003 as any Free Trade Agreement between two countries desiring to improve bilateral trade relations . By 20 June 2005, when it was inked with articles for enhanced labour mobility for PMETs (professionals, managers, entrepreneurs, technicians) across 127 specified job titles, CECA was no longer a plain vanilla FTA but a binding treaty facilitating the flow of Indian workers into Singapore. Adding to the planeloads of incoming Indian workers, favourable immigration policies allowed those that hit home base to sponsor direct family members over, and in turn, spouses may find jobs.

Singapore has a 3.5m home citizens on a tiny 721 km2 space and is a magnet for immigrant workers. India is a behemoth with 1.3b population in 3.2 million km2 land, and high unemployment. With such disparity, an FTA allowing high labour mobility must be the most lop-sided bilateral trade agreement ever signed in the world.

"An economic shock refers to any change to fundamental macroeconomic variables or relationships that has a substantial effect on macroeconomic outcomes and measures of economic performance, such as unemployment, consumption, and inflation. Shocks are often unpredictable and are usually the result of events thought to be beyond the scope of normal economic transactions. Economic shocks have widespread and lasting effects on the economy..."  Investopedia

In simple layman term, shocks are the impact on macro and socio-economics that the influx of Indian PMETs wreak on Singapore. In going to bed with Goliath, can David stand up to the shocks?

Much of what is written here is based purely on personal observation and internet chatter. Hardcore statistics are hard to come by and official data is suspect for its inability to drill down from residents to citizens and non-citizens. With a population of 5.6m of which 2.1m are non-citizens, and where 40% of the workforce are foreigners, statistics that shy away from citizen specific do not tell the real story. The government has a high trust deficit here having been outed on several occasions for presenting statistics skewed to fit its narrative.

The open labour mobility of EU supports the theory of ‘Optimum Currency Area’ that people move from areas of increasing unemployment to where the jobs are. It acts as a stabilisation mechanism in smoothening out employment and population distribution. For the EU, this has consonance with its political and economic integration objectives. It is also facilitated by shared western cultural background. The Singapore-India arrangement has none of these.

Experience has shown the receiving country of immigrant labour, being a higher cost economy, ultimately faces the shock of depressed wages. Employers have no reason not to welcome a source of cheaper workers and the government is certainly happy to push GDP numbers on the back of competitive labour. Yet official statistics show Singapore median wages have grown both nominally and in real terms. How is that so? Without a breakdown of data to show the status of citizens, it remains to be proven that the lot of the locals have actually improved. In the absence of citizen specific data, it is not within the bounds of reason to suggest that the median wage has risen due to a structural change in labour composition. The new high technology economy has caused a paradigm shift of more head counts in a higher skilled sector whose wages has the effect of pulling up the median numbers. The average Singaporean feels wages have not increased sufficiently and resigned to a lowered standard of living.

The shock of unemployment is inevitable as cheaper Indians displace Singaporeans across the board. Local PMETs above 40 years of age who, having hit glass ceilings, are the most vulnerable. There has been a glacial  displacement of local PMETs at a time when they are just beginning to build a family and paying for big ticket items like a home mortgage loan. Lateral mobility is almost impossible for this category of job seekers. Many resorted to work as Grab share cab drivers, security guards, private tutors, insurance or real estate agents, or whatever freelancing or gig jobs that come by.

Not only are PMET jobs taken over by Indians, but increasingly, the C-suites (CEO, COO, CIO, CFO) are also going to the Indian nationals. These pay scales are reckoned to be on levels higher than Hongkong and other cities. Singaporeans find themselves displaced and high paying jobs out of reach.

The shock of welfare tourism is not significant for Singapore since it does not provide unemployment benefits and immigration is work-pass dependent. Nevertheless, permanent residency status has its benefits in subsidised medical, child care, education, right to retire in Singapore, and right to purchase public housing. Many immigrant workers use Singapore as a springboard to move to their country of choice, namely USA or EU.

The influx of hundreds of thousands of Indian nationals present a social and cultural shock that is evident everywhere. Infrastructure and public services are stretched to the limit. Public transport, especially the mass rail transit, are jammed-packed like Tokyo rails. Hospital beds are crowded out, and waiting time stretched long. Public spaces are taken up by Indian nationals. Go to Changi Business Park where it feels like downtown Mumbai. Go to the popular coastal stretch on the East Coast Park and its Indians, Indians, everywhere, Singaporeans are black cats in a coal cellar.  Indians are crowding out locals in selective condominiums such as Mandarin Gardens and social tension is inevitable. Adding a magnitude of Indians on a tiny land of 721sq metres is mind boggling. It is an understatement the demographic landscape has changed radically.

The shocks of labour mobility as a consequence of CECA need to be seriously studied, understood, adequately explained and managed. Hiding behind skewed data, oxymoron statements from Manpower Minister such as 'new job creation increased and unemployment also increased', and Minister of Trade & Industry's view of taking criticisms of CECA as subversive, are not helpful at all. The EU experiment offers a lesson. The same shocks of labour mobility suffered by the British fueled the 'take back our country' cry and was one of the key reasons for Brexit.

See related blogs :

CECA : The Dangers Of Labour Mobility

The Government Thinks Singaporeans Are Too Stupid For Lots Of Jobs