Quick Thought on How Singapore Coordinates Policy Interventions

by Reihan Salam

I am in Singapore, where I’ve been meeting with civil servants, journalists, social entrepreneurs, and local business leaders as part of a trip sponsored by the Singapore International Foundation, a local think tank. I’ve long had an interest in Singapore, yet I’m struck by how much I’ve learned in a short time. Though I’ll have much more to say about Singapore in general and this trip in particular, there’s one quick observation I’d like to share, as it’s very telling about how Singapore’s government approaches public policy. 

Singapore’s population of 5.3 million is divided between 3.3 million citizens and 500,000 permanent residents (the resident population) and a non-resident population (students and foreign workers and their dependents) of 1.5 million. Foreign workers in Singapore are a diverse group. Roughly 70 percent of foreign workers are less-skilled, and they represent a large share of construction workers and dockworkers; 12 percent are mid-skilled, most of whom work in the service sector; and 18 percent are high-skilled employees who work in managerial roles, knowledge-intensive services, and STEM fields. By the standards of global cities, Singapore’s foreign-born population, which includes permanent residents and non-residents, is not unusually large at 38 percent. It is in the same ballpark as London, which has a foreign-born population share of 37 percent, only a third of whom were born in Europe, and New York city, which also has a foreign-born population share of 37 percent. Yet unlike London and New York city, Singapore is both a global city and a notably small sovereign republic, and Singaporeans troubled by the congestion and cultural dislocation associated with a growing foreign-born population don’t have the option of moving elsewhere within their country — they can emigrate, to be sure, but that’s a rather big step to take. One underappreciated fact about the migration-driven transformations of London and New York city in recent decades is that while immigrants have arrived in these cities in large numbers, there have been net outflows of domestic migrants. It seems reasonable to suggest that this domestic outmigration has tended to mitigate anti-immigration sentiment in these cities, as those most likely to be troubled by the consequences of immigration have voted with their feet. Because domestic outmigration of this kind is not a possibility for Singapore, it shouldn’t come as too much of a surprise that anti-immigration sentiment in the city-state has grown quite intense.

Many believe that anti-immigration sentiment played a significant role in the (relatively) poor performance of the ruling People’s Action Party (PAP) in 2011, when the party, which has ruled Singapore since its independence in 1965, and which is often accused of authoritarian tendencies, secured 60 percent of the vote, its poorest showing since independence. The PAP has adaped to changing public sentiment by restricting migration, of the low-end and the high-end variety. To address the concern that foreigners were taking jobs that might otherwise be done by Singaporeans, the government now requires that firms employ more Singaporeans than foreign workers (60 percent). There are exceptions, to be sure, but this new regulation applies to a wide range of businesses. Because Singaporeans tend to demand higher wages, this measure is expected to raise compensation costs. Here is where things get interesting: the Singaporean government also offers generous subsidies to firms that invest in labor-saving technologies, in part to address the fact that new labor market regulations were expected to raise compensation costs. The idea is that if Singapore is to wean itself from its heavy reliance on low-wage foreign workers, it would have to raise labor productivity significantly. Rather than assume that this adjustment would occur organically, the government sought to spur it along. There is no question that this reflects an “industrial policy” mentality. The Singaporean view, as I understand it, is that they don’t have the luxury of waiting for such an organic shift, as the pain caused by costly labor market regulations will quickly generate negative feedback.

It is difficult to imagine U.S. policymakers making a similar decision. Yes, they will impose costly labor market regulations. No, they probably wouldn’t acknowledge that doing so would necessitate an increase in labor productivity that would be difficult to achieve quickly. And no, they certainly wouldn’t coordinate policy interventions by pairing a cost-increasing measure with a cost-decreasing measure. I certainly don’t think the Singaporeans get everything right, and there’s no question that the PAP’s dominance gives them room for maneuver that U.S. policymakers don’t have. But I’ll admit to being impressed.