How Many People is Enough in Singapore?

The recent outcry in Singapore over allegedly excessive immigration, which is said to be putting pressure on housing, jobs and public transport, has raised some interesting issues about what sort of society Singaporeans want to have.

How far does the popular view coincide with the shifting views of Minister Mentor Lee Kuan Yew? And have population increases have been at the expense of productivity and real incomes for that population as a whole?

Data underscore dramatically how Singapore's population has soared in recent years despite one of the lowest fertility rates in the world. Immigration, both permanent via issuance of Permanent Resident status to foreigners and temporary by recruitment for domestic service, construction work and other low-paid or dirty and dangerous work have both risen rapidly.

Thus the total population has grown from 3.0 million in 1990 to 4.99 million as of 2009 – nearly a 40 percent rise in two decades, which has required the import of vast amounts of sand from neighboring Indonesia, Malaysia and Cambodia to increase Singapore's geographic size from 581.5 sq km when reclamation started in the 1960s, to 704 sq km today. By 2030, the island republic is expected to grow by another 100 sq km. Singapore's population density has now overtaken that of Hong Kong, where the population increase has been less than 1 percent a year – its fertility rate is similar but both permanent and temporary migration has been less as it is mainly determined by a fixed quota of mainlanders. It is now the world's second-most densely populated state after Monaco.

Concerns now focus on the grant of permanent residency status. The number of those with PR rose by 11 percent to more than 500,000 last year, with numbers of new PR holders exceeding the increase in those of temporary foreign workers. The current boom in the economy, expected to hit 13-15 percent of gross domestic product in 2010, led Prime Minister Lee Hsien Loong – Kuan Yew's son – to announce another 100,000 foreign workers may be brought in, which seems certain to raise irritation on the part of native Singaporeans.

Even more important for Singapore is the mix of its population, of whom 3.2 million are citizens, 0.5 million permanent residents, and no less than 1.3 million now temporary residents. The latter include highly-paid foreign bankers, professionals and business executives but whose numbers are far outweighed by the maids and other low income workers. Non-citizens now comprise 36 percent of the population compared with 14 percent in 1990.

Is this evidence of a dynamic society? Or of one now focused on size more than quality? Immigration is regarded as partly necessary due to the consequences of past government policies. The birth rate fell precipitously, partly because of a mass sterilization campaign in the late 1960s and early 1970s in which some 30 percent of women of child-bearing age were sterilized. Lee Kuan Yew's belief in genetic ideas led to the formation of the Eugenics Board and the use of financial disincentives to deter births by low-income people with the avowed aim of raising the “quality of the population”.

In more recent times, the high opportunity cost of child-rearing and popular obsession with acquisition of the latest consumer goods have kept the fertility rate very low, particularly among the ethnic Chinese majority.

So demographics partly explains surge in grant of PR status, particularly for people from China. Indeed, it has recently been claimed that PR status can be acquired within a few months even by people from China with scant knowledge of English. The increase in PR holders is widely blamed for pushing up secondary market prices of HDB homes.

But it would be wrong to characterize the surge in grant of PR status entirely to ethnic considerations. Indians have particularly benefited and brought with them many skills in areas of such as information technology. Lee himself clearly sees immigration as desirable because immigrants are seen always to be harder working, more entrepreneurial than older, established communities. It is also a way of offsetting the exodus of many middle class Singaporeans to more open societies such as Australia.

Less controversial perhaps than the rate of increase in PR holders is the growth of employment of those on work permits. These do the necessary jobs, often for very low salaries and, at least in the case of maids, with scant protection from arbitrary and oppressive employers. Singapore increasingly looks to be going down the path of oil-rich Gulf states where citizens enjoy lives of ease thanks to armies of low paid Pakistanis and Bangladeshis with no prospect of permanence.

Singapore's increased reliance on both PR and temporary workers is a reversal of the 1980s policy of pushing up wages in order to force businesses to be more productive. It also has had the effect of making Singapore's economic growth numbers look more impressive than they may actually be. Gross domestic product rose from S$144 billion (US$105.6 billion) in 1999 to S$265 billion in 2009. But over the same period employment rose from 2.1 million to 3.0 million. Because of a mix of immigration and the fall in dependency, employment rose faster than total population, exaggerating the gains in GDP per capita. The workforce participation rate rose from 50 percent of the population in 1999 to 55 percent a decade later. This alone accounts for some of the gain in per capita GDP.

The majority of citizens continued to see real income gains but disparities widened even within the citizen group while the increase in the percentage of low-paid foreigners in the workforce added to income disparity.

Also worrying for Singaporeans is the decreasing share they have been enjoying in their much-touted GDP. In 1999 foreign companies and residents accounted for S$54 billion out of total GDP of S$144 billion. By 2009 the foreign total had risen to S$112 billion out of S$265 billion.

In other words by 2009 42 percent of the GDP was going to the foreigners. Much of that was in local wages and salaries but much too was in the profits of multinationals. The latter are far in excess of the S$30 billion earned by Singaporeans from the rest of the world – much of which is the foreign earnings of the Government Investment Corporation and Temasek.

Although factor receipts and payments vary widely from year to year, the negative trend for indigenous Singaporeans is clear enough. It also contrasts with Hong Kong where

net factor income is positive and gross national product, the measure of the total market value of goods and services produced by all citizens and capital during a given period, is persistently higher than gross domestic product, the measure of the total market value of all the goods and services produced within the borders of a nation during a given period.

The Singapore situation results partly from its immigration policy, which could be viewed as a net overall benefit. However it also points to the fact that while Singapore has huge foreign reserves, these earn relatively little. Meanwhile profits in Singapore are increasingly being earned by foreign, not local capital, and in many cases subsidized by tax breaks and other incentives not enjoyed by local business. Hence Singapore becomes ever more reliant on inflow of that capital for continued growth as well as on importing foreign labor to supplement a now almost static indigenous labor force.

Recent public disquiet over immigration may be prejudiced and seem irrational to a leadership that thinks it always knows best what is good for Singaporeans. But the nation badly needs a real debate about demographics and growth priorities.