Tag: Singapore

An American Visa for Domestic Workers: Taking a Lesson from Singapore

I’ll be a participant in an immigration conference in Michigan organized by Shikha Dalmia of the Reason Foundation later this week.  As part of the conference, Dalmia asked the participants to write essays on specific immigration subtopics that she will later assemble in a book (if I recall correctly).  Dalmia asked me to write an essay on Singapore’s immigration policy – a challenging assignment as I only had the vaguest impressions of their immigration policy from a few readings over the years and a lunch meeting with Singaporean officials from the Ministry of Manpower five years ago. 

Singapore’s immigration system has two main tiers.  The first tier is for highly paid professionals and their families who are encouraged to become permanent residents and eventually citizens.  The second tier is for skilled and semi-skilled temporary migrant workers who will eventually return to their home countries and cannot become Singaporean citizens.  I ended my essay with recommendations for marginal improvements to Singapore’s immigration system that would maintain the two-tier system while increasing the benefits to Singaporeans and foreign workers. 

Singapore is a city-state in Southeast Asia with the fourth highest GDP per capita (PPP adjusted) in the world. Singapore gained its independence in 1965 and developed rapidly since then.  From 1965 to 2017, Singapore’s average annual rate of GDP growth was 7.5 percent, averaging 9.1 percent prior to 1998.  Immigrants and temporary migrant workers have been important components of Singapore’s economic growth since the nineteenth century.  In 1965, 28 percent of the resident population of Singapore was foreign-born.  In 2017, about 47 percent of Singapore’s residents were foreign-born – a figure that dwarfs the 13.7 foreign-born percentage in the United States.  To give a comparison of how liberal Singapore’s immigration policy is, none of the top ten largest American cities had an immigrant percentage of their respective populations above 40 percent. 

The United States can learn much from Singapore’s immigration system, but I will focus on one lesson below: The United States should create a visa for domestic workers based on Singapore’s Foreign Domestic Worker (FDW) visa.

The FDW visa is Singapore’s most interesting and distinct second tier visa for workers who labor in the home providing domestic services, elderly care, childcare.  FDWs are tightly regulated under Singaporean law.  Among other requirements, they must be female, 23-50 years of age, be from an approved country of origin in South or East Asia, and have a minimum of 8 years of education.  Once in Singapore, the FDW cannot start a business or change employers.  The employers of FDWs must also meet stringent regulatory requirements.  For instance, the FDW must work at the employer’s home address, cannot be related to the employer, the employer must put up a $5,000 security bond, pay for medical exams, and cover most other costs of living – with fewer restrictions on FDWs from Malaysia.  According to government surveys, FDWs have high levels of job satisfaction and most intend to apply again for work as an FDW (Ministry of Manpower 2016, 5; Ministry of Manpower 2017).

The United States should adopt a visa like the FDW for at least three reasons.

First, the FDW likely increased the native Singaporean skilled female labor force participation rate (LFPR).  From 1990-2017, Singapore’s female LFPR rose from 48.8 to 59.8 percent while the male LFPR dropped from 77.5 to 76 percent.  Some portion of that increase in the female LFPR can be attributed to FDWs because they specialize in domestic production which allows Singaporean women to enter the workforce.  There is some evidence in the United States that additional lower-skilled immigrants slightly increased female time in the workplace but that is in the highly regulated and expensive childcare market in the United States.  Although some more research is needed to analyze how FDWs affected female LFPR in Singapore, it’s likely than an FDW visa in the United States would allow more women with children to work if they want to.

Second, an FDW visa would put downward price pressure on childcare providers by reducing demand for their services.  If an FDW visa was available in the United States, many American households would take their children out of daycares and other childcare arrangements and hire FDWs instead.  High-earning American households would especially be interested in the FDW as they are also the ones most likely to employ ­au pairs on the poorly-designed J-1 visa.  Taking many high-earning American households out of the daycare and childcare market would initially lower prices, thus allowing Americans with lower incomes to afford those services for the first time.  Americans who would continue with daycare and childcare services would also gain in the form of lower prices. 

Third, a large and robust FDW visa program could increase the fertility rate of highly-skilled native-born American women.  Over time, there is a strong negative correlation between female LFPR and fertility, but that relationship has weakened substantially in the United States.  Economists Delia Furtado and Heinrich Hock found that that weakening relationship is partly explained by low-skilled immigrants lowering the cost of childcare, resulting in an 8.6 percent increase in fertility and a 2.3 percent increase in female LFPR (for native-born skilled women in cities in prime birth years).  Although I do not support fertility subsidies in the United States, the FDW is a wise policy that would improve the livelihood of Americans and achieve the same end much cheaper than an expanded child tax creditreformicons should love it. 

Singapore’s FDW visa has many problems than an American version should avoid.  For instance, an American FDW visa should allow FDWs to live on their own if they want, move between FDW employers without legal penalty or ex ante government permission, be open to both sexes, have a wider age-range, and allow FDWs to sign longer-term labor contracts.  Such a visa would help many American households, migrants, and increase the range of choices open to American women who want to work and become mothers.   

 

OECD Overlooks Amazing Success of Low-Tax Singapore, Urges Higher Taxes in Asia

I wrote a rather favorable column a few days ago about a new study from economists at the Organization for Economic Cooperation and Development. Their research showed how larger levels of government spending are associated with weaker economic performance, and the results were worth sharing even though the study’s methodology almost certainly led to numbers that understated the case against big government.

Regardless, saying anything positive about research from the OECD was an unusual experience since I’m normally writing critical articles about the statist agenda of the international bureaucracy’s political appointees.

That being said, I feel on more familiar ground today since I’m going to write something negative about the antics of the Paris-based bureaucracy.

The OECD just published Revenue Statistics in Asian Countries, which covers Indonesia, Singapore, Malaysia, South Korea, Japan, and the Philippines for the 1990-2014 period. Much of the data is useful and interesting, but some of the analysis is utterly bizarre and preposterous, starting with the completely unsubstantiated assertion that there’s a need for more tax revenue in the region.

…the need to mobilise government revenue in developing countries to fund public goods and services is increasing. …In the Philippines and Indonesia, the governments are endeavoring to strengthen their tax revenues and have established tax-to-GDP targets. The Philippines aims to increase their tax-to-GDP ratio to 17% (excluding Social Security contributions) by 2016…and Indonesia aims to reach the same level by 2019.

Needless to say, there’s not even an iota of evidence in the report to justify the assertion that there’s a need for more tax revenue. Not a shred of data to suggest that higher taxes would lead to more economic development or more public goods. The OECD simply makes a claim and offers no backup or support.

But here’s the most amazing part. The OECD report argues that a nation isn’t developed unless taxes consume at least 25 percent of GDP.

These targets will contribute to increasing financial capacity toward the minimum tax-to-GDP ratio of 25% deemed essential to become a developed country.

This is a jaw-dropping assertion in part because most of the world’s rich nations became prosperous back in the 1800s and early 1900s when government spending consumed only about 10 percent of economic output.

If Poor Nations Want Economic Convergence and Capital Accumulation, They Need Good Policy

There’s a “convergence” theory in economics that suggests, over time, that “poor nations should catch up with rich nations.”

But in the real world, that seems to be the exception rather than the rule.

There’s an interesting and informative article at the St. Louis Federal Reserve Bank which explores this theory. It asks why most low-income and middle-income nations are not “converging” with countries from the developed world.

…only a few countries have been able to catch up with the high per capita income levels of the developed world and stay there. By American living standards (as representative of the developed world), most developing countries since 1960 have remained or been “trapped” at a constant low-income level relative to the U.S. This “low- or middle-income trap” phenomenon raises concern about the validity of the neoclassical growth theory, which predicts global economic convergence. Specifically, the Solow growth model suggests that income levels in poor economies will grow relatively faster than developed nations and eventually converge or catch up to these economies through capital accumulation… But, with just a few exceptions, that is not happening.

Here’s a chart showing examples of nations that are – and aren’t – converging with the United States.

Indonesia Reform, Please

The Indonesian stock market has just hit a record high on the hope that the incoming President, Joko Widodo, will push through economic reforms. But, what path should he follow? My advice to President Widodo is the same as that I gave President Suharto, when I was his advisor in 1998: follow Singapore and Lee Kuan Yew.

When Singapore gained independence in 1965, Lee Kuan Yew developed a set of sound principles, which proved to be highly successful. Indeed, their implementation propelled Singapore to the top of the world’s competitiveness rankings. I have dubbed these principles the “Singapore Strategy.” It contains the following five elements:

  • First and foremost, stabilize the currency. Singapore achieved stability with a currency board system – a simple, transparent, rule-driven monetary regime.
  • Second, don’t pass the begging bowl. Singapore refused to accept foreign aid of any kind.
  • Third, foster first-world, competitive, private enterprises. Singapore accomplished this via light taxation, light regulation, and completely open and free trade.
  • Fourth, emphasize personal security, public order, and the protection of private property.
  • The final key to Lee Kuan Yew’s “Singapore Strategy” is the means to accomplish the previous four goals: a small, transparent government that avoids complexity and red tape. And one that is directed by first-class civil servants who are paid first-class wages.