Low-paid migrant labour a futile economic exercise

ON A TRIP TO Singapore some years ago as an investment analyst I visited a plant making printed circuit boards. These were not fancy multi-layer, high-density or surface-mounted boards but the low-technology drill-the-holes-and-ship-them-out sort. And what very soon became obvious was that a substantial proportion of the workforce consisted of foreign labourers, flown in from as far as Shanghai, with the company lobbying the Singapore government for an even higher permissible contingent of foreign labour. Singaporeans did not want this low-skilled work. It seemed to me a costly way of operating for a business that ran on tight margins and I asked someone in the relevant ministry how this could make sense. Her reply was that Singapore had a large corps of trained engineers and the only way of ensuring employment for these people at home was to ship in foreign labour for the plants at which they could exercise their engineering talents. You know the story of the farmer who, rather than bring the hay down to the cows, rigged block and tackle from the roof of his barn so that he could lift the cows up to the hayloft. Singapore may not have a dairy industry but that must have been a Singaporean farmer. Then again, however, it could have been a Hong Kong one, judging by an equal silliness proposed by Labour Secretary Stephen Ip Shu-kwan. It is to bring in low-cost labour from the mainland in order to stimulate the territory's dwindling manufacturing industries and allow them to continue employing some Hong Kong people as well. The chart gives you the picture on what has happened to manufacturing employment in Hong Kong over the years and, in fact, still overstates the proportion of these workers who could be kept in manufacturing work by having some lower paid co-workers. In the first place it incorporates industries such as food preparation, which needs to be near the diners it serves, or printing and publishing, which is mighty competitive and efficient as it is. A contingent of low-paid workers from the mainland would have little impact on whether such businesses stay or move. And where it could have an impact, garments for instance, in two years time we face a final dissolution of the international quota system that has long protected our rag trade. Garments and textiles account for more than half of our domestic exports. They will not do so in 2006 and the appeal of having a few low-paid labour migrants in the workforce will not keep them when manufacturers can relocate their production lines to places where the entire workforce is low-paid. What we have here in short appears to be a case of the government pandering to a few remaining industrialists who have been too lazy to follow their more industrious competitors across the border. Admit the fact, Mr Ip. Manufacturing is not Hong Kong's future. Why push against a rope? Why try to make water flow uphill? But let us also examine Mr Ip's economic rationale. 'The conditions are that any such schemes should be beneficial to the economy, able to create more jobs and would not drag down local wages,' he said. Beneficial to the economy. If he means that the production of the plants employing labour migrants will be included in our gross domestic product figures, of course it will, but that is never the point. The question is whether the effort could be better directed elsewhere. If this is not a consideration then I recommend my standard scheme of employing these people to dig tunnels by hand to Antarctica. All the money spent on it would go to the GDP figures and it would all be a waste, but, as I say, if this does not matter, why not do it? Create more jobs. Well, yes the scheme would do so and so would the tunnels to Antarctica. The difficulty is that this job creation creates more job destruction when the work is pointless and created only for the sake of job creation. A waste of effort, to whatever measure it exists, is a waste of resources that could produce employment elsewhere. The best way to avoid it is to let the market create jobs and also eliminate them where they no longer constitute a profitable use of resources. The government does this badly, Mr Ip. You are better off not trying it at all. Would not drag down local wages. Come off it. Of course the scheme would have that result. That is why the employers want it. Do you truly, cross your heart now, sir, think you can stop it from happening? But, most of all, it mystifies me that people who claim to be labour representatives, legislator Chan Yuen-han for instance, have professed themselves in favour of this scheme. Have you ever done any collective bargaining, Mr Chan? Have you ever met any real unionists? Graphic: jake19gbz