Foreign Labour in Singapore

Topics: Supply and demand, Employment, Wage Pages: 7 (1943 words) Published: March 12, 2013

Background Of Foreign Labour in Singapore

Since the day Singapore gained independence, the growth of the economy had been advancing tremendous over the past four decades. The influx of foreign labour has been playing an important role towards the Singapore economy. Even up to today, Singapore, itself with scarce resources, could only rely on human resource to sustain the economy growth. With a tightening labour market and a low unemployment rate, this gradual increase in foreign labour had been making up for the shortfall in local human resource (see Figure 1).

Sources: Migration Information; complied from Rahman (for 1970 and 1980) and Singapore Department of Statistics (for 1990 to 2010).

In the recent years with the increasing number of foreign labour, local labour had to face stiff competition against foreign labour for employment. Government further intensifies the competition by introducing policies and incentives to attract more foreign labour. However, this influx of foreign labour remains essential towards Singapore economy.

Definition of the theory of demand and supply

The theory of demand in labour defined the quantities of labour employers are willing and able to hire at different rate in the given time period. In general, demand has a downward relationship between price and quantity (see figure 2). The law of demand states that the higher the price, the lower the demand. That is to say, the quantity of labour demanded will be dependent on its wage rate.

D1, D2 and D3 are points on the demand curve. Each point on the curve reflects direct correlation between labour quantity demanded and price. The demand relationship curve illustrates the negative relationship between wages rate and labour quantity demanded. The higher the wages rate, the lower the labour quantity demanded, and the lower the price the more will be in the demand.

The theory of supply in labour defined as the willingness and ability work specific amounts of time at different wage rates in a given period. In general, supply has an upward relationship between price and quantity (See figure 3). The basic law of supply is that price increases along with the quantity supplied. In general, the greater the wage rate, the more willing one is to go to work.

S1, S2 and S3 are points on the supply curve. Each point on the curve reflects direct correlation between labour quantity and wages rate. The higher the wages rate, the higher the labour quantity.

Definition of Elasticity

In order to identify factors that affect elasticity, we would have to understand the meaning of elasticity. Elasticity is the degree to which a demand or supply curve reacts to a change in price is the curve’s elasticity. The elasticity of the supply or demand curves is determined by using an equation;

% of change in quantity
Elasticity = -------------------------------------
% of change in price

The diagram below shows two labour demand curves with different elasticity.

The diagram below shows two labour supply curves with different elasticity.

Application of Microeconomics Concepts on Foreign Labour in Singapore

In the application of microeconomics concepts, I would use diagrams illustrate the changes in demand and supply from the increasing foreign labour trends in Singapore. We would then further analyse the case for foreign labour in Singapore from the diagrams.

Theory of Supply

In a normal market supply of labour, when wage rates rise, not only do existing workers offer to work longer hours but other workers are drawn into the labour market. It is not the case when there is an increase in foreign labour. Foreign labour is viewed primarily as cheaper economic stop-gaps; it has certain effect in the supply of labour. With foreign labour willing to work longer hours at a lower wage rates, it would increase the supply curve.

The diagram below would purely show the difference between the...
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