Productive contribution of local and foreign workers in Singapore manufacturing industries

Abstract

Purpose

The purpose of this paper is to study the impact of large inflow of foreign workers on the Singapore manufacturing productivity using a panel data at the disaggregated industry level from 1998 to 2008. The results indicate that foreign workers do make productive contribution to manufacturing productivity, but it is much lower as compared to local workers. However, the author observe the declining capital-labour ratio with the increase in the flow of foreign workers. This is expected to have direct impact on the competitiveness of the manufacturing in the export market. Since new technologies are embodied in new capital investment, the declining capital-labour ratio indicates that workers might be producing output with less technology-intensive capital. Conversely, local workers are more productive with high capital investment, indicating that local workers are more skilled and hence there is more complementarity between capital investments and local human capital.

Design/methodology/approach

The author implement a panel estimation of disaggregated industry level data of Singapore manufacturing from 1998 to 2008. The author use GMM estimation to control for any endogeneity issues in the estimation.

Findings

The results indicate that foreign workers do make productive contribution to manufacturing productivity; but it is much lower as compared to local workers. However; the author observe the declining capital-labour ratio with the increase in the flow of foreign workers.

Research limitations/implications

The data for foreign workers at the disaggregated level is not publically available and this is given for this research purpose. The data for foreign workers is limited as it does not have by educational levels.

Practical implications

This is the first paper to study impact of foreign workers on manufacturing sector at a disaggregated panel data. There are important policy implications for managing foreign workers and achieving sustainable growth for the Singapore economy.

Social implications

The welfare and social impacts of foreign workers on the Singapore economy is discussed. There is also the issue of policy calibration to balance the flow of foreign workers in the Singapore economy.

Originality/value

This is the first paper to study impact of foreign workers on manufacturing sector at a disaggregated panel data.

Citation

Thangavelu, S.M. (2016), "Productive contribution of local and foreign workers in Singapore manufacturing industries", Journal of Economic Studies, Vol. 43 No. 3, pp. 380-399. https://doi.org/10.1108/JES-11-2014-0191