IMPACT AND EFFECTIVENESS OF THE INCREASE IN THE FOREIGN WORKER LEVY FROM SINGAPORE BUDGET 2012 TO 2014.

Abstract

Singapore’s government embarked on the path of economic restructuring through Singapore Budget, with the aim of improving Singapore’s construction industry’s productivity as the key objective. The increase of Foreign Worker Levy (FWL) was one of the few economic restructuring initiatives that were implemented. In this dissertation, the impact and effectiveness of the increase in FWL was studied. In particular, the effects of the increase in FWL on the construction industry, the actions taken by the construction companies to adapt to the increase and whether were the two objectives that were set by the government achieved. The two objectives were, to limit the growth of foreign worker numbers and to encourage technology adoption through lesser reliance on manpower. Literature reviews, survey questionnaire and interviews were the primary methods for data collection with regards to the various impacts experienced by the construction companies and their perspectives and expectations due to the increase. The preliminary results showed that construction companies remained reliant on low-skilled foreign workers; the increase in FWL was effective in controlling the growth of foreign worker numbers. However, technology adoption was not welcomed by the industry due to many factors which the government might have overlooked. The conclusion was drawn based on a demand elasticity concept. The concept explains that, as long as the demand elasticity for low-skilled foreign workers remained inelastic, and technology is unable to substitute foreign labor, the increase in FWL might not be effective in increasing the productivity of Singapore’s construction industry.