Stolen from TOC.
53) Lop on July 7th, 2009 8.39 pm I guess none of the people who wrote here were actually employers. Let me share with you the reality as someone who employs and I’m in the retail trade.
The bulk of the business cost comes from 2: Rental and Salary. Nowadays expect to pay at least $25 psf for decent retail space. So for a 500sf retail space, it will cost you $12.5k a month. But wait, that’s not all, landlord will also want to take a small cut like 3% on your gross turnover. I work in the shop and I employ 3 other staff as retail assistant, so that we can work on the 2 shifts retail hours which include weekends. Their basic pay is $900 a month, but if you include CPF and 13th month, that will be close to $1100 a month. On an average my turnover is about $100k a month and my gross profit margin is about 25%. After paying landlord and staff salary, every month I have about 6k to pay for other miscellaneous like PUB, banking (you didn’t think the credit cards and NETS that you happily swipe were for free did you?), accounting, packaging/stationery etc. and MYSELF. Not great but enough to live.
Now my point is: is $900 monthly salary too low for Singaporeans? Most Singaporeans that I had tried to employ would say so. A lot of them also had issues with working weekends and on shifts – they said not pro-family. More importantly they had a lot of ‘pride’, they would not tolerate the way Singaporeans treat retail staff – they think they are god. Most importantly, they didn’t stay long on the job, every 2 or 3 months I had to look for replacement.
A foreigner would give me none of these problems.
For you smart alec out there who said we should send all these foreigners home or impose a minimum wage, do you know what will happen next? I will have to close down because it just doesn’t make any more sense to continue – I run a business not charity. You might say who cares? But don’t forget my business is currently generating a monthly $100k worth of economic activity and there are many others who will be affected just like me.
So if you think a complex problem can be solved by sending the foreigners home or with your vote, think again.
54) Ray on July 7th, 2009 8.47 pm Well that’s because you’re talking about the existing system are you not? You’re working within this system and saying that the complex system can’t be solved. Of course it can’t be solved. The system itself is NOT set up to be solved, it maintains the status quo or ‘improves’ it to the detriment of empployees and employers.
55) Lop on July 7th, 2009 9.14 pm #54
Sure whatever it is I’m not saying it’s good or perfect system. What I’m saying is if you want to abandon the current system, make sure you have something to replace it.
You don’t quit your job unless you are pretty sure you can find a better one right?
56) Terence on July 7th, 2009 9.41 pm 53) Lop
If you think that getting cheap foreign workers is the solution, let me ask will your profits increase if you can get free workers, or will your landlord increase your rent by the same amount you save? I believe you already know the answer.
In fact, it is bad for businesses like yours when many Singaporeans are earning a pittance and they don’t have extra money to spend. The foreign workers are going to save up the bulk of their salary and send them home.
The real solution is a minimum wage. Your salary expenses may go up, but because you cannot price your goods higher, the landlords will have no choice but to lower their rent. If they don’t lower their rent, no one will rent their stores because no one can make a profit. The book “The Undercover Economist” has explained this effect.
The real beneficiaries of the influx of cheap foreign workers are landlords and big employers.
57) lips on July 7th, 2009 9.54 pm Some thoughts:
1. Wages are indeed depressed in the service sector, especially in retail outlets. The lack of a minimum wage definitely is a factor that makes it harder for employers to feel compelled to pay higher salaries. Singaporeans won’t take the jobs because they don’t pay enough, so foreigners naturally fill this gap.
2. That said, even if employers did want to pay higher salaries, they can’t. Why?
3. The main issue are rental costs of running a retail shop. In suntec, or any prime downtown location, rental rates per square foot can range from (if you’re lucky) $38 to $60 or $70. In a typical 1000 sq foot shop, that would be $60,000 a MONTH just in rental. Add the negligible salaries of 3 employees, let’s say it turns up to $65,000 cost per month, not including utilities, loss of stock, other incidentals, etc
4. In order just to justify the shops existence, a shop must earn around $2000 a day. Can our consumption as Singaporeans justify that?
5. We are not a consumption based society. We like to save. Private Consumption makes up around 39% of our GDP, and in other nations such as Hong Kong it is 60%
(See here http://www.adb.org/Documents/Books/ADO/2009/SIN.pdf — I am not sure about the actual magnitudes of figures, but the fact is that we consume much less than our counterparts in Hong Kong. This has been exacerbated by the recession and loss of wealth people have felt since property prices have dropped)
6. No shop or company is in business just to “get by”. They want to make money. This is itself is not bad, and I think the argument that employers are chiefly responsible for this situation is wrong.
7. Employers keep people employed, and that’s how wealth gets distributed to the people, through jobs an salaries. How well or efficiently this distribution happens depends on business conditions, which is largely determined by the government and what they do.
7. Can rental rates be lowered? Well, Capitaland owns much of the land shopping centres are built on. Who owns Capitaland? Ah, it’s government-linked, and Temasek has a share.
So now the picture is clearer. A large extent of the situation is due to government interference in the private sector. This drives up business costs, and coupled with our already-low private consumption and lack of labour protection laws makes it unattrative to hire locals, EVEN IF businesses wanted to.
How to solve it?
1. Get the government out of owning and profiting of land in Singapore. GLCs running land plots artificially inflate the prices beyond its worth, and create a bubble. They also have the staying power to keep prices high without cutting them. If the govt should be involved, their mandate should be to keep prices LOWER to aid businesses, NOT to enrich themselves from it.
2. Have minimum wage laws to equalise the playing field. This allows Singaporeans to be hired, AND doesn’t exploit foreigners for cheap labour. Everyone wins.
3. Increase consumption. This is by far the hardest. How? I have no clue.
Just some random thoughts. Again, I think to place the blame squarely at the feet of employers isn’t really looking at the whole picture. The entire
53) Lop on July 7th, 2009 8.39 pm I guess none of the people who wrote here were actually employers. Let me share with you the reality as someone who employs and I’m in the retail trade.
The bulk of the business cost comes from 2: Rental and Salary. Nowadays expect to pay at least $25 psf for decent retail space. So for a 500sf retail space, it will cost you $12.5k a month. But wait, that’s not all, landlord will also want to take a small cut like 3% on your gross turnover. I work in the shop and I employ 3 other staff as retail assistant, so that we can work on the 2 shifts retail hours which include weekends. Their basic pay is $900 a month, but if you include CPF and 13th month, that will be close to $1100 a month. On an average my turnover is about $100k a month and my gross profit margin is about 25%. After paying landlord and staff salary, every month I have about 6k to pay for other miscellaneous like PUB, banking (you didn’t think the credit cards and NETS that you happily swipe were for free did you?), accounting, packaging/stationery etc. and MYSELF. Not great but enough to live.
Now my point is: is $900 monthly salary too low for Singaporeans? Most Singaporeans that I had tried to employ would say so. A lot of them also had issues with working weekends and on shifts – they said not pro-family. More importantly they had a lot of ‘pride’, they would not tolerate the way Singaporeans treat retail staff – they think they are god. Most importantly, they didn’t stay long on the job, every 2 or 3 months I had to look for replacement.
A foreigner would give me none of these problems.
For you smart alec out there who said we should send all these foreigners home or impose a minimum wage, do you know what will happen next? I will have to close down because it just doesn’t make any more sense to continue – I run a business not charity. You might say who cares? But don’t forget my business is currently generating a monthly $100k worth of economic activity and there are many others who will be affected just like me.
So if you think a complex problem can be solved by sending the foreigners home or with your vote, think again.
54) Ray on July 7th, 2009 8.47 pm Well that’s because you’re talking about the existing system are you not? You’re working within this system and saying that the complex system can’t be solved. Of course it can’t be solved. The system itself is NOT set up to be solved, it maintains the status quo or ‘improves’ it to the detriment of empployees and employers.
55) Lop on July 7th, 2009 9.14 pm #54
Sure whatever it is I’m not saying it’s good or perfect system. What I’m saying is if you want to abandon the current system, make sure you have something to replace it.
You don’t quit your job unless you are pretty sure you can find a better one right?
56) Terence on July 7th, 2009 9.41 pm 53) Lop
If you think that getting cheap foreign workers is the solution, let me ask will your profits increase if you can get free workers, or will your landlord increase your rent by the same amount you save? I believe you already know the answer.
In fact, it is bad for businesses like yours when many Singaporeans are earning a pittance and they don’t have extra money to spend. The foreign workers are going to save up the bulk of their salary and send them home.
The real solution is a minimum wage. Your salary expenses may go up, but because you cannot price your goods higher, the landlords will have no choice but to lower their rent. If they don’t lower their rent, no one will rent their stores because no one can make a profit. The book “The Undercover Economist” has explained this effect.
The real beneficiaries of the influx of cheap foreign workers are landlords and big employers.
57) lips on July 7th, 2009 9.54 pm Some thoughts:
1. Wages are indeed depressed in the service sector, especially in retail outlets. The lack of a minimum wage definitely is a factor that makes it harder for employers to feel compelled to pay higher salaries. Singaporeans won’t take the jobs because they don’t pay enough, so foreigners naturally fill this gap.
2. That said, even if employers did want to pay higher salaries, they can’t. Why?
3. The main issue are rental costs of running a retail shop. In suntec, or any prime downtown location, rental rates per square foot can range from (if you’re lucky) $38 to $60 or $70. In a typical 1000 sq foot shop, that would be $60,000 a MONTH just in rental. Add the negligible salaries of 3 employees, let’s say it turns up to $65,000 cost per month, not including utilities, loss of stock, other incidentals, etc
4. In order just to justify the shops existence, a shop must earn around $2000 a day. Can our consumption as Singaporeans justify that?
5. We are not a consumption based society. We like to save. Private Consumption makes up around 39% of our GDP, and in other nations such as Hong Kong it is 60%
(See here http://www.adb.org/Documents/Books/ADO/2009/SIN.pdf — I am not sure about the actual magnitudes of figures, but the fact is that we consume much less than our counterparts in Hong Kong. This has been exacerbated by the recession and loss of wealth people have felt since property prices have dropped)
6. No shop or company is in business just to “get by”. They want to make money. This is itself is not bad, and I think the argument that employers are chiefly responsible for this situation is wrong.
7. Employers keep people employed, and that’s how wealth gets distributed to the people, through jobs an salaries. How well or efficiently this distribution happens depends on business conditions, which is largely determined by the government and what they do.
7. Can rental rates be lowered? Well, Capitaland owns much of the land shopping centres are built on. Who owns Capitaland? Ah, it’s government-linked, and Temasek has a share.
So now the picture is clearer. A large extent of the situation is due to government interference in the private sector. This drives up business costs, and coupled with our already-low private consumption and lack of labour protection laws makes it unattrative to hire locals, EVEN IF businesses wanted to.
How to solve it?
1. Get the government out of owning and profiting of land in Singapore. GLCs running land plots artificially inflate the prices beyond its worth, and create a bubble. They also have the staying power to keep prices high without cutting them. If the govt should be involved, their mandate should be to keep prices LOWER to aid businesses, NOT to enrich themselves from it.
2. Have minimum wage laws to equalise the playing field. This allows Singaporeans to be hired, AND doesn’t exploit foreigners for cheap labour. Everyone wins.
3. Increase consumption. This is by far the hardest. How? I have no clue.
Just some random thoughts. Again, I think to place the blame squarely at the feet of employers isn’t really looking at the whole picture. The entire
