Today I read that the founder of Twelve Cupcakes, Daniel Ong, had been fined $65,000 for breaching employment laws for underpaying his S Pass holders. His ex-wife Jaime Teo was fined a similar amount earlier and the Indian company which bought the Twelve Cupcakes chain, Dhunseri Group, was fined $119.000 in January. Dhunseri had pleaded guilty but argued that they were merely continuing the practice of the previous owners. Twelve Cupcakes’ owners had been paying the minimum salary required for S-Pass holders but had then coerced the foreign employees to remit back a portion of their salaries to the company.

State media might trumpet this as a successful prosecution of errant employers by Ministry of Manpower (MOM) but all that it illustrates is the toothlessness of laws supposedly there to protect both Singaporean and foreign workers from exploitation. As the prosecution admitted at the trial, the offences would have gone undetected unless there had been a whistleblower. Since it is effectively undetectable we can be certain that the practice is widespread. Clearly MOM turn a blind eye to employers underpaying foreign workers as long as the Government is receiving the foreign worker levy which is all it cares about. Why does MOM not ensure that all S-Pass holders are told that it is an offence for their employer to pay them less than the minimum salary and that if they collude in the practice by agreeing to pay back part of their salary their S-Pass will be cancelled and they will be banned from working in Singapore again? If NTUC was not a PAP-influenced and controlled organisation and concerned about the rights and wages of Singaporean workers and ensuring that they were not undercut by foreign workers then it too would be reaching out to foreign employees to educate them about their rights and duties to report errant employers.

The penalties also send the message that it makes economic sense for companies to break the law. The penalties imposed seem to be less or not much more than the total the company saved by underpaying its foreign employees. Daniel Ong has only been fined $65,000 whereas he has still to make restitution to his employees of $98,000 in underpayment. Even if you include his wife’s fine the total amount of $130,000 is around the present value of the money the couple saved by breaking the law. The standard microeconomic analysis is that willingness to commit crime is a function of the severity of the penalty multiplied by the probability of being caught. So if MOM was serious about deterring breaches of its regulations it would put more teeth into enforcement but also the Government would enact much harsher penalties, including the threat of imprisonment for egregious breaches like this. The fact that it does not sends the message that employers can flout the law with impunity. This damages both foreign workers, who do not receive the remuneration they are legally entitled to, and Singaporeans, who find themselves being undercut by illegally cheaper foreign labour. The Government should of course enact a minimum wage and the Reform Party has advocated this be set at $10 per hour (about a third of Swiss levels and half of the UK) but this is unlikely to happen as long as the PAP remain in power.

Another area of concern, though not the subject of this prosecution, is whether the limit on S-Pass holders being not more than 10% of the workforce of companies in the service sector is widely breached. Certainly anyone visiting a shop or restaurant will get the impression that foreign workers constitute far more than 10% of the workforce.  I have been told that it is easy to circumvent the regulation by putting phantom Singaporean workers on the payroll, usually older Singaporeans. The company then only pays the Employer CPF portion of their wages which is 15%. I am not sure how widespread this is but given the lax enforcement by MOM it is probably widespread.

State media had fun painting Daniel Ong as the pantomime villain and gleefully reporting how he swore at reporters. However the real villain is MOM and the PAP Government from Lee Hsien Loong downwards, who are effectively saying “F*** You!” to all Singaporean workers.

Published by kjeyaretnam

I'm a Singaporean economist who became an opposition activist. I blog to provide an alternative to the porkies that the Pinkies tell. It just so happens that my alternative is the truth. That's why I've never been sued in any civil or criminal court no matter how hard hitting my criticism. I'm quoted and interviewed and asked to speak across the world but largely censored in Singapore in an effort to silence my political opinions. The left hate me because they think I split their vote and because I eschew their outmoded economic models. Models that don't work. The Right and the Conservatives hate me because I'm a liberal. I'm not sure what the middle think of me. I don't think there are more than a handful of people in the middle, here in Singapore. I'm a Singaporean born and bred, dual heritage, my parents Singaporean established here before the State of Singapore was created. I'm not Eurasian. I read economics at Cambridge and could be broadly described as from the Keynesian school but I believe in interventions. I was formerly a successful hedge fund manager. After economics and politics my greatest interests are history, film and Makan. I run but I run so I can eat like a Singaporean. View all posts by kjeyaretnam