Either Make More Babies or Embrace Foreign Workers

(Bloomberg Opinion) -- For Asia’s most prosperous societies, Covid-19 has exposed a big vulnerability: People simply aren’t having enough babies to replenish their aging populations. It's foreign workers that make these countries function.

That’s why pulling up the drawbridge to halt further spread of the disease and protect domestic businesses would be perilous. Even Japan and South Korea, often seen as hostile to outsiders, have been coming to terms with their reliance on employees from abroad in recent years. In Singapore, long open to immigration, foreigners make up about a third of the workforce, be they bankers, kitchen staff, bus drivers or mail handlers.

Not only is the region’s economic health at stake, but also its legacy as a big winner of globalization over the past few decades. The International Monetary Fund forecasts global gross domestic product will shrink 3% this year, easily exceeding the decline of 2009. Trade, the lifeblood of many Asian economies, will fall 11%. Growth in this engine of world commerce would sputter without immigration.

Fertility statistics across the region are grim. In Singapore, the number of children per woman sank to a record low 1.14 in 2018. Korea's rate recently slipped below 1, the lowest in the Organization for Economic Cooperation and Development. Japan is at 1.4; Hong Kong at 1.3 and Taiwan at about 1. The rate at which a population can replace itself is 2.1.

Singapore has worked hard over the past two decades to encourage couples to have more children, introducing measures such as paid maternity leave, childcare subsidies, tax breaks and one-time cash gifts. The government also picks up most of the tab for in vitro fertilization treatment. Live-in nannies, many of whom are Filipino and Indonesian, provide affordable and readily available help. Yet the fertility rate has remained stubbornly low, as Poh Lin Tan of the National University of Singapore wrote here.

Now, this demographic hurdle is colliding with the coronavirus. While the country won early plaudits for efforts to contain the pandemic, infections have more than trebled since the start of April to 3,699 as of Wednesday. Many of the new cases are linked to dormitories housing foreign workers.

Until Covid-19 struck, more than 200,000 low-wage migrants — almost 4% of the population — lived in 43 dormitories, many of which were overcrowded. In one, workers said rooms were infested with cockroaches, rubbish was piling up and toilets were overflowing, the Straits Times reported.

These workers make Singapore tick, serving in key industries like construction, logistics and transportation. At least 15 of their housing units have been identified as virus clusters and eight have been declared isolation areas, the Straits Times reported. In an effort to contain the outbreak, the government has shifted some essential employees to offsite facilities, including repurposed hotels, convention centers and military barracks. Officials are increasing testing and warned that infections may rise further.

The government has stressed it will take care of foreign workers, improve hygiene where they live and appreciates their contribution to the local economy. “Essentially, we are sparing no effort to contain the spread of the virus in the foreign worker dormitories,” Lawrence Wong, minister for national development and co-chair of the virus task force, told reporters last week. “We have a responsibility for these foreign workers who have come all the way here at considerable expense to make a living in Singapore.”

Demographic challenges aren't unique to Asia. Fertility rates are dropping in Europe and North America, too — in some ways it’s a symptom of success. Plugging the gap between natural population growth and job vacancies with personnel from abroad is pretty easy in good times. The sheer need to fill positions tends to outweigh discomfort about newcomers. Even if some politicians eschew the word, immigration has to be part of the answer. 

For Singapore, this issue is broached in existential terms. “To secure our future, we must make our own babies, enough of them. Because if all of the next generation are not our own, then where do they come from and what is the point of this?” Prime Minister Lee Hsien Loong said in October at the Forbes CEO Global Conference. “If we can push [up] the fertility rate, not to 2.1 which would be replacing ourselves, but maybe 1.3, 1.4, we produce two-thirds of what we need, then the balance one-third — well, I am prepared to top up from overseas, and the numbers are not too enormous and will not overwhelm us."

He’s right; it is about survival. Not just of nation states, but of an economic model that’s delivered success to billions of people across the region. Rather than sealing borders, maintaining mobility of labor will be critical for surviving the economic hit from Covid-19.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Daniel Moss is a Bloomberg Opinion columnist covering Asian economies. Previously he was executive editor of Bloomberg News for global economics, and has led teams in Asia, Europe and North America.

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