“Please don’t loiter here,” say signs in Bengali outside multi-storey apartment blocks in Little India. Foreigners make up about a third of Singapore’s five million population, but the government doesn’t want any further increase and is making it more expensive to hire foreign workers.

The levy for work permit holders in the construction and services sectors is expected to go up to as much as S$600 a month per worker by July 1, 2013. The government raised the foreign worker levy – effectively a tax on companies that hire foreigners – for the second time in two years last week. Levies for S Pass holders – foreigners earning at least S$1,800 a month – will also go up to S$300 to S$450 a month. Work permit and S Pass holders don’t have to paid Central Provident Fund (CPF) contributions, which have been raised to 36 per cent this year. That, and their relatively low wages, made them attractive to companies. (Work permit holders are paid less than S$1,800 a month while, to be eligible for an employment pass, a foreigner has to earn at least S$2,500 a month.)

Predictably, companies are complaining about the higher levies, which will add to their business costs. But the government, which has to hold elections by February next year, can’t turn a deaf ear to its own citizens. “We’ve had over a million new people come to live in Singapore in the last 10 years with very little increase in the stock of public housing, so it’s inevitable that prices have risen sharply,” said opposition politician Kenneth Jeyaretnam. “We need to slow the intake of foreign workers and concentrate on raising the productivity and incomes of Singaporean workers instead.”

Even the Wall Street Journal said the influx of foreign workers has kept down blue-collar wages, increasing the income gap between the rich and the poor. From 1998 to 2008, the bottom 20 per cent of households saw their income drop an average of 2.7 per cent while the salaries of the richest 20 per cent rose by more than half, reported the Associated Press.

Productivity – or output per employee – also fell because manufacturers relied on cheap imported labour instead of making their businesses more efficient, said the Journal. “We want to grow Singaporeans’ incomes significantly, by transforming productivity,” said finance minister Tharman Shanmugaratnam, presenting this year’s budget two weeks ago. Hence the higher foreign worker levy to discourage cheap imported labour. The National Productivity Fund is being doubled to S$2 billion this year to help companies train and “upskill” their workers, for which they can also get tax breaks.

Singaporeans come first, as the government says; indeed, it has a duty to help its citizens prosper. But, as David Sandison, a tax partner with PwC Singapore, wrote in Today newspaper: “Productivity is most easily enhanced in the manufacturing industry where machines and clever systems can replace people.” Introducing new technology is more difficult for the food and beverage industry, said a restaurateur. “Can you have robots to replace the chefs and waiters?” he asked rhetorically.

“Singaporeans don’t want to do manual labour,” pointed out another business executive. The overwhelming majority of construction workers come from India, Bangladesh, China, Burma and other countries in the region. Singapore Contractors Association president Andrew Khng said: “If you can’t gain much cost savings from improvements in productivity – because labour-intensive industry can only do so much – costs will have to be passed to consumers .” Foreign workers not only cost less; employers also hire them because they are less likely to job-hop, said a businesswoman. “S-pass holders are usually bound by contract, so they’ll stay for at least one to two years. As for locals, unless you sponsor them for courses, it’s very hard to bind them,” she said.

Singaporeans can pick and choose because jobs are plentiful. Unemployment is just over 2 per cent. So companies have to bring in foreigners. Even former prime minister – and now senior minister Goh Chok Tong – acknowledged last week the government allowed in foreign workers as an easy way to help Singapore grow. The gleaming highrises could not have been built, nor the housing estates kept clean, without foreign workers. Even the waiters and shop assistants include foreigners. But they are holding down the wages of lower-income Singaporeans, said Goh. “We must not make a U-turn. If you go back to a low foreign-worker levy, you’re going to be inundated with foreign workers. Is that the Singapore that you want?” he asked.

Only businesses have complained about the levy hike so far. One wonders, though, about the trees and the parks that have made Singapore one of the greenest cities in Asia. The trees have to be trimmed, so the authorities send around lorries with cherry pickers. Perched on the cherry pickers, however, trimming the trees, are usually Indians and Bangladeshis. Singapore is for Singaporeans, of course, but are they enough to make it bloom and boom? The little city-state had over a million foreigners working alongside its two million local workers as of June last year.