Monday, May 31, 2010

1st World Country, 3rd World Wage Structure?

"For years, companies have creamed off a larger share of economic gains - larger than those in other developed countries or industrialising economies in Asia. As a result, workers get a slice of Singapore's gross domestic product (GDP) that is considered unusually small compared with their counterparts' share in those countries." - Business Times, 18 May 2010

I wrote about this in 2007 (let me try to find the post...) when profits as a share of GDP rose to the highest level in history. In March 2010, Slyvia Lim spoke about it in parliament[Link] when she argued that GDP growth must benefit Singaporeans. What is the selling point of a system for ordinary citizens when most GDP growth generated goes to profits of companies and ordinary citizens have to bear the brunt of cost increases resulting from the growth?

How did all this happen? In the past few decades, the govt had a policy of trying to keep wages way below productivity so that the per unit labor cost goes down. For a long time the Singapore workforce was ranked number 1[Link] and has been the key pillar of Singapore's competitiveness and success. However, the govt never got away from economy dependent on lower wages for growth and in the past few years seek to perpetuate this by importing cheaper labor from overseas. At the same time, they cut corporate taxes while raising regressive taxes such as GST. Our income inequality (measured by GINI) is now the highest in the developed world. The inequality is further compounded by govt policies that shift as much healthcare and retirement burden to ordinary citizens as possible. The Singapore govt share of healthcare cost is the lowest among all developed countries.

We are supposed to be a developed country but the quality of life of ordinary Singaporeans is nowhere near that of the citizens in other 1st world countries even as our per capita income make it look like most of us should be going to Europe for the school holidays. The GDP number has become quite meaningless to ordinary Singaporeans because their lives are not getting better. Most of it goes to profits of corporations, owned by a handful of shareholders. Increasingly, it is no longer sufficient for ordinary Singaporeans to try to work hard to overcome their economic situation...and for small unfortunate number that forms the ultra-underclass in Singapore, they are caught in a poverty trap that they can never get out of.

World country, but not First World wages? [Link]
By Sue-Ann Chia, Senior Political Correspondent
THE recession is over but bosses may not be heaving a sigh of relief. A new challenge is looming: rising wage bills.

From June, bosses will no longer enjoy any wage subsidy from the Jobs Credit scheme.
From July, they will have to fork out a higher levy for foreign workers, or pay more to hire local workers as the inflow of foreigners starts to slow.

From September, they will have to put in a higher contribution to their workers' Central Provident Fund (CPF) accounts.

And if that does not pack enough of a whammy, they also have to heed the national call to boost productivity and pay packages.

Poor employers, some would say, as they seem to be under attack on several fronts to raise wages.

But think of it the other way: Could it be payback time?

For years, companies have creamed off a larger share of economic gains - larger than those in other developed countries or industrialising economies in Asia.

As a result, workers get a slice of Singapore's gross domestic product (GDP) that is considered unusually small compared with their counterparts' share in those countries.

Workers' wages account for less than half of Singapore's GDP. In contrast, wages take up more than half of GDP in developed countries.

This means that Singapore may have achieved one of the highest per capita GDPs - at $51,656 last year - but the superlative showing may not reflect the wealth of workers or benefit them as much.

It has led some analysts to wonder if Singapore is a First World economy with what is closer to a Third World wage structure.

'Factually, our wage levels are much higher than Third World (economies'). Otherwise, so many foreign workers would not be flooding into Singapore,' notes economist Manu Bhaskaran from Centennial Asia Advisors.

'The problem is not our wage levels, which are reasonably high, but whether they are commensurate with our per capita GDP level.'

So are wage levels keeping pace with economic growth? Or is Singapore's low wage share of GDP an indication that workers have been losing out?


run road said...

We are supposed to be a developed country but in truth what PAP has enshrined is the modern day equivalent of a 15th century feudal society. Every other first world nation worthy of its salt has long evolved to a higher standard, discarding feudalism in the process.

The signs are unmistakeable - a nobility class maintaining rigid control over the lower classes with laws passed to keep that status quo. Why, Singapore even has its very own tacit emperor ('I'm the founder') who has assumed the divine right to rule and passed it on through heredity. Today's robber barons (read GLC, MNC) cream off the vast proportion of profits in their own little fiefdoms and all swear fealty to the emperor. Peasants and serfs exist only to serve. They're given just enough to stave off open revolt and not a penny more.

Ours is a Medieval Society wearing the trappings of a Modern Society. We voted for it. We will eventually pay the price in full.

Anonymous said...

it is obvious the exact reason that the PAP govt kept on importing foreigners so as to achieve high salaries for themselves and govt agencies and listed companies linked to temasek..they are as greedy as the US hedge funds.
...and why people have not noticed that...????

Fox said...

Our wage structure implies that households have a relatively small share of the GDP. From a macro-economics point of view, this means that it would be difficult to stimulate economic growth by stimulating domestic consumption. This also means that there is not much room for wages to come down i.e. wages are 'stickier' compared to the rest of the developed world.

sgcynic said...

Parliament often turned out as "directors' meetings" where ministers and MPs ended up being the PR spokesman of GLCs and private companies justifying their price "adjustments". Bewildering to see our leaders "on the other side", speaking out as though they have vested interests to see the hikes implemented.

Anonymous said...

Not satisfied with just keeping wage low, GST riase, PAP government has over the years plunder our savings (including CPF) by keeping interest rate below inflation level. Eventually, those thieves are going to blame us for not saving enough for retirement.

xl said...

I just watched Michael Moore's Capitalism movie over weekend.

Is appalling the state America is in & the similarities Singapore going down that path.

Whoa- Dead Peasant Insurance. We the masses have often been referred to as peasants as well. Similarly structure of Singapore is becoming like a plutocracy as well with 1% of elite > wealth than 95% combined.

Can understand why MM Lee scared of freak election & his send in army remarks cause the other 90+% votes can overthrow the elites as same situation in US.

Alan Wong said...

"Singapore : 1st World Country and 1st World Wages for PAP Ministers and all its cronies & 3rd World Wage Structure for the lesser mortals" would be a more accurate title.

I seriously think our PAP leaders has got some of their priorities wrong ie. spending taxpayers' money where it is not needed and not spending enough when it is most needed.

Examples are :

1) Defence spending increasing year by year as if Singapore is going to war with everybody!

Incidentally it gives the impression that someone is more than happy to spend because of hidden benefits and commission derived from defence purchases just like you get more rebates when you spend more on your credit card.

2) Increased spending on talents imported from foreign countries as if such winning honours is such an important image for Singapore. And then on the other hand our leaders play office politics with local sports talents!

What is there to be so proud of when our Shit Times headlines screamed "Singaporean Import from China beat Champion from China" ? Are we that vain to spend so much funds on producing fake Singaporean talents ?

3) Spending billions on artistic icons like Esplanade and promote foreign art shows which ended with mostly low public attendances and then on the other hand, have no qualms to squeeze on whatever miserable grants for local art groups just because they often poke fun at the authorities.

4) Losing billions of our sovereign funds in very risky investments as if our GIC/Temasek Holdings are 'run-of-the-mill' investment venture houses

5) Last but not least, putting wrongly qualified cronies in charge who doesn't mind spending millions by engaging false investment consultants who gave poor investment advice and don't give a damn whether our investment will turn sour.

Just imaging how all these billions could otherwise have been rightfully channeled for the benefit of Singaporeans with the possible option of :

- No need to worry about retirement
- No need to check whether eligible for medical subsidy
- No need to pay for GST
- No need to pay for TV licence fees
- No need to pay for car radio licence fees
- No need to argue whether HDB flats are affordable
- No need to argue whether PAP Ministers are worth the millions they are paid
- No need to challenge whether LKY is entitled to use the SIA plane for his sick wife
- etc, etc.

Anonymous said...

singaporeans are stupid masochists who love to get fked in the ass. they repeatedly vote in a govt which talks down on them, insults them, commits day light robbery with astronomical salaries, yet provides the lowest healthcare, pension and social security welfare benefits.

singaporeans deserve the shit they get because they are fking cowards who do not have the balls to stand up to an 86 year old megalomaniac, but instead vote him and his sycophants into parliament time and time again.

ain't no sympathy from me

Useless said...

I am looking for a leader that can show me the way and also to build roads that will lead me to wealth and peace.

The choice that is available to me now is unattractive. PAP or otherwise

Still looking.

Anonymous said...

The PAP leeders are the most self centred of all politicians,The pegged the commons wage behind productivity growth but theirs to GDP growth.
That way, lesser mortals like us have to work double hard just to get by , in effect contributing
to GDP growth and thus the leeders

Anonymous said...

This article by PAP's MSM whore is merely another propaganda piece to suggest that PAP is 'doing something right' and peasants and serfs should look forward to higher wages soon.

You can safely bet 100:1 that PAP will create new excuses to open the floodgates even wider **AFTER** the election. The PAP is completely bankrupt of ideas (and not to mention morals) and this is the only easy way out to 'more good years' for themselves.

Anonymous said...

the singapore dream is no more with the passing of late Goh Keng Swee.

more good years translated more foreigners imported, fattening the salary of the civil servants and ministers and cramping of salary increments.

they don't care about the people.
read: they care ONLY for themselves.

Anonymous said...

You should look at those govt sectors and GLCs. Their staffs get paid for doing nothing.

Anonymous said...

In Singapore, only salaries go down. The rent (translated into corporate profits) will always go up, regardless the economic situation.

Salary drops by 30%, it's called a recession. Salary goes up by 1%, it's a booming economy.

If the rent drops by 2%, it's a slump market.

Anonymous said...

The policies will not affect the bigger companies much as compared to the SMEs. They are prepared to let some SMEs go out of the market as I recalled that LSS said that SMEs that could not compete with the market should close down.

However, this will definitely not benefit the country as a whole. From what I know, in Japan, SMEs are the reasons for the sustaining the Japanese economy. The thing in Singapore is that much of the trade is ultimately directly or indirectly controlled by GLCs and larger corporations which are linked or have a bigger bargaining say (as oil and gas) in business. Most SMEs are already quite productive with many people wearing many hats.

I think the policies may just stifle productivity and the few SMEs may think to themselves by playing smart i.e. unethical or inefficient business practises, which in essence, may not create any value.

For example, the reason that Russia and China opened up their economy because they are failing. In Singapore, it is a more unique situation as we are very small and much of our businesses are in the guise of a market economy, which in truth, may not be.

I am pessimistic, but I feel the government is just paying lip service to entrepreneurship and creativity. In the long run, the Singaporean identity will be long way from being established, which in turn, lower the quality of life and lower the perception of the continued existence of being a Singaporean.

Anonymous said...

Today one of my PRC R&D Engineer resigned and left for Shanghai. This is not the first time I saw PRC returned to their native land.

The implication is we already lag behind major Chinese cities in term of overall employee satisfaction.

PAP thinks the can built a high tech hub by depressing pay of engineer on one hand, and mass producing engineer on the other. They think engineer can be productive just by controlling them with scholar who know only how to play politics.

Soon, we cannot even attract African Engineer.

Anonymous said...

When I worked in private sector R&D more than 10 years ago, there are 10% PRC.

Today, there are 10% Singaporean. And foreigners always commented that Singaporean are too soft or stupid to do R&D.


I would like add one more reason why employer prefer foreigner. Before we have a proper training system to put fresh grad into their place. Now, so much cost cutting and man power reduction that many companies short circuited many proper procedure.

Many cannot afford to hire fresh grad. They need experience guy to cover pitfalls of the short circuit system.

This is where foreigner comes in. Many have few years experience in home ground that boss covet.

That is to imply many of our engineering fresh grad will have no place to start off.

Anonymous said...

Just to correct, this insidious newspaper article. We are NOT a first world country yet.

Anonymous said...

I like the analogy written by run road at 31/5/10 08:35. I thought the same too.

Patiently waiting said...

Is it time to pay the ultimate price?
the price of our lives?

The divide grows wider everyday

Rich gets richer
and more mobile

Poor gets poorer
and gets stuck

Is the time right?
Is it time for a fight to the end?
Is my life worth giving up for?

If not, I will return to my warcraft game.. tell me when we have a leader who will lead me into the the valley of death.

Is it time yet?

Anonymous said...

Theory and practice are totally two different things. A lot of people are still chanting gdp growth as though it is some universal gold standard.

Like in almost anything, there are flaws too and they should also be voiced out as loudly as its benefits.

Anonymous said...

korea opposition won over ruling party with twitter movement. i wonder is it possible that it happen in singapore with such 'freak' election. Twitter has since caused many freak outcome everywhere. Obama election, iran civil unrest.

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