Friday, January 07, 2011

Face to Face : HDB & Workfare....

I found some time yesterday to watch the videos of the Face to Face town-hall style meeting between political leaders and a live audience organised by the TOC. It is a great effort on the part of TOC to get people together and speak openly about various issues. Here is the segment which I found most interesting during which the housing issue and income gap was discussed:

One of the members of the audience asked what is the solution for high housing prices and given that many people have committed to high prices how do we go about bringing it down. Various solutions offered were sell HDB flats at cost, form a different category of low cost flats and so on. I think the best answer was given by Dr. Chee when he suggested that we shouldn't try to formulate solutions without all the information at hand - get HDB to open the books first and enough intelligent people look at it and solutions will emerge. It is actually quite a hazard for opposition politicians to try to offer solutions to such a complex nearly intractable problem - they risk getting shot down and people poking holes is not wise to offer yourself as a target when the problem is caused by 3 decades of PAP 'asset enhancement' polices. How do you bring down property prices now that they have already rocketed? Very often housing bubbles deflate on their own causing plenty of damage - e.g. US housing bubble, both the high prices and the subsequent sharp fall in prices caused a lot of pain. The main thing is not to let prices go out of hand in the first place.

3 decades ago, in the 80s, Singaporeans had a good thing going - until the PAP messed it up. CPF contribution was 50% and cannot be used for housing. HDB's mandate was to provide affordable housing so they had to supply affordable flat without people touching their CPF money which would have been more than sufficient for a proper retirement. The surge in property prices was caused by the CPF liberalisation (according to this research paper[Link]). The housing loans to GNP ratio went up from 0.1 in 1980 to a whopping 0.49 in 1997 [Link]- a 500% jump! So CPF was emptied for purpose of buying homes and households became highly indebted - now housing becomes intertwined with retirement. The household debt has grown to $150B as reported a few days ago and the President of CCS warned that Singaporeans are in a "precarious" situation. If not for these policies, Singaporeans would have affordable homes (HDB's mandate) and enough CPF to retire comfortably. The large amont of money we paid for public housing has mostly gone into GIC controlled by a small group of highly paid elites who operate with little transparency - even the late President Ong couldn't get them to open the books fully. How does such an oversized sovereign wealth fund build up by the blood and sweat of ordinary Singaporeans over several decades suppose to benefit the people?

" Housing booms thus create only an illusion of wealth...."

- Daniel Gros, Business Times 1 Jan 2011[Link]

High housing prices only benefit those who are rich and have a few properties which they can unload during the good times, the (smarter) speculators who time the market correctly and property developers whose revenues & margins increase with rising prices. The average Singaporeans family has and needs one home to stay in - they will only benefit if they decide to emigrate which is something many think of doing but most won't. High property prices take away the ability of Singaporeans to save for retirement and reduces disposal income that ordinary Singaporean families can use to improve the quality of their lives. So what can govt do about high housing costs? The govt itself has suggested building more rental flats or build a separate category of flats known as "no-frill-flats" for those who are too poor to buy at current prices. These solutions take care of the poorest of Singaporeans by giving them inferior housing to differentiate from already sold to Singaporeans at high prices. Should the HDB bring down the price of flats? No. The property is used as collateral for loans and people stuck at high prices will be in trouble if the need to sell when the loan is still large. Also, the high prices has created an "illusion of wealth", it is politically unwise shatter this illusion - the last thing Singaporeans home owners want to hear from an opposition politician is the plan to force down his home price. It is hard now to do what should have been done i.e. selling closer to cost, pricing it according to growth in median income to ensure affordability, managing supply well etc. The best the govt can do now is to supply the market with new flats , cool the market with measures and learn the lesson in the next business cycle not to try to boost the market by taking away the measures - remember when the market was still okay the govt liberalised the CPF further by allowing it to be used for the 20% downpayment[Link]. Other things the govt can do is lower the loan tenure - housing price level would be higher if loans can be 30 years vs 15 years - do it when prices threaten to rise and then leave these measures there when prices soften. A long term rise in housing price level much faster than inflation & median income growth is highly undesirable. The best we can hope for in the current situation is for income to catch up with the current price levels assuming the govt can keep the market "cool" over a long period and the global economy grows. The most likely scenario, however, is prices fall in the next downturn and if the downturn is bad, Singapore can experience some of the more nasty effects of housing downturns in other countries given the high level of debt here.

The issue of Workfare was also brought up during Face-to-Face. Gerald Giam of Workers party said that he thinks Workfare is workable but the govt insists that a large part of it goes into CPF and the average Workfare receipient gets only $80 a month. A number of bloggers have also step forward to support the principle of Workfare in the past few months. I want to take this chance to explain more clearly why I don't support Workfare as a long term solution vs minimum wages. Workfare is easy enough to understand-a large number of workers in Singapore no longer make enough for basic living and Workfare supplements their wages. The PAP govt fouls up its own solution by insisting that a large part of Workfare goes into the receipient's CPF account[Link]. But what really is wrong with Workfare? Singapore has a 3rd world wage structure and the biggest income gap among developed countries. That is why we have so many people who cannot support their families working full-time jobs. How did we end up with a 3rd world wage structure? Import of cheap foreign labor that depressed the wages of low income workers and kept industries dependent on cheap labor as a large part of our economy. Once there is cheap labor businesses stop investing to improve productivity and Singapore's productivity was just 1% a year for the last decade [Link][Link]. Workfare helps to entrench the 3rd world wage structure by forcing workers to work for low wages in menial jobs in order get their 'workfare'. It provides no incentive for businesses to improve productivity... businesses being able to get cheap labor will be less motivated to improve productivity. By supporting Workfare as a solution , Worker's Partywill take the pressure off the PAP govt to adopt policies that will move us away from a 3rd world wage structure and narrow the income gap. In the long run, if we do not change course, more people will fall into workfare which is actually a state of poverty (some call it slavery[Link]).

Something is wrong with our economic system if a man working full time does not make enough for a decent living and to support his family. All other developed countries have a narrower income gap and minimum wages. Being able to implement minimum wages says a lot about a govt and the economic system of a country - it has managed to keep the wage gap narrow, move away from industries dependent on low wages, and kept the cost of living contained so that the minimum wage is not disruptively high. Under the PAP we have none of these pre-requisites in place and if the PAP continues on the same path, we will move further and further away from being able to implement minimum wages. Supporting Workfare as a long term solution does not get us back on track to fix the 3rd world wage structure because it gives the PAP the license to continue importing more cheap foreign labor....because they can now argue that Workfare takes care all those whose wages are depressed due to their policies. Workfare over time will create a new and growing underclass among Singapore because it takes away the incentives for changes to our wage structure.


Anonymous said...

To solve the high price HDB flats, the following should be considered:

When Permanent Residents buy resale HDB flats, Permanent Residents are to be taxed 20% of (market buying price+COV) at the point of buying and are taxed another 20% of market selling price at the point of selling. This is to reflect that HDB flats are public housing and are reserved for Singaporeans. Permanent Residents have to pay price premium for owning HDB flats. This is to ensure that by buying HDB flats, Permanent Residents really need to stay in HDB flats, if not they should not buy the HDB flats.

Permanent Residents HDB flats should pay 10 times annual property tax as compared to what paid by Singaporeans HDB flats. This is to reflect that by allowing Permanent Residents to own HDB flats, this is privilege and not entitlement. This is also to make up for the fact that Permanent Residents do not need to do National Service. The premium property tax is Permanent Residents "National Service".

HDB flats owned by Permanent Residents are not allowed to be rent out. This is to ensure that Permanent Residents own HDB flats for their own stay. If Permanent Residents want to rent out the HDB flats, this means that they do not need the HDB flats and therefore they should not own the HDB flats in the first place.

There should be 2 groups of public housing for Singaporeans to choose. For the same flat at the same address, Singaporeans have these 2 choices:
Singaporeans can opt to buy at market price and thus can sell at market price in future. The other option is Singaporeans choose to buy at cost price and can sell at (cost price + inflation) in future.

In the case of resale market, when Singaporeans choose cost based pricing, Singaporeans pay at cost price and the difference between market price and cost price is paid by HDB. When the same flat is sold by Singaporeans in future, Singaporeans will receive (cost price + cumulative inflation over the years of staying in the HDB flats). The difference between the market selling price and the (cost price+cumulative inflation) is returned back to HDB. So Singaporeans are happy with the cost based pricing and HDB also does not lose out.

Anonymous said...

As long as people don’t pitch tents to live on streets and open spaces, it is still OK. I read that there are tent cities in USA! And people even live in sewers!. Just google tent cities, live in sewers, USA to get the story.

Hence Singaporeans, even the underclass, are comparatively fortunate. And even if you are initially underclass or poor, but if you are capable and work hard, you can rise up. There is upward social mobility.

This is why our society is so peaceful and politically very stable. And no better alternative to the PAP. And for good reasons too.

Anonymous said...

@Anonymous at 7/1/11 13:13

You can read about the imperfections of the US society because it has a more open media than Singapore. The local media, like North Korea's, only dares to publish "good" stories. If you really think that Singapore is like what you read in the local media, I think there is no point trying to convince you otherwise. You are simply a hardcore PAP supporter (who probably prefers the status quo to go on, since it is in your favour).

Similarly, just like in North Korea, no unrest doesn't mean that the society is well. It just means a strong state control over the people.

Like what Lucky has mentioned, Singapore is no longer the same as before. It has declined, and is declining. It is out of the love of the country that Singaporeans are voicing out that the current policies are short-sighted and ill-conceived.

I can only hope that for the sake of Singapore, there are more Singaporeans like Lucky (who have a discerning mind of their own) than mere PAP lackeys like you.

Anonymous said...

@Anonymous at 7/1/11 13:13

For your information, please:

Anonymous said...

I actually see a lot of good constructive workable suggestions floating on the internet concerning high HDB prices. But so far i see nothing coming from the PAP govt. It is time to vote out this useless party.

Anonymous said...

One of the main causes of high HDB prices are caused by private property owners.

Current private property owners who currently own HDB flats have to choose whether either to keep the private properties or HDB flats. They are not allow to keep both of them at the same time. If they can rent one of them and stay on the other, this means they do not need both of them at the same time.

Some private property owners illegally rent out their HDB flats without meeting the condition of staying in the HDB flats for minimum 5 years. Of course, these private property owners do not register with HDB when they rent out HDB flats. These private property owners know that they will not be caught and they are laughing that they are collecting regular rental income without needing to pay any rental tax.

Current minimum 5 years staying in HDB flats before flat owners are allowed to buy private properties have to drastically changed to HDB flat owners must stay in their HDB flats for minimum 50 years before they are allowed to buy private properties.

If HDB flat owners upgrade to private property, this means that these people incomes and wealth are well above the mean and median of average working class who are staying in HDB flats, therefore they should not concurrently hold on to their HDB flats when they have already bought private properties. This ensures that HDB flats that are not needed by private property owners should be released into the market or sold to HDB. This also increase the supply of HDB flats into the market and benefits peoples who are in need of HDB flats.

Anonymous said...

Once the property price has gone up, it is extremely difficult to get it down. A dive in property price will stress the home owner, financial system and government revenue. Think of deflation.

Thus, the good solution will be the one which maintains the house price and push up the wage. How to do it ? Inflation.

Singapore dollar has a managed exchange rate. The government can debase the sing dollar against US dollar. This induces inflation in Sing dollar term. Thus, MNC or port operator here can afford to increase the wage of the resident without hurting competitiveness.

Every policy change has its winner and loser. With the debasement of S$, property owner and the saving account owner are stand to lose if their wealth are valued at US dollar term. but this is still better than outright property price clash. said...

I think no-frill flat is a bad solution. Sooner or later, the no-frill housing estate is going to turn to big slump, teeming with gangster, drugs, prostitute and failed-schools.

Look at France Clichy Sous Bois, a "no frill" department in Paris, one of most affluence city in the world, or some of the enclave of New York.

The solution to this problem is to reduce income inequality, to put honest hardworking citizen into middle class.

I do not see the reason why people has to be penalized just because they are unable to study. I do not see whey citizen who work as road sweeper or garbage collector must earn $700 a month while the fools like Ho Ching, property flipper or bankster pocketed millions.

By giving honest and hardworking people decent income, we will not need any "no frill" housing.

And to deal with high property price problem, I have a preliminary suggestions. (I have not thought through its full consequences though)

We can increase the affordability of housing by increasing the salary of citizen by average 2 times. The lower income CITIZEN ONLY, must see the highest marginal increment while asshole like million dollar minister, must take a pay cut.

To offset burden to MNC, we can at the same time devalue Sing dollar appropriately, set power tariff at roughly 5% above generation price.

We can also force bank to lend to business and 1st time property buyer at 0.1% above the interest rate of Singapore government bond.

I think everyone will be happy will this plan. Only elites are not happy.

Anonymous said...

Hi Lucky,
I’m a student who have been reading your blog for the past two years. Recently, Ive been reading online blog entries on income inequality in sg and it’s true that there’re a lot of elderly cleaners and tissue paper sellers around today esp when I’m dining at Bedok hawker centre. But with existing schemes like Comcare, Workfare and Public Assistance Scheme to help the needy, I really don’t understand why it’s not helping this bad situation that has been ongoing for years. Why are these cleaners not going for workfare? Are they not informed or are they not eligible? I thought the govt has been pumping in $ for workfare all this while?("The Community Care Endowment Fund, or ComCare for short, represents the Government’s commitment to do more for needy Singaporeans. Since the launch in 2005 by the Prime Minister, it has disbursed more than $200 million to help 160,000 needy Singaporeans, and the government has been progressively topping up the Endowment Fund which now stands at $800 million." taken frm MCYS News Dec 3 2010) I dunno much about this but is 800 million too little to provide safety net for the society? So wat's the solution to the unequal income distribution in sg? Cease the inflow of foreign labour? Give more welfare and bcome a welfare state? Raise wage(i tot that's what WIS is doing)? Sry for the bombardment of qns...I just wish to understand Sg current affairs better. Pls enlighten me. Thanks

Anonymous said...

@ Anonymous (student) 7/1/11 17:16

In the meantime, please also pose the same questions to our local media and PAP politicians. I'm sure they'll be happy to share with you their views on the effectiveness of the existing measures to address the wealth disparity and social problems in Singapore. (If they say that the measures are working, please ask them to explain the dissonance with what is commonly observed in Singapore nowadays.) If you do meet our local journalists, please ask them to provide serious reporting on the situation in Singapore, rather than merely serve as the PAP newsletter. Thanks.

Anonymous said...

@ anon 7/1/11 17:53

Actually our local journalists tries their best but its well known that its the editors and ISA agents who decide what to publish.

Anonymous said...

Mr Lucky

Workfare -> MOF.
Work Permits -> MOM.

Tharman is doing an excellent job but he is not God and has many constraints thanks to people like YOU doing sweet FA.

The other guy ... I dun see u flaming him ... correct skin color?

Anonymous said...

in other news, POTUS Obama declares war on the bad banksters->

Dun think so.

Anonymous said...

To annon(7/1/11 17:16):
Of course it is helping, but it is not enough. For example if you had a debt of $1000 and I give you $5, that surely helps but it is just too little. The jobs should be able to adequately provide enough income for the workers to live "minimally".
"Since the launch in 2005 by the Prime Minister, it has disbursed more than $200 million to help 160,000 needy Singaporeans" Work out the math and that is 1250 per person per 5 years!!! Is that enough? Why don't you tell me! Is 800million enough? You sure know the answers. How much is your pocket money? Is it enough? I think ceasing the inflow of cheap foreign labour is a nice one. They say this will decrease the competitiveness of the companies. My say is that if the companies is so sucky that they have to depend on cheap foreign labours to compete, they deserve to be shut down. Minimum wage is great too and that would increase productivity but at the same time increase unemployment. That would be sad. The profits from taxes from gambling(casino of those 4D, toto and football gambling) cigarettes and alcohol i think amount to more than 10 billions. Surely spending 10% of it to provide a little welfare isn't that hard.

Singapore Man Of Leisure said...

It's a dilemma.

If I do not own my own HDB yet, I will join the vocal voices that say housing in Singapore too high.... Hoping it will come down to an affordable level.

If I own a HDB already, then I will join the silent majority and be quietly pleased that our net-worth is increasing steadily.

Anonymous said...

Still, high prices for basic necessitites is an excellent strategy to ensure that the populace work harder, longer, better, etc.

Like someone once said, if you can deprive someone of food, shelter or health care services, you have control, and control is what all governments want (PAP or otherwise).

Anonymous said...

If I do not own my own HDB yet, I will join the vocal voices that say housing in Singapore too high.... Hoping it will come down to an affordable level.

If I own a HDB already, then I will join the silent majority and be quietly pleased that our net-worth is increasing steadily.

Do you have a son? Are you interested in canibalising your son?

Anonymous said...

High price of HDB flat ???
Solution ???
Created by who ???

Who suffer ????
May be the current owners who bought the high price flat if not our next generation.

Loan period ???
From previously 15-20 years to current 25-30 years.
Increased in interest expenses.

Ending ???
Ordinary people:
Work and work, become a slave.
Get marriage but no kids or 1 to 2 children, declining in population.
Both spouses working, children problems ??
Worst still, if retrenchment then become family problem.

CPF ???
Not enough for retirement, mostly used up for housing

Inflation ???
Saving interest rate of 0.2%, how to moderate and forget about fighting.

Country or Hotel ???
I really do not know.

Anonymous said...

i bought my first resale 3 room hdb flat at 166k, after deducting my cpf i still have to pay 25 years for half of the 166k with interests. i don't even think my salary and my cpf contribution will remain constant during these 25 years. So i ask all of you here, is this called affordable housing? i call it slavery, i call it bullshit that end of the day even if i managed to pay my flat completely, i still don't own the flat, that 99 years expiry thing. Why are we slave for a flat that we "rent" from hdb for 99 years?

Anonymous said...

When will LKY be in jail for all his crimes against humanity?

That will be the day where Singaporean got back their freedom.

Anonymous said...

""Got hands got legs, but cannot earn enough to even just support oneself, and when u may hv dgrees or diplomas;, let alone buying an expensive HDB""

Who shd be ashame of??

Anonymous said...

This is somewhat out of topic.

To me right now, Chiam See Tong seems to be a mole of PAP. Chiam has been observed to create trouble for opposition party during the past decades, especially when election draw close.

SDP was suffering from internecine trouble until Chee Soon Juan took over. Today SDP is a fully united party, without any scandals.

For the past few months, seems that Chiam is manufacturing one after another scandals for the whole opposition camp.

Anonymous said...

Anonymous said...7/1/11 13:13

Abt the tents, don't worry. you won't get to see many here. Either they will "discourage" tent building or they will fine the tent builders. So you won't get to know the extent of the problem of the poor.

Like what they say, no news means good news. Likewise, no visibility of problems means no problems - as far as the problem can be hidden from view.

Por Alien Party said...
Woman who tried to open plane door given discharge
By Shaffiq Alkhatib | Posted: 07 January 2011 1850 hrs

SINGAPORE : A 28-year-old Irish woman, accused of trying to open a door of a Singapore Airlines aircraft while it was still in flight, has been given a discharge amounting to an acquittal in a district court on Friday.

Diana Mary Scanlon, who is a chef, was charged on December 15 with trying to open the door of the plane at around 6.50am on November 30 last year.

Flight SQ327 was then flying from Munich, Germany, to Singapore.

The slim brunette looked relieved as she stood in the dock on Friday and she thanked the judge before taking her leave.

No reasons were given for her discharge.

Those who threaten the safety of an aircraft can be jailed up to a year, fined a maximum of S$5,000 or both.

Anonymous said...

To the person writing about the tent cities. In Singapore, if you don't have your own home, or a rental flat (which you have to wait 2 years) or some friend/relative's home to stay. You have no where to go. You can't even pitch a tent because the police will chase you out. (Al Jazzeera covered it some time back.) You have absolutely no where to go. Remember those shacks by the railway track last time. They have all been cleared. I am beginning to think slums are not so bad afterall, at least there is some place for the poor to go to. In Singapore there is no place to go.

Anonymous said...

If you work all day and still not earn enough to live on there is definitely wrong with the system. Companies will definitely want to pay less for everything including pay. If they are forced to pay more, they will cope or go bust, I think many companies can survive still.

Also the people who can be on workfare are those that are the least educated, least vocal. You think that 60 year old lady who does not know english knows how to apply for workfare and fight for her rights? They are the ones who do not know how to fight for their rights, and they are the ones who will be most exploited by the employers. They are also not allowed to go on strike. So how can you say that it is a fair system?

Anonymous said...

If you work all day and still not earn enough to live on there is definitely wrong with the system. Companies will definitely want to pay less for everything including pay.

The problem with our wage issue is PAP does not seem to have problem going back to slavery.

Already I knew employer forcing job seekers to sign a 2 year punitive bond for "on job training" knowing that people will quit on first day when exposed to their slave shop and backstabbing culture.

If we remain cooperative and meek, one day we may just wake up and see 80 hrs week, $1/hr salary , indentation pushing into our throat.

PAP will then tell ST the whore to write that everyone is living in the biggest paradise on the earth.

Anonymous said...

An HDB owner who has lived in the flat for 5 years is allowed to purchase another private property without disposing the HDB flat , BUT
A private property owner must dispose the private property if he intend to acquire aHDB flat.
What is the fcuking rationale behind this fcuking policies ?
Is Mah aware of this ?

pallisades said...

why bother with small money HDB investments. i make a cool 10 million selling my 2 st regis apartments to foreigners.

I am holding out on the marina bay suites investments. i plan to use one to impress potential mistresses and sell the other 2 when it double in 2 years time.

Truly rich singaporeans will live in landed oasis. our houses are designed ina way that you cant hear and see your neighbours. anyway most of it is vacant because the owners are indonesian.

condos are unfit for living with the dreaded need to use communal space and see those underachievers trying to network all the time. it is only use an investment for suckers to unload suckers

Wise up my citizens, think bi, forget about HDB and all that stupid rules. its time you guys make your cash on the property market and when you are rich, you can just sweep the poor people under the carpet and forget that they exist. Out of sight, out of thought.

Au Revoir

Anonymous said...

Work fare is not effective and helpful for the lower income in the face of current cost of living. The amount provided is too small and the critetia is too stringent.

Anonymous said...

thanks for share.