Next Time Someone Says Singapore Cannot Have Minimum Wages Or Higher Taxes

The next time someone tells you that we cannot have minimum wage or more progressive taxes in Singapore, here is what you tell them.

Do you know that even though the Ministry of Finance might say that, “Singapore’s individual income tax schedule is progressive, with higher income earners paying proportionately more income tax,” but in actuality, Singapore’s tax is a lot more regressive than many countries (Chart 1). In fact, Singapore’s tax is even more regressive than even developing countries like Indonesia, Thailand, Philippines, Vietnam, Pakistan, Brazil and Argentina.

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Chart 1: Progressive Taxation and the Subjective Well-Being of Nations

Not only that, the highest-income earners in Singapore earn one of the highest incomes in the world (Chart 2).

Rich Earn High Wages

Chart 2: ECA Global Perspectives National Salary Comparison 2012

The highest-income earners also pay one of the lowest taxes in the world (Chart 3). Our ministers, who have their salaries peg to the richest professions in Singapore, are one of the highest-income earners in Singapore.

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Chart 3: KPMG’s Individual Income Tax and Social Security Rate Survey 2012

What is more shocking is that the poor in Singapore actually pay higher overall taxes (tax + CPF) than the rich (Chart 4)!

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Chart 4

Doesn’t take a genius to realise that this is why Singapore thus has one of the highest income inequality in the world.

Because of the seemingly low taxes that we have, the government has used it as an excuse to have Singapore have one of the lowest public spending among the developed countries (Chart 5).

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Chart 5: 2013 Index of Economic Freedom

Now, look at Chart 6, when we chart the GDP per capita of each country against their government spending (Chart 5). You can see that even though many of these countries have lower GDP per capita than Singapore, their governments still spend more than the Singapore government. But why is it that these countries deem it necessary and a right to spend more on their people, whereas the Singapore government chooses not to do so? Singapore would most possibly be the only economically-advanced country which is so rich yet refuses to share the wealth that its people earn with its people – where it’s kept away is anyone’s guess.

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Chart 6: GDP per capita

In fact, in Chart 7, you can clearly see that, generally, the the higher the GDP per capita that a country has, the higher the public spending as a proportion of GDP.

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Chart 7: World Health Organisation’s Implementing Health Financing Reform report

Yet, why is the Singapore government so stingy? Who are they saving for? In Singapore, the highest-income earners earn the highest incomes and pay the lowest taxes in the world. There is no maximum wage imposed on them.

If the government would like to take such good care of the richest among us, could it take good care of the poor as well? Can the government implement a minimum wage?

In Chart 8, you can see some of the countries with minimum wage and their minimum wage amounts.

Chart 11 Minimum Wages Around the World 2012

Chart 8: The Atlantic How America’s Minimum Wage Really Stacks Up Globally

And in Chart 9, we chart the GDP per capita of the countries according to their minimum wage level.

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Chart 9: GDP per capita

Wait a minute! I thought that the government has always said that if we impose minimum wage, our economy will collapse and businesses won’t want to invest in Singapore?

Then why is it the case that the countries with the highest minimum wages are also one of the richest countries? Why are businesses still investing in them?

You see, the reason why the government doesn’t want to impose a minimum wage law isn’t primarily because businesses won’t invest. There are many businesses which have gotten used to the ethical practices of the other developed countries, and they would do what they need to, to respect the laws in those countries. The reason why there’s no minimum wage in Singapore then? Well, for the Singapore companies owned and based here, where do they predominantly earn their profits from? If they increase our wages, where will their profits go to? So, in order to earn from you, they have to depress your wages and increases prices, so that they can earn as much as they can.

And who own this Singapore companies?

Now, let’s compare these countries with minimum wages to their productivity. Again, you can see in Chart 10 the productivity of these countries charted against their minimum wage levels.

(I have included the darker orange bars of countries which do not have minimum wage but which have one of the highest wages in the world because of strong labour unions which collectively bargain for higher wages for the workers in these countries, even when there’s no minimum wage. Not all the countries in Chart 8 are included here because of the lack of available corresponding data.)

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Chart 10: Bureau of Labor Statistics (BLS)

Surprise, surprise. I thought that we should not be given higher wages until we have higher productivity? But these workers in countries with higher wages actually also have higher productivity!

Which comes first? Higher wages or higher productivity? What do you think? The wages of Singaporeans have been stagnating for more than a decade now. Productivity hasn’t been increasing either. What do you think is the reason?

Now, let’s take a look at taxes. In Chart 11 you will see the taxes of some of the countries lined up. You can see that Singapore has the lowest individual income tax rate.

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Chart 11: KMPG Individual income tax rates table

Next, in Chart 12, take a look at the GDP per capita of these countries charted against their tax levels.

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Chart 12: GDP per capita

Again, you can see that the other rich countries have high tax rates but are doing economically well. What’s more, their GDP per capita is lower than Singapore’s. Yet our government keeps telling us that if we have higher taxes, our economy will go down. What is happening here though? The countries with high taxes are actually one of those with the highest GDP per capita in the world as well!

You see, our government hasn’t been telling us logic. Like I had shared on minimum wage, if we increase taxes, who loses out?

We cannot have higher taxes. Why? Will the rich in government want to increase taxes on themselves?

Remember, our politicians are high-income earners and the highest paid politician, by any measure, in the world.

But won’t minimum wage and higher taxes reduce our competitiveness, like the government always say? Take a look at Chart 13, where the score for the Global Competitiveness Index is charted against the tax rates (Chart 11) of the countries.

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Chart 13: World Economic Forum The Global Competitiveness Report 2012–2013

Interesting, isn’t it? Generally, you can see the countries with the higher tax rates are also the ones with higher competitiveness.

How about, will higher taxes reduce our innovativeness? Take a look at Chart 14, where the score for the Global Innovation Index is charted against the tax rates (Chart 11) of the countries.

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Chart 14: Global Innovation Index 2013

Again, some of the most innovative countries are also those with the highest tax rates!

But yet, our government continue to say that we cannot make taxes more progressive. Businesses will go, we will lose our competitiveness, we will lose our innovation. Really?

If so, why not reduce rentals as well? Why are rentals so high in Singapore? Hasn’t it been more commonly heard that because of the high rentals, people in Singapore fear that if their business fails, they won’t be able to recover or even pay for the losses, and thus they choose not to innovate.

If we really want to spur innovation and ignite competition, why doesn’t the Singapore government reduce rentals?

It was never about being competitive or innovation! It was never about our economy collapsing!

If we reduce taxes, who earns? If we depress wages, who earns? If we increase rentals, who earns?

Who earns?

At the end of it all, who earns? Well, definitely not lower-income Singaporeans. They have seen their wages been depressed. They have seen our purchasing power drop, while prices have shot through the roof. Well, who earns?

Is the government taking care of you?

Not surprising then, that Singapore has the highest income inequality in the world, is it (Chart 15)?

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Chart 15: OECD An Overview of Growing Income Inequalities in OECD Countries: Main Findings, Department of Statistics Singapore Key Household Income Trends 2012 

The Gini coefficient in Chart 15 is charted against the tax rates (Chart 11) of the countries. You can see that the countries with higher tax rates are also the more equal ones.

What if we chart the Gini coefficient against government spending in Chart 5? Chart 16 is what you get.

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Chart 16: OECD An Overview of Growing Income Inequalities in OECD Countries: Main FindingsDepartment of Statistics Singapore Key Household Income Trends 2012 

Again, the countries with higher government spending are also the more equal ones.

Our government has kept saying that they believe that they would like to provide better education for Singaporeans so that we can become more upwardly mobile, right? But, in an article by Dr Ho Kong Weng for the Civil Service College Singapore, he said that, “as the Singapore economy has matured to a lower steady-state growth rate, with average years of schooling reaching that of advanced countries, upward mobility in education is likely to be diminishing.

More importantly, it has been shown that countries with higher inequality have lower mobility. Thus you can see in Chart 17 that because Singapore has one of the highest inequalities among the developed country, Singaporeans also have lower social mobility.

If the government doesn’t fix the unequal situation in Singapore, doesn’t this goes right smack against what they say about wanting social mobility for Singaporeans?

Countries with high inequality have low mobility http inequality.is fixable

Chart 17: Inequality.is

Clearly, it has been shown that if we make taxes more progressive and tax high-income earners more, it will not reduce Singapore’s competitiveness or innovativeness. If we increase wages, it will not result in lower productivity. In fact, productivity will increase.

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So, why doesn’t the government want to increase wages and reduce taxes? The reason is not because these will cause the economy to collapse, is it?

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In fact, if we make taxes more progressive and increase public spending, this will allow Singapore to be a more equal society. So, why doesn’t the government want to do it?

And thus, because Singaporeans earn the lowest wages among the developed countries, Singaporeans also have the lowest purchasing power (Chart 18).

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Chart 18: UBS Prices and Earnings 2011

The question then is – should we not pay people higher wages because the economy will stagnate, or should it be that when a country gets richer that we should pay people higher wages? I think the answer is pretty clear. Quite clearly, if we do not want to pay the people higher wages, then we should not let the economy grow in the first place.

But, wait – you mean to tell me that whatever the government has been telling me was not real after all this?

What happened to having the most honest government in the world? What happened to trusting my government through and through?

Wrong era. The PAP of dignity, honesty and respect died a long time ago.

The PAP of today is a corporation. This we know. But the statistics? Here you go.

So, some people are still holding on to hope that they will change and set things right. They had more than 10 years. Now, they have two more years more. Do you think they will change?

And which is why they are producing 30 hours of documentary for Singapore’s 50th anniversary in 2015! Make people think that they are happy and all will be well without actually fixing what needs to be fixed.

What say you? Continue to pretend that all is well or take a stand and make a change?

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9 comments

  1. Attcch

    If the PAP government were to increases wages (screw GLCs) and/or decrease rentals (screw itself), the generals will revolt. Think those generals parachuted into our statutory boards and GLCs know ow to make profits in a genuine market economy? If so they would have grown wings and venture overrseas successfully. If so, we could have parachuted more scholars to grow more profitable businesses. If so, the professors teaching business management courses in the universities would be making big bucks managing their own businesses. One needs to have the acumen, those cocooned in the PAP system are hardly the right candidates.

  2. Anthony Sim

    Someone commented recently that if the construction industry were to pay labourers $4k per month, Singaporeans will not hesitate to to get their hands dirty, contrary to the believe that Singaporeans are afraid of hard work. But this was rebutted by a commenter who believes we should always seek for cheap labour in order to keep the cost down so our HBD will be more affordable. He further added that if such were the case, everything will cost more as a result of this.

    I can see the point made by this person about keeping labour cost in control. This can not apply to the construction industry due the projects in Singapore or even in the service industry. If it was a manufacturing concern, then it will make sense to relocate to a developing country where wages are lower or cheaper .

    Most people fail to see that by employing and depending on foreign workers, we are subjected to many disadvantages for the Singapore. Apart from my believe that employing cheap labour is an exploitation on humanity, unfortunately condone by our Government, it has become a stigma for discontent amongst us for having to share whatever available space there is in an already densely populated island.

    Being dependent on these cheap/cheaper labour affects our social structure and does not help in our economy at all.

    Firstly, it creates an artificial wage filler depriving average Singaporeans from actually earning a decent real wage thus widening the gap further. Then again, I argue the fact that this foreign workers do not actually contribute effectively to our economy. Why? For the simple reason that most of them with the little they earn do not spend all their money in Singapore. They send most of their earnings back to their home country. This does not boost our local economy.

    Alternatively, whatever Singaporeans earn, say for example, $4k for labourers or minimum wage $2k for any unskilled jobs they will tend to spend more. As long as monies are spent locally, everyone stands to benefit. The local economy will benefit. The government will benefit. This is a more sensible approach even if basic necessities may cost a little more.

    It is a win win situation. Happy people, happy government.

    • samuel

      Unfortunately, the PAP MPs are also business owners and directors. Any increase in labour cost will make them lose, not win. So, even if what you wrote is true, it is not going to happen as long as PAP is in power.

  3. Attcch

    If you buy an expensive phone, you most probably will end up buying accessories to protect/enhance your phone. Go for the cheap low end ones, chances are they are disposable. Discarded without a thought. Same with cheap foreign labour. Still wonder why Singapore’s productivity stagnated over the past decade?

  4. JTWY1987

    The cost of construction of HDB flats is very likely minimal in comparison to the land cost, so this excuse of using cheap labor to keep flat prices down holds no water.

    I’m afraid that Singaporeans have been infantalized by the government and its propaganda for so long, that we won’t be motivated by a minimum wage. State policies and our education system have over the years eroded independent thought and critical thinking, so much so that these two traits are now an exception, not the norm.

    It will take at least another few decades to change the mindsets of our people after successfully instituting economic reform, and in the meantime our economy will suffer. Are we prepared to make this sacrifice in undoing the damage the PAP has wrought on our country and its economy?

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