Do Rich Countries Like Singapore Pay Higher Wages to Their People?

Do rich countries pay their people higher wages? Logically, the richer a country is, the higher the people’s wages should be, right? Let’s take a look.

In this article, you will see several charts. I’ve structured the this article to make it very easy to understand the flow. Please take some time to read through it.

In Chart 1, from left to right, you can see the richest to the relatively less rich countries (as measured by their GDP per capita) represented by the orange bars. Singapore is the one of the richest countries in the world. In this chart, Singapore is ranked second.

Interestingly, except for the top 4 richest countries (where the arrows are pointing), the majority of the countries in this chart have higher national average salaries, as compared to their GDP per capita. Of course, we might argue that since the top 4 richest countries are so rich, perhaps even as they already have very high average salaries, these still cannot match up to their GDP per capita.

However, if you look at Singapore and Hong Kong, the national average salaries are actually significantly lower than the GDP per capita.

20130328-234556.jpg

Chart 1

(Source: Human Development Report 2013, BBC Global migrants: Which are the most wanted professions?

For a clearer picture, you can see in Chart 2, where the countries are ranked, from left to right, according to their national average salaries. You can see that even though Singapore has the second highest GDP per capita, we actually have the third lowest average salary.

Even though Luxembourg has a much lower national average salary than their GDP per capita, they still have the second highest national average salary in this chart, which means that their people are earning wages which are more commensurate to the wealth of the country.

For New Zealand, they might have a lower national average salary than Singapore but unlike Singapore, this matches their GDP per capita.

20130328-234633.jpg

Chart 2

In Chart 3, you can see the difference between the national average salaries and the corresponding GDP per capita of the countries. You can see again, that for most of these countries, they have higher national average salaries than the GDP per capita. Norway has a lower higher national average salary than their GDP per capita but this is a reasonable US$3,000 difference.

For Singapore, our national average salary is US$22,199 lower than our GDP per capita.

20130328-234714.jpg

Chart 3

In Chart 4, you can see this difference, expressed in percentage terms, where Singapore’s national average salary is 41% lower than our GDP per capita.

20130328-235015.jpg

Chart 4

But why do Singaporeans get paid comparatively low salaries, even though we are one of the richest countries in the world? Where is all this money going?

If you look at Chart 5, we actually have the second highest income inequality in this chart, and actually among all the economically developed countries, after Hong Kong. Our high income inequality explains why even as the country is rich, the wealth isn’t equally distributed, where our comparatively low average salaries show that there there is a large pool of lower income earners, and a group of super-rich who are amassing the wealth.

20130328-234829.jpg

Chart 5

(Source: Gini Coefficient OECD Factbook 2011-2012: Economic, Environmental and Social Statistics, Central Intelligence Agency The World Factbook)

On the flip side, you can see in Chart 6 that due to our comparatively low national average salaries and a huge income gap where relatively more Singaporeans are earning lower wages, our purchasing power is also one of the lowest in the economically developed countries.

20130328-235154.jpg

Chart 6

(Source: World Economic Forum The Travel & Tourism Competitiveness Report 2013)

Yet, for one of the richest countries in the world, isn’t it surprising that we have such weak purchasing power? Logically, shouldn’t we be able to afford more?

If the people aren’t able to have a respectable purchasing power, where is the money going? Or rather, what do people have to spend on?

In Chart 7, you can see that when it comes to healthcare expenditure, Singaporeans have to fork out their own money to pay for 64% of our bills – the highest among the economically developed countries. Even America, with the next highest private expenditure, an American pays only about half of their healthcare bills.

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Chart 7

(Source: World Health Organisation World Health Statistics 2012)

So, on top of having a comparatively low average salary, where the wealth of our nation isn’t flowing back, Singaporeans are also made to pay more for their healthcare needs, stretching their already low salaries further.

In Chart 8, you can see that our low wages and the high cost of living in Singapore has thus led to a situation where we have the lowest retirement incomes among the economically developed countries in this chart. Even New Zealand, which has a lower national average salary can afford to save more than Singaporeans.

20130328-235518.jpg

Chart 8

(Source: Yours Truly Singapore Blog: Tharman gives assurance on CPF retirement savings)

Coupled with high costs, you would understand why, with our meager incomes, the problem of livelihood would be much further exacerbated among retiree Singaporeans. It is thus not surprising when our older Singaporeans are left without a choice but to work as cleaners and labourers even as they should be allowed to live their old age pursuing activities which they have long postponed, because of work.

The often-argued point is that Singapore simply doesn’t have enough money to increase our social welfare spending because of our low taxes, so we cannot afford to increase our spending for the poor, or for further government expenditure on our healthcare bills, for example.

But is this so?

Chart 9 shows that among the countries compared, we have the highest surplus, as a proportion of GDP.

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Chart 9

(Source: The World Bank Data)

Chart 10 shows that we have the second highest reserves, as a percentage of GDP.

20130328-235622.jpg

Chart 10

(Source: Human Development Report 2013)

In absolute terms, this means that Singapore has nearly $260 billion in our reserves, which is third among the countries compared, as Chart 11 shows.

20130328-235812.jpg

Chart 11

(Source: International Monetary Fund Data Template on International Reserves and Foreign Currency Liquidity)

So, do we have enough money? Clearly, we do. Clearly, the government has sufficient, and in fact, much more than just ‘enough’ to provide for the social welfare needs of Singaporeans. Yet, our government continues to allow the people’s wages to be depressed, even as the rich gets richer, and the people are expected to fork out more of their diminishing wages on the higher and higher prices of goods and services.

Yet, all this time, our political leaders earn significantly higher salaries than the average Singaporeans, as you can see in Chart 12. Our prime minister Lee Hsien Loong earns S$2.2 million annually (not inclusive of bonus), which is several times higher than the next highest paid political leader in Hong Kong. And as someone on my Facebook had pointed out, if you look at the salary per capita, our prime minister is actually paid several hundred times more than the American president.

20130328-235847.jpg

Chart 12

So, by now, you can see in Chart 13, that Singapore is one of the richest countries in the world, in terms of GDP per capita (orange bar), yet we have one of the lowest average salaries in the economically developed world (green bar), which is not on par with our country’s wealth. Not only that, even as a very rich country, our people have the lowest average retirement income (blue bar).

20130328-235931.jpg

Chart 13

Such shameful outcomes can be explained in Chart 14 where there is a considerably high income inequality (green bar), which results in Singaporeans having low average salaries, and coupled with high and rising costs, one of the lowest purchasing powers (yellow-orange bar) as well.

20130329-000013.jpg

Chart 14

Finally, in Chart 15, we can see that even as our government allows the average salaries of Singaporeans to remain low, they have allowed themselves to earn the highest political salaries in the world, several times more than the next highest paid political leader.

20130329-000412.jpg

Chart 15

(Source: Yahoo The 7 Highest Paid Political Leaders in the World (2013))

Not only can we see clearly where the high income inequality arises from and how the government sets the precedence as to how the rich would then learn to exploit the rest to further divide society, this also brings to fore a much larger question – why does the government allow the people to suffer while they continue to sit on their high pedestal, denying Singaporeans of a respectable livelihood, where the people have the lowest purchasing power and retirement incomes (among the economically-developed countries) – and for the richest country in the world!

The question to ask is, for a country so rich, why is the money not being shared with the people? Why is it not used to lessen the load of the people but why is the government stifling the financial health of the people even when they are old and/or sick? Why does the government deem it fit to shower themselves with such extravagant salaries but leave the people in the lurch to fend for themselves?

Indeed, for the longest time, our government has gone on the regular discourse that the people should be independent and take care of their own needs i.e. the people should pay for their own needs as far as possible.

Yet, how can self-sufficiency come to realisation when the government doesn’t allow the people’s wages to rise in tandem with increasing prices and the cost of living? How can the people be expected to fork out more for ever-rising healthcare costs, where their purchasing power is an embarrassment to the wealth that the country has amassed, and where the government continues to hide from its responsibility to protect the people?

All is not well in Singapore. Of course, Singapore is still comparatively much better off than most economically-less developed countries, at least in the material sense. Yet, for a country which is ranked the least happy people in the world by Gallup, what does the material wealth mean, when the people are emotionally and psychologically in such dire state of poverty? What does money mean when deep within, we are empty individuals who snide at others because of our inability to find joy within ourselves that we have to hurt another, just so that we can even be slightly compensated.

Where is our government’s morality in this? Do they not care for the people’s well-being at all? For political leaders who earn millions, has the joy that they have afforded themselves to buy blind them to the reality of the inner poverty that the people face?

The immediate solution is for the government to ensure that people are paid fair wages, where they are able to afford a respectable living, in the face of rising costs. However, if the government is unwilling to do so, it should ensure that prices do not rise or should rise in tandem with the increase of wages, or lack thereof. If the government continues to squeeze the people on all fronts, by depressing wages and increasing costs, this will lead to a very depressing state of health for the Singaporean society. Budget 2013 had taken baby steps to resolve our deep-seated problems of more than a decade-old but the question is, are they enough?

A society which no longer believes in its government and in the government’s direction doesn’t bode well for the long term unity, strength and strategy for the country. The people will stop working with the government and in the long run, the people will lose their drive and motivation, and we will lose our productivity and growth.

Singapore is in dire need for bold and dynamic changes to kick start our chugging engine. Our government is losing its moral authority at an ever quickening pace, where the trust among the people towards it is eroding at light speed. Such is the state of being when a government forgets its responsibility towards the people that had put it in power.

It is not sufficient at this point for the government to continue to make piecemeal changes when what we need are bold, reformist moves which understands where the root of the problem is, drill down to the problem and provide the necessary impetus to spur Singapore and Singaporeans into a new era of reformist dynamism and reignited passion and energy.

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20 comments

  1. stefanbreakdesign

    I agree with a lot of your points, but wouldn’t be the fact that there is no minimum wage in Sgp and HK be distorting the stats compared to most of the countries being compared to?

    • My Right to Love

      Hi,

      Actually in the Nordic countries, they do not have minimum wages as well. Yet they are on the other end of the spectrum, with the lowest income inequality and highest purchasing power.

      The key to fair wages isn’t in whether there’s minimum wage – it is about whether a government treats its people equally.

      And in the case of the Nordic countries, they have strong unions which truly represent the people and help to collectively bargain for fair wages for them. The people also respect the rights and equality of one another and this is enshrined in their wages.

      In Singapore, our government has stunted the growth and rights of the unions, so that instead of fight for the pay of the workers, they pander towards the government’s objectives, which is pretty much aligned to business objectives of profit-making and thus this has marginalised the rights of workers as well.

      Also, Hong Kong has actually implemented a minimum wage law in 2011. This has seen the rights of the lower-wage workers increase as they were able to obtain higher and more competitive wages.

      Thanks!

      Roy

      • stefanbreakdesign

        Thanks for the clarification. I have worked and lived in Sweden, and even though there is legally no minimum wage, the strength of their unions and their constant bargaining, ensures fair minimum wages for each sector. But yes, I know that Singapore has said that they will not follow the Scandinavian model and in continue to put the interests of Capital over Labour in the hope that the economic benefits will somehow magically solve all Singapore’s social problems. It’s quite extraordinary how much value Singapore can extract from it’s citizens, it’s about time that these people get a fair return.

      • My Right to Love

        Hi,

        And yes, it’s amazing how the Singapore government can extract so much value off its people, without nary a whimper in the past. This is now changing though how much value will they transfer back to the people and will it be fair?

        The problem is that this government owns between 40% to 60% of the Singapore economy, including the companies they own through Temasek. Thus they are very resistant towards implementing a minimum wage as this would eat into their profits as well.

        Then the government has severely lost its sense of responsibility and no longer has the moral authority over the people, because its sense of governance isn’t over the people, but over their own profits.

        Why did you leave Sweden though? I would have stayed there if I were there, and enjoy the equitable environment! But then, I’ve not been there so I don’t really know how it’s really like working there, except from reading the experiences of those who have.

        Roy

    • stefanbreakdesign

      Thanks for the info again. I was still young and felt that Sweden was too “perfect” too soon – it is a good place to work, have children, settle down and retire and I hope to live there again one day. Currently we are in a position of having to leave Singapore since the cost of living here is extremely high, especially when wanting to start a family and be able to spend time at home to help raise the child together the first year, this is simply economically impossible in Singapore if one doesn’t have extensive savings or family support. “Simple” things like to own a house with a yard and a dog would require me to almost become a millionaire to afford these “middle-class” things in a country like Singapore. I simply cannot justify putting myself through such a crazy kiasu rat race if even the “simple” things are outside my financial reach. I feel that since the global economic crisis there has been a shift in attitudes from the government. About 7 years ago it was all about bringing in foreign “creative” talent, but that changed purely to “rich” talent – I have seen some middle-class ang-mo’s leave to be replaced with rich financial types that fled Dubai and London to Singapore where they can still get insane bonuses and not feel resented for their obvious wealth. Currently I have to pay myself 8K SGD a month to retain my P2 employment pass, each time I renew, this amount has to be increased – I am already too “expensive” to work with most of my Singaporean creative friends. The opening of the Casino’s and F1 race has also played a big part in Singapore’s image of catering for the rich or those who aspire to be. All the best to Singapore, I do hope that it’s citizens can make the government adjust it’s priorities. As a South African that has gone through our country’s political transformation, I do believe that systems of power can be changed if we are driven by the correct ideals and vigilant to defend those once gained.

  2. random person

    Research 101 tips… 1. Data source attribution please… 2. Which year did you take as the comparison. 3. GDP (local ccy or USD base?) per capita and PPP tend not to be good comparison. PPP methodology tends to be iffy, and varies significantly depending on who does the measurement. Perhaps median incomes net of taxes in local ccy vs GDP/capita would be a more appropriate measure.

    • My Right to Love

      Dear Research 101,

      I hope that you had read the note in last sentence of the article: “Note to reader: I have saved the sources of the data in another computer. I will update them in the article next week.”

      For the data, I had used available data from sources I was able to locate. Will update the sources next week.

      Thanks!

      Roy

  3. Jonno

    Sorry I posted this on the wrong article … Should be this one…

    LOL, another example of how economic statistics can be manipulated to fool ignorant people including sophisticated investors. If one understands statistics and econometric modelling, GDP can be manipulated to show growth & inflated despite the low wage levels.
    Listen up – Look at the amount of on-going construction work in Singapore. These are included in GDP numbers! But who works in construction? Singaporeans – nope! Foreigners but their numbers & wages are not included in the national wage count.
    2nd trick – Singapore is a tax efficient OHQ & a trans-shipment port. What this means is the MNC use Singapore for transfer pricing activities – China manufactured ->S’pore certificate of origin (OHQ) ->Ultimate destination. Profits captured in S’pore – subject to low or no taxation due to OHQ status. GDP boosted from transshipment value – wow, fantastic bit of accounting trick! HK also benefit from this a lot! Just look at construction & OHQ activities contribution to GDP numbers to see the disparity! Cheers!

  4. Jonno

    The fallacy that Singapore is wealthy and rich based on economic numbers is simply stupid! Since year 2000 (Internet revolution & China’s rise as manufacturing centre), Singapore has gone through gut wrenching structural changes for the worst. The last 13 years, we have seen 3-4 recessions in the initial 7 years with the last 6 years a serious stagflation situation – stagnant economy with serious asset inflation & high cost of living. Also, the influx of foreigners have impacted on wages while severely strained transport, healthcare, housing & education resources.
    Singapore’s growth these days are “manufactured” by manipulating economic numbers. The real economy had perished during the last Asian Financial crisis 1997/98 & subsequent recessions including the SARS epidemic. Hence Singapore’s trade numbers are in multiples to GDP figures – indicative of S’pore’s trans-shipment role & OHQ/treasury/accounting functions to MNCs. Growth figures are also influenced by construction activities. Notice the regularity of new MRT project announcements every 2-3 years. The demolition of Budget Terminal after 5 years and reconstruction of a new terminal in its place is another guide.
    The recent growth slowdown was mitigated by ramping of constrction projects including BTO housing projects. If not, S’pore would be in technical recession. The trade slowdown was inevitable given the US & the EU economic problems.
    S’pore sovereign wealth reflects the immense CPF balances held in trust by the govt. These are forced savings of Singaporeans – past & present – invested in paper assets via Temasek & GIC. For those who want to know more – take a look at Prof Chris Balding’s website, Balding’s World. He specializes & researches on sovereign wealth funds. What you’ll find there will set your minds thinking!

  5. Xu Si Han

    There’s one thing which I think you left out, and I think it’s quite a common mistake.

    Healthcare expenditure alone means nothing unless you also talk about healthcare outcomes. The fact that Americans pay only half of their medical bills but by every metric have worse healthcare than we do should tell you something. And in case you didn’t realise, a significant portion of US government liabilities is tied up to their obligations to citizens. Those will probably be slashed as they try to get their budget in order.

    The whole point about healthcare is to spend the least to obtain the best results. There’s no point spending lots of money when people are dying or infant/maternal mortality rate is sky high.

    Play around with the data set here, and compare it against data for healthcare expenditure.

    http://data.worldbank.org/indicator/SP.DYN.LE00.IN/countries/1W-SG-US-DK-NO-CH-HK?display=graph

  6. Minneapolis dentist

    Excellent post. I was checking constantly this blog and I’m impressed! Extremely useful info specifically the last part 🙂 I care for such information a lot. I was seeking this certain info for a long time. Thank you and best of luck.

  7. BT Lim

    According to our supreme leader do not worry about the high GINI. It is better to be employed at a low salary than be unemployed even when Singapore is at full employment.

  8. Andy

    I read your articles but I see some errors actually.. Your data sets are not very accurate I am sorry to say that.. You better get your data sets from International Labor Organization. I bet Singapore’s wage is a lot higher than that. I know compared to GDP per capita level, perhaps Hong Kong has lowest salary. South Korea, for instance, has high Salary to GDP ratio.

      • Jo

        Korea’s gdp (nominal) Is ranked at 13 while Singapore is 36 which is worse than Malaysia (35). Not surprisingly as the population and land size of Sg is significantly less than Malaysia or korea.

        Korea’s gdp per capita on the other hand is much lower than Singapore. But the point is you can’t compare Singapore with a population of 5 million and small land size to a country like korea or even China. It is much easier to develop a small country than a bigger one. Better to compare Singapore with a city like sydney.

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  11. niels kristian schmidt

    PPP is a factor you divide by to get hot air out of local prices and compare shoes with shoes, so it means Denmark is overpriced and Singapore is cheaper than USA. It means the little guy on the street can afford more. On another note, dont forget taxes. Danish wages are net taxes and PPP adjustment not very high.

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