The Straits Times reported yesterday that PM Lee Hsien Loong had said that, “for incomes to rise, the economy must grow … Everyone would like their lives to become better and one important way of doing that is to make sure your pay goes up, especially with low-income workers. And for the pay to go up, the economy has to grow.”
The Straits Times also said that this made “clear the centrality of economic growth which has been disputed by some who are worried about foreign workers and inequality.” Essentially, what is being said is that Singaporeans should prioritise Singapore’s economic growth, and put aside our concerns of over-crowding and income inequality.
- So, should we stop thinking that Singapore’s income inequality is that high, and that we should stop asking the government to increase our wages?
- Is it true what PM Lee had said that as long as the economy grows that we will have higher wages?
Let’s take a look.
In the charts below, I will compare the following:
- GDP per capita
- Wage levels
- Price levels
- Domestic purchasing power
I will compare these indicators with two different sets of countries (developed vs developing economies). Note that except for GDP per capita which is based on the countries, the comparison is based on the cities. I am unable to locate the GDP per capita for the cities.
The data source for GDP per capita is taken from the Human Development Report 2013. All the rest are taken from UBS Prices and Earnings report. The 2012 report did not include Singapore in the report but I had managed to locate the 2011 report, which did include Singapore. You might perhaps understand why Singapore was omitted in the 2012 report after reading this article.
Comparison with Other Developed Economies
In this first set of comparison, I will compare the indicators with a select group of developed economies.
Chart 1 shows the GDP per capita of the developed countries. You can see that Singapore has the highest GDP per capita.
Now, according to PM Lee, if the economy does well, so will our incomes right? So, let’s take a look at Chart 2. Chart 2 shows the wage levels of the cities, with New York = 100.
You can see that even though Singapore’s economy is doing very well and we are the richest country, we actually have the second lowest wage level among the cities compared!
So, when PM Lee says that, “for incomes to rise, the economy must grow”, is that even true? Obviously, not.
In Chart 3, you can see the price levels. What is shocking is that even though Singapore has the second lowest wage level, we actually have quite a high price level – we have the fifth highest price level.
Which means that if you look at Chart 4, because we earn such a low wage and prices are so high in Singapore, we actually have the lowest purchasing power, as compared to the other developed economies.
In sum, what you can see here is that even though Singapore is the richest country and has the strongest economy, by per capita, we earn comparatively much lower wages, and because prices are so high, we have a severely eroded purchasing power.
Comparison with the Developing Economies
In the next set of comparison, I will compare the indicators with a select group of developing economies.
In Chart 5, you can see that Singapore has a much higher GDP per capita than all the other countries.
In Chart 6, you can see that our wage level is higher as well, but more importantly, even though Singapore’s GDP per capita is nearly 4 times higher than the next highest country and 7 times higher the third highest, our wage level is barely twice as high as the second and third highest city!
In Chart 7, you can see the price levels of the cities. Note that price levels in Kuala Lumpur is actually half that of Singapore.
Finally, and more importantly, when you look at Chart 8, you can see that Singapore’s purchasing power is similar to the next highest city – Kuala Lumpur. This is even though our GDP per capita is nearly 4 times higher than Malaysia!
Singaporeans, We Are Being Cheated
What’s going on here?
- Even though Singapore is the richest country in this comparison, we are paid the lowest wages among the developed economies. Among the developing economies, their peoples are paid comparatively higher wages even though the country is much poorer.
- Even though Singapore is the richest country, we have the lowest purchasing power among the developed economies. Not only that, when compared to the developing economies, our purchasing power is the same as that of Kuala Lumpur.
What the F is PM Lee Hsien Loong talking about when he says that, “for incomes to rise, the economy must grow”?
If this is indeed the case, what has happened to the past two or three decades of economic growth? Where has all the supposed wage growth that PM Lee is presumably talking about gone to? Why is it that even though Singapore’s economy was growing so strongly and that we are the richest country, that our wages are the lowest in the developed economies (as compared to countries in this comparison)?
Not only that, why is it that even though we are the richest country, we have the lowest purchasing power among the developed economies and our purchasing power is almost on par with that of the other developing economies.
For a country so, so F-ing rich, why are we able to afford only a standard of living which is only on par with the developing economies?
Behind all the glamour and blink-blink, have we been had, Singaporeans?
Last year, the government said that they had hoped to increase productivity by 30% in the next 10 years so that our wages will increase by 30% as well. As I had written previously, this proposal was doomed to fail because:
- Singapore’s productivity growth did not even reach an average of 2% annually over the past decade. In fact, Singapore’s productivity growth had been dropping decade-on-decade for the past 3 decades. How did the government intend to miraculously grow productivity by 3% annually for the next decade?
- Also, Singapore’s wage growth had never kept pace with productivity growth in the past decade so even if productivity growth did miraculously grow by 30%, our wages wouldn’t have grown by as much.
So, after one year of telling people that we need to grow our productivity, so that wages will grow – knowing how it will not work at all – the government has finally changed tack and said, well, we would need to grow the economy.
Of course, when you increase productivity, you would be able to grow the economy. So, is PM Lee saying one and the same thing? Well, he could be.
Old Wine In New Bottle: Still Not Interested to Increase Our Wages
More importantly, the government is trying to repackage what they had been saying. The government would be thinking – you know what? People might not understand what productivity growth means and if we keep saying that and they don’t see results, they will know that we are lying to them. Let’s say something else. Maybe let’s say if the economy is growing, their wages will grow? Maybe they will buy into that?
And wa-la – economic growth for wage growth. Whereas last year, the government came out with some statistics, no matter how erroneous, thrown together to explain how productivity growth will lead to wage growth, I don’t see any statistics this time.
Perhaps PM Lee will show some statistics on the May Day Rally on Wednesday, but I wouldn’t think too much of the statistics, if there were to be any. The statistics that I have presented here are already very clear. Whatever the government wants to show us, you can trust that it is not going to work, because it didn’t.
As I had discussed before, the government gets to decide how much wages can grow. When the government comes out with fanciful concepts of how if we grow this, wages will grow, or if we do that, wages will grow, it will not. The only way wages will grow is if the government DECIDES to grow our wages. It’s all in the government’s hands.
So, it’s a matter of whether they want to or not. They have insisted that they do not want to implement a minimum wage. As said, Singapore is one of the few countries which still does not have a minimum wage. All the Asian Tigers and even Malaysia, Thailand and Indonesia have minimum wages to protect their people.
There are a few countries without the minimum wage law but which pay their workers well – the Nordic countries and Switzerland – but this is because they have very strong and independent unions which fight for their workers’ wages and are not lackeys. You can read more about it here (link).
I have also discussed here (link) before that Singapore has the highest income inequality among the economically developed economies.
So, what is PM Lee trying to tell us when he knows jolly well that even if the economy grows, that our wages wouldn’t grow in tandem. And what is The Straits Times trying to tell us when they tell us not to focus on income inequality but on economic growth, when our income inequality is so dire! (Please read the link)
Holding Singaporeans Ransom to Our Wages
Do you know what the government is doing? The government is holding us ransom. Essentially it is this, the government is saying – you know what, you want to have higher wages? Well, we don’t feel like it. We will pay ourselves high wages but you can stay as low as we want you to be. And you know what, if you want high wages, well we can raise it. But – only if you increase productivity for us. Can’t do it? Well, we know. Guess what, let’s try growing the economy. You know what, if you can do it, we will increase your wages. How about that?
So, you might say – but you have the power to increase our wages if you WANT to!
But, the government would say – precisely, I have the power. So, now what? Do you want to work hard for us or not? If you don’t, you will not get any increase. If you do, well, let’s think about that when we come to that, shall we?