Singaporeans, The Truth About Our Wages Revealed

The Ministry of Trade and Industry (MIT) wrote to The Straits Times Forum to say that, “the Government’s aim is to create good jobs for Singaporeans by building a competitive and vibrant economy, with productivity as a key driver.” MIT had also said that, “Our strategy is directed towards achieving good employment outcomes for Singaporeans, including raising median wages.”

Finally, MIT said that, in response to “Mr Perera (who) has suggested using wage share as an indicator of quality jobs,”, “wage share, while important, does not reflect the wages of Singaporeans. Compared to those in many developed countries, Singaporeans earn higher real wages even though our wage share is lower. A more detailed analysis of wage shares can be found in the 1Q 2013 Quarterly Economic Survey released yesterday.

So, I took a look at the survey and it said that, “Singapore has one of the highest GDP per capita in the world. However, our wage share of GDP (at around 43%) is lower than the shares of most developed economies (at 50% or more). Some argue that this shows that workers in Singapore are underpaid, and that Singapore’s economic growth has disproportionately benefitted multinational companies and capital owners at the expense of workers.” It then said that, “Nonetheless, a country that has a low wage share need not necessarily have lower wages.”

MTI justified that, “In Singapore’s case, our Purchasing Power Parity-adjusted average monthly remuneration per worker, at US$3,106 between 2000 and 2009, in fact exceeds that of workers in countries like Japan, the Euro area and South Korea even though they have higher wage shares. Furthermore, real remuneration per worker in Singapore grew by 1.4% per annum in the past two decades, higher than that experienced in many developed economies.”

The Real Statistics and The Truth

I am not sure where MTI had gotten their statistics from. So, I had decided to take a look at the other statistics available. However, the statistics that I had managed to locate were contrary to what the MTI had claimed.

In fact, Singapore has the lowest wages and lowest wage growth among the developed countries!

Compared with cities in other developed countries, Singapore had the second lowest wage level (Chart 1).

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Chart 1: UBS Prices and Earnings (2011)

The Lee Kuan Yew School of Public Policy had disputed Singapore’s ranking in the UBS report but even in their adjusted rankings, Singapore’s wage level fell below that of New York, London and Tokyo, even though our GDP per capita is on par with them (Chart 2)!

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Chart 2: Lee Kuan Yew School of Public Policy Comments on UBS Report

Not only that, Singapore had the lowest hourly pay in manufacturing in 2010 (Chart 3).

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Chart 3: International Labour Organisation Global Wage Report 2012/13

Not only do Singaporeans have the lowest wages, our real hourly compensation (in manufacturing) also grew the slowest and actually became lower than in 2002 (Chart 4)!

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Chart 4: Bureau of Labor Statistics Real Hourly Compensation in Manufacturing

According to the International Labour Organisation’s Global Wage Report 2008/09, between 1995 and 2000, Singapore actually had one of the highest average real wage growth among the developed countries, at 5.75%. But from 2001 to 2007, this dropped to only 1.8%.

In fact, you can see that between 1995 and 2000, Singapore’s average real wage growth had followed the GDP annual growth closely, but between 2001 and 2007, our real wage growth fell way below the GDP annual growth (Chart 5).

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Chart 5: International Labour Organisation Global Wage Report 2008/09

If you look at the wage growth to GDP growth ratio, between 1995 to 2000, Singapore had one of the highest wage growth to GDP growth ratio (Chart 6).

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Chart 6: International Labour Organisation Global Wage Report 2008/09

But after 2000, everything changed. Between 2001 and 2007, Singapore actually a much lower wage growth to GDP growth ratio (Chart 7)!

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Chart 7: International Labour Organisation Global Wage Report 2008/09

However, this is even though Singapore had one of the highest GDP annual growth between 2001 and 2007 (Chart 8) among the developed countries! – which means that after 2000, even though the Singapore economy was doing very well, the government was treating Singaporeans poorly and Singaporeans suffered.

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Chart 8: International Labour Organisation Global Wage Report 2008/09

So, all in, you can see that real wages have remained stagnant in Singapore in the past decade (Chart 9).

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Chart 9: Ministry of Manpower Income

Worse still, not only are incomes the lowest in Singapore and have risen the lowest, incomes are not evenly distributed and the rich earn much more than those who are not as rich in Singapore.

In Chart 10, you can see that a junior manager in Singapore is ranked 21st in terms of his/her buying power, which is much lower than other developed countries.

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Chart 10: ECA Global Perspectives National Salary Comparison 2012

But for the rich, an executive is ranked 8th in the world and 1st among the developed countries in terms of buying power (Chart 11).

Not only do the rich have the highest buying power in the developed countries, the rich in Singapore are ranked the highest, but the less rich are ranked one of the lowest!

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Chart 11: ECA Global Perspectives National Salary Comparison 2012

But of course, the income inequality, as represented by the Gini coefficient, has been rising in Singapore (Chart 12).

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Chart 12: Key Household Income Trends, 2012

In fact, Singapore has the highest income inequality among the developed countries in the world, after deducting for taxes and transfers (Chart 13)!

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Chart 13: OECD Factbook 2013: Economic, Environmental and Social StatisticsKey Household Income Trends, 2012

So, you can see that the incomes of the rich have been rising several times faster than the poorest in Singapore (Chart 14).

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Chart 14: The Straits Times Foreign talent policy had effect on income gap

As you know, the salaries of Singapore’s ministers, until 2011, were pegged to the top income earners in Singapore – which means that the salaries of the Singapore ministers have grown at a faster rate than the average Singaporean!

From 2002 to 2010, the nominal salaries of the ministers increased by 5.64%, but it only increased by 3.23% for the average Singaporean (Chart 15).

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Chart 15: White Paper for Salaries for a Capable and Committed GovernmentMinistry of Manpower Income

According to Singapore News Alternative, “our ministers earn approximately 108.3 times more than bottom earners. (Chart 16)”

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Chart 16: Singapore News Alternative Opinion: Income Inequality in Singapore: Our Annual Peak (2013) – Ryan Ong

Khaw Boon Wah: Degree Isn’t Important. What About Wages?

Recently, The Straits Times had reported that National Development Minister Khaw Boon Wah had said that, “Singaporeans do not need to be university graduates to be successful.” Khaw had said that, “If they cannot find jobs, what is the point? You own a degree, but so what? That you can’t eat it. If that cannot give you a good life, a good job, it is meaningless.”

In an article in The Straits Times, ‘Is a degree really all-important?‘, it was reported that, “A diploma holder’s average starting salary is $2,000, while that of a degree holder is $3,000. So the difference is $1,000 at the starting line. The gap widens further over their working life. There are no up-to-date figures, but a 2007 study by the Ministry of Manpower showed that every extra year of schooling increases a worker’s earnings by 13.7%. The rate is higher for tertiary education.”

But not only that, over a person’s working life, the diploma holder is more likely to earn lesser and lesser, as compared to a degree holder.

In Chart 17, you can see that by age 60, a degree holder would earn a higher wage than what he/she did at 25.

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Chart 17: Ministry of Manpower Report on Wages, 2011

However, for a diploma holder, his/her wage at 60 would on average, become lesser than it was at 25 (Chart 18).

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Chart 18: Ministry of Manpower Report on Wages, 2011

So, a degree isn’t important, Khaw said?

If the government sincerely believes that a degree isn’t important, then wages have to be brought up to parity, so that regardless of what job you do, you will receive a wage that is commensurate to the cost of living in Singapore.

Question is, will this happen – under Singapore’s elitism-driven meritocracy?

Tan Chuan-Jin: Wages Have Remained Stagnant. Government Kept Wages Depressed

Not only that, Acting Manpower Minister Tan Chuan-Jin had admitted, “that entry-level salaries had been stagnant for five years”. The Straits Times had reported that, “In 2007, the median monthly gross starting pay for a local university graduate was $2,750 … Last year, it was $3,050, up almost 11%. Yet cumulative inflation over the same period was 21% – meaning that in real terms, starting pay actually fell 10%.”

If you look at the news releases by the Hay Group (Chart 19), average salaries for diploma graduates had risen from $1,743 in 2009 to $1,799 in 2011 – or had hovered around $1,800.  For degree graduates, this has risen from $2,433 in 2009 to $2,593 in 2011 – or had hovered around $2,500.

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Chart 19: Hay Group, Hay Group

Tan had said that “salaries had been stagnant for five years”. Do you know why? The real reason why is because the qualifying salary for an S Pass had been kept at $1,800 and that for an Employment Pass had been kept at $2,500 for several years. In effect, the government has pegged the S Pass to a diploma holder and the Employment Pass to a degree holder.

The real reason entry-level salaries have stagnated? – the government allowed it to. They had maintained the qualifying salaries rigidly at a fixed amount, even as inflation and prices have increased, and the cost of living has increased. Employers are thus not motivated to offer higher salaries to local graduates when they can hire foreigners at a chronically depressed rate.

The government should have increased the qualifying salaries year-on-year, adjusted for inflation and the cost of living – as they have done for the increases for our CPF and Medisave minimum sums. Now, if the government has the foresight to see the need to increase the minimum sums to account for inflation, why not the qualifying salaries? Lack of foresight? I doubt so. In the first place, a policy pegged to a rigid salary structure would necessarily contain the growth of the wages of the people.

The Real Reason Why The Government Won’t Increase Wage Share

MTI had surmised that, “A more meaningful discussion on how to raise wage levels in Singapore should thus focus on tangible measures such as on-going efforts to raise productivity across the economy (e.g., through skills upgrading and job restructuring) and policies to encourage employers to share these gains with employees, rather than on wage shares.”

But what productivity is MTI talking about when Singapore has one of the lowest productivity growth (GDP per hour worked) among the developed countries (Chart 20)?

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Chart 20: Bureau of Labor Statistics International Comparisons of GDP per Capita and per Hour, 1960-2011

In fact, “while Singapore had the second highest level of GDP per capita, it had a relatively low level of GDP per hour worked (or productivity) (Chart 21). The difference is related to Singapore having the highest average annual hours worked per employed person and the highest employment-to-population ratio of all countries covered.”

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Chart 21: Bureau of Labor Statistics International gross domestic product (GDP) comparisons, 2011

But perhaps the most damning criticism of MTI’s survey comes from an article within MTI itself, ‘Productivity and Wage Growth in Singapore‘, which had said that, “In recent years, however, falling relative output prices has dampened the translation of productivity growth to real wage growth for residents.”

The report had also said that, “Indeed, if we examine the relationship between productivity and the real median wages of residents in Singapore, we find that it is weaker than that between productivity and the real average wages of residents (Chart 22). You can see that real median incomes (green line) grew slower than productivity (full black line).

The report surmised that, “this suggests that there are distributional concerns in Singapore, and that more effort will be needed to ensure that the fruits of productivity gains do not just benefit the average worker but also workers at the lower end of the income spectrum.”

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Chart 22: MTI Productivity and Wage Growth in Singapore Feature Article (2011)

But the whole truth about why wage share has been maintained at a low level? The Department of Statistics report in 1998, ‘Income Components of GDP: Trends and Analysis‘, will reveal it all.

According to the report, in 1997, “remuneration (wages and salaries) is the second largest income component of GDP, comprising nearly 43% of GDP at current market prices.” And so, why doesn’t the government want to increase the wage share of GDP? Because “a sustained increase in the share of remuneration tends to raise the cost of production, which will have an adverse impact on competitiveness.”

In fact, “a rising remuneration share preceded the recession (in 1985) and the slowdown (in 1992) (Chart 23). An article on AsiaOne, ‘First World country, but not First World wages?(via Diary of a Singaporean Mind) explained that, “in 1980, the wage share was a low 38%, climbing to a peak of 48% in 1985, due to high wage policies during that high-growth period. But recession hit in the mid-1980s, and the high wage policies were seen as adding to the severity of the situation as they eroded the profitability of companies.”

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Chart 23: Department of Statistics Income Components of GDP: Trends and Analysis (1998)

The government had believed that, “this eroded the profitability of Singapore companies.” It continued to say that, “however, in recent years between 1993 and 1997, Singapore companies have been successful in moderating increases in wages and salaries. Remuneration share has therefore been maintained at a relatively stable level of around 42%.”

Finally, the report surmised to say that, “wage restraint will help to control wage costs and avoid substantial decline in this ratio. This will ensure that businesses operating in Singapore continue to be profitable.”

So, the real reason why wage share of GDP remained low? Profits – the government wants to make money, and not only that, but money at the expense of the people. In 1998, right before the government embarked on a path to depress the wages of Singaporeans, the government had analysed that the best way for them to increase their profits is to marginalise Singaporeans’ pay.

(If you are interested to see how the profits of some of the Singapore companies perform with what the rising prices that the government is making you pay, you can read this article here.)

PAP Has Not Performed for Past 3 Elections. It’s Time for Change.

Now, do you know why our wages have remained stagnant? Now, do you know why our wages have not grown and things have become more and more expensive?

Do you believe it when the government had said time and again that they had no control over wages, that they were left helpless? Nonsense. Utter nonsense. This government knows how to control our wages. They had known how to since the mid-1990s but it was only from 2000 onwards that they became so efficient that could cut down on the wages of Singaporeans more effectively.

It is not because this government is incapable which had resulted in our wages diminishing. It is because this government is so capable that they knew how to grow the wealth of the richest, and then peg their salaries to the richest, so that they could share in the wealth. And the people? They suffer. We suffer.

The government’s own report in 2011 had shown how productivity isn’t increasing wages, especially for the poor. The government’s own report in 1998 showed how the government had embarked on a path to  cut down on Singaporeans’ wages. All these – straight from the horse’s mouth.

This government is shrewd and cunning. It knows how to act helpless while crying wolf and acting all innocent. It’s all lies. I have poured over so much statistics that I no longer trust this government. It doesn’t care about the people but it cares about it’s own pockets. I do not know how else to put it. Our politicians are selfish people who have lined their own pockets, because they control all power in Singapore and they have taken for granted that they can do whatever they want and Singaporeans won’t bat an eyelid.

I am very clear who I will vote for at the next elections and it won’t be PAP. I do not want PAP to win the next elections because after 3 elections, they have ruined our lives, while they continue to make up stories and cry crocodile tears. All this while, while they enrich their own coffers. All this while, when the poor and elderly in Singapore suffer.

Enough is enough. At the next general election, I know many Singaporeans and I will vote decisively against PAP. We have to put in a government which will work for the people and care for the people.

Enough is enough.

*****

Afterword

If you might be asking about what the solution might be to achieve wage parity, this article, ‘Low-wage Lessons’, from the Centre for Economic and Policy Research in America gives a good summary – “The experience of the last few decades suggests that we have a pretty good idea of how to reduce the size of the low-wage workforce. “Inclusive” labor-market institutions that extend the pay, benefits, and working conditions negotiated by workers with significant bargaining power to workers with less bargaining power appear to be the most effective general remedy for low-wage work. The specifics can take many forms, from extending collective bargaining agreements to cover workers who are not themselves members of unions, to setting a minimum wage at or near the threshold for low-wage work. Greater public social spending may be another way to increase the “inclusiveness” of national industrial relations systems since a generous social safety net improves the bargaining position of low-wage workers relative to their employers. The national details aside, the available cross-country data show a strong association between higher levels of inclusiveness and lower levels of low-wage work.

Mr Leong Sze Hian had also written an excellent article, ‘18 Ways to Reduce the Income Gap‘., where Mr Leong had discussed, “four key areas where new policies – or in some cases, a return to previous rules – could reduce the income gap, increase purchasing power and ensure that catastrophic illnesses do not also bankrupt families.” It is worth a read. 

There are plenty of solutions for the uneven wage distribution and stagnant wage growth in Singapore. The question isn’t whether the government knows about them, but whether this government has the heart to do what’s right for the people.

13 comments

  1. Guest

    Hello. I am rather surprised that you found this out just recently.

    Personal advice is instead of ranting about it on WordPress, just prepare and execute plans for the exit door at the soonest. This place is doomed as long as people continue to vote for their personal selfish interests.

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  9. Jimmy

    Great article. I think you are one of few people who actually figured out our government isn’t stupid or incompetent. But rather they dictate the country for their profits only.

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