Singaporeans Earn The Lowest Wage Share As Compared To Other High-Income Countries
“Wage share” refers to the share of wages in total GDP, which is the “proportion of economic value added which goes to wages“. According to the International Labour Office (ILO), “If the growth in average wages is slower than the growth in GDP per capita, then the wage share usually declines. If, on the contrary, average wages grow faster than GDP per capita, then it will usually be the case that the wage share increases at the expense of proﬁts.”
Thus if wage share is low, this means that profits are high.
Do you know that Singapore has the lowest wage share among all the high-income countries (Chart 1)? This means that profits would be much higher as well.
Also, you can see that whereas for all the countries, their wage share had maintained at a consistently higher level but Singapore’s wage share had remained at a consistent low, and hovered at near-40% (Chart 2). By now, you would know that Singapore is the richest, if not, one of the richest countries in the world, by GDP per capita. Yet, it performs so dismally in sharing the wealth that its people had helped it built with the people.
According to the ILO, it is important to look at the wage share because “the wage share has often been given signiﬁcance as an indicator of a “fair share” for workers. This is because a declining wage share usually implies that a larger share of the economic gains is directed into proﬁts. Not only may this be seen as unfair, but it can also have an adverse impact on future economic growth.“
The ILO also said that, “governments are encouraged to display a strong commitment towards protecting the purchasing power of their populations and hence stimulating internal consumption”.
However, do you know that Singaporeans have the lowest purchasing power among the developed countries (Chart 3)? Mind you, we are the richest country in the world, but we have the lowest purchasing power among the developed countries.
Chart 3: UBS Prices and Earnings Report 2011
So, quite clearly, you can see that in Singapore, wages seemed to have remained stagnant, at the expense of profits.
Also, because of stagnant wages and rising prices, the purchasing power of Singaporeans have now become the lowest among the high-income countries.
Importantly, there are also clear benefits to increasing wage share, The ILO had stated that, “because the marginal propensity to consume is higher for labour income than for capital income, it is usually considered that an increase in wage share will have a positive economic impact. Recent studies of Europe estimated that one percentage point increase in the wage share would increase GDP by 0.17 per cent.”
But more importantly, the question is – is the PAP government more interested in maintaining high profits, than to increase wages for Singaporeans? You see, the government benefits from the high profits from two fronts. First, as mentioned previously here, the government has majority shares in the major companies in Singapore, through Temasek Holdings and the GIC, so if the companies do well, they do well. Also, when profits increase, corporate tax increases as well and increases the government’s revenue.
And as Singapore Singaporean had shared on Facebook, corporate tax in Singapore is high – “Over 6 years, it has grown by 39%. (Chart 10).
Chart 10: Singapore Singaporeans Facebook Page
Also, you can see that corporate tax forms the largest proportion of revenue for the government (Chart 11).
Chart 11: Singapore Singaporeans Facebook Page
Knowing this, do you think that the wage share of only around 40% is too low in Singapore?
Do you think that it is healthy for the people when the PAP government takes such an overwhelming interest in profits, that this might come at the expanse of the people’s wages?