Deputy Prime Minister and Minister for Finance Tharman Shanmugaratnam had said at the NTUC Ordinary Delegates’ Conference on Tuesday 29 October 2013, that, “What (Singapore has) achieved is not normal. It is not normal amongst countries that are in the same league as us. And it means, first of all, that we must be doing some things right. We can’t be doing everything wrong, because we would not be in this very unusual situation of having low unemployment and significant income growth, a better situation than these other economies.”
For the countries that DPM Tharman had pointed out as being in the “same league” as us, he had singled out US, UK, Germany and Japan, and the Asian NIEs (Chart 1).
Chart 1: The Straits Times
Mr Tharman had said that in the US, “the median household has seen a decline in their real incomes” and in Germany, “the average household has seen very little income growth”. He also said that Hong Kong has “achieved some income growth for the average household, about 6% in real terms in the last five years” but for Singapore, “for the median household, we have achieved significant real income growth in the last five years, about 18%.”
He also added that, “Over the last 20 years, lower income households in Singapore, households that are at the bottom 20 per cent, have seen their incomes improve by 60 per cent in real terms.”
If you were taken aback by the statistics that Mr Tharman had shown, you wouldn’t be the only one.
Because if you look at the chart below, you would see that for the lowest income households, they have actually seen their real incomes drop (Chart 2). So, where did the “60% growth in real terms” for the low income households come from?
Chart 2: The Straits Times
Not only that, if we turn our attention to look at the real median income of individual Singapore residents, you can also see that it has hardly grown for the poorest 20% since 1996 (Chart 3).
Chart 3: The Straits Times
In fact, I had then compared Singapore with countries in the “same league” – the other high-income countries, and I found that Singaporeans actually earn the lowest median wage (Chart 4).
We also earn the lowest pay in manufacturing, as compared to the other high-income countries (Chart 5).
Chart 5: Global Wage Report 2012/13
Other statistics also point to the same thing – Singaporeans earn the lowest average salaries among high-income countries (Chart 6).
UBS also says that we have the lowest wage levels among the developed countries (Chart 7).
Chart 7: UBS Prices and Earnings 2011
And if you look at the growth in our median wages over the years, you can see that our median wages (red line) continue to remain the lowest among all the high-income countries (Chart 8).
Now, don’t get me wrong. Is Mr Tharman justified to say that real incomes have grown in Singapore? Well, he is. Mr Tharman had quoted the growth in real median household income from 2007.
So, let’s take a look at the change of personal incomes from 2007. From 2007, you can see that indeed, Singapore has one of the highest change in median incomes in some years (2008 and 2011) (Chart 9).
But perhaps there is a reason why he doesn’t show the statistics for before 2007. Because if you look at Chart 9, from 2003 to 2006, we actually have one of the lowest change in median incomes (Chart 10).
But the issue isn’t in so much as in whether our growth in median wages is the highest – not at this point anyway, because as you can see from the charts above, we have the lowest wages anyway, so even if we have the highest proportionate change in income, the nominal change would not be as significant.
Imagine this, if you have 20 oranges and you increase the number of oranges you have by 20%, you will get another 4 oranges. But imagine another person who has more oranges to start off with, say 50 oranges,and if he increases the number of oranges he has just by 12%, he would get another 6 oranges – 2 more than the 4 you would have. But the proportionate increase is only 12%, as compared to the more dramatic 20% that you have. This is the kind of situation that Singapore is at now, as compared to the other countries.
Indeed, if you look at Chart 11, if you compare the wage growth in monetary terms, from 2007 to 2010, the monetary wage growth is average, when compared to the other high-income countries.
In fact, between 2008 and 2009, the wage growth in monetary terms is the lowest in Singapore (with the exception of Japan) (Chart 12).
Also, the question isn’t whether we have the highest income growth, but whether this growth will keep up. If growth continues based on the 2007-2011 growth rate of 6%, by 2020, we should reach an income level of that of the United States or Canada (Chart 13).
But if growth falls back to the levels of 2003-2006, of 1%, we will still continue to earn the lowest incomes among the high-income countries (Chart 14).
But let’s put some things into perspective.
Do you know that Singapore has one of the highest prices in the world (Chart 15 – note that this chart only shows the high-income countries).
Chart 15: UBS Prices and Earnings 2011
However, when compared to our wages, there is a huge disparity (calculated as the difference between the price and wage levels) in what we are paid as compared to what is necessary for us to use. You can see in Chart 14 that Singaporeans are paid the least adequately in our wages as compared to what is necessary for us to have a commensurate standard of living (Chart 16).
Chart 16: UBS Prices and Earnings 2011
In fact, we should actually be paid wages that are similar to the standards of Australia and Finland – countries with similar price levels as Singapore.
Thus you can see that in order for us to get there, our wages should be growing at 9% every year until 2020 (Chart 17).
However, wages are only growing on average, at 6% between 2007 and 2011. It doesn’t seem likely that wages will increase by 9% anytime soon, and even so, what is the likelihood that wages will continue to grow at 6% for the next 10 years?
In fact, the Monetary Authority of Singapore had also just announced that resident wage growth is at 4.5% in the first half of 2013. Thus at this rate, it is likely that Singaporeans will continue to earn the lowest wages among the high-income countries.
But do you know what is the major discrepancy here? Singapore is actually the second richest country in the world, by GDP per capita (Chart 18). Add to that with one of the highest prices in the world, this means that we must have one of the highest income inequality in the world.
As UOB economist Francis Tan had said, the “more worrying is the fact that the wage growth is not even across all sectors (and this) may worsen income inequality.”
And he is right. From 2002, there is an increase in the income inequality in Singapore, and this is already after deducting for taxes and transfers back to the poor (Chart 19).
Chart 19: Key Household Income Trends, 2012
And when compared to the other high-income countries, we also have the highest income inequality (Chart 20).
But perhaps the government is trying its darn best to reduce the income inequality, you say? Perhaps they are doing so, and that is why the growth of median incomes has increased over the past few years?
Sorry to burst your bubbles but that’s not likely. If you compare the income inequality of Singapore to the other countries since 2000, you can see that the income inequality in Singapore has remained consistently high, while that of the other countries have been consistently lower (Chart 21).
You see, the governments in the other countries put in a consistent effort to reduce the income inequality in their countries.
But why is our income inequality so bad, you might ask? One reason could be because in Singapore, the workers have the lowest wage share among the high-income countries (Chart 22). This also means that in Singapore, companies earn higher profits, and possibly the highest profits as compared to the other high-income countries – all these while the workers in Singapore earn the lowest wages.
In fact, the low wage share (and high profits) is something that has plagued Singapore for more than two decades now (Chart 23).
Perhaps the income inequality couldn’t be more apparent than if you look at the chart below from The Great Singapore Race (Chart 24). According to The Great Singapore Race, average monthly household income from work grew by only 18% for the poorest 10% from 2000 to 2012, while it grew by a staggering 95% for the richest 10% over the same period.
Chart 24: The Great Singapore Race
And in Chart 25, you can also see that the gap between the rich and poor have thus grown even further apart. In 2000, the richest 10% earned 12 times more than the poorest 10%. In 2012, the gap grew to be 19 times bigger.
Chart 25: The Great Singapore Race
So, you see, Mr Tharman is correct. What Singapore has “achieved is not normal”. Indeed, for a country that is the richest, if not one of the richest in the world, and for a country with one of the highest prices in the world, it is very “not normal” for our incomes to be so low. It is also very “not normal” that as such a rich country and when compared to the other high-income countries in the “same league” as us, that the government is not able to do more for its people and reduce the income inequality in Singapore.
Singapore stands in stark contrast to the other countries in the “same league”, where the governments in these countries would share in the wealth of the nation, so that the poor in the country wouldn’t be left out. Singapore is indeed an anomaly and the only country among the other high-income countries where the government continues to take the wealth contributed by the people, without sharing it back. As such, the poorest in Singapore have only seen slight increases in their nominal wages, but when factoring for inflation, their real wages have actually dropped.
The government can try to come out with all sorts of ways to paint a nicer picture but the fact of the matter is that the lot of the poor has gotten worse and this is not something that the PAP can run away from, just by putting up another set of statistics that would tell the story that they want people to hear. Also, for Singaporeans who have to live with one of the highest prices in the world, we are being paid wages that cannot possibly allow a respectable standard of living for the most of us.
The matter of fact of the situation in Singapore is that prices have gone berserk in Singapore, as the government had for a few years tried to make as much money off the people as they could, so they had increased prices beyond levels that the people could comfortably afford. And now, where prices in Singapore has reached a peak, where the people can no longer properly consume with the wages they are given, we have reached a threshold, which might be difficult to contain down the road.
Unfortunately, do we see an end in sight to this mess that has been created? It is unlikely that the PAP would be able to take any drastic measures to correct the issues that plague our country, as doing so would cause them to sacrifice their own economic and business interests, which have been deeply entrenched into the system. A viable solution would be a major shakeup in our system that allows the government to properly function in its role as an oversight of the economy, rather than a key business player within the system. Only when the government can play a non-intrusive role would it have more autonomy to decide on key policy measures that would enable the rights of the citizens and the workers here to be adequately protected.
The choice is clear, if we want a country where our people would be treated and respected as equally as possible.