For far too long, Singaporeans have been told that we don’t earn what we deserve because we haven’t been hardworking enough, or that we are not good enough. And so we resign ourselves to our fates.
How wrong we are. How wrong we have willed ourselves to be.
Today, find out here how the government undercuts your wages and how we are made to fight among ourselves.
(1) Singaporeans Are Losing $1,600 Of Our Income Every Month
In an economy, the workers – us – work to help grow the economy and the GDP. In an optimal scenario, all of us should share in the growth of the GDP – we should be getting what we help to earn back.
However, in Singapore, the wage share in Singapore is only 42% – this means that Singaporeans are only paid 42% of what we help to produce.
But Singapore is a very rich country, by per capita GDP, and when we look at other high-income countries, they would pay their workers up to 60% of the GDP. What this means is that Singaporeans are paid very unfairly. Whereas the workers in other high-income countries get back a much larger share of what they have helped produced, Singaporeans are given much lesser – by up to a massive 18 percentage points.
This means that in another high-income country, for every $100 that their workers helped earned, they would receive $60 back in return. In Singapore, we are given back only $42 while $18 goes back into their profits (on top of the $58 profits that they already earn).
If you look at the GDP, Singapore’s GDP was $370 billion in 2013. The 18% that we should have gotten back but are taken away from us is $66.6 billion. If you divide this by the total labour force of 3.4 million workers in Singapore equally, this means that each worker should receive an additional $1,612 every month.
In other words, the typical Singaporean who earns a low income of $800 a month now should be earning $2,412 and someone who earns the median income of $3,250 now should be earning $4,862. For someone who earns a high-income, of say $20,000 now, they should earn $21,612.
(2) Low- And Middle-Income Should Receive $600 More In Income Every Month
But wait, that’s not yet it.
As I have written several times before, the difference in wage between a high-income and a low-income earner is massive and the widest in Singapore, as compared to the other high-income countries. In fact, the high-income earners in Singapore earns the highest wages among the developed countries while the low-income earners earn the lowest wages among the high-income countries – so, it’s not just that workers in Singapore are paid unfairly, it is specifically the low- and middle-income earners who are paid unfairly.
And as I have written, I estimate that the richest 15% earns as much as the poorest 85% in Singapore. So, of the 42% wage share of GDP, half (or 21%) of it is earned by the richest 15%, or 516,555 of the workers, while the rest of us 2.9 million have to fight for the other 21%.
If the wages are more equitable in Singapore, let’s assume that the richest 15% should only earn a third of the the income (or what they would have earned in a more equitable country) – or 14% of the wage share, which means that as compared to the 21% of the wage share that the are currently getting, another 7% should be returned to us. 7% of the GDP is $25.9 billion, which means that each worker should get another $627 monthly back.
In other words, a worker in Singapore who currently earns $800 a month should receive $3,039 and a median income earner should earn $5,489. For a high-income earner, they would be getting an additional $4,179 than the rightful wage.
Including for the 18% lost wage share of $1,612, what this means is that each worker in Singapore is losing $2,239 in wages every month!
When you look at the other countries with a similar income level as Singapore by GDP per capita, indeed, for a person who earns $800 in Singapore, the counterpart would earn $3,667 in Sweden. According to Mercer, Australia has a similar cost of living in Singapore and Australia has a minimum wage of $3,080. Thus the minimum of $3,039 that Singaporeans should be earning is just about right.
So, when we we have all the statistics at our disposal, we realise that the Singapore government is underpaying Singaporeans severely. All the claims about their Progressive Wage Model being better than a minimum wage is utter nonsense when the best they can afford as the lowest basic wage is $1,000. $1,000 is a far cry from what a low-income earner in Singapore should actually earn, taking into account the cost of living and equitable distribution – a low-income earner should be earning at least $3,000!
(3) Low- And Middle-Income Singaporeans Only Have 63% Of Our Incomes Left After Tax And CPF
But next, let’s look at tax and CPF.
Wages are only one side of the story – the other side is how the personal income tax and CPF structure have also been finely made to undercut Singaporeans.
Here are three things you need to know – (1) how much the personal income tax and CPF rates are , (2) which income groups personal income tax and CPF mainly affect and (3) how much personal income tax and CPF each worker actually pays.
- For personal income tax, the highest tax bracket is only 20%. But for CPF, the highest rate is now 37%.
- For CPF, the CPF would hit Singaporeans who earn below $5,000 the most, as income-earners who earn above $5,000 need only pay CPF on the first $5,000 of their income. For personal income tax, the highest tax bracket only hits at a very high income level of $26,667 every month. In fact, this is one of the highest income level at which the highest tax rate sets in, in the world!
What this means is that essentially, almost all Singaporeans who earn $5,000 and below have no choice but to pay 37% of their full income into CPF, while high-income earners do not have to pay the full CPF rate and most of them do not have to pay the full income tax rate of 20% as well.
So, for a Singaporean who earns $800, he/she would have to pay a total personal tax and CPF rate of 37%, for a median income earner who earns $3,250, this would be 38%. For someone who earns $5,000, this would be 40%, while for someone who earns $20,000, he/she will only need to pay a much lower 25%.
What this means is that low- and middle-income earners pay at least 12% more of their wages into personal income tax and CPF than high-income earners do!
To put it in another way, a low-income earner would only have a purchasing power of 63% of his/her income, a median income earner only 62% while a high-income earner would have a purchasing power of 75% of their income.
This comes on top of the high-income earners being paid the highest wages in the developed world and the low-income Singaporean being paid the lowest – which means the purchasing power of the high-income earner is magnified and that of the low-income earner is much diminished!
To put things into perspective, 73% of Singaporeans earn less than $5,000 every month – which means that for almost three-quarters of Singaporeans, we have a much lower purchasing power simply because of this personal income tax-CPF mechanism that the government has put in place to undercut the wages of low- and middle-income Singaporeans.
(4) Singaporeans Have To Pay Tax On Our CPF – 3%
But wait! There’s more.
How this personal income tax-CPF mechanism is more insidious is this:
For personal income tax, the government has no choice but to report this as government revenue, which they have to return back to Singaporeans. So, for high-income earners, whatever they pay in personal income tax, it goes back to them. For CPF, a person who earns $20,000 every month would need only pay a CPF of 9.25%, so in relative terms, it is less of a hindrance.
In contrast, for 73% of Singaporeans, we would need to pay 37% or more of our income into CPF. Now, the thing about the CPF is that there is no international standard for reporting. The Singapore government can change its reporting framework at their whims and fancy. What does this mean?
This mean that they don’t have to report to you what they use with your money.
The tax framework is a very straightforward system – this is what you pay, this is what I give you back.
- They say that they have invested your CPF in government bonds.
- They say that these bonds are invested in the reserves.
- They don’t say this outright but the reserves are invested by the Monetary Authority of Singapore, GIC and Temasek Holdings.
- In effect, the government is borrowing almost all our CPF to let their investment firms invest.
For tax, the government doesn’t take your money to invest. For CPF, not only is your money not returned to you, the government doesn’t tell you what they do with your money and the government takes almost the whole money to invest.
“Borrow” is a very nice word. In reality, how many Singaporeans actually get to see the money that the government “borrowed” returned back?
Do you even know who sits on GIC or Temasek Holdings? Do you know in what GIC invests in and what the investments are earning? That’s where your money is going, mind you. Do you know that the Singapore Prime Minister is Chairman of GIC and the two Deputy Prime Ministers are also on their board of directors?
As I have explained several times, for many of us who hold on dearly to the idea that the “CPF is our money”, it is not. In 2013, the total balance in the CPF is $253 billion. And what was withdrawn was only $14.9 billion, or only 5.9% of the total CPF balance and 1% of the reserves. If the CPF is “our money”, why is it that there is a more than a quarter of a trillion sitting inside the CPF?
Meanwhile, our CPF has helped to earn $1 trillion in the reserves. Do you see any of this billions or trillion coming back?
The whole point I am trying to make is this – for personal income tax, the government collects and they return (well, somewhat and then not – read this article to find out more). But for CPF, not only does the government takes it away from us, the amount they return is minute. So, if we give up our money into CPF, when Singaporeans say, “we won’t see it coming back”, it is as what we say – we won’t.
How did the CPF become from being “our money” to “we won’t see it coming back”?
There are many tricks that the government has done to siphon your CPF away from you:
- Make you pay the highest contribution rates of 37% for social security/CPF – highest in the world.
- Gives you the lowest returns of 2.5% and 4% in the world.
- Makes you pay tax on your CPF – GIC earns 6.5% in interest and Temasek Holdings earn 16% – the interest that is not returned to you is known as an “implicit tax”. This implicit tax is estimated to be about 3% (see Chart below for illustration according to income level – the implicit tax is negligible for high-income earners)
- Make you use your CPF to pay for your housing mortgage so that when you borrow from your CPF, not only do you have to pay a 2.6% mortgage, you have to pay another 2.5% accrued interest on your CPF. What this means is that when you take your CPF out to finance your house, because the CPF doesn’t get to earn the 2.5% interest if it were left inside, the government wants you to pay the 2.5% that would otherwise have been earned, back to them. Something amiss? Yeah, this 2.5% interest should be paid by the government to you, but they have distorted the system to make you pay to them instead, so that they can earn from you without you knowing. Smart trick to generate income for themselves.
- Finally, put in a CPF (and Medisave) Minimum Sum to entrap your money by claiming that if you don’t meet this amount, you cannot take your CPF out. This Minimum Sum is carefully calibrated based on how much they know you would have left in your CPF after paying off your housing mortgage and accrued 2.5% CPF interest.
Which is why Leong Sze Hian has estimated that only 1 in 8, or 13% of Singaporeans are able to meet the CPF Minimum Sum.
(5) Singaporeans Are Not Being Paid Fairly
So, do you see the whole picture now?
- First, the government doesn’t pay the right wage that they should be paying you – only 42% of GDP goes into your wages. If we are paid what we should be paid, the median income earner in Singapore should be earning $6,139.
- Second, use the CPF to entrap your money so that not only are you paid terribly low wages, the government cuts up this low wage of yours and use it for their own investments, and return very little back to you, and at the same time, make you use your CPF to pay for your house and siphon even more off from you.
Now, to be very clear, this entrapment exercise mainly affects the low- and middle-income Singaporeans.
For high-income Singaporeans:
- They are paid the highest wages among the high-income countries.
- The personal income tax that they pay are more likely to be returned back, as it doesn’t get as entrapped as the CPF.
- They are much less affected by CPF than the rest of Singaporeans are, and the much smaller CPF contribution rate is something that is easier to live with, since they are compensated by the higher than should-be income that they should be earning.
However, note that this is by no means a fault of the high-income earner. This is a critique of the system that the PAP has created more than the individual earner.
And if you look at how much each of the income groups are losing in wages today, the low-income earner is losing $2,399 of his/her wage, or 3 times his/her current wage. The middle-income earner is losing $2,889, or almost the whole wage he/she is earning now. And the high-income earner is getting an additional $1,717 more than what he/she should be getting now.
To put it in another perspective, in the chart below, you can see the wages of Singaporeans drawn to scale of one another. The low-income earner earns only 4% of what the high-income earner earns and the middle-income earner earns only 16%.
And if you look at how much more they should be earning (in the chart below), you will see that even with the lost income that the low-income earner should be earning, he/she still earns only 17% of what the high-income earner earns and the middle-income earner would earn only a third of what the high-income earner would.
So, do you see now how the whole government entrapment exercise to entrap Singaporeans look like? It is by no accident that the majority of Singaporeans have seen our lives been cut down and compromised. It is not because we are not hardworking. It is not because we are not smart enough or good enough. It is not because we are unwilling to do our best.
It is because the PAP has already created a system where they would systematically pay themselves the highest income and us – the majority – the lowest, and where they make us pay the highest social contribution/CPF rates in the world and siphoned it off for their own use.
It is by no accident that the richest 15% earn as much as the poorest 85% of us, by no accident that 27% of the high-income earners are less affected by the CPF, that only 13% of the high-income earners are able to meet the CPF Minimum Sum, and that 85% of Singaporeans live in HDB flats and 15% do not.
This 15% – the richest in Singapore, which comprise the Singapore Prime Minister, the PAP ministers and the PAP politicians – this richest 15% controls the whole system in Singapore – the government, the civil service, the investment firms, our CPF and the largest companies in Singapore – this is where the profits are going.
Yet, we stay silent and blame ourselves. Yet, we believe we are not good enough. They throw us a bone and expect us to fight among ourselves over the bone which has so little meat. And like blind mice, we fight and struggle among ourselves and blame one another for our mishaps.
When you open your eyes and see for yourself who is taking away your money – the poorest 85% of Singaporeans – when we are willing to open our eyes and wake up to the reality that our lives have been so squeezed and compromised because of a PAP which has constructed this system to stifle us, you would know who the perpetrator of our oppressed lives are.
Yet, why do we choose to fight among ourselves instead of turn our attention to the very people who have created this utter mess? Don’t you think it’s time we stop allowing ourselves to be oppressed?
Don’t you think it’s time we stop fighting among ourselves and realise who the common perpetrator is? Don’t you think it’s time you find your voice and speak up? For far too long, we have kept quiet. For far too long, we have willed ourselves into believing that we cannot do anything about our situation. For far too long, we have failed ourselves.
It’s time to take the fight to where it should be taken. It is time you take a stand for yourself, for ourselves, for our children and for the children of our children.
What say you? Are you ready?