Jociegrace's Blog

THE STRAITS TIMES SATURDAY, MAY 15 2010

• The 2008 Financial Crisis may be over, but new challenge is looming: rising wage bills
• From June, employers will no longer enjoy any wage subsidy from the Jobs Credit Scheme
• From July, employers will have to fork out a higher levy for foreign workers, or pay more to hire local workers due to a slow in foreigners
• From September, they will have to put in higher contribution to their workers’ Central Provident Fund (CPF) accounts
• For years, companies have creamed off a larger share of economic gains
• Workers’ wages account for less than half of Singapore’s GDP
• In contrast, wages take up more than half of GDP in other developes countries
• Singapore may have achieved one of the highest per capita GDPs- at $51,656 last year, but the superlative (highest degree) showing may not reflect the wealth of workers
• Some analyst wonder if Singapore is a First World economy closer to a Third World wage structure
• Economist Manu Bhaskaran from Centennial Asia Advisors notes ” The problem is not our wage levels, which are reasonably high, but whether they are commensurate  (proportionate) with our per capita GDP level.”
• GDP split in 3 ways: 1 share paid out in wages, another to companies as profits, lastly to government as taxes
• In 2000, Singapore’s wage share was42%, lower than the U.S. (58%), Japan’s (57%) and France’s (52%) according to the paper by the Statistics Department
• Singapore’s profit share is at 44.9% as of 2008
• On a list of 73 cities, Singapore is the 24th most expensive city
• But when it came to wage levels, Singapore slipped two notches to 40th position
• With prices rising more than wages, Singapore workers cannot afford to buy as much as people in many other cities
• Purchasing power in Singapore declined 10 spots to 50th place behind Kuala Lumpur in Malaysia, Johanesburg in South Africa
• Some observers question the accuracy of such comparative studies, one inescapable conclusion is that wage increases have not been on par with economic growth
• Success of Singapore being able to attract foreign investment meant that foreign investors also earned returns to capital in Singapore (reflected by growth in disposable in comes from which households could finance their consumption was lower than GDP growth in Singapore
• 2 reasons for low wage share

             => dominance of foreign multinationals, which are likely to repatriate a large proportion of their profit rather than distribute it back to workers as wages

             => An increase in the no. of lower skilled jobs, many which are filled by foreign workers

• Mr Bhaskaran puts it ” So of the rise in GDP is increasingly going to companies rather than individuals and most of the profits go to foreign companies, the welfare improvement from economic growth in Singapore is not as great as it mght have been.”
• Singapore Management University Professor puts it ” Even if the wage share is comparatively small, workers as a whole can still benefit enormously from growth because the size of the national pie is growing strong.”
• Widening income gap between occupations at the top (managers) and bottom (cleaners and labourers)
• Those at top earned four times more than those at the bottom in 1998; this grew to 5.12 times in 2008
• This means that low-skilled workers have a less than equal share in the fruits of rapid economic growth
• Singapore has made increasing the productivity a key priority
• Singapore Government has promised to pay special attention to low-wage workers as it aims for inclusive growth by enhancing Workfare Income Supplement (WIS) payments
• It would go some way towards increasing workers’ wages, but whether pay packages will be commensurate with growth figures depends on how Singapore innovates and transforms its economy
• Mr Bhaskaran concludes ” Do we really have the inherent (essential constituent) capacity to create, innovate, produce and drive our economic destiny that smaller, developed countries such as Sweden, Finland or the Netherlands have? When we have that inherent capacity, then we can say we are First World.”

* This supports the argument that a high GDP is not necessarily reflective of economic growth of an economy such as here, in Singapore. This is because wage differentials were not justified, hence lowering standard of living as people can no longer afford to pay for certain commodity! XD

Article from The Sundays Times Sunday, May 2 2010

• Singapore’s focus on saving jobs paid off
• GDP went up 13% year-on-year in the first quarter
• Government has raised growth forecast for the entire year to between 7% and 9%
• This quarterly growth figure reflects the volatility of our small, open economy
• The jump represents a transient rebound from the sharp dip last year, and is not a sustainable long-term growth rate
• We can continue to achieve our target of 3% to 5% annual growth over the next decade and conntinue to improve wages and lives of all Singaporeans
• Firms need to restructure their own organisations by cutting waste, streamline processes and automate routine work
• Firms have to constantly innovate and invent new products, fight for market share and strike out into new, unfamiliar territories
• Businesses can be done cheaper, better and faster only when the firm is in the right business and is operating efficiently
• Hence workers will be able to work productively
• To support this, workers need to update and improve their skills, pick up new abilities and achieve greater mastery at their jobs
• Singapore is building a first-class Continuing Education and Training system
• Singapore is also raising foreign worke levies to encourage businesses to improve their productivity and not rely excessively on cheaper foreign workers
• Some companies are awarding bonuses and increments (strenghtens trusts between workers and employers)
• The Workfare Income Supplement has raised its income limit from $1,500 to $1,700
• The new Workfare Training Scheme will encourage employers to send workers for retraining and workers to complete their training programmes
• Singapore’s track record of tripartism is a key competitive advantage
• We have to work together, uphold tripartism, focus on productivity and give special attention to low wage workers
• Then can we improve workers’ lives and sustain inclusive growth for all over the long term

* Singapore’s workforce has been ranked the best by Washington-based Business Environment Risk Intelligence (Beri) for many years^^

Article from The Straits Times Saturday, May 1 2010

• Prime Minister Lee Hsien Loong said that Singapore’s economy has emerged strong from the recession in a strong position and will end the year on a good footing
• New jobs continue to come onstream in the first quarter and the jobless rate held steady at a low 2.2 per cent.
• PM Lee cautions that the spectacular growth figures of the first 3 months of this year are not sustainable
• Compared to 2009, Singapore’s economy grew by 13.1%; the biggest gain in 16 years
• The government revised its growth forecast to between 7% and 9% up from between 4.5% and 6.5%
• This quarterly growth reflects the volatility of Singapore’s small and open economy  eg. Some sectors like electronics & biomedical sciences expanded sharply, but others have not done quite as well
• PM Lee says ” We must make the most of this opportunity to push forward our longer-term plans, transforming the economy, upgrading our workforce and raising our productivity”
• He called on companies to focus on quality instead of quantity and for workers to upgrade their skills
• The resident jobless rate hit a two-year low of 3.2% in March, a dip from 3.3% in December
• The overall rate, which includes foreigners, was 2.2% in March
• Training of workers will place both employers and employees in a better position to capitalise on the opportunities that come with the recovery,” said Mr Gan Kim Yong