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Written by Ng E-Jay
01 May 2013
Last week, Prime Minister Lee Hsien Loong said that in order for salaries to increase, we need to have economic growth. While this may be true in most developed countries, the correlation between Singapore’s economic growth and wage increases has broken down in recent years.
Take a simple example. Our GDP per capita, on a Purchasing Power Parity (PPP) basis, is near US$60,000 — one of the highest in the world; in fact one of the top few. Yet, our wage levels are only comparable to Hong Kong or Taipei — they lag far behind developed cities like New York, Sydney, Frankfurt, London, Paris, Auckland, or Tokyo.
Clearly, economic growth as measured by GDP per capita (on a PPP basis) has diverged from growth in wages. A double whammy is then served onto Singaporeans — in the form of our high, and ever-increasing cost of living. We are one of the most expensive cities in the world, on par with Toronto, Sydney or Paris, and catching up fast with Tokyo.
This double whammy has rendered Singaporeans with little purchasing power. Our domestic purchasing power falls far behind almost every developed city, including Hong Kong, Taipei, London, New York, Dubai, Auckland, etc. We only have more purchasing power than poorer, developing cities like Shanghai, Bangkok, or Jakarta.
What does this tell us? It tells us that while our headline GDP figures are one of the best in the world, the ability of Singaporeans to afford a decent living, as measured by domestic purchasing power, is only on par with poorer developing cities.
GDP growth in Singapore has benefited the rich and elite segments of society disproportionately and has led to a widening income gap. Our Gini Coefficient is off the charts. Ordinary citizens are not sharing in this economic growth. The wages for average Singaporeans have stagnated in recent years due to the import of tons of cheap foreign labour and outsourcing by GLCs and MNCs.
The cost of living in Singapore has increased dramatically due to domestic inflationary pressures caused by our Growth At All Cost policies, yet our purchasing power has stagnated because wages have not risen. Hence, it is no wonder that our quality of life has gone down in recent years. Singaporeans find it harder and harder to pay the bills. To add salt to the wound, young couples need to take out larger and longer mortgages due to the rising cost of public property, including BTO flats.
Singapore is a unique country where economic growth and wage increases do not go hand in hand.
The reason for this is because our Growth At All Cost model of economic management has hollowed out our economy, and it has led to major corporations and other businesses using cheap labour to drive profits rather than innovation and productivity.
Our domestic inflationary pressures have their root cause in the escalating property market, which has caused rentals to skyrocket. When rentals go up through the roof, the price of everything increases as tenants have no choice but to pass the cost to consumers, or risk going out of business.
It is time our economy is restructured to a more sustainable model, where productivity and innovation take centre stage, rather than the import of cheap foreign labour. The runaway property market and the rising rentals have also to be reigned in, or else domestic inflation will always remain high and homes will become increasing more unaffordable to all but the wealthiest.