The debate that Lim Chong Yah kicked off is a welcome one. He has argued that if Singaporeis ever to make progress on narrowing the income gap, it is going to require strong affirmative action by the state. He has proposed double-digit increases for the bottom wage earners over a few years coupled with a moratorium on salary increases for top earners.
Predictably, the government has megaphoned its opposition. It will be economic suicide, it says, touting its own plan for improving productivity through financial incentives while gently tightening up on the import of foreign labour instead.
Look away from the specifics and you’ll see a fundamental issue being debated. Look harder and you will see another fundamental issue NOT debated.
Let me begin by dealing with the first.
Ultimately, Lim Chong Yah’s proposal rests on a belief that unless there is sufficient pain, productivity improvements will not be made. The government however is saying let’s make productivity improvements first, income rises will follow.
I think the government believes in the tooth fairy.
Consider the old saying: Necessity is the mother of invention. Unless it becomes really necessary, businesses and employers are not going to put their minds seriously enough into productivity improvements to yield the benefits the government hopes for.
Partly, this is because productivity improvement is much harder than it appears. It is not just a question of making workers do more; it involves redesign of processes, retraining of people and maybe the elimination of certain jobs. All of these involve costs and goes up against much resistance. There are vested interests to overcome.
Just take a simple example from everyday life: our foodcourts. It is just shocking how few Singaporeans clear their trays, relying instead on an army of cleaners to do the job.
The other day, I tried to clear my own tray, and was scolded (yes, scolded!) by an “auntie” for attempting to do so.
She was at her work station sorting out plates, bowls, trays and chopsticks, chucking out swill, and when I approached, she said to me, loudly, “Don’t come.”
She then grumbled that I would only make a mess of her working space. “You people don’t know where to put things, anyhow put, then I have to sort them out all over again.”
In a way, she was right. The design of our foodcourts is such that it cannot easily accommodate self-service in clearing trays. Firstly, the workstation is too small for the customer traffic and the utensils load; the space is constantly overflowing. Secondly, the food served is of a nature that creates lots of spit-outs, and therefore lots of swill, making the clearing process very complicated. Taken together, the messiness that results is a huge turn-off and customers will not want to get near the station.
Therefore, to get to a true self-service culture would require complete redesign of the entire foodcourt layout – sacrificing tables and seats and devoting more space for clearing stations, installation of digesters for swill that customers can feed directly into, and simplification of the food served, in order to reduce messiness.
It’s a huge project and it’s not going to happen unless the alternative – carrying on as usual – becomes painful.
Or take another side of our economy that I know something about: The construction industry. It is shocking how often I see construction workers working for firms that they are not employees of. Many workers are officially employees of “supply companies” who provide labour to contractors in the same way one might hire out a mule. Just as shocking is how rapid the turnover of staff is. Work permits are now typically of one year duration. We’re constantly importing fresh, untrained labour, and as soon as they get any experience or acquire a little bit of English, we throw them out of Singapore.
Between these two realities, there is absolutely no incentive for construction companies to invest in skills upgrade. Why train someone who is not your employee, and who anyway will be out of Singapore by this time next year?
If we’re going to get anywhere, it’s going to require a completely new model. I would say we need to freeze new hires. Those who are here today can stay indefinitely, but there will be no more new workers coming in except as replacement for those who want to go back. That’s the only way to make employers sit up and think hard about upgrading the workers they currently have.
As you can guess, I agree with Lim Chong Yah: productivity improvement is not going to happen without the needed pain. The government’s softly, softly approach is wishful thinking.
* * * * *
At the same time, Lim and the government are not fully engaging. Lim was talking about narrowing the income gap, but the government sidesteps the question and talks about productivity improvements.
They are actually different things.
You can have productivity improvements that raise the wages of the bottom stratum, but still have top salaries zooming away. They result may not be any happier. As top salaries zoom up, their buying power tends to raise the overall price level in an economy, and so even as bottom wages rise, they may still find things priced out of reach.
Concentration of wealth sucks vitality out from a society. Vested interests that are too entrenched present barriers to innovation, in the same way that monopolistic behaviour stifles competition. There is a public good to be had when income spreads are prevented from getting too wide.
Yet, the sad fact is that the government does not even want this question on the agenda. They chant the mantra that high pay attracts great talent and that great talent means economic growth.
Lim Chong Yah, on the other hand, has proposed a statist way of dealing with the issue: freezing top salaries for a few years. Unsurprisingly, many others have said it will not work.
What I don’t understand is why he has not proposed raising the marginal income tax rate. At 20% for personal income tax (and 17% for corporate tax), Singapore’s is far too low. We should be discussing rates in the region of 35% or more, like other developed countries (see this OECD website and this nationmaster website).
* * * * *
The issue that is NOT debated is simply this: distribution of wealth and privilege in society follows the distribution of power. Income inequality in Singapore reflects power inequality.
Free up space for independent trade unions, pack away all those paranoid controls against political activity, and I dare say, half the problem will solve itself.
Yawning Bread 
Be careful what you wish for. Britain has most, if not all, of the things you’re asking for but still have a very high level of income inequality and its economy has been in the doldrums since 2008.
Why the UK? Why not Scandinavia?
I am in favor of raising wages by imposing a minimum wage in Singapore. As an alternative, I support the wage increases measures as suggested by Professor Lim Chong Yah.
I wish to point out that increased higher wages should not mean that the manual work, such as cleaners in food courts, should be eliminated. We need jobs for these people as well. If they do not have these jobs, they will be unemployed.
Many people are afraid that higher wages mean higher cost of living. This is not the only outcome. If wages go up, it is possible to keep the cost of living at a moderate level, by controlling the other components of the total cost, i.e. the cost of rentals, high salaries for top executives and the profit margins.
During the past years, while wages were depressed, the cost of living continue to increase. The poor wages of the workers goes to the other parties in the cost equation, i.e. shareholder, property owners and the top managers. It led to high income gap.
As Professor Lim had suggested, the wages of the top managers should also be frozen. This should also apply to rising property prices, which is causing a lot of pain.
“Free up space for independent trade unions, pack away all those paranoid controls against political activity, and I dare say, half the problem will solve itself.”
Yawning bread
But that may also facilitate the growth of a strong opposition and alternative to PAP.
And seriously affect the PAP’s at least 93% majority seats won at every election in future.
So why would PAP want to do that?
Welcome back Alex! Was beginning to wonder where you’d gone.
Anyway, I hate to parrot the government’s line, but it does seem that an arbitrary wage increases without underlying productivity increases would hurt our competitiveness, especially in the short run. Also, for some jobs, for example toilet cleaners, one does have to wonder if it is actually possible to substantively increase their productivity, short of investing in costly self-cleaning toilets or the like, something that would render many cleaners redundant anyway.
Nevertheless, the proposal’s call to freeze top income growth while raising the base is a seductive one, and although it sounds almost too good to be true, I’d very much like to be proven wrong.
Either way, healthy, open debate is in order. Right now, the government’s eagerness to pooh-pooh this radical proposal from someone as qualified as Lim only seems to reinforce the notion that the government isn’t interested in debate, because they always know what’s best. Disturbingly, the media coverage has been disproportionately focused on ministers, labour movement people and unnamed “SME bosses” all disparaging the proposal. Curiously missing from the debate so far, though, are the economists.
“Anyway, I hate to parrot the government’s line, but it does seem that an arbitrary wage increases without underlying productivity increases would hurt our competitiveness, especially in the short run.”
At least the parrot is consistent. What happened to this argument when it came to senior civil servants and ministers?
Good viewpoints – I don’t understand why the productivity movement has almost died in Singpaore compared to the 80s and early 90s. Then why there is such reluctance on the govt’s part to reduce the slaries of the top.
Hear, hear. Fabulous post.
Alex,
Income inequality doesn’t reflect power inequality here. It appears to be so only because Singaporeans allow this to happen. Majority of the people are either intimidated or become unthinking robots who think that the
government has their interests at heart, not knowing they’re being screwed.
Back to the topic, productivity was brought up by the government to obfuscate the issue, citing pay raise without productivity improvement will cause inflation or economic suicide. The officials obviously did not think through what Prof Lim was trying to say, increasing wages of lower stratum workers and freezing that of high income earners will not increase the company’ labor cost and doesn’t affect the revenue. There’s also no inflationary effect since net increase in income is zero. However if this is implemented, the management of the company (top earners) will have to resort to improving productivity in order to increase revenue. Right now the perverse situation is that, in general, their high wages are based on high revenue that depends on employing cheap labor. So Prof Lim’s solution actually enables productivity improvement as a follow-on action. Improving productivity doesn’t mean high income earners will be making astronomical salaries. Germany and the Scandinavian countries are good examples of countries with high productivity and reasonable income gaps.
Also Prof Lim mentioned the economy requires shock therapy, i think he might be hinting of restructuring to remove monopolies and any companies that make money by being a rent-seeker. I can understand why Prof Lim didn’t mention increasing income tax, since it may affect our competitiveness vis-a-vis Hong Kong. His proposal is a short term one of a few years of moratorium. But a tax increase is not for the short term, and the government can’t willy nilly reverse it. There’re many ways to skin the cat and Prof Lim’s solution is a quick and effective way to resolve this serious problem plaguing the country.
“The issue that is NOT debated is simply this: distribution of wealth and privilege in society follows the distribution of power. Income inequality in Singapore reflects power inequality.”
You hit it right on the bullseye with that statement. Those in power will not willingly relinquish their hold on power and they know narrowing the income inequality will change the rules of the power equation. Aristotle touch upon this issue with “economic inequality = political inequality”
Well put, Alex. We really can see the selfish PAP leadership in denial most clearly in this topic. Prof Lim is somebody of standing. To have “youngsters” brushing aside his warnings, is very sad. Maybe, the leadership is counting on the newly recruited citizens to bolster their ‘popularity’ rating come 2016. Good luck to them and Singapore as a whole. By then, if things are left to PAP current policies, I am afraid not even 10 Prof Lim can put back Humpty-Dumpty back together again.
“We’re constantly importing fresh, untrained labour, and as soon as they get any experience or acquire a little bit of English, we throw them out of Singapore.”
Took the words right out of my mouth! I employ preschool teachers from China & the Philippines. They are good, stay with me for a long time. We are the training ground for them & then boom! The work pass cannot be renewed & they go home. All the training & experience gained gone… Heart pain. And we.start from scratch again. I don’t understand this process nor the rationale behind it.
‘It is not just a question of making workers do more; it involves redesign of processes, retraining of people and maybe the elimination of certain jobs’
Spot on again. Without clarity on job scope, you’ll have duplication of work and areas where it becomes no one’s responsibility. Added to that is the ignorance of what training / prerequisite has to be in place.
In my own experience, I regard multitasking as a dirty word, abused by management to avoid hiring and training in areas where it’s much needed. Like what a senior ex-colleague said ‘What system? The reason why this place survives is the committed hardworking staff who didn’t want it to fail. There’s no system here!’
“Between these two realities, there is absolutely no incentive for construction companies to invest in skills upgrade. Why train someone who is not your employee, and who anyway will be out of Singapore by this time next year?”
I presume this is fully intentional: this way foreign workers do not crawl up the value chain, threatening Singaporean jobs; and employers have an incentive to train their Singaporean employees instead.
Addiction to cheap foreign labor is like addiction to oil. Everyone knows there are alternatives but it’s too hard to make dramatic changes to the way we work and live (think INCONVENIENT truth). On top of that, businesses are the strongest lobby against it while politicians in office don’t really have sufficient political capital to implement shock therapy of such extent.
In the old days, I recall we used to clear our own trays at fast food places. how did we evolve into a nation now where people dont even clear their trays in fast food places like Burger King? Modern Food courts can easily be redesigned to hold a few more collection stations to faciliate self clearance of trays. It is a matter of reeducating people with things like signage at the foodcourts requesting customers to return their own trays. If our govt truly care about making real changes they have to put in more heart and more real problem solving analysis to tackle the root of the problems instead of just skimming the surface.
YB says “… a true self-service culture would require complete redesign of the entire foodcourt layout …”
Ikea does have a properly designed food-hall with umpteen signs asking people to clear their own trays. They have been trying hard to educate visitors to their stores for years. Yet, look around on any day and see the number of uncleared, dirty trays and napkins lying around. So how?
(In case you misunderstand, I agree fully with your comment).
Food at Kopitiam (foodcourt) sucks. Compared to food prepared by small business owners at hawker centres, the standard has dropped to an implorable level.
I don’t know how this is relevant. But it is.
This will need confirmation, and it can from nowhere else than the horse’s mouth: Lim Chong Yah himself, who was helming the NWC at some point way back when.
I recall an ST article from that time, that Lim himself was opposed to the policy demanded of the NWC by the PAP government, then headed by Lee Kuan Yew, of a general wage increase policy every single year that outpaced prooductivity gains. If Singaporeans recall, that.was also the period during which Lee Kuan Yew was at his most drunk on Confucianism, with the attendant implications for global Chinese supremacy; one marker of Chinese superiority, according to him, was a Singaporean population which he characterized as a “Chinese society” comprising a people earning high income/s.
This actually does not detract from your own assertion that, “Income inequality in Singapore reflects power inequality”, but the further discussion of which is slightly outside the theme of my post, so I shall not elaborate on it.
Only when the previous wage policy had gotten too far out of hand so much so that Singapore as an economy started losing its competitiveness – and then, only in the area of cost-competitiveness – was the policy halted. In it’s place came what is now referred to popularly as the “FT policy” and the over-reliance on cheap foreign labour intended to return wage levels to what the PAP deems to be competitive levels.
However, the astronomically high wages of the top income earners remains a legacy of the previous high wage policy, that the PAP government foolhardily pursued to the point that it is now deemed to be in need of shock therapy, while the real incomes of the lower income earners have either stagnated or fallen (All this is also probably why Tan Jee Say referred to Lim’s proposal as Economic Restructuring 33 Years Delayed.)
To me this suggests that it is not economic forces that are at play, but instead ideological ones.
This brings me to my point. While I don’t disagree with Lim’s proposals in principle, I differ on one specific: I don’t agree on a wage freeze for those earning over $15 ooo primarily because the quantum of the incomes start off increasing again from the same point that they were frozen at after the period deemed appropriate for a moratarium of their wages comes to an end.
In truth, the incomes earned by the top income earners need to be slashed drastically to reflect the mediocrity – in terms of productivity – that pervades those ranks, even while the incomes of the low-waged are increased to reflect their own productivity, as well as the cost of living.
In Norway the de facto minimum wage is about SGD 27. A high minimum wage won’t hurt the economy too badly as the high level economic activity is not performed by low or unskilled workers anyway.
Some big time business entrepreneurs are in a cosy relationship with the ruling party. So it is in their interests to keep it statas quo and nod their heads with what the ruling party dishes out when it comes to talk on productivity, wages & foreign labour. A good example is the entrepreneur who owns a chain of bread shops around Asia & several foodcourts, this person also sits on the Ministerial wage review committee.
Ever been to his chain of bread shops? Noticed the transparent glass wall which separates the shop from the baking station where you see bakers kneading & rolling the bread, count the number of bakers, then count the number of retail staff at the shop front. Then listen to their foreign accents of the retail staff. A good example of productivity thrown out of the window completely. Why not introduce robotics into the baking station to create entertainment for your customers? Why not go to Japan & see what more can be done to automate your processes & make it fun to watch? Why not prepackage your bread products with price tags stamped on it & allow self check out. This will also weed out shoplifting as price tags trigger alarm when customer has not paid?
After all, this is a big chain and not a mom & pop shop but no way is push for productivity taking place anytime soon.
> Income inequality in Singapore reflects power inequality.
power inequality has always existed here, and there is no indication that it increased in the last twenty years, during which income inequality increased considerably
the issue certainly needs discussion, which is not taking place, neither in the mainstream media nor in blogsphere, partly because those who benefit have no incentive to discuss it, partly because it is a slippery topic hard to get a handle on
“power inequality has always existed here, and there is no indication that it increased in the last twenty years, during which income inequality increased considerably”
Simplistic. What does “increase” mean? As power relations change, so do economic conditions. Today the retrenched middle aged PMET and factory worker, pre-WW2 the wretchedness of the coolie.
“the issue certainly needs discussion, which is not taking place, neither in the mainstream media nor in blogsphere, partly because those who benefit have no incentive to discuss it, ”
This blog? Lim Chong Yah?
“partly because it is a slippery topic hard to get a handle on”
Huh? This is never a reason for a discussion not taking place.
Singapore’s economic growth is based on exploitation of cheap labour. That’s why the govt is happy to retain the status quo.
I dare say remove PAP from power and all our problems will be solved.
“The issue that is NOT debated is simply this: distribution of wealth and privilege in society follows the distribution of power. Income inequality in Singapore reflects power inequality.”
That’s why they like to make it seem like the problem is productivity.
Even with greater productivity, an employer will not pay higher salaries if he can get away with it – that’s where power comes in.
For many jobs, productivity measures are at best arbitrary. How do you measure the productivity of the two of the worst paying jobs – security guards and cleaners? Productivity is never brought up for certain jobs – are Singapore ministers that much more productive than Swedish ones? How not to see productivity arguments as disingenuous?
“Singapore ministers”
Don’t forget that the true cost of their remuneration must include the maintenance of the system of sinecures – they need some place to go when they fail or fall out of favour. Just how productive does someone need to be for all this to be justified!
Why did the govt hastefully abolished estate duties in 2008???
Why is that not a good thing?
The truly rich escape them by turning their wealth into charities run by their more useless offspring (just one of the many ways they avoid paying them). It ends up a mostly a middle class tax.
Stripped of everything else, the fundamental issue is that the government wants to protect businesses whereas the rest of us wish to protect Singaporeans (and by extension, migrant workers).
Economic theory holds that scarce resources (in our case limited land and manpower) must be put to the best possible use. This means that some businesses, those that are heavily labour-dependant, must be let go of. The government seems to be loathe to do this out of a misguided and myopic desire to hold on to every shred of economic activity. That this is, in land and manpower-scarce Singapore, political, social and environmental suicide has completely escaped its understanding.
In the 1970s low value businesses such as textile and shoe-making were phased out and replaced by higher-value activities. Professor Lim’s recommendation will result in another round of culling which will be no bad thing for Singapore. Activities that can be done cheaper in other places, such as across the causeway, can and should move to make way for higher-value economic activity.
I would have liked to have seen Prof Lim add to his thesis by commenting on our tax structure. Businesses need much greater incentives to raise productivity. The government needs to provide tax breaks to encourage both R&D and application of robotics and other automation processes. Conversely, there must be a penalty for those who continue to depend upon low-wage labour.
The government’s emphasis on low-value services such as tourism and casinos is counter-productive. Although they provide tax revenue and boost shopping, they also create a vicious cycle: more foreign workers to man hotels, restaurants and shops, more housing to accommodate them, more room needed in our public transport systems and so on. How much more can this bubble called Singapore be inflated?
Do you really think raising the corporate income tax means only the rich gets taxed?
You are pretty much saying nothing. It’s a banality that any kind of revenue raising instrument will impact everyone one way or another. It’s what will do the job with the least impact to the less well off. Better corporate taxes than GST.
It took the PAP 20 years to dig the deep hole that most Singaporeans find themselves in. Can we dig ourselves out in 2 years?
Food court mee pok (NOT down-sized or degraded) –
1980 $2; 2010 $4; 2020 $15 when USA/Europe recovers and climate change intensifies.
Wage shock will translate into immediate price shock. Hardest hit will be the (i) un-, (ii) under-, (iii) part- and (iv) non- employed above age 18. Does Prof Lim have stats to project likely impact on these vulnerable population segments?
Agree with you, Alex, that it is high time for U-turns on corp and high income tax. Ditto for estate tax. Thanks to laws and policies rolled out by MOF under Lee HL and his successor, Tharman.
Ditto for internationalization of Singapore Dollars – 1G PAP leaders (the likes of Goh Keng Swee, Hon Sui Sen) had these measures in place but these have long since flown the coop from 2G PAP onwards.
Seller’s Stamp Duty (SSD) over 4 years is a joke when new projects typically take 4 years from launch to TOP.
Additional Buyer’s Stamp Duty (ABSD) is even bigger joke when GST is 7% for the poor to buy rice but ABSD is 3% for locals/PRs buying 3rd or 2nd residential property, respectively. ABSD at 10% for foreigners/corporates is cancelled out when buyers have other agendas in parking $$$ here and they know MAS uses only one tool – exchange rate.
How much public $$$ has been expended for the array of funds and grants to improve productivity? Have NOT worked for last few years despite various Economic Strategies Committees’ repeated exhortations (the last was under Finance Minister Tharman too), correct?
Is it beyond the intellect of our highly paid Civil Servants to craft schemes that would PENALIZE industries for (A) NOT achieving productivity gains thru job/process re-design or re-scoping or (B) NOT employing older Singaporeans within a specified time-frame? And then REWARD with grant only AFTER they show results?
As with a precocious child – I reckon the Regulators need the Stick AND the Carrot for Productivity to gain traction. But they have been giving Carrots without any Stick all these years. And when they brought out the Stick, it turned out to be a limp stalk (eg, SSD, ABSD). Lembek lah.
Progressive Corporatism all the way – PAY AND PROFIT (PAP) who have wittingly bolstered (1) Property Sector and (2) Asset Management Sector for almost 2 decades …. even exposing citizens’ CPF retirement savings to greater risks relative to costs and benefits.
But what to do? 60% Singaporeans voted for Pay And Profit in GE 2011. So we deserve the type of government we have. Can’t complain lor.
Insightful.
Welcome back, YB!
Two small comments. On the matter of clearing up at foodcourts: install conveyer belts that remove the trays – with or without pre-sorting of cutlery etc by customers – to an adjacent room where the mess can be dealt with. Combine with recycling facilities.
On the matter of Lim Chong Yah’s proposals: one of the virtues of the proposal may be that it obliges others to come clean about their own positions and the assumptions behind them. From there, a meaningful debate can proceed (we hope). The speed and ease with which detractors invoked the ‘freeze top pay and lose top local and foreign talent’ argument reveals quite starkly how much the current economic system is organised around self-interest. The self-evidence with which this has been stated, without even a tokenistic nod to the ‘trickle down benefits’ canard, demonstrates that many people believe an economy built on growing income inequality is the only way to go. Whether or not one agrees with Lim Chong Yah’s proposals, this is surely cause for concern.
One reason why we want to have short term stay workers is that once they ‘take roots’ here, we may have an increase in social issues much like in Western Europe (eg: read Germany and the Turks). Fast in fast out is easier to deal with. Low cost supply that seems endless. If Bangladeshis are no longer attractive, then we have other nationalities stepping in to do our dirty work. Sad but i am sure not far from the truth
I think the more important consideration is the amount of money they are raking in year after year for dong nothing than pushing papers. The Foreign Worker Levy and Maids Levy amount to billions of dollars per year – and these are recurrent income accruing from no value add by the government, except from the modern “slavery” and “human trafficking”.
I’m not so sure about raising income or corporate tax. That’s one of the ways which enable us to compete with the likes of Hong Kong. Raising it would give international corporations and high income earners no incentive to stay in this country.
I believe that there is some merit in what you say that by forcing the pain on companies, they may evolve and improve productivity. That is the ideal scenario that we’d all hope for.
However, there is also the possibility that they will react differently. For example, they could decide to cut labour costs first by retrenching staff and making the remaining staff work harder. After all, by raising productivity, i can do the same with less staff. Then if i decide later that i want to expand, then i’ll increase my staff. Worse still, companies decide that Singapore isn’t that great a place to operate in and they head some place else where labour is dirt cheap… perhaps China or even in our backyard, Indonesia.
Hence, i am inclined to disagree that a simple wage increase will make life so much better for all of us. The fact is, practicality would mean that a good number of us lose our jobs first before we will see the changes we hope for. Like you said, “productivity improvement involves…the elimination of certain jobs.” I have a family to support, so i’m not inclined to lose my job…
I want my wages to increase. But not by putting my job at risk.
I disagree with Lim Chong Yah’s proposal.
That doesn’t mean that i completely agree with the government’s proposal.
The key issue here is income inequality.
The government’s proposal is an indirect method of getting there, but i feel that we need a mix of methods both direct and indirect. The explanation of which is a whole blogpost by itself.
one last comment;
quote: “You can have productivity improvements that raise the wages of the bottom stratum, but still have top salaries zooming away. They result may not be any happier. As top salaries zoom up, their buying power tends to raise the overall price level in an economy, and so even as bottom wages rise, they may still find things priced out of reach.”
Is this a fact or a conjecture? I can think of examples that support either way.
Economic studies have shown the counter case where if there are richer people around, they spend more, and as a result of higher taxes, etc the net contribution to the economy is positive. This brings me to your other point which I do agree with; that of taxes. We should raise the taxes on the rich…or perhaps on luxury goods. That has a net effect of redistributing wealth.
James,
It’s not necessary that employers will cut labor costs by retrenching workers just because of pay raise of the lowest stratum workers, there’s no increase in overall wage bill. What increases there are will be offset by wage freeze of the high income earners. That’s the beauty of Prof Lim’s proposal, redistribution of income because current wages are based on monopsony pricing. It’s a fallacy to think that raising wages will cause higher unemployment.The sad fact is the body will try to fight your effort.
As for companies moving out of Singapore to cheaper countries, haven’t you realized that China is raising wages of its workers? As for moving to Indonesia, it’s not just a matter of cheaper labor cost, there’re various factors to bear in mind like infrastructure, rule of law and education level of local workforce etc. If these companies only care about cheaper labor cost, please get out. Seriously why the hell are we competing with countries to offer cheap labor? We should be going up the value chain.
By the way, it’s another fallacy to think that the rich spends more. The truth is they save more. Besides raising taxes is not a feasible idea because the taxes collected would go to welfare and subsidies to the poor, creating a permanent underclass. Wouldn’t it better to empower them by raising their wages, making them independent?
“Free up space for independent trade unions, pack away all those paranoid controls against political activity, and I dare say, half the problem will solve itself.”
That is like the mice asking the cats to go vegan. Why would the fat cats sacrifice having a cheap, delicious and healthy diet for the sake of the mice?
They think they are cats and you are mice because of the genes and under our system of meritocracy, the cats get fat feeding on the mice.
> Why would the fat cats sacrifice having a cheap, delicious and healthy diet for the sake of the mice?
When mice are able to vote out the cats, watch how much cats love vegetables.
I worry when people say things loosely like “we just vote out the cats”.
One of the key reasons why Singapore has managed to do well all these years is because of the commitment to long term planning.
What many fail to realise is that linked to this ability to plan long term is the continuity of government. There are so many examples all over the world where political parties keep getting voted in and out of power and the country ends up going nowhere. Just look south to our neighbouring country for an excellent example. Their long term planning is absolutely crap and the citizens themselves know it!
Of course, there is the other danger that a government that is in power for too long may get complacent and start to slip up in delivering what is required. That is where we need monitory mechanisms to ensure that alarm bells are sounded early so that the necessary agencies have time to react. In this area, We still have some way to go.
What we need is a loud voice, and one that is credible and will make the necessary agencies sit up and listen. Constantly waving the spectre of voting them out is in my opinion counter-productive and may even lead to a situation where we end up creating a populist government. I’ve seen enough populist governments around the world to know that the a populist government would mean that we are screwed big time.
“When mice are able to vote out the cats, watch how much cats love vegetables.”
You said it, man! As Lim Chong Yah pointed out, as the ginny coefficient gets closer to 0.5 the situation becomes tricky, in other words there is the possibility of social upheaval. I wonder if the powers that be fully appreciate that they are skating on very thin ice.
“One of the key reasons why Singapore has managed to do well all these years is because of the commitment to long term planning.”
What you call long term planning is more accurately described as:
“carrying on with a plan even when it is more trouble than it is worth – but we don’t want to stop because we don’t want to lose face and admit that our critics were right especially when we are still in charge”.
And yes, South Koreans don’t subscribe to your view – and today they make music, TV series and electronics that our kids are crazy over. As for us, we have the Merlion.
With apologies, I don’t see how raising income tax will address the wage gap. Won’t it drive the high earners to pay themselves higher?
Not sure how it would apply to the civil sector, but in private companies, I daresay paying oneself too much to offset the tax increase would draw the attention of irate shareholders.
It’s not the raising of tax itself that addresses the wage gap, it’s what you do with the money. Training, more training, and support for restructuring so that businesses can employ one skilled (and usually Singaporean) worker instead of two unskilled (and usually foreign) ones.
To understand why our ministers, MPs are acting “agressive” against Lim Chong Yah’s idea, I doubt they don’t understand the situation in Singapore. Let’s drill further the mentality of all these objections from the PAP camp, especially with questions on their true role (interest) such as:
1) What were their actual occupations of members of parliament? Are they shareholder, partners, Chariman, CEOs, directors of companies that also relied on cheap foreign labors to determine how much bonuses they could get from cutting these companies costs?
2) How many directorships, partnerships, CEOs, Chairman and shareholdings they held directly or indirectly. When Saw Phiak Hua resigned from SMRT, it was shocking that she held multiple directorships within the group and benefited from low operating cost resulted in SMRT current mess. So is this a common trend from the rich and “powerful” to cut as much cost as possible to up profit and underpaid workers.
3) Were these ministers’ siblings, wives and relatives owned business too and have milked the systems set by their son, cousin, husband, or father sitting in parliament who implemented policies with family self-interest at heart?
4) If the above is true, than I have to believe that our NTUC labor union is (indirectly) helmed by an employer to conflict the interest of workers, in this case Lim Swee Say being the chief. By agreeing with LCY’s suggestion, will he see any of his family members suffered or his rice bowl broken if he sit in any of the boards in Singapore?
5) How many grassroots people who strongly supported PAP also operate their own business and PAP viewed them as strong pillar that cannot be shaken, thus have to object aggressively to up worker’s salary.
6) What is the percentage of GLC-LINKED companies hiring cheap foreigners? If the father and wife are benefiting from cheap labors, can the husband and son setting policies said no to influx of cheap labors thus cheap operating costs?
Here is one example of Ong Ye Kung’s conflicting roles. It will pose some trick to hear his take on Lim Chong Yah’s speech. His answer will most likely shaped from whom he reported to or where he benefited the most, he may not have the depth of economic analysis like many minister who strongly objected LCY and at best to please his master(s)..
1. Executive Secretary of National Transport Workers’ Union and Assistant Secretary-General of National Trades Union Congress (NTUC)
2. Board Member of SMRT
3. Member of PAP Establishment
Luckily he is not given mandate by Alljunied GRC to vote in parliament, otherwise he will take side with his employer(s).
The above is only few questions among many that collectively shape the decision of ruling party, which unfortunately, are making up of mostly group of employers and bosses implementing policies? If there is no transparency and accountability of who they, and their family, actually worked for other than people ministers, than conflict of interest must surely exist without good governance, mainly with self-interest of few individuals milking and setting the systems instead of putting interest of Singapore larger work force before self. As of now, there are still many overdue questions left unanswered.
Productivity so often harped by PAP is fairy tales throughout Singapore history, We are not cattle or low livestocks for cheap tender. Enough craps from PAP, Singaporeans need something fresh that is workable, achievable and can look forward to with promising future, not politically correct motherhood statement and tiring rhetorics from the ruling party.
The MIWs believe the key to retaining power is to maintain a firm grip on labour unions and grassroot organisations, maintain the control over the media, financial assets and the police and military forces. With these controls, everything falls neatly in place and other political parties will have little opportunity to wrest power from them. Even if the other parties manage to garner a majority of votes, the MIWs without ceding control, will have within 2 years the armed forces restoring the rightful ruler (who by virtue of his possessing the right set of genes giving him the meritorious talents) to lord over the populace. If the other parties can deliver a crushing defeat to them, control will be ceded and they will be obliterated but there is no chance of that happenning with the pervasive controls the MIWs have.
However, a local version of the Arab Spring may erupt to sweep them away if they persist with their tight grip and that event will be disastrous for our country.
Hi Alex, I share your belief that reducing income inequality will improve the public good.
I just want to share Richard Wilkinson’s research on the impact of income inequality on society. His research, spanning dozens of countries, found that high inequality is correlated with higher rates of a host of social and health problems such as violence, crime rates, mental illness, etc. The root cause seems to be a decrease in social trust and the psychological anxieties and stress that result from marked differences in social status between individuals.
Wilkinson has written a book called ‘The Spirit Level’ on this subject. This website provides a summary of his work: http://www.equalitytrust.org.uk/why
Looking around me in Singapore, I can indeed see some of the effects associated with high inequality that Wilkinson’s findings predict. There is a general lack of a feeling of common identity between the lower and higher income groups and the widespread consumerist culture points to status anxieties. I wonder when the govenment will make the connection between raising inequality and societal benefits…
Another issue that is not debated that is related to the distribution of wealth in tandem with distribution of power is the zero capital gains and exempt dividend tax regime in Singapore. Power generates wealth which is used to generate more wealth which is then used to secure power further, directly contributing to stratopheric return on capital and the stagnant income of the masses, which had little power/wealth to begin with.
This tax regime is simply unconscionable, unsustainable and ultimately self-destructive.
a breath of fresh again from prof lim or more of the same control, control, control of the taxpayers’ income?
I read a very interesting article on the Mar 2012 issue of Harvard Business Review. In this issue, the faculty of Harvard Business School came together to explain the competitiveness challenge USA faces and some suggestions on how to move forward.
In the article Macroeconomics Policy and US Competitiveness (http://hbr.org/2012/03/macroeconomic-policy-and-us-competitiveness/ar/1), Richard Vietor and Matthew Weinzierl came up with the following definition for competitiveness: “the extent to which a nation’s companies can succeed in the global marketplace while its people enjoy a high and rising standard of living”.
I believe there lies the crux of Singapore’s problem. To the government, the idea of competitiveness is to make the cost of business low and hence attract foreign corporations to invest in Singapore. The assumption is that more investment equates to more jobs for Singaporeans.
Nevertheless, the policies to ensure that the people enjoy “rising standard of living” seem to be absent as of now. As such, what is the use of being “competitive” in Singapore when the people loses out to the competition and do not gain anything from it?
Whenever an enhanced tax solution is suggested. The flip side of tax collection i.e. distribution and social transfers needs to be considered.
Your preferred policy solution i.e. income tax collection provides no signal to the structure of consumption patterns.
A reliance on large social transfers distorts our politics. We will acquire an apparently overly heroic and generous excessively incumbent government dishing out rewards at strategic times and ways.
Yet, we over-consume cheap non-exportable, labor intensive services like manual car wash, 24×7 security services, cleaning services and whimsical interior renovations which do not add to a more vital people and country.
Do we really need to have security guards sitting in every condo 24×7?
This can only be affordable with a large class of working destitute.
Do we really need large regional malls with cookie cutter style stores requiring masses of low skilled retail assistants, cleaners, security guards and checkout clerks?
This can only be affordable with a large class of working destitute to service them.
Economics would dictate a centralized location for improved productivity and management.
IMHO, it appears plausible to replace the over consumption of such uniquely third world services with more sustainable urban planning, designs and automation-assisted services.
You can not tax and distribute your way to a better and more dignified existence to the service station car wash man.
Better to cultivate a set of market conditions to improve the value added pie to the working poor. Price the non-exportable uniquely third world services into extinction. Accept more sustainable services priced to professionalized domestic non-exportable services and requiring them to meet transparent Safety, Health and Environmental standards.
Vital centers have been able to do implement this and yet be able to manufacture sought after products as OEM manufacturing hubs.
The tax revenue distribution problem should be minimized as a goal.
The size discipline of the civil service should be maintained as a goal.
A plausible approach clearly is ratcheting down corrosive labor conditions for low wage migrant workers to improve the bargaining power of unskilled workers.
A plausible long term re-structuring approach is clearly to prepare to reverse our current regional urban plan back to the city center and have the resident population-density weighted back into the city again.
“We will acquire an apparently overly heroic and generous excessively incumbent government dishing out rewards at strategic times and ways.”
We already have one.
Just that the beneficiaries are not what you are accustomed to.
Like condo swimming pools that allow guests – white ones no one will notice – those who look like Filipinos or Indonesians will cause queries to be made.
Just wanted to share this article :
http://roundtable.nationaljournal.com/2012/05/the-inequality-speech-that-ted-wont-show-you.php
“Prepare to meet Nick Hanauer. He’s a venture capitalist from Seattle who was the first non-family investor in Amazon.com. Today he’s a very rich man. And, somewhat jarringly, he’s screaming to anyone who will listen that he, and other wealthy innovators like him, doesn’t create jobs. The middle class does – and its decline threatens everyone in America, from the innovators on down. “