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World country, but not First World wages?
This article can be found published on 15/5/2010 Straits Times
By Sue-Ann Chia, Senior Political Correspondent
THE recession is over but bosses may not be heaving a sigh of relief. A new challenge is looming: rising wage bills.
From June, bosses will no longer enjoy any wage subsidy from the Jobs Credit scheme.
From July, they will have to fork out a higher levy for foreign workers, or pay more to hire local workers as the inflow of foreigners starts to slow.
From September, they will have to put in a higher contribution to their workers' Central Provident Fund (CPF) accounts.
And if that does not pack enough of a whammy, they also have to heed the national call to boost productivity and pay packages.
Poor employers, some would say, as they seem to be under attack on several fronts to raise wages.
But think of it the other way: Could it be payback time?
For years, companies have creamed off a larger share of economic gains - larger than those in other developed countries or industrialising economies in Asia.
As a result, workers get a slice of Singapore's gross domestic product (GDP) that is considered unusually small compared with their counterparts' share in those countries.
Workers' wages account for less than half of Singapore's GDP. In contrast, wages take up more than half of GDP in developed countries.
This means that Singapore may have achieved one of the highest per capita GDPs - at $51,656 last year - but the superlative showing may not reflect the wealth of workers or benefit them as much.
It has led some analysts to wonder if Singapore is a First World economy with what is closer to a Third World wage structure.
'Factually, our wage levels are much higher than Third World (economies'). Otherwise, so many foreign workers would not be flooding into Singapore,' notes economist Manu Bhaskaran from Centennial Asia Advisors.
'The problem is not our wage levels, which are reasonably high, but whether they are commensurate with our per capita GDP level.'
So are wage levels keeping pace with economic growth? Or is Singapore's low wage share of GDP an indication that workers have been losing out?
Higher profit share
THE issue of Singapore's low wage share has surfaced time and again.
In 2000, a paper by the Singapore Statistics Department highlighted this anomaly, noting that it could be due in part to conscious efforts by the Government to moderate wage increases and maintain high returns to investment largely from multinational companies.
The GDP is split three ways: One share is paid out in wages, another to companies as profits, and lastly, to the Government as taxes.
In 1980, the wage share was a low 38 per cent, climbing to a peak of 48 per cent in 1985, due to high wage policies during that high-growth period.
But recession hit in the mid-1980s, and the high wage policies were seen as adding to the severity of the situation as they eroded the profitability of companies.
Since then, the wage share has moderated to an average of 43 per cent to ensure a competitive wage structure.
It is, however, not on a par with that in other countries with similar GDP rates.
In 2000, Singapore's wage share was 42 per cent, lower than the United States' (58 per cent), Japan's (57 per cent) and France's (52 per cent), according to the paper by the Statistics Department.
In contrast, Singapore's profit share was 48 per cent, higher than these countries', which were closer to 35 per cent.
In fact, countries such as South Korea, New Zealand and Spain have a higher wage share than Singapore even though they have lower per capita GDP.
'These observations suggest that Singapore has First World per capita income but a Third World cost or productive structure,' the paper stated.
But it is not necessarily bad, the paper went on to explain, adding: 'As the economy matures, and wages and per capita income increase, the tendency is for the remuneration share of GDP to rise.'
Yet, a decade later, the wage share has not risen much. At last count, it was 44.9 per cent in 2008.
In March last year, economist Linda Lim said Singapore's economic growth model has tried to 'do too much, and achieved too little' in delivering returns for Singaporeans, relative to foreign firms and foreigners.
She cited the low wage share (41 per cent in 2007) and high share of profits, interest and dividends (more than 50 per cent). Foreign share of domestic production and income has also increased.
Similarly, a survey by Swiss bank UBS on prices and earnings last year showed a sobering picture for Singapore workers.
On a list of 73 cities, Singapore is the 24th most expensive city - moving up eight spots from the previous survey in 2006. It is costlier than Chicago, Hong Kong and Sydney.
But when it comes to wage levels, Singapore slipped two notches to 40th position. It is just one rung above Moscow, which is way down the 'expensive cities' list at No. 56 - or 32 places below Singapore.
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 cities like Bratislava in Slovakia, Johannesburg in South Africa and Kuala Lumpur in Malaysia.
While some observers question the accuracy of such comparative studies, one inescapable conclusion is that wage increases have not been on a par with economic growth.
What accounts for this phenomenon?
Link:- http://business.asiaone.com/Business...17-216611.html
This article can be found published on 15/5/2010 Straits Times
By Sue-Ann Chia, Senior Political Correspondent
THE recession is over but bosses may not be heaving a sigh of relief. A new challenge is looming: rising wage bills.
From June, bosses will no longer enjoy any wage subsidy from the Jobs Credit scheme.
From July, they will have to fork out a higher levy for foreign workers, or pay more to hire local workers as the inflow of foreigners starts to slow.
From September, they will have to put in a higher contribution to their workers' Central Provident Fund (CPF) accounts.
And if that does not pack enough of a whammy, they also have to heed the national call to boost productivity and pay packages.
Poor employers, some would say, as they seem to be under attack on several fronts to raise wages.
But think of it the other way: Could it be payback time?
For years, companies have creamed off a larger share of economic gains - larger than those in other developed countries or industrialising economies in Asia.
As a result, workers get a slice of Singapore's gross domestic product (GDP) that is considered unusually small compared with their counterparts' share in those countries.
Workers' wages account for less than half of Singapore's GDP. In contrast, wages take up more than half of GDP in developed countries.
This means that Singapore may have achieved one of the highest per capita GDPs - at $51,656 last year - but the superlative showing may not reflect the wealth of workers or benefit them as much.
It has led some analysts to wonder if Singapore is a First World economy with what is closer to a Third World wage structure.
'Factually, our wage levels are much higher than Third World (economies'). Otherwise, so many foreign workers would not be flooding into Singapore,' notes economist Manu Bhaskaran from Centennial Asia Advisors.
'The problem is not our wage levels, which are reasonably high, but whether they are commensurate with our per capita GDP level.'
So are wage levels keeping pace with economic growth? Or is Singapore's low wage share of GDP an indication that workers have been losing out?
Higher profit share
THE issue of Singapore's low wage share has surfaced time and again.
In 2000, a paper by the Singapore Statistics Department highlighted this anomaly, noting that it could be due in part to conscious efforts by the Government to moderate wage increases and maintain high returns to investment largely from multinational companies.
The GDP is split three ways: One share is paid out in wages, another to companies as profits, and lastly, to the Government as taxes.
In 1980, the wage share was a low 38 per cent, climbing to a peak of 48 per cent in 1985, due to high wage policies during that high-growth period.
But recession hit in the mid-1980s, and the high wage policies were seen as adding to the severity of the situation as they eroded the profitability of companies.
Since then, the wage share has moderated to an average of 43 per cent to ensure a competitive wage structure.
It is, however, not on a par with that in other countries with similar GDP rates.
In 2000, Singapore's wage share was 42 per cent, lower than the United States' (58 per cent), Japan's (57 per cent) and France's (52 per cent), according to the paper by the Statistics Department.
In contrast, Singapore's profit share was 48 per cent, higher than these countries', which were closer to 35 per cent.
In fact, countries such as South Korea, New Zealand and Spain have a higher wage share than Singapore even though they have lower per capita GDP.
'These observations suggest that Singapore has First World per capita income but a Third World cost or productive structure,' the paper stated.
But it is not necessarily bad, the paper went on to explain, adding: 'As the economy matures, and wages and per capita income increase, the tendency is for the remuneration share of GDP to rise.'
Yet, a decade later, the wage share has not risen much. At last count, it was 44.9 per cent in 2008.
In March last year, economist Linda Lim said Singapore's economic growth model has tried to 'do too much, and achieved too little' in delivering returns for Singaporeans, relative to foreign firms and foreigners.
She cited the low wage share (41 per cent in 2007) and high share of profits, interest and dividends (more than 50 per cent). Foreign share of domestic production and income has also increased.
Similarly, a survey by Swiss bank UBS on prices and earnings last year showed a sobering picture for Singapore workers.
On a list of 73 cities, Singapore is the 24th most expensive city - moving up eight spots from the previous survey in 2006. It is costlier than Chicago, Hong Kong and Sydney.
But when it comes to wage levels, Singapore slipped two notches to 40th position. It is just one rung above Moscow, which is way down the 'expensive cities' list at No. 56 - or 32 places below Singapore.
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 cities like Bratislava in Slovakia, Johannesburg in South Africa and Kuala Lumpur in Malaysia.
While some observers question the accuracy of such comparative studies, one inescapable conclusion is that wage increases have not been on a par with economic growth.
What accounts for this phenomenon?
Link:- http://business.asiaone.com/Business...17-216611.html
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