Though this article was written in 2003, I think it is still very relevant today.
Full Marx for Singapore's working class.
By Jake van der Kamp jakeva@s...
29 August 2003
South China Morning Post
(c) 2003 South China Morning Post Publishers Limited, Hong Kong. All
rights reserved.
AND HERE IS the latest gem from Singapore, straight from the front
page in this diehard bastion of central planning of the leading
English language newspaper, Pravda (Party Rendition and Authorised
Version of Daily Announcements).
Apparently the Singapore government is worried wages have gone too
high and some corrective action must be taken to bring them down.
That finding results in part from what some people in New York told
Deputy Prime Minister Tony Tan on a visit there (this counts for
detailed policy research in Singapore) and partly from a recent wage
survey by the Political and Economic Risk Consultancy (Perc), which
rated labour costs in Singapore as higher than those in the United
States or Australia.
Perc's methodology in this survey was to ask expatriates what they
thought of labour costs in different countries, another example of
the sort of detailed policy research that has little time for hard
statistics. The figures from both countries on employee earnings say
that average wages are at least 25 per cent greater in the US than in
Singapore and this is after taking the highest Singapore numbers I
could find.
For the flavour of what you get when basing a labour cost study on
expatriate opinion, notice from the table that Perc rates labour
costs in Vietnam higher than in Thailand. For a good laugh tell that
to people in Hanoi or Bangkok.
You may also wish to note that Singapore's gross domestic product per
capita is 25 times greater than Indonesia's while Perc says its
average labour costs are only 1.6 times as great. This sort of
disparity with neighbouring countries is common and suggests that
Singapore workers are underpaid for their level of productivity.
But why let the facts get in the way of a good scare story. The
Singapore government subscribes to the story and has come up with a
way to cut labour costs - cut back contributions to the Central
Provident Fund (CPF) from their present level of 36 per cent of
employee earnings. This does not mean, by the way, employees will
instead get this money. It is their employers who will.
Now if the Hong Kong government were to cut Mandatory Provident Fund
contributions in Hong Kong most people probably would applaud. It is
dead money anyway. Given the derisory rates of return that the CPF
gives Singaporeans, you would think they might share that sentiment.
But Singaporeans do not have to wait until retirement to get their
CPF money. They can use their contributions to pay for their homes
and other approved investments. Many of them are thus unhappy with
the proposed cut. In mortgage payments they will have to make up from
their direct income what previously they got from the CPF. It is all
rather highhanded and will hurt them.
And who will benefit? To answer this question you must first
appreciate two crucial differences between Singapore and Hong Kong.
The first is courtesy of the usual central planner's obsession with
making things, Singapore still has 25 per cent of its economy tied up
in manufacturing while the figure in Hong Kong is less than 5 per
cent.
The second is that 75 per cent of investment in manufacturing in
Singapore is foreign investment whereas that figure in Hong Kong is
negligible. What will happen in Singapore is foreign employers will
take what native Singaporean workers lose through this cut.
There will be a transfer of wealth from the people who worked for it
to the multinational corporations (MNCs). This could be excusable if
these MNCs then invested the money back in Singapore but the
difficulty is capital investment in Singapore is dropping faster than
a rock in freefall and has never been lower than it is now, relative
to the size of the economy. The MNCs are mostly in exit mode now.
They will not put the money back into Singapore. They will just take
it home with them.
Then you get to that fuzzy thinking that labour costs are an
obstruction to economic performance. If so, Mr Tan, may I ask you
what is the point of economic effort? Is it not to improve the
prosperity of those who participate? What sort of an achievement is
it if you instead make them poorer?
I have always maintained that Singapore is the one country to have
come closest to achieving communism in the classic Marxist sense.
This is now unfortunately also showing the classic result of central
planning put in practice, a steady grinding down of working class
disposable income.
Not only that our aged 40 and above supervisors and executives are losing their jobs to restructuring! No wonder nowsaday Singaporeans have no sense of belonging.