Our stumbling economy and the fallacy of low wages..
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Its quite a fallacy to think that lowering wages will eventually improve the economic climate of Singapore. Think about it, this does not improve our lives but only enriches MNCs who are here to setup shop and market their products to this region. Seems to me that by depressing our income, the market for global brands will eventually shrink when ppl like us have less and less dispoasble income on our hands.
Thus, won't it defeat the purpose of our so-called MNC based volatile economy as companies will be comon sense, refuse to setup business in a place where there is dwindling market share..Unless they might assume that our Northern giants will have a higher spending power than us in the near future.If so, have we trapped ourselves into downgrading ourselves from a consumer society to one that smacks of EPZ(export processing zones) and maqiladoras albeit an so-called advanced one?
An MNC based economy without similar investment in local and unique industries is doomed to fail as there is only meat without the skeleton to hold it together. No doubt, foreign investment can and has always been a stimulant for trade and economic growth, but it is not the only key to a strong economy. Recent reports place Thales as locating its regional HQ here, but it will only create 50 jobs..Will this 50 jobs have a credible impact on our economy or GDP?Im not sure, but it gives an impression that the MNCs that we are attracting are mostly regional HQ with token staff. We should lower physical and fixed costs like taxes and rent and cut red tape to attract firms, be it local or foreign that can generate industrial activity that can help us be self-sufficient to a certain extent. No economy can survive just by being a single type, e.g our frantic race to convert our economy to a service economy instead of a whole spectrum..G7 nations have not given up traditional manufacturing , who are we to say that we do not need them and let them slip out of our country due to an unfavorable business climate.
Comments please..Thanx
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The G7 (or is it G8 ) nations can keep a manufacturing base because there will always be companies for whom relocating halfway round the world to China or India is not a viable option. However, we in Singapore, do not have this option since the cheaper markets are literally a stones throw away in geographic terms. Theres no distance/time to stop Singapore-based companies from moving out to cheaper locations.
That said, the heavy handed planning of the Singapore government has always charged, blinders on, headlong into "vogue" industries, ignoring all else (someone has mentioned this before here). I think, relaxing this policy would go a long way to helping Singapore. They should wake up and smell th roses, central planning is passe. -
The idea of having "High Wages" was generated by the Ruling Party beginning in the mid-1980's, and was a political tool to move the supposedly labor intensive industries out from Singapore.
The objective of "High Wages" was to encourage the MNCs to move labor intensive operations off-shore, and then to utilise the higher educated Singaporeans to work on 'Higher Value Added' tasks in Research and Developments, or High Value Processing and Manufacturing.
It looks like the MNCs did not bite this line from the Government, and had instead made cursory response in R&D in Singapore, but when the crunch came, economy of scales, larger market, and lower labor costs still count.
The Government Plan to elevate the wages of Singapore by artificially forcing wages to go up can only be seen to have failed in all its intent and objectives. -
I will have to disagree with Atobe here. The nature of high wages in Singapore is not entirely fuelled by influences from the Government.
Rather, this variable had reached its current level primarily through two factors.
Firstly, we have seen with us, the gradual appreciation (not to mention inflation) of the Singapore dollar against other major currencies since trading levels from the 1970s to present. With the bulk of foreign direct investment coming in from countries such as Japan, Germany, USA and etc, the rise of the dollar has since greatly diminished on their level of 'purchasing' power.
Secondly, as mentioned in my other post somewhere else in here, it is also the inproper focus by the mainstream employers on their over-valuation of experienced staff that has contributedto the currents day scenario.
By contrast, the bulk of Civil Servants whom are employed within the lower ranks have actually seen peers in private sectors earning up to premiums of some two to three hundred above their salaries during times when the economy was flying.
And adding on, it is also a fact that the entrance salary range of fresh civil servants had been reviewed downwards to match within par range, against similar functions of those in the private sector periodically from time to time. -
[Neo], you are not wrong with your views concerning the appreciation of the Singapore Dollar vis-à -vis the other major currencies that can affect the Wage Level; and also with your views concerning the preference of the Employers to pay higher wages for ‘experienced’ workers.
When Singapore started on the industrial path, it mattered little what kind of industries were being attracted, as long as the industries can set up shop quickly, and start to employ a very large pool of Singaporeans who were facing a glum future with the pull-out of the British Forces from Asia.
Most were labor-intensive types of industries – in fabric weaving, garments, low-end consumer products – electronics and electrical appliances, and the likes of it.
During the period between 1960's to 1970's, most of the workers in these labor-intensive industries were earning wages of $500 to $1000 per month. Managers and Engineers in the 1960Â’s to 1970Â’s were earning only $1500 to $2000 per month. General Managers were earning only $4000 to $5000 per month.
As a result of the growing competition from neighboring countries that possess a larger and cheaper labor pool, and with these countries also attracting labor intensive industries to set up shop in their respective countries, Singapore had to find a way out of its tight labor pool and land space to accommodate these large labor and space intensive industries.
During the mid-1980Â’s, with a greater reliance on imported labor to man the labor intensive industries, a concerted effort was made to price wages higher, so as to force the labor intensive industries to leave Singapore, and allow higher value added manufacturers to step into the vacated factories.
During the 1980Â’s, average wages for factory workers were raised to a minimum level of $800 to $1500; ManagersÂ’ salary were raised to $3000 to $5000; General ManagersÂ’ $6000 to $15,000; and DirectorsÂ’ remuneration hitting five figures.
Many fabric weaving factories and garment factories pulled out of Singapore, even the only rubber tire factory – Bridgestone of Japan – also pulled out from Singapore.
In its place, came the next wave of manufacturers - The Seagate, Texas Instruments, Hewlett Packard, IBM, and other high tech manufacturers.
In the 1990’s, the next wave of foreign investors that came into Singapore in the 1990’s, were the bio-tech, chemical and gas industries – these included the Baxters, GATX, Sumitomo, and others.
Since the 1980Â’s, although the Wage Council recommended average wage increment of 10% each year in its annual review, the actual amount increased was higher by an additional 5% in the Private Sectors that performed well.
During the good years, many companies paid their workers higher bonus, and gave out higher wage increments; and had little time to accept new workers that need training – and who more often than not, will quit before probation run out as there are more jobs waiting to be filled than there are good and able workers to be found.
Under such circumstances, can anyone blame those Companies who were desperate to get experienced workers to capture the a share of the market, before the whims of the Market take over and change the fortune.