Budget Debate 2011 Round Up Speech

Dear Mr Tharman,

I refer to your Budget Debate 2011 round up speech.

Are the two Japanese experts brought in by Chun Cheng Fishery here on short term assignment or are they here for good? Having completed their tasks, why would they continue to stay on? If they no longer stay on, how can they be likened to the foreign worker who is here for the long term and who does the same work that Singaporeans do? In the case of workers in Chun Cheng Fishery, one more foreign worker means one less Singapore worker. So in the context of what we normally term as workers, foreign workers don’t create jobs for Singaporeans.

It is strange you should use Singapore as a global city to explain our huge wage disparity but when it comes to comparing wages, you choose, not cities, but countries instead for comparison. If we were to adopt, as you did, the city perspective of making sense of things, we should be comparing our wages with those of Seoul rather than South Korea, Tokyo rather than Japan, Zurich rather than Switzerland, London rather than the UK and New York rather than the US. That comparison is already done for us by UBS as follows:

Cities 2009 gross hourly wages
Zurich 30.3
New York 26.1
Tokyo 19.4
London 18.0
Hong Kong 8.8
Seoul 8.0
Singapore 7.1

Singapore’s wages pale in comparison to those of other global cities. Notice too that the comparison here is hourly wages rather than monthly or annual wages. Part of the reason why Singapore wages look more decent than they really are is due to the fact that we work much longer hours than people from other global cities.

Our small population makes it easier for us to keep unemployment low. We would certainly have a much bigger headache if we were faced with the employment issues of a big country like the US or Japan.

The coincidence of wage growth and growth in foreign work force doesn’t imply that the former is due to the latter. Correlation doesn’t imply causation. Something else more fundamental explains the difference between the first half and the second half of the decade. In the first half of the decade, we had the dot com burst, the September 11 stock market crash and the SARS epidemic. Three major setbacks in five years. In the second half of the decade, we only had one major setback, the global financial crisis. Thus, the wage growth difference between the first half and the second half of the decade is quite simply the difference in the number of global setbacks we faced. This explanation fits in very nicely with your global city argument. It is entirely possible that wages may have grown even more without the huge influx in foreign workforce during those boom periods.

The increase in the percentage of those with tertiary education could mean that everyone’s education has gone up without any shift within our social hierarchy.

The fact that half of the children from the bottom 1/3 of households end up in the top 2/3 in the PSLE doesn’t necessarily imply that these students have therefore gone from bottom 1/3 to top 2/3. Since the bottom 1/3 of households tend to have more children, the number of children from the bottom 1/3 of households will account for more than 1/3 of PSLE students. In other words, without even considering any mobility effects, children from the bottom 1/3 of households already spill over to the top 2/3 of PSLE students. Therefore, there is still not enough information to gauge how well students from humbler backgrounds have moved up.

While it may seem noble that the government ensures that our houses appreciate over time, in reality, any housing appreciation that we enjoy will be paid for by the future generation. It is not wealth creation but wealth transfer from the future generation. Any so-called benefit is at the expense of future generations.

The average lifespan of a Singaporean is slightly over 80 years. In your example, the young couple in their late 20s would continue to receive benefits for another 50 years or so. The $490,000 lifetime benefits that the couple will end up receiving when spread over 50 years is about $9,800 per year. This figure is far higher than the figures you have provided in Chart 8 of your round-up speech.

Your discussion on cost of living omitted the very important cost of housing which for most people is the major component of cost of living. The few thousand dollar growth and share benefits hardly compare with the hundred thousand dollar increase in flat prices.

Mr Low Thia Khiang’s proposal to cut GST from 7% to 5% is inequitable in and of itself. However, just as you have referred to GST Plus rather than GST itself, a GST cut together with an increase in other taxes will bring equity back to Mr Low’s proposal. Even though the rich pays the most GST, they pay even more in other taxes. Cutting GST while increasing other taxes will result in even greater transfer from the rich to the poor or the middle income.

While many MPs have contrasted our happy situation now with the strains and heavy borrowings of other countries, it is good to note that we are not alone in being happy. Most of the East Asian nations too are in a happy state. That is because, the habit of saving for a rainy day is an East Asian habit, not a particularly PAP one. Similarly, the timely intervention to help businesses was a practice shared by many in East Asia, not just Singapore.

While our 4% of GDP expenditure on healthcare appears to be better than the 9% by OECD countries, it is worth noting that most OECD countries have much aged populations than ours so it is not really a fair comparison. It is also worth noting that we are not alone in having low healthcare expenditure. Again, East Asian nations tend to have lower healthcare expenditures in general.


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