Singapore a costly city? It depends

Dear Straits Times,

I refer to the 1 Aug 2012 report “Singapore a costly city? It depends”.

The many private sector surveys that paint Singapore as expensive are renowned ones like UBS, Mercer and EIU. It is unlikely that these renowned institutions, making independent studies but coming to the same conclusion, are all wrong and that only LKY School of Public Policy is right.

It is also wrong to break down cost of living into expat and resident categories. An expat who returns home becomes a resident in his home country. It is unlikely that he would lower his standard of living and consume a lesser set of goods when he goes home. But according to LKY School of Policy, this expat who returns home ought to be judged based on the resident category of goods when he in fact still consumes the expat category of goods back home. This will result in an incomplete comparison because the expat category of goods consumed by the resident in other countries (but expat in Singapore) is unaccounted for when compared to the Singapore resident.

Furthermore, if the average Singaporean cannot afford the expat category of goods that the resident in other countries (but expat in Singapore) can afford, doesn’t it show that the average Singaporean has a lower standard of living? LKY School of Public Policy seems to promote the ridiculous idea that the society that uses cheaper or more inferior goods is better off when it should be the other way round: the society that can afford more and better quality goods ought to be better off. Any purchasing power parity calculation restricted to a set of inferior goods is bound to be meaningless. So what if rice is cheaper in Singapore but housing, cars and lifestyle goods are cheaper in the West? Do we have better purchasing power because we can buy more rice or do we have better purchasing power because we can buy more housing, more cars and more lifestyle goods?

Furthermore, the break down between expat and resident categories is arbitrary and LKY School of Public Policy’s division may not necessarily be the most fair and objective. We can devise a category that is anything that fills the stomach. For that category, some Third World nations may end up having the highest purchasing power because it costs them next to nothing to fill their stomachs with grass and grasshoppers.

It was also reported that the LKY School of Public Policy, using the ILO database, found Singapore’s gross hourly wage to be US$17.71 (SG$22.30) last year, 88.8% that of New York’s (US$ 19.9).

The ILO database can be assessed here: http://laborsta.ilo.org/data_topic_E.html. There are only three links under the wage category:

1. Wages by economic activity
For this Table 5A, the latest year available is 2008 and it is United States that is being listed, not New York

2. Wages in non-agricultural activities
For this Table B7, neither United States nor New York is listed

3. Wages in 159 occupations (October Inquiry)
For this Table O1, again it is United States, not New York that is listed and the latest year available for United States is 2007

It is bewildering that the LKY School of Public Policy could obtain New York’s gross hourly wage last year from ILO when the ILO database doesn’t even contain data from last year nor contain data specifically from New York. Even if we were to install ILO’s “Key Indicators of the Labour Market, 7th Edition” software application, we can only go as far as 2009 for a limited number of countries only.

What is interesting for the United States data in Table 5A is the accompanying note which says “Notes: 1 National classification not strictly compatible with ISIC. 2 Not all employees covered; only production and non-supervisory workers; private sector.” There is no such note accompanying the corresponding Singapore data. In other words, LKY School of Public Policy is actually comparing the wages of all Singapore residents with the wages of US production and non-supervisory workers which is not an apple to apple comparison.

We can go straight to ILO’s US data source which is the US Bureau of Labour Statistics (BLS). BLS indeed has two different figures for average hourly earnings in 2011: US$19.5 for production and non-supervisory workers and US$23.1 for all workers. The LKY School of Public Policy’s figure of US$19.9 is indeed quite close to the BLS’s figure of $19.5 for production and non-supervisory workers. The LKY School of Public Policy has used the wrong figure and should have used the figure of US$23.1 for all US workers instead. Moreover, LKY School of Public Policy could have directly obtained from BLS, New York City’s average hourly wage of US$30.7 [1].

Having established the wage figure for New York, we also need to ascertain the correctness of the wage figure for Singapore. The Ministry of Manpower lists our 2011 average monthly earning as SG$4,334 [2]. The average weekly paid hours is listed as 46.2 hours [3]. The hourly wage works out to be SG$21.6 / hour which is slightly lower than the figure of SG$22.3 quoted by the LKY School of Public Policy. This is equivalent to US$17.17 when converted to USD using the exchange rate of 1.2579 [4].

So the average Singapore resident worker’s wage is US$17.17 / US$ 30.7 = 55.9% that of the average New York worker. It is therefore true that the average Singapore wage is much lower than that of New York’s and that UBS is not wrong to have painted the same picture. Contrast this with the LKY School of Public Policy’s figure of 88.8% which paints the wrong picture because it is wrongly based on US rather than New York data and wrongly based on production and non-supervisory workers rather than all workers.

LKY School of Public Policy’s effort to debunk the UBS study has once again turned out to be a flunk.

[1] US Department of Labour, Bureau of Labour Statistics, Average Earnings and Hours in New York – April 2012, Table 3

[2] Ministry of Manpower, Manpower Research and Statistics Department, Yearbook 2012

[3] Ministry of Manpower website, Labour Market Statistical Information, Hours Worked

[4] Singstats website, Table A4.1, Exchange Rates

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