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Medium wages stagnant

As much as I personally don’t really find the Reform Party credible (given all that resigns of party candidates before the GE), I cannot disagree with the following article, published by our third world media:

Source: http://www.channelnewsasia.com/stories/singaporelocalnews/view/1123342/1/.html

SINGAPORE : In response to the People’s Action Party’s (PAP) manifesto, Reform Party’s Secretary-General Kenneth Jeyaretnam said the PAP has failed to raise median household income significantly over the last decade.

As a result, he asked why should the electorate trust the PAP to do better over the next decade when global economic conditions are likely to be worse.

Mr Jeyaretnam also said that the lower-income groups have fared much worse than those on median incomes, which he said is a deliberate result of the government’s open door immigration policy, combined with the lack of a minimum wage.

He questioned the PAP’s long-term commitment to slow the growth of the population, given that the ruling party’s economic growth strategy and asset inflation strategy is dependent on a continually-rising population.

On education, Mr Jeyaretnam asked how educational levels of the lower-income groups can be raised when there isn’t any universal free education or the investment to improve teaching standards or lower class sizes.
– CNA/ms

After every GE, the PAP government rewards themselves with pay rise, bringing more zeros to their million dollar pay checks. It is unfair to tag their performance to the GDP. A GDP is not a good measure on social improvement. This is a rather heavy topic on economics (and minimum wage) and I will leave it for another post. For now, let me illustrate briefly why the government’s performance should not be pegged to the GDP.

In theory, the government is in full position to artificially increase GDP. How so? Simply by fiscal policy. Increased government spending will lead to an increase in GDP. And that does not necessarily translates to the citizen being better off. So by simply constructing an expressway or propping up a few more monuments and buildings will increase GDP. But does that means the nation is better off?

In economics, we talk about Total Factor Productivity. National income can be grown using 3 inputs, denoted as

Y = A \times K^\alpha \times L^\beta

where Y denotes GDP output, A denotes productivity (eg: it’s reported in our 3rd class media that Japanese workers are more productive than Singapore workers so their A is higher), K denotes capital investment and L denotes labor input. Given the foreign influx of ‘talents and workers’ since 2006 and the investment from foreign entities (notably the 2 Integrated Resorts), it is obvious the ‘phenomenal’ growth that Singapore experienced last year is artificially created through more K and more L. In fact, we have created so much jobs that we need foreigners to come in. That leads to a low unemployment rate that gives PAP something to boast about.

Problem is the influx of foreigners also attribute to the usual globalization phenomenon whereby the income of the lower income group became stagnant or even decreased due to cheaper labor coming from poorer countries. Only those with higher valued skills can ride on globalization and profit from it while those that can’t catch up losses out. This results in an ever increasing disparity in income distribution. Singapore already has one of the highest Gini coefficient in the world!!

Admittedly, it has not yet been proven in economics theory that a wide income disparity is bad. In fact, on an even wider macro view, globalization is good. It help to lift poor nations from poverty levels (notably China and India) while it forces jobs that are not adding much value to developed economies (such as U.S.) to be shifted to nations that can do the same job but with less cost. On a global scale, it’s simply shifting production to a more cost efficient location. In the end, the owners of companies profit from higher profit margin, the poorer economies benefited from more jobs, while the low skilled in developed economies loss out.

However, and that is a very very pronounced However, we are talking about a nation. A small little red dot that is insignificant on the global scale. The world won’t miss us very much if the island is to drown tomorrow. So who else to help ourselves other than ourselves? Why is the PAP government so reluctant to introduce a minimum wage? A wide income disparity is always bad for social cohesion. Add in the equation of a large foreign population and suddenly you don’t know your country any longer.

The PAP talks about slowly integrating foreigners. It’s impossible. Because when 1/3 of the population are foreigners, they form enclaves. They don’t bother to fit into the society. They bring in their own cultures and is comfortable in being themselves. Who can blame Singaporeans for feeling foreign in their own country? Why should I continue to serve my NS so as to protect foreigners? Why should I protect them if only the elites and foreigners benefit?? Being elites, the PAP government does not mix with all these foreigners. They don’t see them as we do. They don’t hear foreign languages all around them but we do. We hear, see, smell, squeeze with them in MRT, in bus stops, in NTUCs, everywhere!

Now that the citizens can no longer tolerate the influx of foreigners creating havoc on public infrastructure and start voicing out their concerns, the PAP decided that continuing to increase foreign imports can no longer work for long without political repercussions. Why else would the government starts to get interested in raising productivity in recent months? Because there’s only that much K and L you can add! This illustrates the myopia the PAP government has towards economic development.

Conclusion:

  • The PAP’s performance tagged to GDP can be manipulated by the PAP with no organic growth so far. It’s not fair.
  • Increasing GDP comes with increasing income disparity. Add in increasing foreign population, it distorts the social fabric we have painfully built over the last 40 years. The policies destroyed our national identity and culture.
  • The lower income group suffered the most from globalization and while the PAP is increasing the effect of globalization, it has done little to help them. Giving them a one-off payment of $4-800 before every election hardly helps.
  • The PAP has totally lost touch and does not dare to admit it.
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