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Local media self-promoting the goodness of the government

Median income of S’poreans increased over past 10 years
By Saifulbahri Ismail | Posted: 11 October 2011 1935 hrs

SINGAPORE: Singapore has one of the highest employment rates internationally and the median income of workers also increased 11 per cent in real terms, over the past 10 years.

These were some key findings in a paper released by the Manpower Ministry on Tuesday.

Singapore faced three recessions in the past 10 years, yet Singaporean workers are earning more.

But almost all of the income growth occurred in the later half of the decade.

From 2001 to 2010, the median monthly income grew 11 per cent in real terms, or 29 per cent in nominal terms.

However, income for households at the bottom 20th percentile grew only 8.1 per cent in real terms, or 34 per cent in nominal terms.

The government has pledged to raise average Singaporeans’ median incomes by 30 per cent in real terms over the next 10 years. To achieve this, the median income must grow by threefold from the current level. Analysts said this is not something that is impossible.

“What we need to do is to try and aim for growth of between 5 to 10 per cent over the coming decade before we can actually achieve the aspiration that has been set. Singapore’s economic condition is actually determined to a large extent by circumstances beyond our control. So, this really has to depend on the global economic climate that would allow such an ambitious growth performance,” said Associate Professor Randolph Tan, head of the Business Programme at SIM University.

There were also more Singaporeans working over the decade. The number grew by 1.8 per cent per annum.

There were 1,712,600 Singapore citizens in the labour force in June 2010, making up the majority or 58.3 per cent of the labour force.

This is faster than the growth in citizen population aged 15 & over of 1.6 per cent per annum over the same period.

Government transfers had a redistributive effect on household income.

In addition, Singapore has one of the highest employment rates internationally – with nearly eight in ten Singaporeans (aged 25 to 64) employed in 2010.

This employment rate surpassed economies such as Hong Kong, Taiwan, South Korea, Japan, the US, Canada and the UK.

The ministry explained that although Singapore’s labour force participation rate is not higher than in many advanced economies, the unemployment rate amongst those in the labour force is low.

With the strong economic recovery, the unemployment rate declined to 3.1 per cent in June 2011, down from a high of 4.5 per cent in 2009 during the recession.

The unemployment rate was lower among better educated citizens, as well as older citizens.

However, once out of work, older Singaporeans were more likely to stay unemployed longer.

The long-term unemployment rate of older citizens aged 50 & over was 0.8 per cent, compared with 0.7 per cent for all citizens in 2010.

With continued emphasis and investment in education and training, more Singaporeans are also holding higher skilled jobs.

In 2010, 23 per cent were degree holders, up from 14 per cent in 2001.

Including those with diploma & professional qualifications, the share was 41 per cent compared with 28 per cent in 2001.

Forty-nine per cent of citizens employed in 2010 were in professional, managerial, executive & technical (PMET) jobs, up from 42 per cent in 2001.

– CNA/cc

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Sometimes I laugh at how the local media loves to self-congratulate their masters on how well they have done and tried to propagandize the community. I would like to point out some technicalities in this report:

First question some of you who have taken basic statistics might ask: Why use Median and not Mean? The simple answer is, it depends on the distribution. If the distribution is symmetrical, using mean would be better. But if the distribution is skewed, using mean would be meaningless as large outlier, such as a relatively larger increase in wealth in the top 10% of the population would artificially push the average beyond the rest of the distribution. The average figure therefore does not truly reflect the entire population.  Using median would be more meaningful in a skewed distribution as it solely reflects the ‘middle value’ of the entire range.

In this case, we clearly knows that wealth distribution is highly skewed in Singapore going by the extremely high Gini coefficient we have in the country. Thus, the median method is employed in this article, confirming that the country is indeed divided along uneven economic distribution. I am not saying that there should be highly equal distribution. In any capitalistic model and just to quote the grossly over-used explanation of globalization (seriously, i think we are giving too much credit to this argument of globalization. But that’s for another post), there are bound to have people who can’t catch up as fast as certain groups. However, I believe that there is a line, a limit, to how much we should allow this uneven distribution to grow in order to rein in social order.

Then we know from this article that the growth in the median wage grew by 11% in real terms and 29% in nominal term, giving us an estimated inflation rate of 18% over the past 10 years. 18%? Over the past 10 years? Really? Look at the food you paid for 10 years ago and how much you are paying now. Look at the items that make up major spending decisions in life– flats and cars you paid 10 years ago and look at how much you need to pay now. While I don’t have the figures to back my argument, I definitely don’t feel that my expenses had only went up by 18% on average. Congratulations to those who don’t feel that way, you must be privileged. One thing is for sure though; the population in Singapore has definitely increase more than 18% over the past decade. On the sideline, and just to throw in some figures, according to DoS, the entire population grew by more than 22% from 2001 to 2011 while the Singaporean population only increase by close to 14% (and it includes new citizens).

We also know from this article that the government is ‘a genius’ to generate so much jobs that unemployment rate is consistently low. I would like to bring up the facts that while unemployment rate continues to be low, the labor force participation did not increase significantly. How do I know that? Well, the report stated that the figure is not higher than most developed economies. Being developed economies, the labor participation rate is usually pretty stable. In addition, I have looked up at statistical figures from DoS and it confirms that. So what does all that mean?

Let’s throw up some boring connotations and simple mathematics. I apologize to those who are new to economics but please bear with me:

Labor force participation rate (LFPR) = Labor force (LF) / Labor force population (LFP) (generally referred to all healthy males and females within legally working age range)

Labor force (LF) = Employed (E) + Unemployed (U)

Unemployment rate (UR) = Unemployed (U) / Labor Force (LF) = U / (E + U)

Given the government’s stance on the need to bring in foreign talents to help the country’s economic growth, supported by population growth figures, it is obvious the labor force population (LFP) and Labor force entering the market (LF) must increase. A relatively unchanged LFPR would mean that the change in LF and LFP must be positive and similar in magnitude. This in turn means that E and U must have increased at very similar rates to LFP. Since the UR is consistently low, U and E must have also increased at similar rates. In other words, while we have more people getting employed in absolute terms, there are also more people being unemployed in absolute terms.

Another point to take note is when a person is out of job for a long period of time, he or she can be classified as ‘not actively looking for a job’ and excluded entirely from the LFPR computation. The actual unemployment rate could jolly well be much higher.

To put it even more simply, the scenario goes like this: The government creates a lot of jobs to drive the economy so they use this excuse to bring in more foreign workers. More foreigners come into Singapore to work. At the same time, there is an increase in people being unemployed as well, probably due to frictional or structural unemployment. Rationally, foreigners who cannot find a job will have no choice but to return to their country. Staying on serves no purpose and being out of work means he or she can’t possibly support himself or herself in a foreign land. Singaporeans, on the other hand, who did not benefit and was retrenched (either due to structural changes in industry or under-priced by the cheaper foreigner workers), will get kicked out of the labor force and has no where to go unless they cross a bridge to nearby Malaysia so that their savings might last them a bit longer. Guess what? The older workers are exactly the group most susceptible to get retrenched or fired. To rub in more salt on the wound, older workers will find it harder to get re-employed, as what was stated in the report.

In a nutshell, this report has cleverly boasted all the ‘good things’ the PAP government had done but skillfully avert the real issue that matters. There are only 58.3% of working adults who are Singaporeans even though the article used a misleading word ‘majority’. A sad majority, I would like to add. And most importantly, more people are getting unemployed and those unemployed Singaporeans, usually older ones, are the ones that suffer the brunt of the nation’s economic growth strategy.

P.S. To make my point clearer: I illustrate how the segment of employed gets larger and larger fueled by foreign ‘talents’ and some young, educated Singaporeans benefiting from it, but at the same time the segment of unemployed gets larger and larger and would largely consist of old Singaporean workers who are usually not highly educated. Non-singaporeans that belongs to this segment of unemployed should rationally leave the workforce (or rather, the country) due to the lack of means to continue living in the island city. Therefore, the unemployment segment will make up of mainly Singaporeans.

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Categories: Economics
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