http://singaporemind.blogspot.com/2009/02/truth-about-jobs-credit.html
Excerpt:
Here is the truth about the jobs credit. I first heard about this term called the jobs credit during Barak Obama’s campaign a few months ago. He wanted to subsidise firms for keeping and hiring workers. This idea was thrown out by his own party members, the Democrats, as unworkable.
http://208.79.203.2/~wayangpa/?p=4648
Written by Eugene Yeo and Jeremy Koh | 28 January 2009
PRIME Minister Lee Hsien Loong has described the $20.5 billion Resilience Package as a ‘very decisive Budget’ that aims to help see Singaporeans through the difficult economic times ahead.
Much has been said about the Budget lately with most PAP ministers and MPs, labor union leaders, employers and ordinary Singaporeans echoing the Prime Minister’s words.
The package consists chiefly of measures to help companies save jobs, retain workers and to keep them afloat during the economic downturn. Measures to help households include doubling of GST credits and a personal income tax rebate of 20% which was unchanged from last year.
The government had argued that the most effective way to help Singaporeans cope with the recession is to save their jobs through supporting the employers. However, it does little to address glaring long-term deficiencies in our corporatist economic model.
The S$20.5 billion ($13.7 billion) package — a whopping 8% of GDP — looks like past stimulus plans instead of a forward looking economic blueprint to retool our export-oriented economy.
Why does Singapore suffer the most from the global economic turmoil as compared to our nearest neighbor Malaysia ?
For far too long, we have been overly dependent on external trade while certain government policies like the compulsory CPF saving scheme and the high prices of public housing squeeze the middle class dry and dilute their spending power in the domestic economy.
Singapore’s economy would be more resilient if it were better balanced. Consumption composes only about 40% of GDP — far less than other developed Asian economies, nearer to 55%. (read Wall Street Journal’s commentary here)
The best way to prevent companies from retrenching workers and shutting down is to provide a steady flow of businesses for them. Only when there is demand will there be supply. The government’s incentives to the business sector are only temporary measures to tide them over these hard times and does not generate a demand for their services or products.
Why is our domestic consumption so low as compared to other developed Asian countries like Japan, South Korea or Hong Kong ?
Take the example the average Singapore worker earning a median pay of $2,500 a month to support his family of four – his wife and two children. He takes home $2,000 after contributing 20% of his pay to his CPF. Assuming his CPF is enough to pay for his monthly mortage, all he has is $2,000 for the living expenses of his entire family. How much spare cash does he still have to spend ?
The limited spending power of Singapore’s middle class is the real scourge of the current malaise pervading every sector of our economy and we will be able to shower the storm better had we have a greater domestic consumption.
The GST credits and personal income tax rebates provide more relief to the lower-income group who does not spend much anyway than the middle income group.
We propose two measures which will put extra cash in the pockets of the middle class almost immediately:
1. Decoupling the price of newly built HDB flats from the resale market:
New HDB flats are currently sold at 70% of the resale value of neighoring flats. With the HDB resale market being popped up artificially by downgraders from private homes and foreigners, this impose a heavy strain financially on newly-wed couples looking for their first home.
Public housing must be kept cheap and its prices should reflect current economic realities on the ground. Singaporeans should not be allowed to spend more than a certain percentage, e.g. 15% of their monthly salaries on servicing their housing loans. Those whose incomes failed to reach the benchmark should be offered rental flats instead.
The prices of new HDB flats should be pegged to the median pay of the average Singapore worker, calculated based on the amount the average worker will need to fork out over a 30 year period. For example, 15% of $2,500 gives us a monthly installment of $375, and a loan of $135,000 which middle-income households can afford easily.
2. Reducing employeers’ CPF contribution to 10% or less:
An extra 10% cash for each Singapore worker to bring home monthly will translate to greater spending power beyond basic subsistence levels.
Less Singaporeans will need cash handouts which the government can redirect to give more to the lower-income groups to lift them out of poverty.
Upon the recovery of the economy, Singaporeans can be encouraged to buy life annuities and health insurances from private insurance firms to supplement their CPF and medisave.
CPF has already failed in its original function of serving as retirement funds for Singaporeans. How many of us can afford to depend on our CPF when we retire ? The government should stop meddling in the personal finances of its citizens and allowed them to manage their own hard-earned savings.
Singaporeans have one of the highest saving rates in the world at 34.5%. We are also home to the richest sovereign wealth funds in the region with Temasek and GIC amassing assets of more than $100 billion dollars combined. Why then do we have less spending power compared to our counterparts elsewhere ? Why can’t we retire comfortably in our golden years and instead have to continue working for as long as we can ? Why are there still homeless Singaporeans with no roofs over their heads in a developed country like ours ?
There is something fundamentally wrong in our corporatist model and it is time we rectify it. Singaporeans from three generations – our grandparents, parents and now ourselves have contributed immensely to build up these SWFs through our CPF contributions and HDB flats purchases and yet they can afford to lose billion of dollars in failed overseas investments with impunity.
Reducing both the employees’ CPF contribution and prices of new HDB flats will benefit every Singaporean far more than GST credits and cash handouts. It is time we reduce our contribution to Temasek and GIC unless they are made to be accountable to the people like the Norwegian Pension Fund which publishes an annual statement of account for every Norwegian with a stake in it.
http://singaporemind.blogspot.com/2009/01/budget-where-are-safety-nets.html
Written by Lucky Tan | 24 January 2009
The day after the “Resilence Budget” was announce, Straits Times was filled with articles on how it will save jobs and help Singaporeans during the impending hard times. The budget attempts to save jobs by giving companies a wage credit. The govt will subsidize up to 12% of the first $2500 of wages. This was reported as an innovative new idea to save jobs. I figured this is probably a rehash of an old idea – in the 1980s recession, employer’s CPF contribution was slashed to lower the wage bills of companies. The lower wage bill helped to save jobs in the 80s recession. This time the govt probably wanted to do the same but cutting CPF is not possible because there is not much left to cut and many depend on it to service their HDB loans. The only way to lower the wage bill was for the govt to subsidize wages. However, this move will not save as many jobs as it did in the 80s. If you recall the 80s recession was caused in part by the loss of competitiveness due to the NWC recommending wages to be increased too quickly, the cut in wages helped Singapore to restore its competitiveness thereby saving jobs. This recession is very different. It is triggered by a massive abrupt collapse of external demand. Wages are not the issue – they are losing jobs by the tens of millions in China where the wages are the lowest in the world. Cutting wages will have a limited impact on retrenchments. Companies need to shed capacity because there is no demand for goods produced- Intel, Nokia, Microsoft, DBS etc etc have decided to cut jobs and these are companies that are still cash rich and competitive. When Lim Swee Say “scolded” DBS for retrenching staff instead of cutting pay, DBS replied that cutting pay is not the answer because certain segments of their business will not be revived for years and they just don’t need headcount.
What is going to happen is quite predictable. There will be widespread retrenchments and our unemployment rate will rise because the measures in the budget will have limited impact. A few months ago, Alex Au wrote that it is time for safety nets to be in place. I agree with him completely. These can be removed once the crisis is over and jobs are plentiful again. A survey done recently showed that 30% of Singaporeans are worried about retrenchments …they believe they will be retrenched. The last time something so abrupt happened was during the Asian Crisis. People simply queue up around the block at the MP office to seek help because they don’t know what to do when they become desperate. The MP had to decide what help to give on the spot. It is all very unsystematic and haphazard. Its the worst way to dispense help. This is a crisis people need to clear about where to seek help, how they will qualify for help and what help is given so they can at least plan when the situation deteriorates. Many Singaporeans will become jobless through no fault of their own and many have no savings because of the rising cost of living made it difficult for them to save. We will face a problem for which the budget offers no solution.
I have long thought there will be a serious situation which will cause the PAP govt to overcome its aversion to giving help to Singaporeans when they really need it. When the crisis came, I thought “this is it”…they will have to do it. Afterall, Singaporeans contributed to the massive reserves which are meant for rainy days. The crisis we are seeing is a once in a lifetime event….for once in our life, our govt has a chance to lift you up when you go down. But the PAP helped to recapitalise Western banks with our reserves instead. There was no scrutiny when tens of billions are lost in those banks but when it comes to helping Singaporeans directly with the reserves the PAP just can’t do it. Our PM recently brought up his fear of Singaporeans cultivating a sense of entitlement and dependency when the govt gives help – that is why there is no direct help for Singaporeans?! It is like not sending the fire fighters when someone’s home is getting burnt because you think that the people will abuse the fire engines by not taking measures to prevent fires in their own homes. But this time someone threw a lighted match into our backyard, it is global systemic crisis and ordinary Singaporeans will get into trouble through no fault of their own. This is not a time to teach your citizens lessons about being self reliant or worry about entitlement mentality. The last time our PM was very worried….it was about he and his minister colleagues being not paid enough and he fought hard for the pay he believed they were entitled to. Isn’t it time to worry about jobless Singaporeans who cannot afford the basic necessities? ….When will he fight for us?
http://theonlinecitizen.com/archives/5175
Tuesday, 20 January 2009, 5:51 pm | 919 views
Choo Zheng Xi / Editor-in-Chief
“If we would like to see Singapore moving up as one of the most developed countries in the world, and costs increase accordingly, lower income Singaporeans might need a minimum wage to survive.”
A minimum wage law was a constant theme of the late opposition icon Mr Joshua Benjamin Jeyaretnam, and more recently canvassed by ex-NTUC Income CEO Mr Tan Kin Lian. But yesterday the minimum wage was canvassed by an unlikely proponent: businessman and People’s Action Party (PAP) Member of Parliament, Mr Inderjit Singh.
Speaking in his personal capacity at the Institute of Policy Studies’ (IPS) Singapore Perspectives 2009 seminar, Mr Singh said that cheap foreign labor had depressed wages, and this hurt low income Singaporeans the most.
“As we brought in more and more people, many from India and China, not just at the top level of talent, but also at various levels including unskilled workers, we depressed wages of Singaporeans”, he said.
Noting that the problem of low wages was exacerbated by a high cost society, he added:
“Our costs continued to go up. So we caused a double whammy for Singaporeans who had no choice but to live with the high cost of living while having to accept lower wages”.
Minimum wage a possible solution
One way of solving this problem, he said, could be a minimum wage policy.
Speaking to TOC after his speech, he acknowledged that a minimum wage would be an additional cost to business, but that the government was in a position to draw up a scheme to make it workable.
Noting that the government was “unlikely to move very quickly on this”, he nevertheless emphasized its importance.
“If we would like to see Singapore moving up as one of the most developed countries in the world, and costs increase accordingly, lower income Singaporeans might need a minimum wage to survive.”
One way of doing it, Mr Singh suggested, was “either we incentivize companies to implement it, or the government has to supplement wages to a minimum level.”
Mr Singh favoured an incremental introduction of a minimum wage policy, as companies might not immediately adapt well to such a policy in the current economic downturn.
To begin with, the government could work within the existing Workfare Income Supplement (WIS) framework to level up wages. Mr Singh suggested including workers earning up to $2,000 in the scheme. The current scheme covers only those earning up to $1,500. He also suggested giving payouts on a monthly basis instead of the current six-monthly payout.
Growth at all costs a mistake
In the course of his presentation, Mr Singh was critical of several of the aspects of the Singaporean growth model, which he characterized as “growth at all costs”.
He raised the problem of high business costs not matched by productivity, tracing it to the government’s fixation with moving up the manufacturing value chain too quickly.
Mr Singh told the audience of 700 that a growth driven policy had “dislodge[d] Singapore’s economy, workforce, and other infrastructure”. He felt that a “slower rate of development, encouraging the stretching of domestic capabilities and technologies, would keep industries in Singapore for a longer period of time”.
He was also critical of what he called the government’s approach to “disincentivize companies from trying to keep many of what the government considered as no longer attractive capabilities in Singapore”, which he felt had led to too high a turnover in Singapore’s core competencies and had “made it difficult for Singaporeans and firms to cope”.
Moving ahead, Mr Singh proposed a model he felt was more sustainable:
“The suggested model should involve a moderation of cost while Singapore’s core competencies are strengthened…We must avoid any “boom and bust” type of policies, which go for broke in good times and slow down when the world economy grows.”
——-
Note:
In 2008, Mr Inderjit also criticised the “growth at all cost” policy. He “pointed out that the “grow-at-all-costs” policy of the government might have overheated the economy and worsened the income divide… “I feel a significant part of the inflation has been caused by factors that we could have controlled.
“In the last two years, the government has contributed to inflation by allowing multiple cost increases, both directly or through policy changes that resulted in cost increases.
“The end result is an era of very high cost increases, high inflation not supported by enough wage increases, especially for the lower and lower middle income Singaporeans and companies.” (Channel NewsAsia)
———
Read Channel NewsAsia’s latest report (20 Jan 2009): Average household income up across all income groups in 2008.
http://thestar.com.my/news/story.asp?file=/2009/1/10/focus/2975672&sec=focus
Extracted from article:
A high-ranking civil servant’s account about spending RM110,124 for him, his wife and son to learn fine French cooking has blown up in his face.
Two factors invited criticism to flare.
First, he was seen as flaunting wealth, obtained from his high pay, at a time when Singapore is suffering one of its worst slumps in history.
Many thousands of workers are still losing jobs or suffering wage cuts.
And, secondly, government leaders are accused of being hugely overpaid, as a result of which some are no longer able to relate to the common people.
http://theonlinecitizen.com/2009/01/keeping-seniors-at-work/
Prime Minister Lee Hsien Loong spoke at the Reinventing Retirement Asia Conference organised by the Council of The Third Age. He urged “no let up in keeping seniors at work”. He said that outmoded social attitudes and systems have to change, and that seniors should continue to work beyond the customary retirement age.
I agree.
Less energetic
Older people should continue to work, if they are productive and useful. But we have to recognise that they are less energetic, slower and more likely to fall sick. They cannot be expected to work as productively as younger people.
Older people should be allowed to work at a slower pace and part time, and to earn a proportionate wage. If their wages match productivity, it is likely that employers will continue to engage the older workers – as they bring the benefit of experience, lower training cost and greater stability in the workforce.
Fair wages
But, the older workers should not be exploited. They should be entitled to a fair wage for the work that they put in. Left to fend on their own, the seniors will be exploited by the market. If employers can get people to work at lower cost due to their desperate situation, the wages of seniors will stagnate or drop.
The trade union movement can, and should, take a stronger stand to get a fair deal for the older workers. Most of these workers were formerly the members of the trade union. There is little that the movement can do if it continues to believe that wages should be left to market forces.
Individual workers will continue to be weak. That is why they need a trade union to help them get fair wages through collective bargaining. There is a role for the trade union movement to play a more active role.
Saving for retirement
A better protection for the older workers is financial independence. During their working life, they should set aside sufficient savings to meet their financial needs during retirement.
If they have sufficient savings at the customary retirement age, they are financially independent. They do not have to work if they do not get satisfactory working conditions and wages. These people can continue to work for pleasure, to keep active, and to benefit society. A supplementary income is a bonus.
Unfortunately, many of our older workers are not financially independent. They are not able to save sufficiently or to invest their savings wisely during their working life.
The wages of our lower income workers are inadequate and had stagnated during the past decade. This is due to the absence of a minimum wage policy, a pro-business environment and reliance on market forces. It has led to a widening of the income gap. The fruits of economic growth are not fairly shared among the population, leaving people at the lower income groups in a worse position.
The cost of living increased significantly during the past decade. Although the official statistics calculated inflation at a modest level of 2 percent for most years, the actual inflation rate felt by most people were much higher, as they see it daily in the consumer prices, taxes and levies. The inflation rate escalated to 7 percent in 2008.
High cost of living and inadequate wages result in less money available to be set aside as savings for the future. Many people reduce their savings due to this squeeze.
Poor return on savings
The return on savings has been poor. For risk-adverse savers, the interest rate on bank deposits dropped to below 1%, which was grossly inadequate to cover the actual inflation rate.
Those who invested in life insurance and structured financial products received a poor return relative to the risk. The financial institutions were able to take away a large margin on these products to earn a big profit. In good years, these products gave a modest return to the investors. In bad years, the investors suffered the full impact of the losses. The investors have also been exploited by the market.
During the global financial crisis, more than 10,000 risk adverse investors had their hard earned or life savings completely wiped out on their investments in the credit linked notes, which were marketed to them as safe investment products. These investors were not risk takers, as they were not given a high return on these notes. To earn a modest return of 5%, they had to lock up their savings for 5 years.
Disappointed seniors
It is a bad mark on Singapore’s success story that so many seniors do not have sufficient financial security, in spite of a lifetime of hard work and prudent savings.
This is directly attributed to the economic strategy of reliance on the free market and inadequate protection for workers and consumers.
It is quite sad that many seniors have to work to earn a low income just to survive. They have to work hard and long hours, in spite of their weakened health. Apart from the low wages, they have to suffer indignity as well.
The Prime Minister quoted the example of hotels favouring older women attendants to clean rooms. But they tend to drop out due to pressure from their children. “This is a delicate matter of face and status,” the PM said.
There is no need for people to suffer indignity, if they receive fair wages. If the room cleaners are given adequate wages, they will have greater dignity and will even receive the encouragement of their children!
In some countries, refuse collectors earn more than office workers. If this situation applies in Singapore, there will be no shortage of locals wanting to work as refuse collectors.
Positive Government policies
It is time to review this failed strategy – which has resulted in many seniors facing the financial insecurity of retirement.
We need positive Government policies to make a change to improve the lives of the working people. They need to have fair wages and a fair return on their savings.
We need stronger regulations, trade unions and consumer associations to safeguard the interests of workers and consumers in the free market environment.
Tan Kin Lian
http://www.tankinlian.blogspot.com/
http://singaporeindianvoice.blogspot.com/2008/12/singapore-has-lowest-gdp-but-highest.html
Highest Paid Presidents / PM’s around the World
Source: The Mango Blog
The Economic recession has hit one and all, salary cuts and pink slips have taken their toll on the common man. Presidents, Prime Ministers are no exception. Most of the heads have cut down on their salaries or are planning to do so in the near future. Lets take a look at what the heads of top nations are earning.
Lee Hsien Loong, Singapore
(Country GDP: $235.6 billion – 2008)
Politicians in Singapore are amongst the most highly paid government officials in the world. Lee Hsien Loong, Prime Minister of Singapore earns five times more than the American President. Lee Hsien Loong takes an annual salary of $2.46 million.
Barack Obama, USA
(Country GDP: $13.81 trillion – 2007)
Second on the list is the President of the biggest economy of the world with a GDP of $13.81 trillion (2007). President Elect, Barack Obama will be getting an annual salary of $400,000 when he joins office next year.
Kevin Rudd, Australia
(Country GDP: $773 billion – 2007)
Third on the list is the Australian Prime Minister, Kevin Rudd with an annual salary of $330,300.
Angela Merkel, Germany
(Country GDP: $2.585 trillion – 2006)
The first lady chancellor of Germany, Angela Merkel receives an annual salary of € 242,000 (€ 22000 bonus included) ~ $ 307,340.
Nicolas Sarkozy, France
(Country GDP: $1.871 trillion – 2006)
The French President, Nicolas Sarkozy gets an annual salary of € 240,000 ~ $ 304,800. This is after he doubled his salary earlier this year.
Stephen Harper, Canada
(Country GDP: $1.274 trillion – 2007)
Stephen Harper, Prime Minister of the seventh largest economy of the world, Canada recieves an annual salary of $280,000.
Gordon Brown, UK
(Country GDP: $2.772 trillion – 2007)
Gordon Brown, Prime Minister of the second biggest economy in Europe and fifth largest in the world receives an annual salary of € 187611 ~ $238,266.
Vladimir Putin, Russia
(Country GDP: $2.076 trillion -2007)
The Russian Prime Minister recieve an annual salary of $81,190, which is significantly less than his counterparts.
http://mathialee.wordpress.com/2008/12/17/taxation-for-min-wage/
Here’s my 2-cents worth on the Minimum-wage issue that many people seem to be advocating as a means to help the lower income. My disclaimer: I’m way out of my depth here, I’m ignorant about how the country is run financially or how economics works (my JC refused to let me do Econs with Bio, and forced me to do Physics instead. No disrespect to you physicists out there, but till today, I don’t see how learning the equations of gravity has helped me at all — no matter what, we all stick to the ground). So this is my 2-cents worth that i’ll ask everyone to take with a pinch of salt. And I’ll LOVE to hear your views, especially if you disagree.
You know how, during PE lessons, when you have to play a 2-sided ball game, and you need to form your teams ? There’ll be some really really lousy people (I was one) , and if the teacher forced everybody to play, the team quality will be compromised with the lousy people. To have good teams, and a good game, it is more beneficial for the lousy people to stay out of the game. These lousy people “contribute” by staying out of the way. Now, lets say that the teacher rewards the teams — the winning team gets a chocolate bar each. If you were a lousy person, staying out of the game means you WILL NEVER get a chocolate bar. If you insist on being in the game, you MAY get a chocolate bar because your team mates might be able to compensate for you and still win the game. But if you insist on being in the game, the ENTIRE team will actually lower its chances of getting chocolate bars and will thus suffer with you in the game. But its not fair to force you out and deny you of your chance totally. The most beneficial thing for the team to then do is, ask you to stay out of the game, and for agreeing to do so, they will each give you a small portion of their chocolate bar each, such that at the end, you get almost the same amount that everyone else gets. This way, the team has a better chance of getting the chocolate, and you have contributed to that increased chance by staying out, and you are compensated for that act. The teacher should not be the one to give you, the lousy person, extra chocolate, because then the teacher will be rewarding both the top players, and the non-players, and everyone would naturally want to be a non-player then.
Taking this principle, and applying it to the Minimum Wage issue.
I do agree that anyone living in singapore has to have a certain minimum income in order to live in a decent manner. But I do see the govt view about having to remain competitive. Because if I were a businessman, I wouldn’t like laws that prevent me from doing my businesses at the lowest possible cost. How would I benefit, as a businessman, from hiring a more expensive person over a cheaper person, for the same work done? And how would I benefit to pay someone more than he is worth, because of a minimum wage law? Businesses may move out to regional countries if we force them to pay a minimum wage, which i suspect might be quite high to make sure the worker can live decently in Singapore.
Businesses moving out of the country is bad for the country. When the businesses move out , these low income earners would be reduced from fighting for a minimum wage to fighting for a job. That leads to problems for the country as a whole due to the social cost.
So at the end of the day, it is the entire country’s population that benefits from making sure business can be unethical, and can pay workers competitively, so that they remain here. But who pays the price for that benefit? Currently, it’s these low income earners that pay the price. Do they benefit? Yes, to a certain extent, because at least they have jobs. But it’s the ENTIRE population that really stands to benefit the most, and the entire population is NOT paying for it at the moment. We’re trying to shift the cost of this benefit from the low income earners to the businesses, when we are the ones benefiting. We are the ones who ought to pay the costs.
And so I think that these low income earners should have their income TOPPED UP to that minimum level to live decently. Topped up with TAXPAYER money, rather than with the businesses money. And we should pay more taxes for that. Because we benefit from their “cheap labour”. Even for the chronically unemployed, one could argue tha we benefit from their “unemployment” because these people tend to be really lousy workers and forcing businesses to hire them will not be productive. So we should support them with our taxes.
And of course we need the government to enforce that tax increase. Charities are unfair, because with the charity model, the kind-hearted people are paying the cost, and why should we reward selfishness and make the kind-hearted pay? Taxation make sures that everyone contributes fairly.
So what do you all think?
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