Study shows Republic lags behind other top cities in gross hourly pay
By Aaron Low, The Straits Times, 4 Aug 2012
IT USED to be that a conversation starter would be asking what one had for lunch or how the children are doing.
These days, though, hardly a conversation goes by without a mention of the $90,000 certificate of entitlement or the $900,000 Housing Board flat.
Indeed, the rising cost of living has been one of the hottest political issues of late and looks set to remain so.
Inflation has hovered at around 5 per cent over the past 18 months and is unlikely to abate by very much soon.
The consumer price index is likely to rise by 4 per cent to 4.5 per cent for the whole year - far higher than Singapore's historical average of about 2 per cent.
Singapore's reputation for being an increasingly expensive place to live in has been reinforced by numerous surveys conducted by consultancies and banks on the cost of living.
Consulting firm Mercer, for instance, ranks Singapore the sixth most expensive place for expatriates to live in, among 214 locations.
UBS Wealth Management went one step further and compared 73 cities on not just the cost of living but also the purchasing power of workers in each city.
It ranked Singapore the 10th most expensive place to live in. It also said that Singaporeans earn only 36 per cent of what New Yorkers do.
Is living in Singapore that tough? Are residents really so much worse off compared with workers in New York?
An answer came this week in the form of a new study conducted by researchers at the Lee Kuan Yew School of Public Policy. It suggested that Singapore residents do not have it that bad, and in fact are better off in some ways than their counterparts in New York.
He created two different indices, one for expats and one for residents, reasoning that both groups have different lifestyles. The main difference between the two indices was the weights attached to each item in the basket.
For expats, consumption was tilted towards drinks, food, clothing and rent. For locals, the index was based on the World Bank's study of spending habits and had a higher weighting on transport, recreation and household supplies.
The study found that, yes, Singapore is a very expensive place to live in - for expats. In fact, it ranked fifth in the world, and was the second-most expensive city in Asia after Tokyo.
For locals, however, the picture was markedly different. Singapore emerged as the 61st most expensive city to live in - out of 109 locations.
And when it came to purchasing power - which is what you can buy with every dollar you have - Singaporeans are actually 34 per cent better off than New Yorkers. Singapore came in 25th for purchasing power, that is, in the top half.
This study is probably a more accurate representation than previous studies of the costs of living here for residents.
Yet, if casual conversations and online grouses are anything to go by, many Singapore residents find the cost of living a problem. What accounts for this?
It could be that rising costs are just part of the problem; the other is income. After all, if incomes rise faster than prices, no one would really complain.
On this front, the ACI study shows that Singapore is not faring too well.
Gross hourly pay for the average Singapore worker was US$17.71 (S$21.90) last year. That puts Singapore at 51st out of the 60 top cities featured in the ACI study. Singapore's wages were also about 12 per cent lower than that of the average worker in New York.
In contrast, workers in Copenhagen had a gross hourly income of US$61.42 - more than three times Singapore's - while workers in Luxembourg were paid US$40.18.
To be fair, the numbers do not take into account taxes which, if included, would likely boost Singapore's ranking, given its low personal income tax.
But the gross hourly pay figure is an average number and does not take into account the level of income inequality in Singapore.
Data from the Manpower Ministry shows that about 908,900 workers, or 46.7 per cent of all workers, had monthly incomes of less than $2,500 last year.
That means that for about half of workers, gross hourly pay is equal to or less than $14.20, based on the average of 44 hours worked a week. This is much lower than the average wages ACI used in its study.
Thus, the reason many people, especially those at the bottom end of the scale, complain is that, for them, incomes are not keeping up with rising costs of living.
The Government has flagged the need to raise incomes as a priority and said last year that it wants to raise real incomes by 30 per cent over 10 years, or roughly about 3 per cent a year.
But this is a very difficult task. Last year, for instance, real incomes grew by just 0.9 per cent, eroded by the high level of inflation. This was much lower than the real wage growth of 2.9 per cent workers enjoyed in 2010.
There have been other steps taken to address the gap.
The National Wages Council has recommended that low-wage workers earning up to $1,000 monthly enjoy a minimum built- in increment of $50 this year.
The labour movement has also embarked on a plan to work with companies directly to raise productivity, by offering funding to the companies. The catch is that the companies also need to raise the wages of the workers in turn, after reaping gains from productivity improvements.
These are moves in the right direction and the Government needs to keep its focus on incomes if it wants Singapore to be a top global city.
Otherwise the complaints in casual conversations might turn into mass disgruntlement. Then the cost to society and government could be very high indeed.
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