Are Singaporeans underpaid?

The subject is not new. Already back in 2010, there was plenty of talk about Singapore’s economic growth spurt not necessarily translating into higher wages. The issue was further aggravated by analyses suggesting that average monthly nominal earnings per employee had steadily declined while the GDP had risen quite significantly. Others even went so far as describing Singapore as a global country without first world wages.

That’s why today there’s much expectation regarding the results of the latest Economic Survey of Singapore, most particularly regarding the paper titled “A Look at Wage Share and Wages in Singapore”.

Written by economist Goh Tee Wei, the paper examines the relationship between wage share and wages across countries, as well as across sectors in Singapore.

Although aggregate wage share has been stable over the past years at about 42%, there has been variation across sectors. Labour-intensive sectors like construction and hospitality tend to exhibit higher wage shares while capital-intensive ones including electronics and biomedical sectors have produced lower wage shares.

The paper suggests that lower wage shares, however, do not necessarily mean lower wages, since factors like economic composition (represented by industry sectors), trade openness, market structure, labour market regulations, and trade union strength must also be taken into account.

It also points out that Singaporean wages are in fact higher than those of some developed economies with higher wage shares. Singapore is shifted under more favourable light when you look at our PPP-adjusted (Purchasing Power Parity) average monthly remuneration per worker compared to certain European countries, Japan, and South Korea.

Real remuneration per worker in Singapore has also appreciated by 1.4% per annum over the past 20 years, which is a more positive trend than that seen in several developed economies.

Finally, the paper raises the correlation between productivity and wage growth. Citing the electronics cluster (which is more productive than general manufacturing) and the information and communications sector (which is more productive than the accommodation & food services sector), Goh suggests that there is “a positive, albeit weak, relationship between productivity growth and real wage growth across sectors in Singapore”.

He pays homage to the government strategy of growing higher value-added and productive sectors (like biomedical manufacturing and financial & insurance), saying that while these have created better-paying jobs in the economy, these industries’ low wage shares may have contributed to suppressing the nation’s overall wage share growth.

Another key factor that can’t be overlooked is income inequality (charted by the Gini coefficient). Singapore has taken one of the top spots in terms of income inequality among developed countries in the world.

Ignoring averages, the real income differential between top earners (without pointing fingers) and bottom earners is somewhat appalling.

This could be an explanation to the general sentiment that Singaporeans’ wages are increasing at a slower pace than rising day-to-day expenses. This means that raising workers’ salaries at the bottom of the labour market is a good thing, but it’s not enough; these workers still have to pay for products and services whose price continues to rise as even more affluent people make their way here and raise the costs of basic necessities (food, housing, schools, etc.).

Hopefully the Economic Survey report, along with other constructive and objective analyses, will help decision-makers soften the economic blow Singaporeans are facing today.

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