Does Singapore have big wage gaps between the educational levels among the rich countries?

 

This article is written in response to an article on “The Heart Truths”, where the writer alleges that Singaporean graduates are paid unequally to their foreign counter parts.

 

PM Lee Hsien Loong was quoted to have said that, “Polytechnic students have many good options after graduating and need not just aim for a university degree.

This was echoed by National Development Minister Khaw Boon Wan echoed Lee’s statement by saying that, “If they cannot find jobs, what is the point? You own a degree, but so what? That you can’t eat it. If that cannot give you a good life, a good job, it is meaningless,” and Minister for Social and Family Development Chan Chun Sing , who had said that, “It’s not the degree or the diploma… that is most important.”

It is heartening that our top leaders are finally telling the ground to de-link paper qualifications from skills/pay.

But you can argue: What about wage discrepancies between degree and diploma holders? Shouldn’t that at least demand for better papers? Well, yes… there has to be a wage discrepancy. In fact, it is desirable to do so. Why? If not, there is no incentive for the workforce to upgrade and attain higher skills for high value-add jobs. We can even argue that if the wage disparity between workers of different education levels is low, then, what is the value of tertiary education?

In Singapore at least, our current education system provide excellent avenues for income and social mobility. Even ITE graduates have good opportunities to advance to Poly and Universities. Ladders of upward mobility have all been setup, ready for anyone eager to climb them.

Wages have certainly improved. Not just how much is being paid… but also, HOW they’re being paid. Once upon a time, the older you are, the more you get (seniority based wage system). Which wasn’t really fair. Today, Singapore is seeing a more results driven model (productivity based). Singaporeans enjoy high wage and this is evident from our high starting points, we do not want a high wage growth which is not in tandem with productivity growth, otherwise, Singapore risks losing competitive and the dire consequences is unemployment when move out to seek cheaper labour elsewhere. Japan is currently experiencing such problem because their seniority based wage system which weighed down their economy. High wage and rigid hiring system have caused many Japanese companies to substantially cut back domestic employment or even move their R&D and production out of Japan, this is not what we like to see in Singapore.

Comparing with other countries

Our median wages should not be compared with resource rich countries like Canada, Norway and the US – this is akin to comparing Chery with a Ferrari. They run on different engines. Also, the tax rates of these countries are generally very high like Norway and Finland. Some countries like US and Canada even tax their citizens on world-wide income.

Although already very robust, Singapore will still benefit from tweaks to the system. For example, we can improve the Gini coefficient by levelling up the low income groups through subsidies, income supplement schemes or any other forms of social welfare which will not diminish their incentive to work. We also have to acknowledge that Singapore is an open economy. This means we depend on low wage, low skilled foreign labour in certain sectors of economy as Singaporeans move up the productivity ladder. The presence and the abundance of cheap foreign labour inevitably depresses the wage in these sectors and the government, together with its tripartite partners are addressing the issues by helping low wage Singaporeans workers to earn more. We do not want to go the extent of Japan where general price level is high because the country restrict cheap foreign labour to work in low value add industries.

So if you read articles with big charts and numbers trying to sound like they’re trying to prove something, take a minute and reflect – perhaps even compare with notes from this article.

Our employment and wage figures are stable, healthy and yes, it will also benefit from minor changes to the system.

 

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About the author

Tay Leong Tan

Tay Leong Tan is a collective of 3 writers. Tay, Leong and Tan. (Who were you expecting?!) We are enthusiastic about labour issues, economics and current affairs in particular.

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