Lorraine Boon had published in the Straits Times Forums last week (Mar 08 2014, Why Cost of Living Survey Matters) her opinions on why luxury goods should be considered in a Singaporean’s cost of living.
Five Stars and a Moon caught up with Lorraine and asked her what she thought about the cost of living in Singapore, middle class Singaporeans and expensive rentals.
FS: Do you think Singaporeans are better off than expats when it comes to day-to-day living?
Lorraine: A recent survey by HSBC Global Research shows that Singapore expats are the richest in the world. 54% of Singapore expats earn more than US$200K annually versus global survey average of only 7%.
This means 54% of expats earn US$16k/month or S$20k a month.
Compare this with the annual Singaporean income per household:
So the simple answer is probably “No”.
FS: Do you think luxury items should be included in measuring inflation?
Lorraine: As Housing and transport costs are such dominant weights in the CPI basket, including branded luxury goods is a moot point.
FS: Should efforts be made at lowering prices of luxury items?
Lorraine: As mentioned above, this is a moot point.
In reality, most Singaporeans don’t buy these things. Only 12% of the non-resident population probably fall into the expat definition (Source: http://population.sg/resources/population-composition/#.UyAqpFGSz3Q) or about 175,000 who can afford to flaunt and buy luxury items PLUS another 20% of wealthy Singaporeans – so if you add those number together. Just over 20% of people here can buy the items.
But my point is the the gap exacerbates social corrosion – hence you see backlash regarding Anton Casey, the China born Ferrari driver etc.
However, I do have a problem with presumption – which was why I was motivated to write the letter! We alone should decide ourselves what we should or should not have in our consumption baskets.
It simply brings the income inequality into sharper focus.
As some of my friends report, it hammers home the reality we are second class citizens. It accentuates the “us versus them” mindset.
I feel it is intuitively wrong to talk about a separate economy for expats and another one for Singaporeans. Ultimately, one will influence the other and it is not going to be that the cheaper item will be used as a benchmark.
FS: There has been a lot of work in raising the wages at the lower percentiles of our society, what more do you think could be done in raising wages at the middle?
Lorraine: Our economy is transforming and changing. What used to be “middle/low income jobs” in Singapore are now competing internationally with even lower-waged workers in developing countries.
Jobs are migrating out of Singapore. This results in a rapidly shrinking middle class. To add to that problem, Singapore’s population is ageing. The population needs to be “retrained”, otherwise there will be more older workers with obsolete skills.
So what must be done is to provide SUBSIDIZED and easily accessible opportunities for MATURE workers to retrain. Which could mean allowing them to intern in new positions without prejudice.
FS: Should there be policies to restrict how much a landlord can charge for rent?
Lorraine: Trouble is, if you have policies, you are tinkering with the free market.
But if they are going to tinker then these are 2 areas to tinker:
(1) perhaps rethink REITS. Why? Reits are causing them to cough up more in rents. This is because Reits act mainly to boost returns for shareholders. (http://www.commercialasia.com/news/9484/singapore-retailers-say-reits-are-pushing-up-rental-costs)
(2) And here is the other area – HDB to come up with a policy to cap the profit from these transactions: http://www.todayonline.com/voices/hdb-should-intervene-sales-coffee-shops-food-prices
FS: Data shows wages have been increasing. The irony with increasing prices is that it contributes back to inflation and rising prices – at what point should Government intervention step in?
Lorraine: If you read DPM’s budget speech, he recognizes that wages have to rise in order to create the new middle class.
Literature has identified how having a strong middle class and a more egalitarian distribution of income can build long-term growth.
The benefits can be listed as:
• It promotes the development of human capital and a well-educated population.
• It creates a stable source of demand for goods and services.
• It incubates the next generation of entrepreneurs.
• It supports inclusive political and economic institutions, which underpin economic growth.
The govt also recognizes that they need to help companies during this transitioning stage – so they are already stepping in with PIC incentives etc to help businesses.
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