Rising Costs, Stagnant Wages "more people feel squeezed

[Dennis Ng]

As I have said before, in 5 to 10 years' time, Singapore will be Heaven for the Rich, and .........

This is why I want to help as many middle class in Singapore to become Rich by sharing with you how to make your money Grow, so that you can reach Financial Freedom, sooner rather than later.

Cheers!

Dennis Ng

http://www.huffingtonpost.com/huff-wire ... ncome-gap/

17 Feb 2011, SINGAPORE — Singaporean Ramzi Mohamed is tired of sleeping in the living room of the two-bedroom apartment he shares with his mother and older brother.

His problem is that housing prices in the city-state are up almost 70 percent since 2006 while the 29-year-old gym administrator's monthly salary of 1,200 Singapore dollars ($938) hasn't budged in five years.

"When I was 20, I thought I'd have my own place by 30," Ramzi said. "Now that I'm almost 30, I wonder if that will ever happen."

Like tens of thousands of others living in the tiny island nation that boasts one of the world's highest levels of GDP per person, Ramzi's failure to realize his modest ambitions is no accident.

A flood of cheap immigrant labor – and stiff competition for manufacturing jobs from Asian neighbors like China and Vietnam – has kept wages stagnant for many and widened the gulf between a very wealthy minority and the island's poorest. Housing prices have skyrocketed as rapid population growth outstrips supply.

At the same time, ostentatious signs of the wealth enjoyed by the elite have multiplied. That has put the government under pressure to loosen its tightfisted stance on welfare in the next national budget Friday as it tries to defuse criticism its policies have worsened the plight of ordinary Singaporeans.

The government must also call general elections by February 2012. Analysts expect the ruling People's Action Party, which has held power since independence in 1965, to maintain its overwhelming majority in parliament. But if poorer Singaporeans who feel left out of the country's prosperity bring their discontent to the polls, the government could find itself with a weaker mandate and the beginnings of a stronger opposition.


"The lowest income group has struggled to stay afloat," said Irvin Seah, an analyst at Singapore's biggest bank DBS. "Plainly, not everyone has benefited equally from the economic growth that has occurred over the past decade."

Singapore's economy – which relies on manufacturing, finance and tourism – grew a record 14.5 percent last year.

Despite rapid economic growth, the U.N says income inequality in Singapore has risen steadily over the last decade and is the second highest behind Hong Kong among developed nations.

From 1998 to 2008, the bottom 20 percent of households saw their income drop an average of 2.7 percent while the salaries of the richest 20 percent rose by more than half.

To be sure, the poor in Singapore as a whole are better off than their counterparts elsewhere in Southeast Asia – homelessness and hunger are almost nonexistent. The richest 20 percent of Singaporeans mostly live in private developments, and the rest of the population lives in housing built by the government, so slum areas of concentrated poverty don't exist.

The few opposition figures in tightly scripted Singapore are calling for more housing construction, a minimum wage – and fewer foreigners.

"We've had over a million new people come to live in Singapore in the last 10 years with very little increase in the stock of public housing, so it's inevitable that prices have risen sharply," said Kenneth Jeyaretnam, son of Singapore's best known opposition politician J.B. Jeyaretnam, who died in 2008.

"We need to slow the intake of foreign workers and concentrate on raising the productivity and incomes of Singaporean workers instead," he said.

The government in recent years has also courted events such as Formula 1 – a predominantly European sport with little local following – and allowed two casino resorts, where citizens must pay a $78 fee per day to gamble, while foreigners enter for free.

"Some feel that we're creating this place to be a playground for the rich," said Eugene Tan, assistant professor at Singapore Management University. "There are people who genuinely feel that Singaporeans don't come first."

The PAP has long rejected policies such as a minimum wage or public retirement pensions, arguing welfare state-style policies would undermine competitiveness, foreign investment and economic growth. But it increasingly recognizes its hold on power will be undermined if a large section of society is left behind.

"Economic growth must benefit all members of the community," top government adviser and former Prime Minister Goh Chok Tong said last month. "Otherwise, our community may be divided by differences in income levels within it."

Analysts expect the government – whose coffers are flush with last year's budget surplus estimated at about 7 percent of GDP – to announce Friday increased retirement fund contributions, training for low-income workers, tax cuts, rebates and cash handouts.

Part of the reason for the jump in income inequality has been the success of Singapore's richest – billionaires whose fortunes largely stem from banking and real estate development. According to Forbes' list of richest Singaporeans last year, eight of its 11 billionaires made their money in banking or real estate.

The island also has the world's highest percentage of millionaires – households with at least $1 million in liquid assets – at 11.4 percent of the country's 5 million population, according to a survey last year by Boston Consulting Group. Rolls Royce, whose least expensive model in Singapore costs about $850,000, said sales in the city-state soared 171 percent in 2010.

"The PAP has made it a central plank that it is a party for all," said Tan, the assistant professor. "Once enough people feel that is just rhetoric, then that would really undermine the government's legitimacy."

[jamestai]

Hi,

Just briefly read through the 2011 Singapore budget. Beside giving out money to singaporean, increase employer CPF contribution, reduce personal tax, do away the TV and Radio license fee permanently etc. I don't see any significant step that the goverment is taking to tackle the 4 - 5 % inflation rate this year. IF I understand correctly MAS is not going to raise interest rate but just trying to keep singapore dollar. But all this incentive and new policies do they translate into a saving of 4 -5 % inflation rate that singaporean are facing today ? I don't quite understand how the new budge can help to tackle interest rate problem. What is your view ? Maybe I am missing something.

James Tai

[Dennis Ng]

Hi,

Just briefly read through the 2011 Singapore budget. Beside giving out money to singaporean, increase employer CPF contribution, reduce personal tax, do away the TV and Radio license fee permanently etc. I don't see any significant step that the goverment is taking to tackle the 4 - 5 % inflation rate this year. IF I understand correctly MAS is not going to raise interest rate but just trying to keep singapore dollar. But all this incentive and new policies do they translate into a saving of 4 -5 % inflation rate that singaporean are facing today ? I don't quite understand how the new budge can help to tackle interest rate problem. What is your view ? Maybe I am missing something.

James Tai

Hi James,
agree with you.

Before the budget, in the last few weeks, there were advertisements on TV building up expectation for the Budget, including words such as how would the government help meet concerns of rising inflation (or to that effect), guess they don't know this can "back fire".

Personally, I felt the expectations was built up, but the Budget fails to deliver. Giving an Ang Pao of S$200 to S$800 would make most people happy, since most people don't know how to calculate, without knowing that such an ang pao can be easily offset by rise in daily costs...

Members of this Forum, (seminar graduates who are Financially Literate) is of a minority in Singapore....thank goodness, that is why such giving of Ang Pao still works. I don't think it "works" on us (those who are financially literate).

[jamestai]

HI,

Just to share with you something funny what my mum said to me just now when she came back home. The first thing she ask me is

Mum: "Son, I hear that PAP is going to give us money do you know how much ?"

Me: "Yes Mum, the singapore budget just announce, so we maybe getting around 100 - 800 depend on how much you earn each month. So maybe you can get $800 since your income is less than a $1000 per month "

Mum: "Oh you mean every month I can get extra $800 ?!"

Me: "No lah, only 1 time, PAP say we will get it in May 2011"

Mum: "Only One time $800 where got enough, everything so expensive now, $800 is like 8$, you buy food, take MRT, take bus and eat outside, 1 month all gone"

Son: "Wow mother, you also know that is not enough ?"

Mum: "Of course lah, no need to count also know is not enough".

My mother only has primary school education, I must say she is not that stupid at all, So don't play play Auntie and Uncle very good at counting money Wink.

James Tai

[djwongdj]

Touchè to James' story.....Singaporeans aren't deceived, no matter the age and education level.

The ST online survey at 9.30pm this evening showed that 45% of those polled felt the budget didn't meet their expectations....

The US Fed Reserve depend on QE to distract the population from the more serious problems they cannot solve....

The PAP depend on one-time payouts every annual budget to distract the population from serious problems they don't wish to solve....

LOL!!! Sigh!!!

[jamestai]

Hi,

Actually I think one of the thing that our goverment should consider and I know they have the power to do it, is to prevent Singapore public transport and water and Electric cost to rise further. They should have the money to subsidise those thing. Then for the rest the only thing we individual can do is to cut back and save. But I know is a simplistic thinking but personally that is what i hope for.

James Tai

[Trade2win]

Singaporeans will never demonstrate like other Countries, we are psychological trapped with the System. Law, Fines & Jail - we are well managed. The only Fear of the "Power" is a fluke result in the GE. That's the avenue where the people will take a risk by casting protest votes.

Falling income and inflation is a worldwide PROBLEM now. Just read this at the CNNmoney.com:

Danger! Falling middle-class incomes
Incomes for 90% of Americans barely budging since the '80s, and fallen over the last few years. Here are some who have seen their earnings drop.

Gay Pinder
• How the middle class became the underclass
Hometown: Baltimore, Md.

During the recession, I was let go from my job at a non-profit in Washington, DC. After being out of work for 19 months, I got a job as a media relations specialist for my alma mater, Towson University. Now, I make $15,000 a year less.

I like this job much better than the one that paid more, but that said, there are trade offs. The "American Dream" of being a homeowner has become the quintessential American struggle. I'm a single woman and I own my home. But it was purchased with a certain salary, and I still have to pay the mortgage.

My savings are gone, my retirement I've gone through. I took part-time jobs over the Christmas season, working at Macy's for $7 an hour.

I consider myself lucky to have a job at all, but come on, this is ridiculous. I have a master's degree. I'm an experienced worker. This isn't how it's supposed to be.

http://money.cnn.com/galleries/2011/new ... index.html

Will this happen in Singapore?

[wemakebread]

With such high housing prices, will Singapore follow in the footsteps of Japan?

Maybe one day, even a simple HDB flat have to be paid over 2 generations!

[DavidisFinanciallyFree]

With such high housing prices, will Singapore follow in the footsteps of Japan?

Maybe one day, even a simple HDB flat have to be paid over 2 generations!

And someone will continue to say that HDB remains "affordable" . And because they love to use Debt to Service Ratio (DSR) to preach how affordable public housing are and what a great job they have done, who knows one day they may even intro and suggest longer term loans (>35 yrs) and/or even get additional person to service the loan and voila! Your Debt to Service Ratio remains low and below 35% (very healthy!!). And they will continue to preach that public housing in Singapore is so afforable that every household's DSR is still the recommended <35% despite the growing prices of flats (you cannot imagine the high profit margin).

It's sad to know what majority of Singaporeans have short memories and easily manipulated with the one time perks in exchange for the "tickets".

[kelly wee]

hi all,

I think that is also part of the reason why singapore do not have enough babies. Just imagine fm housing to childcare and to medical expenses etc, everything is escalating. Right now many singaporean already can feel the pinch, they will wonder if their children can afford a home in 20years later. Even though many are highly educated but not necessary can afford a home in future.

Probably that is the reason why many have migranted elsewhere cos housing is affordable.

I want to thanks Dennis to impart us the importance of financial literacy. I deeply believe that financial literate is very important. And I will pass this important knowledge to my children, nieces and nephew.