Value-add

[wemakebread]

My friend shared this article with me, which I found quite interesting.
I feel that it teaches us something about value.
http://www.economist.com/node/16525240? ... d=16525240


It is NOT news that Singapore Govt Ministers are amongst the highest paid in the world today. But what is interesting from this article is the comparison of: ratio of minister's pay vs country's GDP per person

I am thinking in terms of value-add.
A low ratio means that minister's pay is low compared to the value he/she creates, measured in terms of GDP per person.

The 5 countries with the lowest ratio are:
India, China, Poland, Israel, South Korea

At the other end of the spectrum, the 5 countries with highest ratio are:
Kenya, Singapore, Indonesia, South Africa, Hong Kong


Frankly speaking, I am a bit doubtful about the figures.
India & China both have very large population (1.1b & 1.3b respectively)
Therefore their GDP per person should be small.
Hence, minister's pay / GDP per person should be large.

Yet amazing, these 2 managed to achieve the lowest ratios.
So, if my original interpretation is correct, their leaders have created tremendous value for their country!


The other glaringly obvious observation is that Singapore's ministers are paid 2m, way above the next highest at 400k (USA) or 5 times higher.
If we bring minister's pay to 400k as well, our ratio will be close to 8 (using 42 / 5) which is similar to other developed countries like France, US, Japan, Germany.


So at face value, it really begs the question, are our leaders being paid very handsomely but not generating sufficient value (in terms of GDP)?

Or maybe I really misinterpreted the data.
Hopefully someone can enlighten me & point out how where I went wrong.

[Dennis Ng]

In my opinion, GDP per person can be misleading, becos it means nothing. For example, let's say 1 country has only 2 persons, 1 person earns S$1 million per year, another earns S$10,000 a year.

What is the GDP per person? It will be S$505,000, very impressive. But is this a True reflection of the situation in the country?

Thus, a possible alternative is to compare Median Income of Singaporeans to the income of the ministers instead. Singapore median income is S$2,400 per month. So maybe we can use this to compare with other countries, this is done so that we will NOT have distortion caused by Population Size.

This is why I really think Financial Literacy is so IMPORTANT. Becos if you're financially literate, you probably will have the same Views as me when you read this article, instead of taking everything you read in newspapers as Truth.

My friend shared this article with me, which I found quite interesting.
I feel that it teaches us something about value.
http://www.economist.com/node/16525240? ... d=16525240


It is NOT news that Singapore Govt Ministers are amongst the highest paid in the world today. But what is interesting from this article is the comparison of: ratio of minister's pay vs country's GDP per person

I am thinking in terms of value-add.
A low ratio means that minister's pay is low compared to the value he/she creates, measured in terms of GDP per person.

The 5 countries with the lowest ratio are:
India, China, Poland, Israel, South Korea

At the other end of the spectrum, the 5 countries with highest ratio are:
Kenya, Singapore, Indonesia, South Africa, Hong Kong


Frankly speaking, I am a bit doubtful about the figures.
India & China both have very large population (1.1b & 1.3b respectively)
Therefore their GDP per person should be small.
Hence, minister's pay / GDP per person should be large.

Yet amazing, these 2 managed to achieve the lowest ratios.
So, if my original interpretation is correct, their leaders have created tremendous value for their country!


The other glaringly obvious observation is that Singapore's ministers are paid 2m, way above the next highest at 400k (USA) or 5 times higher.
If we bring minister's pay to 400k as well, our ratio will be close to 8 (using 42 / 5) which is similar to other developed countries like France, US, Japan, Germany.


So at face value, it really begs the question, are our leaders being paid very handsomely but not generating sufficient value (in terms of GDP)?

Or maybe I really misinterpreted the data.
Hopefully someone can enlighten me & point out how where I went wrong.

[wemakebread]

Sorry Dennis, I would beg to differ.
I think this may be more about statistical literacy, rather than financial literacy.

Anyway, I have indicated doubts about the figures in the article & what they represent. Because authors can always selectively choose the statistics that support their line of argument, and put aside those that do not.

However, I do agree that between mean vs median, median may better illustrate which direction income distribution is skewed, assuming "Normal distribution" across the population.
(For population of very small size, both mean & median can be skewed and misrepresent the true picture.)


Nonetheless, the author may not be totally wrong in using average GDP per person. This is because, as a country, if there are good mechanisms in place to re-distribute wealth, then the average GDP per person may be a good indicator of the country's overall prosperity. If there are inadequate wealth re-distribution mechanisms, then there may a tendency for rich-poor divide to form, which would show up more clearly when we look at the median income.


Just my opinion.

[Dennis Ng]

Sorry Dennis, I would beg to differ.
I think this may be more about statistical literacy, rather than financial literacy.

Anyway, I have indicated doubts about the figures in the article & what they represent. Because authors can always selectively choose the statistics that support their line of argument, and put aside those that do not.

However, I do agree that between mean vs median, median may better illustrate which direction income distribution is skewed, assuming "Normal distribution" across the population.
(For population of very small size, both mean & median can be skewed and misrepresent the true picture.)


Nonetheless, the author may not be totally wrong in using average GDP per person. This is because, as a country, if there are good mechanisms in place to re-distribute wealth, then the average GDP per person may be a good indicator of the country's overall prosperity. If there are inadequate wealth re-distribution mechanisms, then there may a tendency for rich-poor divide to form, which would show up more clearly when we look at the median income.


Just my opinion.

Hi wemakebread,

there is a saying, there are 3 kinds of lies:

1. Lies
2. White Lies and
3. Statistics

One can use a same set of numbers and put different interpretations using statistics.