19 November 2006

All work, little pay

The government intends to raise the Goods and Services Tax, in order to address the problem of stagnating and falling incomes affecting many Singapore households. The problem comes out of globalisation, but our demographic problem exacerbates it. Full essay.

14 comments:

Anonymous said...

since there are insufficient younger workers to fill high skilled jobs, economic planners should encourage more low skill enterprises, in particular service industries

that would also reduce demand on welfare and tax increase

nofearSingapore said...

Hi YB,
Excellent and truthful analysis.
We ( the govt and people) need to face these problems and find solutions together.
Dr.Huang

zj83 said...

ya i agree with you that we got to wait for the govt schemes to be announce 1st b4 better comments could be made upon it. However, widening income doesnt only affect the old people s well. poor families (young n old)..they will be affected too. imagine a family need to makes end meet, how could they provide their kids a better education,medical care, environment..ETC. N these kids might haf a less likely chance to achieve what middle-class or upper class children could. i wonder how is the govt going to help these kids from low income families getting a better oppotiunity in society? if govt is always toking abt meritocracy this n meritocracy that, thats means society provide equal opptiunities for all to compete in resources n rewards.

Frankly speaking, i dun tink the schemes provided by the govt to the low income families will be of much help, similar to wat you haf written, its not permanent. n oso refering to PM Lee sppech in paliament, he doesnt wan the poor to over rely on the state(The PM haf his reasons, maybe "for the greater whole", however i cant seem to agree totally on his comments).eventually the low income families hav to cope wif the 7% GST. n by that time, sgporeans would haf already get used to the 7% n the media might haf already forgotten the low income citizens.

*i Apologize for my poor command of english*

Jordan said...

'Singapore will stick to its current social model based on wealth creation, self reliance, and individual saving and spending within one's means, Lee said.'- PM Lee HS

http://www.bangkokpost.com/breaking_news/breakingnews.php?id=114209

The GST will go up from 5% to 7%.
When GST goes up, the poor people will be most affected. The middle income group will have to 'tighten their money belts' even more.
Income gaps will widen evern more with this GST hike.
Where will the GST money go to?
You just read, that Singapore is not going to be a welfare state.
The problem is 'what does Singapore do with its old people?'
Old Singaporeans cannot perform hard physical work.
Unless the Govt is willing to assist the old,
what are the choices?
1. the old living with their families?
2. the old placed in nursing homes?
3. the old that live alone?
4. the old who are displaced?

The old appear to have no place in Singapore.

Anonymous said...

YB, you said about foreigners --> "They do jobs that Singaporeans do not want to do, but increasingly too, they do jobs that Singaporeans are unable to do. We're either too old or too unqualified, often both."

I feel this is being too simplistic, your tone one of blaming Singaporeans once again for their own plight. Yes, cheap foreigners flooding our shores may be attributed to the impact of globalisation, but these are jobs that aren't exactly the value-adding sort. The question remains why isn't Singapore exacly moving up the value chain? How long more can Singaporeans be told to endure this structural "transition" that is taking place? Another decade? (The casinos are only a stop-gap measure IMO.) Or has our education failed? Or is the problem really one of central planning, increasingly anachronistic in a globalised age?

My take is the root cause is a political one. Singapore's unenlightened political situation is shackling economical and creative development. A totalitarian state will only progress so far economically and Singapore has obviously reached a plateau.

Anonymous said...

This is something i just read here in Hong Kong last week.

In Macau, the government's tax gains raised significantly due to the overwhelming increase in gambling visitors and the new casinos.

The Macau government then announced that they will double their Social Welfare support - increasing it to 16.5% of their GDP, as opposed to the current less-than-10%, almost doubling their social welfare payments. They will also set a minimum wage.

Now, to help our poor in Singapore, I would look to the tax gains from gambling as an alternative source of the increase in social welfare, rather than GST.

This was a question that i raised a few times during the shall-we-or-not discussions over the casinos.

Everyone's arguments were focused on that, when it was clear the government will go ahead, regardless. I would have focused on "ok, so what will we do with increased tax gains, increased revenue from the gambling money". I wrote to journalists to write about it. but i didn't see a single discussion in this area - which was disappointing.

Also, the huge Macau tax gains are driving the HK and the Korean govt to rethink their own policies about casinos.

So, if HK and Korea also start casinos, do the Chinese gamblers still keen to head down to Singapore?

Will the Singapore casinos end up only locking down Singaporean money - that it does not go away in Macau, Aus, Vegas et all?

So, in summary, shouldn't we use the gaming tax gains to help the social welfare structure, rather than GST which is more broad-based?

Also, the public need to be educated - the government should start telling us what sort of social welfare packages are in place. They made a mistake of announcing the GST hike without accompanying it with the welfare announcements. They shouldn't be surprised then, if the GST hike was met with cynicism and negativity.

manonmars

Anonymous said...

If the help package for the poor helps them earn money out of govt services, do you thinking 7% GST is too much? hehe!
http://dogahowl.blogspot.com/

Anonymous said...

If the help package for the poor helps them earn money out of govt services, do you thinking 7% GST is too much? hehe!
http://dogahowl.blogspot.com/

casper said...

The French does a "Luxury Good" GST which I think would work well in Singapore. I think a better solution is to reduce current GST and adds a 15% GST or similar taxes to services at 4/5 star hotels, high class restaurant, branded clothes, purchase of goods by corporations, item cost >$500 etc.

In that way, wealth transfer objective can be better achieved.

Anonymous said...

'To raise Singapore salaries he had to make sure that local wages wouldn’t be under-cut by migrants. So Lee set a high levy on each migrant’s salary. Yes, you could pay an unskilled Bangladeshi $400 dollars a month. But in that case you had to pay the state another $400 a month.'
http://www.zmag.org/content/showarticle.cfm?ItemID=10374 - PLEASE READ

http://www.latimes.com/business/la-fi-sigbank11nov11,1,1428006.story?coll=la-headlines-business- PLEASE READ
'It's a match made in financial heaven because the island city-state is seeking to establish itself as Asia's newest private banking hub by luring the planet's super-wealthy — and their bank accounts — away from places such as Hong Kong and Switzerland.'

http://newpaper.asia1.com.sg/news/story/0,4136,117797,00.html - PLEASE READ
'IT was a roomful of suits at the Tanglin Club on a Tuesday afternoon.The couple have two sons - Chris, 15, and Mark, 13. They live in a 10-bedroom house with a swimming pool along Swiss Club Road.
The two-storey house, with a land area of 9,000 sq ft, is worth at least $3m.The family also has two cars, a Volkswagen sedan and Landcruiser Prado, and a chauffeur.
Not one to sit still, Mr Bader is now handling two projects: a new restaurant and the $2m Saraphi Plaza in Koh Samui.'

http://english.cri.cn/2947/2006/11/13/198@162424.htm - PLEASE READ
'Lee said the GST report would come with a package weighted in favor of lower income groups.
'There are plans to increase the grant to the needy to buy their first home, as well as to give them more "workfare" bonuses as an incentive to stay employed, according to the report.'- PM Lee

Having set the stage for Singapore's GOAL as Asia's next 'Switzerland', Singaporeans themselves can decide, if there are sufficient funds to help the poor in Singapore.
I cannot comment on Singapore's 'casino' projects, as they have not been built as of yet, n what the Singapore Govt's cash intake/taxes from the casinos will be handled?
I also do not know what Singapore's definition of 'needy' is?

Anonymous said...

Your superimposition is very interesting. What it does point out is that the gap in jobs vs "resident" population is greatest in the young female group. In other words - foreign domestic workers. The second largest gap is in the construction worker segment - young males.
What you are saying is that there are not enough Singaporeans and PRs to fill domestic maid and construction jobs. Or perhaps that these jobs should be made more attractive for us! :-)

Anonymous said...

Why do you wait for the full details of the GST hike to be announced? The logic of whole thing is so warped!

The TODAY newspaper's sycophantic Editor's note: "The Prime Minister has said he will announce details of the offset package in the Budget in February next year."

I suppose it's not the first time they've created a problem and then boasted about helping to "offset" the burden that they've imposed...

Anonymous said...

Excellent analysis YB! This affects all Singaporeans, the old age, job skills, GST hike, income gaps? How are all these ISSUE going to be handled? What is the Singapore Government going to do? We are talking major reforms here that will have to be addressed. Times have changed, but will the Govt also change 'with the times'? What is left for the Singaporeans then?

Anonymous said...

Shocking as it may sound, it appears to me that a wider income gap, combined with high intake of foreign talent, is advantageous to a totalitarian govt.

Look at it this way - a sizable proportion of foreign talents means there is a large number of high-income taxpayers who don't vote. It is normally the more comfortable citizens who harbour thoughts of voting opposition.

The lower end of the income group depends on various govt help schemes. They probably need to seek their MP's help or their grass root leaders to fill up the red tape for the govt help. Now that is a strong incentive to vote for the ruling party.

So the wider is the income gap, the more they are reliant on govt help. Also the more of the population fall into this group who needs assistance. See what I mean? It is advantageous to the ruling party in a totalitarian system.

The large proportion of foreign talent will contribute the taxes to keep the economy going. And they don't get to vote. The money collected can be dished out to the lower end of the income group. This group must now vote wisely to get the aid they need.

Robert L