Whose growth, open economy, and globalization along with gov's
tinkering of CPF, causes the current woes of those who contributed
in earlier years of Nation's economy who are now in their
50s.
Are we really progressing???
====================================================
Middle class wage stagnation could lead to social instability
By Pearl Forss, Channel NewsAsia | Posted: 11 January 2007 1856
hrs
SINGPAORE: Middle class wages have been stagnant in the past 5
years, according to economists, and this could lead to social
instability.
These concerns were shared at the annual Institute of Policy
Studies Singapore Perspectives conference.
Economists believe a US economy slowdown in business and consumer
spending may cause problems for Singapore, but as Singapore is tops
in the ASEAN resilience index, it should be able to weather
external shocks, thanks to a diversified economy and strong Asian
demand.
They predict that growth going forward will be 3 to 5
percent.
The long-term growth limits for a mature economy was previously in
the 3 to 5 percent range.
However, economists are asking who this growth is for. The income
of the bottom 30 percent of the population has fallen. What is more
worrying is the fact that the majority of Singaporeans in the
middle class has only seen about a 1 percent increase in nominal
income in the last 5 years.
It is not just Singapore - economists say stagnant wages is a
global problem, and the chief reason for this is
globalisation.
India and China are introducing a large pool of skilled and
unskilled labour to compete with the labour forces of
industrialised countries.
Singapore is susceptible to this because of its open economy.
123,000 jobs were created last year and economists estimate some 70
percent of these jobs went to foreigners.
"With the rate of immigration, even among unskilled and semi
skilled labour at a rate twice of what we experienced in the 90s,
at a rate fastest in the developed world, the question is - does
this dampen our real wages as we grow? Does the strategy itself
dampen real wages and depress real wages at the low and middle end
of the spectrums? They are sacred cows but we should step back and
think about them," said Yeoh Lam Keong, Vice President, Economic
Society of Singapore.
Another reason cited for middle class wage stagnation is the move
by the government to cut CPF employer contribution rates for older
workers by 4 percentage points over the last 2 years.
"So if you were a worker in the 50-55 age group, you could have
seen your wages fall as much as 10 percent over the last 3 or 4
years. Now with the economy improving, the government could bring
that back, the increase is 1 or 2 percent. I'm in support of CPF
tinkering but probably it happens far too often, but I think
there's probably some justification to look back and think that the
restructuring was a bit too aggressive on the CPF side and it has
contributed somewhat to a very sandwiched middle class," said Chua
Hak Bin, Director, Asia Pacific Econ & Market Analysis,
Citigroup Global Markets Singapore.
The government is looking at increasing CPF by 1 to 2 percentage
points in 2007.
Economists say workfare should become a more permanent pillar of
the economy so as to cushion growing inequality.
Adding that long term middle class wage stagnation could lead to
social instability. - CNA /dt
