Singapore Swing
The island's economy is booming. So why are so many citizens worse
off than they were 10 years ago?
By Sonia Kolesnikov-Jessop
Newsweek International
Jan. 29, 2007 issue - Tiny Singapore, with its population of 4.3
million, is often lauded for the way it has embraced globalization
to maximum advantage. In the last decade, the city-state has opened
its doors wide to foreign investment and talent, slashed corporate
taxes, offered incentives to nurture strategic industries (such as
biotech, pharmaceuticals and financial services) and cut free-trade
deals with a host of other countries. The payoff has seemed clear:
over the past three years, Singapore's economy has averaged 7.6
percent growtha staggering pace for an industrialized stateand
created new jobs at a rate any European government would
envy.
There's only one problem: average citizens have yet to reap the
benefits. New statistics reveal that middle-class households have
tasted none of Singapore's spectacular growth, and that the
island's poorest 30 percent are worse off than they were five years
ago. "Although we have seen very strong growth, we're experiencing
this new phenomenon of median real-wage stagnation and low-income
decline," says Yeoh Lam Keong, vice president of the Economic
Society of Singapore.
This predicament is hardly unique. Wages and salaries are
stagnating across the industrial world. What's surprising is that
even a country famous for its smart and transparent leadership has
been unable to prevent the gains of globalization from flowing
mostly to rich individuals and multinational corporations. In its
bid to adapt Singapore's economy to international competition, the
government has tried hard to reduce business costs. This has meant
slashing labor prices, which has helped push wages down. According
to official figures, over the past five years Singapore's
wealthiest 10 percent have seen their income rise by 2.3 percent
annually (and that doesn't include nonwage earnings such as capital
gains or dividends). At the same time, the poorest 10 percent have
suffered a staggering 4.3 percent drop in their salaries each year.
The government has also allowed employers to cut their
contributions to Singapore's Central Provident Fund, which pays for
pensions, public housing, medical expenses and education.
Together, these factors have led to lower-than-expected private
consumption, which has risen by just 3 percent in the past two
years. "Private consumer spending has been the weak link in this
current expansion," says Chua Hak Bin, an economist at Citigroup
Global Markets in Singapore. This has, in turn, stung Singapore's
large retail sector. "It is evident that [they] are not the big
winners from high growth," says Manu Bhaskaran, a director of the
U.S.-based Centennial Group.
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