Inequality in Singapore

by on August 25, 2013 at 5:01 pm in Economics, Political Science, Uncategorized | Permalink

Singapore is inequality on steroids, as you might expect from a high human capital, high information tech, growing financial center.

Seventeen percent of the population are millionaires, and that is not counting real estate wealth, which is substantial.

The H&M in the shopping district is closing, because the rent was doubled and it is being replaced by luxury retailers.

These days one sees very few Malays in the wealthier parts of the city center, contra my first visit in 1988.  It’s not about prejudice, rather it is segregation by price and income class.  One sees many more resident Westerners (and tourists) than native Malays in these parts of town.  (One even wonders if the Malays will eventually be priced out of the country altogether, and conversely the Chinese in Malaysia are arriving in Singapore in increasing numbers.)

Even a very modest car can cost over $100,000 to buy and license, and the total can easily approach $200,000.  The tax on imported cars — and they are all imported — is one hundred percent.  Housing prices are exorbitant.  Those are the main reasons why Singaporean private indebtedness is rising so rapidly.

It seems self-understood, within the Singaporean government, that growing inequality merits some kind of policy response.  In the meantime, the inflow of low-skilled labor is being restricted.  At what level of wealth is inequality no longer a moral or practical problem?

Arguably there is more envy of the rich in Singapore than in the United States.  The country is small, and luxury consumption is readily observable and indeed impossible to avoid every time you walk or drive through the heart of the country downtown.

It is noteworthy that Singapore’s recently constructed and now iconic building is on the top a swimming pool and on the bottom a casino.

This story is not over.

Millian August 25, 2013 at 5:46 pm

“At what level of wealth is inequality no longer a moral or practical problem?”

I think this is miscalibrated. It’s not a practical problem in the US, Canada or most European countries right now, in the same way that say flooding is not a practical problem, but the extent of the moral problem depends on the poverty of the poor rather than the wealth of the aggregate. If Singapore had lots of millionaires but also lots of people with jobs like hawkers, that would be a big moral problem.

mw August 25, 2013 at 7:09 pm

The overall level of wealth doesn’t have any effect on relative political power. Singapore’s low-corruption dictatorship is probably less co-opted by their plutocrats than China’s is becoming, or the US’s ‘democracy’ is. This question is similar to “how many flat screen televisions do you people need before you’ll shut up?”

+1 Squad August 25, 2013 at 8:00 pm

Great point.

Cliff August 25, 2013 at 8:16 pm

Is it? What was the point?

Alexei Sadeski August 25, 2013 at 9:57 pm

Something something VSP, something something Karl Marx, something something “unsustainable”.

How’d I do?

Andrew' August 26, 2013 at 10:06 am

If the Plutocrats were so powerful, Pluto would still be a planet.

Brandon Berg August 25, 2013 at 9:29 pm

This always strikes me as somewhat confused. Who are the billionaires bribing politicians with their own personal wealth? Influence in American politics is usually purchased by corporations, unions, and other collective entities, not by wealthy individuals.

The Original D August 25, 2013 at 11:53 pm

With the possible exception of billionaire-by-inheritance types like the Walton family, most billionaires have one or more going concerns they either run or are heavily invested in. As such they keenly interested in keeping those concerns profitable and growing.

TMC August 26, 2013 at 12:34 pm

Make that Warren Buffett for a more obvious example.

TommyVee August 27, 2013 at 12:01 pm

“Who are the billionaires bribing politicians with their own personal wealth? ”
Koch brothers – http://www.motherjones.com/politics/2012/11/charts-map-koch-brothers-2012-spending
Sheldon Adelson – http://www.propublica.org/article/how-much-did-sheldon-adelson-really-spend-on-campaign-2012
http://www.politico.com/news/stories/0512/76849.html “The Billion-Dollar Buy:
Republican super PACs and other outside groups shaped by a loose network of prominent conservatives – including Karl Rove, the Koch brothers and Tom Donohue of the U.S. Chamber of Commerce – plan to spend roughly $1 billion on November’s elections for the White House and control of Congress, according to officials familiar with the groups’ internal operations.
That total includes previously undisclosed plans for newly aggressive spending by the Koch brothers, who are steering funding to build sophisticated, county-by-county operations in key states. POLITICO has learned that Koch-related organizations plan to spend about $400 million ahead of the 2012 elections – twice what they had been expected to commit.”

20 seconds on google to answer your question, makes me wonder if your ignorance is willful.

Andao August 26, 2013 at 1:06 am

Singapore is the only place in the world where I’ve been told that paying a bribe would help me move along, and I’ve done business in China and SEAsia for the past 6 years.

On two separate occasions I had taxi drivers give me unprovoked tirades about how crooked the government is. Again, never experienced this elsewhere in Asia or the West.

I think the corruption-free thing is a bit overdone

cyd August 27, 2013 at 11:30 am

In Singapore, paying a bribe is certainly likely to move you along—to jail (do not pass Go). That is some seriously bad advice you got.

Every so often, there’s a news report here about some dumb foreigner who gets into some minor trouble, attempts to bribe an official, and thereby ends up in serious doo-doo.

philomenloy August 28, 2013 at 5:04 am

@Andao

+cyd

I think you are confusing two different characteristics of Singapore. (1) Complaining about the government is the national past time. Taxi drivers can be especially vocal. (2) The almost complete lack of low level corruption*, and the very severe punishment dealt to people (high and low) who are caught. The same taxi driver will tell you that, say, attempting to ‘speed up the process’ of getting through the customs, or getting a license, or getting a business registered, etc., by offering some ‘speed money’ will land both parties in jail, pronto.

*Why the importance of ‘low level corrpution’? Because that’s the sort that makes life difficult for ordinary people, businesses, etc. A parking enforcer, custom office lowly police officer can make life hell for a lot of people. The hurt caused by high level corruption tends not to be as perceivable.

Millian August 26, 2013 at 4:06 am

Singapore is not actually a dictatorship, any more than (say) South Africa or Botswana is, even though one coalition has continuously held power. It seems odd that you speculate on relative levels of Singaporean corruption while admittedly knowing little about it.

Jeff August 26, 2013 at 5:12 am

It’s a “low-corruption dictatorship” as long as you take the dictator’s/ruling family’s definition of “corruption” as something done by other people.

Melbourne August 26, 2013 at 6:21 am

Rather him than Marcos or Suharto. Or the inept Mahathir.

I try to keep the counterfactuals in mind.

Daniel August 25, 2013 at 5:53 pm

It’s not about prejudice, rather it is segregation by price and income class.

If segregation by price and income class is fine, why isn’t segregation by race, religion, ethnicity, gender, sports team preference, ice cream flavor preference, etc. fine?

Ashok Rao August 25, 2013 at 6:10 pm

What you mean to say is “why isn’t segregation by race, religion, ethnicity, gender, sports team preference, ice cream flavor preference, etc. immoral“. And clearly there’s nothing immoral about spatial segregation by sports team preference or ice cream flavor. So once you remove those frivolous add-ons, this becomes a lot more frivolous.

The fact that you even added something ridiculous like “sports team preference” or “ice cream flavor” to the list speaks enough about why segregation by race is not okay.

That and/or meritocracy.

The Anti-Gnostic August 25, 2013 at 6:27 pm

I’m afraid I missed that chain of reasoning. Explain to me why segregation by race is not okay.

People segregate heavily (though not always exclusively) by race in religious worship, residential housing and breeding partners. Where do you think ‘diversity’ comes from?

mike August 25, 2013 at 7:59 pm

The problem with segregation by race is that Asho Rao really really does not want to be stuck with people of his own race.

Ashok Rao August 25, 2013 at 8:17 pm

Segregation by race is not my idea of a good society. It is not the worst thing that can happen, and other people are free to disagree.

Very confused by this comment.

Therapsid August 25, 2013 at 8:57 pm

Why should he? Is he an individual with personal preferences and beliefs or just a ephemeral manifestation of some racial collective?

Daniel August 25, 2013 at 9:06 pm

No that’s not what I meant. I meant exactly what I said.

I added “sports team preference” and “ice cream flavor” to the list to emphasize that I mean any and all kinds of preferences, not because I think it’s “ridiculous”. It’s not “ridiculous” to many people. Many people take their sports team allegiance far more seriously than religion.

Again, If segregation by one sort of preference is fine, why isn’t segregation by another sort of preference – race, religion, ethnicity, gender, sports team preference, ice cream flavor preference, etc. – fine?

Andreas Baumann August 26, 2013 at 1:17 am

Because neither race, ethnicity or gender is malleable, as opposed to religion or ice-cream preference.

Daniel August 26, 2013 at 2:55 am

People who wish to only associate with members of their preferred race, ethnicity or gender and segregate themselves from others can change their preferences just as people can change their religious and ice cream preferences.

Claude Emer August 25, 2013 at 7:00 pm

I read the statement as “Malays aren’t disadvantaged because of their race but rather because of their class”. Either way, I see nowhere implied that it was fine. But I’m pretty sure the whole post is about getting us to debate inequality.

I happen to know a few Singaporeans and I only knew that a Honda Civic could cost you $50,000 and that taxes are found under every rock. For all that’s said about the city state, maybe it’s not that great to live there if you’re not a millionaire.

What’s the point of hitting every metric on the macro side if individuals cannot reap the benefits? What’s the country’s GINI coefficient? Inequality is unavoidable even in communist countries but it has to be balanced with welfare (in the broad sense). Figuring out the right balance is what economists and sociologists should be doing.

Cliff August 25, 2013 at 8:18 pm

What you mean by “welfare in the broad sense” is the question, then. Because there are very few people in poverty in Singapore.

Jeff August 26, 2013 at 6:09 am

If you listen to Government papaganda, there are NO “people in poverty” in Singapore. If you live here for a while, and manage to venture beyond the tourist/expat bubble constructed with great care by The Minister and His Cronies and paid for by ordinary Singaporeans (often dismissed as “mere heartlanders”), you see a different story.

The last free election this country had was probably in 1959. Enough people are aware and angry now that the one in 2016 should be epochally important; the last chance for a very long time for peaceful change.

Millian, it depends on how you define “dictatorship”. I’ve been asking for years for any example of where the courts told the Lee family and their close associates that they couldn’t do what they wanted, when they wanted to, how they wanted, without at best career-limiting effects incurred by the court officials involved. I’m still asking. Limits can’t be enforced by a Constitution that only requires a small supermajority in Parliament for change, when such a supermajority is under iron Party control.

Claude Emer August 25, 2013 at 11:40 pm

If most of the poor have access to healthcare, education, food and a place to sleep, inequality will mater less.

Millian August 26, 2013 at 4:12 am

Of course it will matter less; that’s the point most of Europe has reached, but it doesn’t stop mattering because people deep-down recognise that much of the gulf in wealth is inherited or otherwise arbitrary, and consider this grounds to make inequality a political topic.

Melbourne August 26, 2013 at 6:11 am

“because people deep-down recognise that much of the gulf in wealth is inherited or otherwise arbitrary”

I don’t understand how inherited wealth is any less deserving. Isn’t it just our forebears’ hard work?

Claude Emer August 26, 2013 at 12:49 pm

How about if it’s the forebears’ ethnicity or political connections? Not only are you assuming wealth acquisition is meritocratic but you’re implying it always has been.

That’s a very interesting take on life.

Andrew August 27, 2013 at 4:08 am

Isn’t inherited wealth capital gains and not income, and therefore wouldn’t actually impact Gini or income inequality measures?

Matt August 27, 2013 at 1:11 pm

or otherwise arbitrary

It’s ultimately always arbitrary. The propensity to work hard, or intelligence, or cunning, or to have a professionally useful level of psychoticism is ultimately heritable or random. So at root it’s hard to morally justify rewarding people with these qualities. It’s certainly no more moral to reward people with those qualities than it is to reward lottery winners or aristocrats (also the beneficiaries of random and heritable luck).

But the reality is that if you don’t, in the current world, wanabee meritocrats can and will do something about it (and can be made to do useful things to get rewards), while the old families and the lucky people can’t and won’t.

Rahul August 26, 2013 at 1:40 pm

No it won’t. Everything is relative: When I’ve access to primary heath-care I crave access to cutting edge care. When I have plenty of food to subsist on I want better food.

TuringTest August 25, 2013 at 6:13 pm

Aside from the obvious response (Who cares?), is it just me, or can we all take a break from blogging on Sundays?

Jeff August 26, 2013 at 6:11 am

Fifty years ago, a wise man pointed out that “injustice anywhere is injustice everywhere”. If you tolerate injustice being done to others, to whom will you turn when injustice is done to you?

Jeff August 26, 2013 at 6:13 am

Fifty years ago, a wise man pointed out that “injustice anywhere is injustice everywhere”. If you are so easily bored by injustice done to others, who do you expect will come to your aid when injustice is inevitably done to you?

Bill August 25, 2013 at 7:01 pm

I don’t see the logic of this statement: “inequality on steroids, as you might expect from a high human capital, high information tech, growing financial center.”

The logic is apparently that INEQUALITY is the result of high human capital? That INEQUALITY is result of high information tech? That INEQUALITY is the result of a growing financial center?

Prove it.

Here is a link which lists the highest earners as being….civil servants!

“The low income group makes about $800 to $1,500 a month. Mind you, there are some who earn far less than that. Either they’re not on the record, or have variable incomes (e.g. odd job workers).

The middle income earners make between $3,500 to $5,500 a month. For more on this wide ranging group, you can look up the Ministry of Manpower’s reports on wages). You should probably do that anyway, to make sure you’re not getting ripped off.

High income earners (company directors, senior management, etc.) tend to earn between $11,500 to $16,600 per month.

The absolute top earners can be calculated from our Ministers’ incomes.

Ministers’ salaries are good for this, because they are pegged to the 1,000 highest earners, minus 40%*. Why 40%? Because it exemplifies the sacrifice required of political service. Imagine that: Having to drink lower grade Bird’s Nest, and have only one lunch in Paris a week.

Anyway, the typical Minister is paid around $124,558 per month (the Prime Minister gets about double that). Add on 40%, and it suggests our top earners are looking at figures of about $174,381 per month.”

Here is the link: http://www.moneysmart.sg/money-talks/income-inequality-in-singapore-our-annual-peek-2013/

Melbourne August 26, 2013 at 6:13 am

“The logic is apparently that INEQUALITY is the result of high human capital?”

I interpreted it as Tyler suggesting correlation rather than causation. High human capital etc -> more opportunities, which some will take advantage of and others not. Hence a more marked level of inequality.

Bill August 26, 2013 at 7:17 am

Mel, If that were simply the case, then there are many, many other countries that have higher human capital, and less inequality.

I am not saying that varying investments in human capital does not result in different levels of equality, but to attribute this to Singapore, relative to all other countries in the world, is just sophistry and an untested assertion relative to other countires which have a much higher investment in human capital and less inequality.

Maybe if Tyler had started with elites, differential educational opportunities, etc. he might have had something.

Look at Wobbly Guy below and look at the link I attached.

Bill August 26, 2013 at 11:38 am

Mel, By the way, human capital is not defined as more opportunities. It is usually defined as more education.

Doug August 25, 2013 at 7:04 pm

Is the issue “inequality on steroids,” or “gentrification on steriods?”

More knowledgable people (especially Tyler) may know the answer to this, but what about Hong Kong? Lots of millionaires, lots of expensive real estate, but lots of poor people in there too. From the context of this post, the poor are LEAVING Singapore, so you’re not really stretching the distribution, you’re increasing the mean and median of it by removing the bottom end.

jt August 26, 2013 at 1:22 pm

Unfortunately, the poor are the ones who are unable to leave Singapore, because few countries would have them. It’s the white-collar middle-classes who are leaving, despite voting for the current government election after election. So the middle is slowly getting eroded by an ever-increasing low wage population serving an elite class.

Gary S August 25, 2013 at 7:07 pm

As a general note, Singapore has among the very lowest birth rates in the world. The hypercompetitiveness of its economy produces phenomenal wealth (which should be praised), but the resulting inequality can mean that the wealthiest make scarce resources (like housing) more expensive for everyone else. Then everyone else has to make sacrifices (work longer) that may decapitalize the country in the longer term (fewer babies). Singapore has a lot to teach to the world, but (like everyone else) it has its own problems.

Daniel August 25, 2013 at 7:11 pm

No that’s not what I meant. I meant exactly what I said.

I added “sports team preference” and “ice cream flavor” to the list to emphasize that I mean any and all kinds of preferences, not because I think it’s “ridiculous”. It’s not “ridiculous” to many people. Many people take their sports team allegiance far more seriously than religion.

Again, If segregation by one sort of preference is fine, why isn’t segregation by another sort of preference – race, religion, ethnicity, gender, sports team preference, ice cream flavor preference, etc. – fine?

Jeff August 25, 2013 at 7:49 pm

For one thing- segregation based on things you can’t choose is inherently less acceptable. You can choose- with conversion- religion, sports team etc. can’t choose your race

widmerpool August 26, 2013 at 5:13 am

That obviously isn’t true. President Obama, for example, claims to be black, although in many other countries he would be regarded as mixed race. American TV shows are full of people who look like southern Europeans claiming to belong to some kind of non-white race.

Claude Emer August 26, 2013 at 11:23 am

President Obama doesn’t claim to be Black so much as the U.S. defines Black as looking Black. Suddenly the one drop rule ceases to exist because he’s president? How about all the mixed people throughout history that were called Black? Should we go back and retroactively not apply our segregation laws on them? I remember Tiger Woods being asked what it was like to be the first African American to win a Masters and he responded that he didn’t really think he was Black since his father is part Cherokee and his mother’s Thai. An uproar ensued.

The thing with race is you are whatever society tells you you are, regardless of who you think you are.

Chip August 25, 2013 at 8:04 pm

You will hear Singaporeans occasionally complain about the wealth of politicians but I really never hear them complain about inequality. The reason is that it’s a thriving meritocracy with educational and employment opportunities for all if you study and work hard.

My wife came from a humble background, received good grades, went to law school and ended up working for a top ten law firm in London. Most of her friends have similar stories. Some have inherited wealth but still did well at school and to be honest, it was years before I discerned who grew up poor in the 70s and who came from wealthy backgrounds.

Most resentment in Singapore falls on recent immigrants as the massive influx of new arrivals in the last several years has put significant strain on transport and housing. But if you’re looking for an est the rich mentality you need to look elsewhere.

Millian August 26, 2013 at 4:15 am

If you knew people who weren’t currently rich, would their opinions about inequality be different?

I don’t expect most of the variance of inequality opinions is due to “always rich” versus “recently rich”.

Chip August 26, 2013 at 4:41 am

As I mentioned elsewhere, my kids attend local schools so I do meet a cross section of society. Most of my wife’s family isn’t rich either, but content compared with what Singapore was like in the decades after the war.

You just don’t see the naked resentment of the rich here as opposed to the west, where there is so much support for grindin tax rates ever higher even if they do reduce overall economic activity and tax revenue.

Chip August 25, 2013 at 8:04 pm

You will hear Singaporeans occasionally complain about the wealth of politicians but I really never hear them complain about inequality. The reason is that it’s a thriving meritocracy with educational and employment opportunities for all if you study and work hard.

My wife came from a humble background, received good grades, went to law school and ended up working for a top ten law firm in London. Most of her friends have similar stories. Some have inherited wealth but still did well at school and to be honest, it was years before I discerned who grew up poor in the 70s and who came from wealthy backgrounds.

Most resentment in Singapore falls on recent immigrants as the massive influx of new arrivals in the last several years has put significant strain on transport and housing. But if you’re looking for an eat the rich mentality you need to look elsewhere.

Gwai Lo August 25, 2013 at 8:05 pm

Inequality isn’t a problem in Singapore because they are strict enough to keep the poor in line. They have also been forcibly integrating people of different races and classes for decades now, which would not be tolerable if they weren’t willing to discipline the lower class. As long as the disciples of LKY remain in charge, everything will be fine.

ChrisA August 25, 2013 at 8:16 pm

The critical thing to remember is that Singapore is the financial capital of South East Asia, it is not really a standalone economy. Rich people relocate there from other parts of the region when they become rich. Many rich people in Indonesia, Malaysia, Thailand etc funnel their money back into their home countries via Singapore both for tax avoidance issues, also for security. If Singapore was to become more egalitarian, this capital would simply move elsewhere, leaving Singapore poorer. London has a similar dynamic. Poorer locals are somewhat priced out of this economy and basically have another parallel economy in poorer parts of the city, benefiting of course through spill over effects and additional employment. It is sort of like Bill Gates moving into your local town. All of a sudden inequality has drastically increased, but no-one is really worse off, people are actually better off as Bill will probably employee a few locals and raise local wages a bit. So driving Bill away wouldn’t actually improve things except if you are a fanatic about inequality. And the fact will remain, Bill will still be rich, but he will be rich somewhere else.

Millian August 26, 2013 at 4:19 am

Bill only needs one house. The hordes of lucky Russian and Arab oilmen in London need more than one house. So your parable is misleading. A more accurate parable would be: if 400,000 Bill Gateses arrived in Omaha, the people currently in Omaha would probably end up worse off.

Melbourne August 26, 2013 at 6:18 am

I don’t think property is a good example in the Singapore context. The housing market is deliberately two tiered and manipulated to ensure that citizens will always have a roof over their heads. Hence the large proportion of public housing. Bill and his gang are allowed to play in a separate private market instead.

I think rich people like Bill are undoubtedly a net benefit to Singaporeans. The recent wave of less educated migrant hopefuls, not so much.

Cimon Alexander August 25, 2013 at 8:20 pm

>It seems self-understood, within the Singaporean government, that growing inequality merits some kind of policy response. In the meantime, the inflow of low-skilled labor is being restricted

An influx of low-skilled immigrants into a society with high inequality would only exacerbate the problem. What policy makers would be stupid enough to do that?

The Wobbly Guy August 25, 2013 at 8:54 pm

Integration efforts are becoming less effective as social segregation by ability becomes entrenched. Sure, there is still some social/academic mobility between the classes, but that is decreasing rapidly. The meritocracy is becoming an ‘entrenched’ meritocracy, and those who have ended up on top are going to do everything in their power to ensure that their children enjoy the same privileges.

Did you think they will step aside nicely and say, ‘Hey, no problem that your kid did better than mine and got into NUS School of Medicine!’? No, they are in the ranks of the civil service, the executive class, the business owners, and they have huge influence over how decisions are made. It doesn’t hurt that their children, generally, possess the same genetic advantages they had, and are on average smarter than the poor proles, who are becoming more and more trapped by rising prices, and even their smarter children are unable to keep up when the rich kids have tuition out the wazoo to help them get that extra edge in the exams. The teachers in school try their best, but…

Case-in-point: top primary schools in Singapore have preferential admission for children of their alumni and former students. When all is said and done, that leaves a meager handful of places left for the rest. While I personally think these top schools don’t have as large an effect on academic performance as many parents assume, the end effect is that these children end up with other kids in their social strata.

It’s now entirely possible for a majority of Singaporean children to go through their education years without having a friend from a working class family (and vice versa). Singaporean males have it slightly better – we have NS to force some level of integration, so we know how the other groups feel and think (somewhat). Toughing it out and going through hardship together helps too. The girls? Sometimes the differences in their attitudes and assumptions are startlingly shocking, as well as the lack of empathy.

A quick check of top scholarships given out in recent years also bears this out – While many past scholars came from extremely humble backgrounds, such cases are becoming rarer.

This wealth inequality is not going to be, in the popular parlance, ‘sustainable’. At least politically. The PAP is losing the support of the Malay community, who are getting very incensed after finally achieving a modicum of parity with the other ethnic groups, only to find themselves being dragged back down by competition from foreign workers. I have no proof of this, so I guess we’ll only know in the 2016 elections, which everybody is eagerly anticipating for various reasons.

BTW, the COE for a Honda Civic alone is more than SGD$70,000.

Other points for consideration: A three-room HDB flat (99 years lease) costs around SGD$350,000. If the median pay is about $3000 per month (it’s actually lower), even if a person takes half his salary to pay for his housing, he’ll need to pay for 20 years. And that’s not counting interest yet. The price-to-salary ratios are simply insane.

But other than housing and cars, everything else is still quite affordable. A cheap meal costs SGD$3, which is about USD$2.50. Despite my above-median salary, simple ‘economic mixed rice’ is still my fare of choice. :)

Melbourne August 26, 2013 at 6:52 am

1) “and are on average smarter than the poor proles, who are becoming more and more trapped by rising prices”

“Poor proles” needn’t worry too much. The Singaporean Government may be many things but it does take care of the truly needy. That’s why housing subsidies are tiered, for example – so they can be easily adjusted if necessary.

I don’t think an “entrenched meritocracy” (i.e. relative opportunities), if truly based on merit, is necessarily a bad thing as long as all members of society enjoy, on an absolute level, better opportunities than their predecessors. You will be pleased to know that preferential admission is being abolished.

2) A 2 bedroom unit costs around AUD$700,000. If the median pay is about $6000 per month (it’s actually lower), even if a person takes half his salary to pay for his housing, he’ll need to pay for 20 years. And that’s not counting interest yet. The price-to-salary ratios are simply insane.

I plugged in some Aussie figures into your example. Housing prices aren’t really out of line when compared against cities with similar demographics. Household income would probably be a better metric to use.

Many people complain about the 99-year leases but few acknowledge why they exist – they are a socialist policy to ensure that future generations have somewhere to live in this land-scarce island.

I invest in property and one of the reasons I left Singapore is because it isn’t possible to easily buy multiple properties there. Now imagine if the Government needed my land to solve an urgent housing shortage and I refused to move. They wouldn’t be able to respond as efficiently as they do today.

The Wobbly Guy August 26, 2013 at 11:59 pm

1. “You will be pleased to know that preferential admission is being abolished.”

It’s only being tweaked to allow non-affiliates a slightly better chance, not abolished. 40 places for non-affiliates – 1 class. Out of six, seven classes? Versus the number of applicants?
http://www.straitstimes.com/breaking-news/singapore/story/ndr-2013-primary-schools-reserve-places-children-no-prior-connection-2

You drink too much of the PAP’s kool-aid.

2. Apples-to-oranges comparison. Your bedroom unit example is probably near the city center. My prices are average values derived from estates already considered on the outskirts (10-20 km away) from the central district. And guess what? We have nowhere else to go, while in Aussieland you can shift even further and play on the tradeoffs on distance, cost, and space.

Also, if land prices in Aus are so expensive, why is my sister’s family immigrating there, with the money from selling her 3-room HDB flat more than sufficient to buy a frickin’ HOUSE that’s conveniently located (according to her)?

Stop being disingenuous.

The 99 year lease issue? A socialist policy? Yeah, the PAP was formerly a member of the International Communist Party (or some such). So what? I didn’t harp on it because it’s a minor issue in the shadow of more important factors like unaffordable prices. But since you brought it up, how about thinking it this way – extending the leases so that future descendents of the current generations have somewhere to live on this land-scarce island?

Your example of the state needing the land? The PAP has ways to chase people out even if they owned the land and refused to move. It has no bearing on the purchase of multiple properties and the 99-years lease issue.

Personally, I don’t mind people owning multiple properties. They can make it easy to purchase. Just have successively more punitive property tax rates, up to 40%. The top rate will be 20% in 2015.
http://www.straitstimes.com/breaking-news/singapore/story/budget-2013-more-progressive-property-tax-rates-singaporean-households

And since I’m on tax rates and leases, we could ask the government why we have property tax on HDB flats – something we don’t own technically but leased from the owners (the State). This is ridiculous.

Melbourne August 27, 2013 at 6:11 am

There’s no need to be rude. As an investor I’m familiar with both markets, so I share my experiences unreservedly. No reason to lie.

Is 25km from Sydney CBD alright? http://www.realestate.com.au/property-apartment-nsw-parramatta-111795591

Sounds like your sister’s going to Perth, Adelaide or Brisbane. Vis a vis Singapore, now that’s apples and oranges. But best to visit and judge for yourself.

Given my expertise, my initial intention was merely to offer a view that Singapore property prices are comparatively reasonable. Unfortunately my impression is you’d rather indulge whatever preconceived notions you have. Hopefully I’m wrong.

Melbourne August 27, 2013 at 6:37 am

>> But since you brought it up, how about thinking it this way – extending the leases so that future descendents of the current generations have somewhere to live on this land-scarce island?

That’s exactly what SERS does. 99 years is a non-issue because barring a catastrophe, indefinite renewal is implied.

>> The PAP has ways to chase people out even if they owned the land and refused to move. It has no bearing on the purchase of multiple properties and the 99-years lease issue.

Sure, they can exercise control via eminent domain. But that creates sovereign risk and uncertainty. Far better to have the deal up front so there are no illusions.

I mentioned the prohibition on multiple properties to demonstrate how basics like housing are equitably distributed.

>> And since I’m on tax rates and leases, we could ask the government why we have property tax on HDB flats – something we don’t own technically but leased from the owners (the State). This is ridiculous.

Would you prefer if they abolished “property taxes” and imposed a “lease tax”, “COE renewal fee” or “stamp duty” instead?

Dismalist August 25, 2013 at 9:05 pm

Give me your tired, your poor… what, and raise our Gini?

Inequality is a most blatant non-problem. Social science discovers social problems. Inequality discussions are largely driven by envy.

Pestilence, disease, starvation, violent death–now those are problems.

dirk August 25, 2013 at 10:13 pm

“Inequality discussions are largely driven by envy.”

Good thing then that envy never causes problems.

Melbourne August 26, 2013 at 6:23 am

Not in Singapore.

The Wobbly Guy August 27, 2013 at 12:01 am

Well, not yet.

Chip August 25, 2013 at 9:08 pm

I wonder too at the comment there are no Malays in the business district. Not all Malays where the head scarf or look readily different from local Chinese, particularly Peranakan Chinese.

They are certainly under represented among the wealthy but I’m not sure what kind of policy response will change this when the public schools are excellent and students advance on merit.

My son is in the top class of his local school and the top student in the class is a Malay girl. She sweeps the academic awards every year.

The greatest impediment she will ever face is not racism, inequality or some other construct of entitlement and victimhood borrowed from the modern west, but her parents and culture who may foist a head scarf on her or insist on early marriage.

Test August 25, 2013 at 9:34 pm
philemonloy August 25, 2013 at 10:58 pm

1. Most of the rest of the country are not like the wealtiest parts of the city centre, period. That’s where tourists spend their cash and the very rich flaunt their stuff. The other places–e.g., the many regional malls, the local town centres–are where folks who actually live here can be found. Not sure if observations about Orchard Road or the Marina can be extrapolated. Do places such as Vivocity or Compass Point Mall give the same impression?

2. Cost of owning and driving cars: small country, very high population density, you do the math. As a life long public transport person, I’d rather that the cost of car ownership be high (make that exorbitant) as long as the public transport networks are properly built out. Those networks are feeling the strain of recent population increases, but the solution is make car ownership affordable. And I’d rather they keep those patches of forest and swamps than build more roads.

3. You can see a lot of wealth flaunted in Singapore, no doubt (though I’m afraid we still lose out to Hong Kong and Shanghai on, say, flaunting by fashion, mostly because of the climate). But inequality is more of a perceivable concern if there are visible poor. As in very poor–panhandlers and the like. In Singapore, that level of poverty tends to be between non-existent and well hidden. By this measure, Singapore feels more “wealth” rather than “unequal” compared to, say, San Francisco.

philemonloy August 26, 2013 at 3:38 am

Correction: “…but the solution is NOT TO make car ownership affordable…”

revver August 25, 2013 at 11:42 pm

“Even a very modest car can cost over $100,000 to buy and license, and the total can easily approach $200,000. The tax on imported cars — and they are all imported — is one hundred percent.”
Didn’t the russians and chinese have a solution for just this problem: importing cut up luxury cars and then reassembling them once their in the country?

Willitts August 26, 2013 at 12:27 am

Inequality is never a moral problem. What another man has is none of your business, and if you need what he has, then the moral problem is yours, not his.

It is a practical problem the moment any coalition believes it can take the wealth of others by force, and then it is a problem for the wealthy, not the unwealthy, unless the wealthy are well armed and fortified.

Claude Emer August 26, 2013 at 2:27 am

Because humans, as we know, have perfected the art of meritocracy and what another man has, he’s always earned. No one ever exerts influence on lawmakers, no one ever takes advantage of unearned privilege, networks, cut corners, etc…

I didn’t know they had computers in the middle ages.

Willitts August 26, 2013 at 3:40 am

Of course people seek rents. The solution to that is reducing the power of government to become a target of rent seeking. A government that redistributes income and wealth and otherwise regulates and distorts the economy increases rent seeking.

I presume that people earn their income until I have evidence to believe otherwise. You apparently believe that wealth is accumulated through unseemly activity until that wealth is blessed by government.

“I didn’t know…”

A phrase you should embrace without your tongue in your cheek.

steve August 26, 2013 at 7:55 am

Inequality is always a moral problem. Those who have money have incentives to use that money to make sure that they, and family and friends, use that money to make sure that they continue to be wealthy. Among the methods they use to achieve that, they always use government, regardless of the size of govt. Incentives matter.

Steve

FUBAR007 August 26, 2013 at 1:45 pm

Wealth is power. Power corrupts.

Inequality in itself isn’t the problem. It’s the inequities in the distribution of power that follow from prolonged, massive inequality that are the problem. Inevitably, they lead to the powerful becoming corrupt and using their power to abuse the less powerful.

Shrinking the government Norquist-style reduces one type of rent-seeking. It also removes from the game board the actor in society which can constrain powerful private actors. Those actors then compete with each other, eliminating the weaker ones until only the strong few, or even one, remain. Those strong will then use their power to manipulate the remaining system, or to establish a new one, to ensure their continued dominance. This is why anarcho-capitalism and minarchism are unsustainable. They would inevitably result in a kind of feudalism. As with communism, human nature precludes their viability.

Claude Emer August 26, 2013 at 4:09 pm

Ergo, back to the middle ages.

Claude Emer August 26, 2013 at 2:31 pm

I’m pretty sure I wrote nothing about government in my post. Let me read it again to be sure.

If your understanding of others’ posts is indicative of how you looked for evidence of how wealth is acquired then it’s no wonder you hold the myopic views you do.

Here are some factors that make up wealth acquisition in no particular order of importance:
Hard work, determination, luck, privilege, inheritance, intelligence, cronyism, networks, favoritism, criminality, ruthlessness.

Wealth depends on a combination of those factors. Some are earned, some are not. Some people would like to pretend all wealth is self created, regardless of the abundance of evidence to the contrary.

Millian August 26, 2013 at 4:25 am

If it’s none of my business what he has, does that mean I enjoy impunity after I take it from him? After all, now I have it. If you admit an exception to that seemingly sensible principle, it means you must believe in property rights in some sense, which imply a belief about the correct distribution of property at any time. It just means that your idea of the correct distribution is more similar to the status quo than that of a Marxist, but it doesn’t mean your idea is more valid without arguments beyond assertions.

Artimus August 26, 2013 at 1:39 am

I believe that the reason cars are so expensive is because the government is trying to reduce car ownership and congestion. In any event the mass transit system is good and taxi’s are not expensive. A car is not usually essential in Singapore.

Marian Kechlibar August 26, 2013 at 7:06 am

On a densely inhabited city-island, a car acts as a kind of nuisance to the rest of the citizens, including the necessary parking space and the pollution of air, which is hard to get rid of.

I wonder how the current systém could be improved.

Perhaps the car import duty could be abolished and replaced by mandatory purchase/lease of a single parking space in your place of residence, and a fee dependent on the overal capability of the car to filter the exhaust gases AND the operating noise. This fee would not be a part of the general budget, and would be only used on projects designed to improve the air quality and reduction of noise (In a corrupt country, this would be a major invitation to crony capitalism, so I hesitate on this one.)

It seems to me that such system would reflect the car ownership externalities better. I am not sure about the daily commute to work, though. Cars of people who would commute to their work into the city center would still clog the streets when at work. Perhaps normal parking meters / long-time garages would do. This, on the other hand, means coercing the developers into building enough subterranean parking spaces when building a new building.

Rahul August 26, 2013 at 8:29 am

I think a car is a awful item to illustrate Singaporean prices. A very modest car costing $200,000 is ~20x US prices.

I doubt food, electronics, clothes or any of the other items a person buys are 20x more expensive there.

The Wobbly Guy August 26, 2013 at 11:24 pm

Other than housing and cars, everything else is quite cheap. In fact, everyday items and meals are generally cheaper than in the US.

TallDave August 26, 2013 at 9:34 am

Interesting Tyler, thanks for sharing.

jypt98 August 26, 2013 at 1:13 pm

Despite all reports of wealth in Singapore, Singapore is really a communist country, with the government being the biggest employer and many of the “privatized” companies being state-owned enterprises. The only difference, is that the rising costs are borne by the people while the financial benefits are reaped by a selected few. Native Malays being priced out of their own land is only a matter of time, for that matter, so will immigrating races (to Singapore) sooner or later, unless they bring with them a lot of money or do not mind their children serving the elites as hawkers, taxi drivers, and so on …

The Wobbly Guy August 26, 2013 at 11:22 pm

Communist?

That’s a base slander! We’re actually fascist!

Think of it – other than the aspect of autarky, Singapore fits the economic and political criteria of a fascist state.

Andrew August 27, 2013 at 4:15 am

The problem with Gini is that it doesn’t consider capital transfer by the state to the people, so every dollar of housing subsidy is not included, as Gini only considers income transfer from the state to the people which is why the “developed” countries have a better metric since they’ve been giving handouts for a long time for unemployment, social security and more.

To use cars as an item of “cost” in Singapore is terribly stupid considering that the cars are intentionally made expensive so people are forced to use public transportation. Housing is expensive because land is limited and the demand is high. But we are still cheaper than HK or London or NY. Comparatively food and other expenses are also lower than in the other countries.

But I do agree that we do have poor people in Singapore. Some through no fault of their own while others through many mistakes of their own. The state is unable to improve the lives of all people unless it can execute policy at the most micro level, the individual, perhaps with new technology and better data analysis that future might not be too far off.

Singaporean August 27, 2013 at 4:17 am

I am a Singaporean and this article has made several wrong references. For one thing, H&M (Singapore) will not be closing anytime soon because of rental rates. I think he got his information messed up – The H&M in Hong Kong is the one he was referring to.

http://www.stasiareport.com/the-big-story/asia-report/hong-kong/story/hk-shops-eateries-felled-soaring-rents-20130824

Another thing, our Malay ethnic group is not being segregated by income such that they were not mostly seen in central town areas of Singapore. Clearly that is a tourist mindset. Homes in the town areas do fetch at high prices and a number of them are rented out to companies hosting foreign professionals. Increasingly, the Malay ethnic group is becoming highly educated and holding PMET jobs across all industries. They will never be “priced out” of the country because Malays are recognised as in integral part of Singapore’s core identity. Singapore is pretty much a fair ground for all to get a good education and earn decent wages, regardless of ethnicity.

A.B Prosper August 27, 2013 at 4:31 am

Singapores inequality issue is self ccorrecting to a degree. It has one of the lowest birth rates on the planet at 1.2 per children per couple, and no immigrant group seems to have a signifucantly higher fertility rate for long at least once they get there.

Thus the government there cannot bring in a replacement population because of local condtions and since the nations sending replacements mostly come from countries with declining and subreplacment fertility rates, In time the population will decline measurably and wage share will rise or whatever external costs will decline.

Alternately more automation could make up for labor losses but if popuilation continues to shrink, local consumption driven busniesses will suffer,
Its even possible Singapore becomes a nation of eseentially only rich people, not eloi of course, working rich. This will prove to be interesting.

collin August 27, 2013 at 8:47 am

Isn’t one of the core problems of Japan in terms of small business and less innovation caused partially by depopulation? With all the other problem Japan has, at the center of it is the population does not feel comfortable enough to have children and thus creates a demographic deflation as aggregrate demand is contained by less people. Singapore has able to escape this depopulation because of more open immigration and thus allowing cheap labor to flow into the economy.

Tyler, for all the love of Singapore, why does it have such a low birth rate? This is indication of people are not comfortable enough to have more than 1 child and doesn’t that limit economic growth in the long run?

Comments on this entry are closed.

Previous post:

Next post: