Singapore has a very low wage share

by on August 23, 2013 at 1:36 pm in Data Source, Economics | Permalink

Singapore has one of the highest GDP per capita in the world. However, our wage share of GDP (at around 43 per cent) is lower than the shares of most developed economies (at 50 per cent or more).

Of course Singapore is one of the wealthiest countries in the world.

You will find a variety of interesting graphs at this pdf link.  That is from the Economic Survey of Singapore, more here.

Bob August 23, 2013 at 2:28 pm

Singapore would be an outlier among economically free countries if our study is to be believed.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2205786

Capitalism and Labor Shares: A Cross-Country Panel Study

Andrew T. Young
West Virginia University – Division of Economics and Finance

Robert A. Lawson
Southern Methodist University (SMU)

July 2013

Abstract:
We examine the empirical relationship between the institutions of economic freedom and labor shares in a panel of over 90 countries covering 1970 through 2009. We find that a sample standard deviation increase in the Fraser Institute’s Economic Freedom of the World (EFW) score is associated with a 15 percent increase in labor share. Starting from the sample mean labor share in our panel, this amounts to about 6.5 percentage points. A positive relationship between EFW and labor share is robust to considering, separately, OECD and non-OECD subsamples. Breaking the EFW into its constituent area scores, larger government size (in terms of expenditures and revenues) appears to be associated with higher labor shares, particularly in for non-OECD countries. The areas of the EFW that drive its positive estimated relationship with labor share are (i) regulation of credit, business and labor and (ii) freedom to trade internationally. While (i) appears to be a statistically and economically significant determinant of non-OECD labor shares, we estimate that (ii) is important for labor shares in OECD countries.

Phokus August 24, 2013 at 9:11 pm

Free market policies exacerbate the income gap. Hong Kong has a lower minimum wage ($3.90 an hour) than every other wealthy industrialized nation and 10% of it’s working citizens actually make that wage (insinuating that without a minimum wage, the natural equilibrium of the lowest wage would actually be lower for a lot of people). Factor in that Hong Kong’s GDP per capita is higher than the US and this is absolutely shameful. The GINI coeficcient of Hong Kong is much higher than the US, thus income inequality is much greater, somehow the superwealthy in Hong Kong actually make a BIGGER share of the income pie than their counterparts in the US:

http://www.bloomberg.com/news/2012-12-12/hong-kong-to-increase-minimum-wage-by-7-1-as-inflation-bites.html
“Hourly salaries will rise to HK$30 ($3.90) on May 1, 2013, up from the current HK$28, Labor Secretary Matthew Cheung said yesterday at a press conference.

The proposal will bolster the wages of about 327,200 employees, or 10 percent of the city’s workers, according to a earlier report by a government commission.”

Probably explains why the poorest in hong kong live in cages like animals:

http://www.nydailynews.com/news/world/wealthy-hong-kong-poorest-live-metal-cages-article-1.1258661

\By my calculations, $3.90 an hour would be slightly more than $8000 a year, i don’t know how ANYONE could live on that in one of the most expensive cities in the world.

Phokus August 24, 2013 at 9:20 pm

Also, this would also explain why 80% of Singaporeans live in public housing. Citizens simply don’t have enough money for their basic needs and governments are forced to subsidize their most expensive living costs.

cyd August 24, 2013 at 11:12 pm

Singapore’s public housing program is a national institution dating back to the 1950s, tied to the ruling People’s Action Party’s socialist origins. In a country smaller than Rhode Island, it shouldn’t be a surprise that the government plays a heavy role in the allocation of housing.

The “citizens not having enough for basic needs” doesn’t really fly. The median household income in Singapore is around US$5900, compared to US$3900 for the United States. Even accounting for the larger household size in Singapore (3.5) versus the US (2.6), people in Singapore seem to be getting by just fine.

philemonloy August 25, 2013 at 6:29 am

+1 cyd

Are they people who don’t have enough money for their basic needs in Singapore? Sure there are. But That’s not the lot of the vast majority of the 80% who live in public housing, which include many upper middle class families. Unfortunately, the term ‘public probably give outsiders the wrong impression. Most of such housing are somewhat boring looking, more functional than aesthetic–from the outside. But the *insides* vary tremendously depending on the wealth of the owners (owners are allowed to contract their own interior designers).

The actually poor don’t buy but *rent* specially set aside units at super low rates (S$23 to S$205 per month for 30 sg m, depending on income). There was a BBC report about this a while ago. http://www.bbc.co.uk/news/world-asia-16920951

Ricardo August 27, 2013 at 2:47 am

Just about every big city in the world has an affordable housing problem. The way working class and middle class people deal with this is simply to move to the suburbs once they no longer feel like paying rent. Since Singapore is a city-state, the country has decided to deal with the problem by keeping most real estate under government ownership and by providing apartments to families in a means-tested manner at below-market rates. The alternative would be having an even larger chunk of most people’s paychecks going to property developers. The policy seems reasonable to me and Singapore’s public housing is safe and decent by developed country standards.

David T August 23, 2013 at 3:24 pm

Singapore has a lot of forced savings (health care & retirement).

“In Singapore, we have a mandatory savings program called the Central Provident Fund. Young people starting off in the workforce save about 36% of their income — they are required to put in 20% and their employers put in 16%. As they age, the rules allow their savings rates to slowly decline, but the lowest they go is to 11.5%. Both Hong Kong and Malaysia have similar systems. In Singapore, the investment options include a government special interest rate that currently yields from 2.5% to 5%. You can put in up to $60,000 and get up to a 5% return. Above $60,000, your returns start to decline but only to a minimum of 2.5%. The government allows people to withdraw money for things including housing and education but the program ensures relatively high savings rates.”

So they have a lot of available capital and a lot more returns on that capital. Doesn’t seem that surprising to me.

Brandon Berg August 24, 2013 at 1:06 am

This was my thought, as well. The obvious question is, how well does share of GDP going to capital correlate with an economy’s capital-to-labor ratio?

Joe Smith August 23, 2013 at 7:38 pm

If Singapore is a regional financial center then some of the GDP reported in Singapore will reflect returns on capital invested in surrounding countries – that will tend to reduce labor’s percentage share of “income” in Singapore.

Dismalist August 23, 2013 at 8:08 pm

Will not! That’s GNP.

I can be so small. :-)

Willitts August 23, 2013 at 8:54 pm

Who cares what wage share is? The numbers between countries are not comparable because of different composition of various tax rates, public goods, publicly provided private goods, share ownership, etc. By most measures they are doing well, and saying that wage share is to low implies policy changes to increase it at the expense of other types of income or lower public expenditures. If that’s what people want, then saying wage share is too low begs the question.

Peter Whiteford August 24, 2013 at 9:37 am

Tax rates and the public expenditure share are completely irrelevant to the wage share of national income and are not part of the same accounting framework.

BC August 24, 2013 at 9:58 am

I think neither Tyler nor the linked report are saying that wage shares are “too low”. Tyler points out that Singapore is one of the wealthiest countries in the world. The abstract of the report says: “Some argue that [low wage share] shows that workers in Singapore are underpaid….Overall, [this report] finds that higher wage shares do not necessarily translate to higher wages. Hence, a more meaningful discussion on ways to raise the wages of Singaporeans should focus on tangible measures like skills upgrading and job restructuring, rather than wage shares.”

So, the report basically supports your view.

Brandon Berg August 24, 2013 at 1:17 am

Huh. The US has the highest wage share of any country in the report, and the highest average wage by far. For all the allegations from the left that workers in the US get a raw deal due to low rates of unionization, it’s tough to see it in the data.

By the way, Singapore also seems to have an unusually low tax share. Which implies that the profit share is much, much higher than in other countries. Profit shares in the US are somewhere on the order of 10-15%, compared to Singapore’s 50%, are they not?

Crocodile Chuck August 24, 2013 at 2:02 am

“Singapore has one of the highest GDP per capita in the world”

One in every five people in Sing is a millionaire. (18%)

Peter Whiteford August 24, 2013 at 9:38 am

Source please?

Crocodile Chuck August 24, 2013 at 4:46 pm
philemonloy August 25, 2013 at 6:31 am
dan1111 August 24, 2013 at 3:58 am

It seems this would have a major impact on healthcare as a percentage of GDP.

Ex-Expat August 24, 2013 at 9:54 am

Part of the low wage % must be the high number of low paid foreign workers. Singapore government statistics show about 1.25 million foreign worker out of a population of about 5.2 million – almost 25%.
http://www.mom.gov.sg/statistics-publications/others/statistics/Pages/ForeignWorkforceNumbers.aspx

When I lived there a few years ago, I could see Tamil construction workers living in shipping containers stacked at construction sites outside my condo balcony. While it was illegal to ride in a taxi without wearing a seatbelt, lorries were commonly seen with a full load of worker in the back with no restraints. The SIngapore Straits Times also reported on nursing home caregivers also living in shipping containers. That ought to help keep health care costs low. Pregnancy tests were required of female workers every six months, and they were deported if found pregnant. Of course it easier to control the borders on an island country.

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