Rich World’s Fastest Inflation May Escalate on Singapore Wag

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Rich World’s Fastest Inflation May Escalate on Singapore Wag

Postby ilovecck » Thu Dec 06, 2012 9:46 am

Rich World’s Fastest Inflation May Escalate on Singapore Wages

http://www.bloomberg.com/news/2012-12-05/rich-world-s-fastest-inflation-may-escalate-on-singapore-wages.html

Wa piang, a Bangla mentioned in the article earn less than $20 per hour......

I honestly think that if all Bangla, Thai, MY and other foreign worker in construction have the same wages than a Singaporean who is working as a construction worker, our housing price may be much higher than HK...

When dozens of Chinese bus drivers held Singapore’s first strike in 26 years last week, the island deported the perpetrators. Getting rid of the soaring prices that are emboldening calls for higher wages won’t be as easy.
Rising housing, transportation and business costs have given the city state the fastest inflation among the developed world’s biggest economies. The illegal protest by the SMRT Corp. (MRT) drivers in late November may herald a further escalation in price pressures, as even foreign laborers whose cheaper wages have helped restrain inflation express dissatisfaction with their incomes.
Enlarge image
Office workers walk underground during lunch time in Singapore's central business district. Photographer: Bryan van der Beek/Bloomberg
“All price go up, only salary no up,” Delowar Hussin, a Bangladeshi laborer, said as he hauled a bag of concrete debris into a dumpster outside a Singapore office tower housing Morgan Stanley (MS) and Citigroup Inc. (C) Hussin, 41, said he earns a basic wage of S$18 ($15) a day, a rate that hasn’t changed the past four years even as his monthly living costs jumped to as much as S$400 from less than S$300.
Singapore is grappling with the elevated inflation that comes with years of economic growth and population expansion on an island smaller than New York City, with rising demand fueling record property and car prices. The country tightened monetary policy this year while neighbors from Thailand to the Philippines cut interest rates, spurring gains in the currency even as the government predicts gross domestic product will rise at the slowest pace in three years.
Adjustment Period
“Singapore Inc. is facing an adjustment period and there is no easy way out,” said Kit Wei Zheng, an economist at Citigroup who previously worked for the Monetary Authority of Singapore. “The work-cheap model is reaching its limits especially since the cost of living is high. With inflation likely to stay above historical averages, macroeconomic policy will likely remain on a tightening bias.”
Singapore has the highest inflation rate among 27 economies with GDP of at least $100 billion and classified by the International Monetary Fund as advanced. The island’s inflation has exceeded 4 percent every month but one since November 2010, more than double the 1.9 percent average in the past two decades.
Consumer prices are forecast by the central bank to gain more than 4.5 percent this year and be in a 3.5 percent-to-4.5 percent range in 2013. “Persistent tightness” in the labor market will support slightly stronger wage increases in 2013, which will continue to be passed through to consumer prices, the central bank and Trade Ministry said last month.
Catching Up
“When inflation has started running up for a while, wages needing to play catch up is just social equitability, so that the low-income do not get unnecessarily and disproportionately penalized,” said Vishnu Varathan, a Singapore-based economist at Mizuho Corporate Bank Ltd.
In a country with 2 million foreigners where many restaurants, hotels, builders and shipyards rely on overseas workers willing to toil for lower wages than Singaporeans, some employers are bracing for the possibility of further labor strife.
Singapore Health Services Pte, the country’s largest healthcare group with more than 16,000 employees, is reviewing its business contingency plans in the aftermath of the drivers’ strike, said Goh Leong Huat, deputy group director of human resources for the government-linked operator of hospitals and polyclinics. The government said in March it will spend about S$200 million to increase salaries of the healthcare workers.
China Salaries
“Wages in neighboring countries are playing huge catch-up and in China in particular, wages have been outstripping GDP growth,” said Varathan. “People will start assessing whether the trade-offs to come to a foreign land, working long hours and being away from the family is worth it.”
Average urban salaries in China increased 12 percent in the first nine months from a year earlier without adjusting for inflation, after climbing 14.4 percent for all of 2011 and 13.3 percent in 2010, government data show. In Indonesia, the government said it may raise the lowest required wages to 2 million rupiah ($208) a month, while Malaysia this year joined Thailand and Vietnam in implementing a minimum income. Singapore doesn’t have such a rate.
Median monthly incomes in Singapore rose 7.1 percent this year without adjusting for inflation, after climbing 8.3 percent in 2011, according to a preliminary report on the island’s workforce by the Manpower Ministry last month.
No Easing
Singapore, which uses the exchange rate to manage inflation, unexpectedly refrained from slowing the pace of its currency’s appreciation in its October policy review even after the economy contracted last quarter. The Singapore dollar’s 6.4 percent gain this year has done little to damp inflation stemming from domestic price pressures.
Home prices climbed to a record in the third quarter, and the cost of a permit for a small car rose to an unprecedented S$78,523 on Dec. 5, from S$46,889 at the start of the year. The country auctions limited vehicle permits to control congestion and pollution.
Adding to price pressures is a government drive to cool the inflow of foreign workers, after voter anger against competition for jobs, education and housing boosted support for the political opposition in elections last year. Opposition parties have said that the large numbers of overseas workers have depressed local wages.
Higher car and property prices and the measures to tighten rules on hiring overseas workers are driving up the “overall cost structure” of the economy, spurring inflationary pressures that are a result of “self-imposed” policies, according to DBS Group Holdings Ltd.
Losing Edge
“Singapore used to have the upper hand on inflation but somehow has been losing its edge in this aspect in recent years,” said Irvin Seah, an economist at DBS who formerly worked for Singapore’s Trade Ministry. “Inflation will remain significantly higher than normal for as long as those policy measures remain in place. The policies are growth-limiting and pushing Singapore closer and closer toward the brink of recession.”
The city-state avoided falling into a technical recession after second-quarter GDP data was revised to show the economy grew. The $240 billion economy is forecast to grow about 1.5 percent this year and 1 percent to 3 percent in 2013.
The dispute between SMRT and more than a hundred of its bus drivers from China led to the repatriation of 29 protestors, while five others were charged in court for instigating the strike. Of the five, one was imprisoned for six weeks while the rest will appear in court today.
Wage Disparity
At the core of the disagreement was a disparity in wages that the company pays the Chinese nationals and their Malaysian and Singaporean counterparts. Even before the strike, SMRT, the island’s biggest subway operator and one of its two main bus companies, had said that rising wage costs would impact its profitability.
The incident highlighted lingering public resentment for the presence of some foreigners in the country, even as it showed overseas laborers demanding better treatment from their Singapore employers.
In a snap poll of 313 Singapore citizens conducted by a government feedback unit and released after the strike, about eight of 10 respondents said the Chinese drivers should be “punished to the full extent of the law” and authorities have “acted swiftly” to bring the situation under control.
For Hussin, who has to support his wife, child and mother in Bangladeshi city of Khulna, the repercussions of asking for higher pay may be more than he can afford.
“Not happy also no choice, have to work,” he said. “I want to ask my boss for more money but scared he will scold and tell me to go back to Bangladesh. Maybe after my contract over, I look for other company that pay me more or go home.”
To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
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