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[h=2]Our Swiss Standard Of Living[/h]
January 5th, 2013 |
Author: Contributions
How the media defines “real growth in income”
I refer to the report “Real growth in household incomes over past 5 years despite higher inflation: MOF” (Channel NewsAsia, Dec 26).
Really?
According to the the Ministry of Finance’s second issue of the Singapore Public Sector Outcomes Review(SPOR), “Real incomes have risen in the past five years, driven by good economic growth and a tight labour market.”
However, the above is based on “Real Median Monthly Household Income per Household Member (including Employer CPF Contributions) among Resident Employed Households (in 2009 dollars)”.
What is the outcome, if we use the income excluding Employer CPF Contributions? The real median income growth for workers (excluding Employer CPF Contributions) was negative in 2008, 2009, 2011, 2012 (June) and only 0.5 per cent in 2010. (“2012 real income declined – 2.3%?”, Nov 30)
In the past, I understand that the labour data did not have two data sets ((including and excluding Employer CPF Contributions). It is only in recent years that we tend to see outcomes given solely on the basis of “including Employer CPF Contributions”.
Affordable healthcare?
“On average, Medisave and MediShield cover more than 90% of a subsidised hospital bill”. So with the increase in MediShield deductibles and premiums from 1 March, will the out-of-pocket cash medical expenses of Singaporeans go up? (“MediShield: Deductibles increased by 5 times historically for elderly?“, Nov 12)
In respect of “One-off Medisave top-up to help with MediShield premiums”, we have been calling for top-ups to go directly to paying premiums, as much of it may be consumed by medical expenses leaving patients without any funds to pay for premiums.
HDB affordable?
“In 2011, the Debt Servicing Ratio for first-timers buying new flats was 24%. These are well within the international benchmark of 30% to 35% for affordable expenditure on housing.”
The Debt Servicing Ratio refers to the proportion of the monthly household income set aside for housing instalments and is calculated based on a 30-year HDB concessionary loan, factoring in the various housing grants. Data is for non-mature estates which form the majority of HDB’s new flat supply”, using such a measure of affordability based on buyers’ incomes may be quite meaningless because only those who can afford would buy.
(“HDB flats seem to be priced many times my annual income. How can I afford one?, Oct 1)
A more appropriate benchmark may be the rise in HDB prices versus incomes.
I would also like to point out that “the international benchmark of 30% to 35% for affordable expenditure on housing” does not just refer to mortage payments, but also include other expenditure related to housing like property tax, maintenance charges, etc.
Also, why not also give the affordability data for mature estates and resale flats, in order to give a more complete picture of public housing affordability?
Adequate retirement savings
As to “An MOM-commissioned study confirmed that for those who work consistently, the CPF system will provide adequately for retirement, provided they choose their housing prudently and use their CPF savings wisely. Among entrants to the workforce today, the median male earner should be able to replace 70% of his wages when he retires”, from the graph in the study, it appears that real earnings start to decline from around age 38, for males at the 50th percentile for earnings.
My understanding is that at age 55, which is the age used to compute the Income Replacement Ratio (IRR), the real earnings would be about the same as that at around age 33.
So, does this mean that we are assuming that one would be earning at age 55, the real earnings equivalent of what one earned at around 33? Had the study not used age 55 earnings for the retirement age of 65, the drop in real earnings growth may continue to age 65. (“Retirement study: High IRR?, Nov 15)
Productivity measures are not working?
With productivity growth failing miserably at 0.2, – 7.3, – 3.6, 11.1 and 1.0, from 2007 to 2011, why are we still repeating the consistent rhetoric that the lower-income’s wages can only go up with productivity growth?
Can replace 70% of income when retire?
Budget surpluses but charges up: Why?
And finally, since the “Average Overall Budget Balance* over the Business Cycle as a Percentage of GDP” continues to grow from 0.41 in FY2007 to 0.68 in FY 2011, why is there a need for the relentless rise in the prices of public charges, goods and services? (“HDB rentals up 10%, but property tax up 118%?”, Nov 27).
.
Leong Sze Hian
Leong Sze Hian is the Past President of the Society of Financial Service Professionals, an alumnus of Harvard University, Wharton Fellow, SEACeM Fellow and an author of 4 books. He is frequently quoted in the media. He has also been invited to speak more than 100 times in 25 countries on 5 continents. He has served as Honorary Consul of Jamaica, Chairman of the Institute of Administrative Management, and founding advisor to the Financial Planning Associations of Brunei and Indonesia. He has 3 Masters, 2 Bachelors degrees and 13 professional qualifications. He blogs at http://www.leongszehian.com.
I refer to the report “Real growth in household incomes over past 5 years despite higher inflation: MOF” (Channel NewsAsia, Dec 26).
Really?
According to the the Ministry of Finance’s second issue of the Singapore Public Sector Outcomes Review(SPOR), “Real incomes have risen in the past five years, driven by good economic growth and a tight labour market.”
However, the above is based on “Real Median Monthly Household Income per Household Member (including Employer CPF Contributions) among Resident Employed Households (in 2009 dollars)”.
What is the outcome, if we use the income excluding Employer CPF Contributions? The real median income growth for workers (excluding Employer CPF Contributions) was negative in 2008, 2009, 2011, 2012 (June) and only 0.5 per cent in 2010. (“2012 real income declined – 2.3%?”, Nov 30)
In the past, I understand that the labour data did not have two data sets ((including and excluding Employer CPF Contributions). It is only in recent years that we tend to see outcomes given solely on the basis of “including Employer CPF Contributions”.
Affordable healthcare?
“On average, Medisave and MediShield cover more than 90% of a subsidised hospital bill”. So with the increase in MediShield deductibles and premiums from 1 March, will the out-of-pocket cash medical expenses of Singaporeans go up? (“MediShield: Deductibles increased by 5 times historically for elderly?“, Nov 12)
In respect of “One-off Medisave top-up to help with MediShield premiums”, we have been calling for top-ups to go directly to paying premiums, as much of it may be consumed by medical expenses leaving patients without any funds to pay for premiums.
HDB affordable?
“In 2011, the Debt Servicing Ratio for first-timers buying new flats was 24%. These are well within the international benchmark of 30% to 35% for affordable expenditure on housing.”
The Debt Servicing Ratio refers to the proportion of the monthly household income set aside for housing instalments and is calculated based on a 30-year HDB concessionary loan, factoring in the various housing grants. Data is for non-mature estates which form the majority of HDB’s new flat supply”, using such a measure of affordability based on buyers’ incomes may be quite meaningless because only those who can afford would buy.
(“HDB flats seem to be priced many times my annual income. How can I afford one?, Oct 1)
A more appropriate benchmark may be the rise in HDB prices versus incomes.
I would also like to point out that “the international benchmark of 30% to 35% for affordable expenditure on housing” does not just refer to mortage payments, but also include other expenditure related to housing like property tax, maintenance charges, etc.
Also, why not also give the affordability data for mature estates and resale flats, in order to give a more complete picture of public housing affordability?
Adequate retirement savings
As to “An MOM-commissioned study confirmed that for those who work consistently, the CPF system will provide adequately for retirement, provided they choose their housing prudently and use their CPF savings wisely. Among entrants to the workforce today, the median male earner should be able to replace 70% of his wages when he retires”, from the graph in the study, it appears that real earnings start to decline from around age 38, for males at the 50th percentile for earnings.
My understanding is that at age 55, which is the age used to compute the Income Replacement Ratio (IRR), the real earnings would be about the same as that at around age 33.
So, does this mean that we are assuming that one would be earning at age 55, the real earnings equivalent of what one earned at around 33? Had the study not used age 55 earnings for the retirement age of 65, the drop in real earnings growth may continue to age 65. (“Retirement study: High IRR?, Nov 15)
Productivity measures are not working?
With productivity growth failing miserably at 0.2, – 7.3, – 3.6, 11.1 and 1.0, from 2007 to 2011, why are we still repeating the consistent rhetoric that the lower-income’s wages can only go up with productivity growth?
Can replace 70% of income when retire?
Budget surpluses but charges up: Why?
And finally, since the “Average Overall Budget Balance* over the Business Cycle as a Percentage of GDP” continues to grow from 0.41 in FY2007 to 0.68 in FY 2011, why is there a need for the relentless rise in the prices of public charges, goods and services? (“HDB rentals up 10%, but property tax up 118%?”, Nov 27).
.
Leong Sze Hian
Leong Sze Hian is the Past President of the Society of Financial Service Professionals, an alumnus of Harvard University, Wharton Fellow, SEACeM Fellow and an author of 4 books. He is frequently quoted in the media. He has also been invited to speak more than 100 times in 25 countries on 5 continents. He has served as Honorary Consul of Jamaica, Chairman of the Institute of Administrative Management, and founding advisor to the Financial Planning Associations of Brunei and Indonesia. He has 3 Masters, 2 Bachelors degrees and 13 professional qualifications. He blogs at http://www.leongszehian.com.
