Thursday, 18 October 2012

Ideals and the man - Prof Lim Chong Yah

Update - In defence of Lim Chong Yah

Don has reminded us our inequality could adversely affect cohesion

Professor Lim Chong Yah is one of Singapore's most distinguished economists. He was the professor of economics at the National University of Singapore (NUS), before moving on to the Nanyang Technological University (NTU) to become the first Albert Winsemius Professor of Economics.

He is currently Emeritus Professor of Economics of both NUS and NTU.

Prof Lim is both a scholar and practitioner. He was the founding chairman of the National Wages Council (NWC), a post which he held for more than 30 years. No one has contributed more to the success of this unique Singapore institution than he. In view of his credentials and track record, we should study carefully his three proposals for a more inclusive Singapore wage policy.

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Renewed call for 'shock therapy' to raise wages

Veteran economist Lim Chong Yah has renewed his call for "shock therapy" to raise wages at the bottom

Rising income inequality and a falling proportion of gross domestic product going to wages "are telltale signs that our inclusive growth policy requires a relook", he said yesterday at the annual Singapore Economic Policy Forum.

The former National Wages Council chairman praised the NWC's recommendation in May to raise pay by at least $50 for those earning less than $1,000 a month. It was the first time in decades that the council had suggested specific figures.

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Professor reiterates need for 'shock therapy'

Six months after his call for the Republic's economy to be put through "shock therapy" ignited intense public debate - with the Prime Minister and several ministers criticising his proposals as risky and unsustainable - Professor Lim Chong Yah yesterday reiterated that they were needed to stem worsening income inequality and arrest an over-reliance on low-cost foreign labour.

Speaking at the Singapore Policy Forum co-organised by the Nanyang Technological University (NTU) and the Economic Society of Singapore, Prof Lim argued his case for freezing the salaries of top earners for three years and called again for the institution of a minimum wage system.

Suspending raises for top earners - those who make more than $$15,000 a month - would prevent top-tier salaries from pulling further away and widening the wage gap, he said. 

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Shock therapy II revisited

My remedial proposal had two parts. One aimed at lessening the number and percentage of workers at the lowest end of the income ladder. Two advocated a three-year pause to the ever-increasing rate of escalation of income of the highest-income group.

Media reports on the salaries of some top executives in Singapore can range from S$2.5 million a year to S$5.5 million a year, or roughly S$208,000 to S$458,000 per month. In one instance, I recall four top family-related directors of a publicly listed company paid themselves between S$2 million and S$3 million each, when the company did not see it fit to pay a single cent dividend to its shareholders.

When a very brave shareholder at the annual general meeting (AGM) asked the Chairman of the Board of Directors for an explanation of this dichotomy, he replied to the effect: "If you do not think this is a good company to invest your money, you are of course free not to invest in our company." The shareholder walked out of the AGM. 

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'Singapore could lose its competitive edge, locals could lose jobs'

The second call for an injection of shock therapy to the economy received much the same reaction the first one did, as economists cautioned that Professor Lim Chong Yah's proposals could cause Singapore's economy to lose its competitive edge in attracting global talent, as well as plunge some locals into unemployment.

Said Economic Society of Singapore (ESS) President Euston Quah: "The talents that draw high pay are scarce; the market knows and signals this by allocating a higher price to them. If you put a cap on these people, they will leave for other places."

Given the limited talent pool among the country's population, Singapore's economic position would be "precarious" if foreign talents will not come, he added.

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Singapore's economics doyen talks about 'shock therapy' and the Pledge, sending more S'poreans abroad for PhD studies - and wooing his wife with a poem

When Professor Lim Chong Yah was asked by the Economic Society of Singapore to give a public lecture in April, he chose a topic that he titled, matter-of-factly, Economic Restructuring II.

It was the use of the words "shock therapy" during the question-and-answer session later, he thinks, that got people's attention instantly after it was reported.

With all the responses that followed, "sometimes I think I sacrificed a bit of my sleep, reading what they said", he admits.

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Prof Lim Chong Yah: Send more Singaporeans to Ivy League universities to do their PhD

The Malaysian Insider, 13 Oct 2012
Some of his suggestions have seen fruition in the past, such as his call years ago to fund the best students and young university staff to get their PhD abroad. And they went “by the dozens”. But the scheme no longer exists, a retrogressive move he still laments.

“They say it is too expensive. Well, we are quite a wealthy nation,” he remarks.

Indeed, in a span of nearly two hours, there is only once when Lim says he is “not happy” about something: When talking about scholarships and how “so many” are being given to foreigners to do a doctorate here. 
Prefacing his view with the point that he is “not anti-foreigner”, he says: “I would prefer to send more and more Singaporeans abroad to Ivy League universities to do their PhD.” Full story

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Prof Lim Chong Yah’s proposals are timely and should be implemented

Professor Lim Chong Yah, the Albert Winsemius Chair Professor of Economics at Nanyang Technological University and one of the key architects who helped overhaul Singapore’s economic system and wage system in the late 1970s, has spoken out very strongly against the current malaise plaguing low income earners in Singapore. He has also proposed raising the lowest incomes by at least 50% over three years, and instituting a wage freeze for top income earners for three years.

Of the wage increases for the lowest income groups, a third of the increase will go to a skills development fund, which the Government will co-fund and which will pay for workers’ retraining, while another third will go into the workers’ Central Provident Fund (CPF) savings.

From 1979 to 1981, Singapore went through a similar wage restructuring exercise where wages were raised cumulatively by 20 percent per year. That was spearheaded by the National Wages Council, which was then chaired by founder Prof Lim.

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Lim Chong Yah’s shock therapy timely

The remisiers in the stock broking industry are thrilled by the recommendations of Lim Chong Yah’s shock therapy. Those remisiers earning less than $1,500 pm can look forward to a 50% increment in their income in three years time. That should make them quite comfortable to buy a 2 rm HDB flat with money to spare.

It is like a timely intervention from heaven to this dying trade. For the time being they can shelf their plans to become taxi drivers. Just wondering if they will try to upgrade the skills of taxi drivers, or improve their knowledge in driving and be tested on driving buses, coaches and lorries, or even cranes.

Another good thing is that the remisiers can think of submitting their claims to the Skills Development Fund for upgrading courses, for course fees and examination fees. The first batch of remisiers taking the Module 6A are busily calling the SDF to enquire on their applications.

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Lim Chong Yah clears up "fallacies" over wage restructuring proposal

Former chairman of the National Wages Council Professor Lim Chong Yah has issued another statement to clear up what he describes as "fallacies" over his wage restructuring proposal.

He said the "Shock Therapy" between 1979 and 1981 in fact, resulted in a higher GDP growth rate for Singapore.

"Official statistics show Singapore had an average of 6.4 per cent real growth rate per year from 1974 through 1978, the quinquennium before Shock Therapy I. They also show that the quinquennium that followed, covering the three years of Shock Therapy I and the two years following it, the average real GDP growth rate was 9.2 per cent per annum, a figure which is much higher than the preceding five years of 6.4 per cent per annum," said Prof Lim.

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Lim Chong Yah : Singapore's Inequality approaching dangerous levels.

"One of the architects of an economic restructuring exercise that overhauled Singapore's wage system in the late 1970s said on Monday that the country now 'needs shock therapy to wake up its economy'.

Professor Lim Chong Yah pointed to growing income inequality, which he says is approaching dangerous levels, and the nation's overdependence on cheap foreign labour.",- Straits Times, 10 April 2011.

In case you don't know who Lim Chong Yah is, he is the author if the most widely used "A" level economic text book when I was a student. He is perhaps Singapore's most prominent economist and very much part of the establishment. The problems Singapore is facing are severe enough for Professor Lim to recommend "shock therapy". Readers of this blog are probably very familiar with the problems highlighted - I've writing about and tracking these problems since 2006.

The PAP govt has repeatedly claimed that it is the changes it has made towards the creation of an "inclusive" society are significant and sufficient - we saw this line of thinking again in the recent budget debates. The changes the PAP govt has made are just tweaks to old policies and does little to address underlying problems which are quickly deepening and, in Professor Lim's words, getting dangerous. Professor Lim pointed to a GINI of 0.5 as the "danger level". We are just a shade off this level at 0.47. However, even if this number does not worsen, maintaining this level of inequality over time, we can expect the deleterious effects on our society to spread and deepen.

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Prof Lim Chong Yah debunks notion that wage “shock therapy” caused 1985 Singapore recession

Professor Lim Chong Yah has issued another public statement to counter what he terms as “fallacies” in the criticisms of his wage restructuring proposals, which include freezing top level wages and increasing the lowest wages by 50% over three years.

Prof Lim asserted that the first wage “shock therapy” between 1979 and 1981 resulted in a higher GDP growth rate for Singapore.

“Official statistics show Singapore had an average of 6.4 percent real growth rate per year from 1974 through 1978, the quinquennium before Shock Therapy I. They also show that in the quinquennium that followed, covering the three years of Shock Therapy I and the two years following it, the average real GDP growth rate was 9.2 percent per annum, a figure which is much higher than the preceding five years of 6.4 per cent per annum,” said Prof Lim. “Do not the comparative figures indicate the overall economic success of ER I or Shock Therapy I? No doubt about it.”

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Rationale behind Lim Chong Yah's wage shock therapy

PROFESSOR Lim Chong Yah's radical proposal on Monday - for a wage revolution not unlike the 1979 one he was central to - drew criticism from disbelieving economists and businesses who saw it as impractical - 'economic suicide'.

It is not hard to see why. His bold three-year plan includes a wage freeze for top earners while incomes for the poorest are raised by huge quantums - 15 per cent in each of the first two years and 20 per cent in the last year.

Those earning the most are the very same globally sought talent Singapore cannot afford to drive away with such a move, critics said. And small and medium enterprises (SMEs) unable to bear wage cost hikes could put low-wage workers out of work, or channel costs to their prices, driving inflation up, others added.

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Lim Chong Yah gives shock therapy, PAP gives shock no action

Lim Chong Yah gives shock therapy, PAP gives shock no action The debate on Lim Chong Yah's shocking therapy rages on. I have said my piece here - Prof Lim Chong Yah from PAP camp, thinks like PAP

In this post, I will discuss that the idea of raising productivity to raise wages does not work in Singapore anymore.

Today is unlike the 1970s where Lim Chong Yah's idea could work. During that era, our labour skills was truly low. We could raise productivity by training workers in specific skills - especially blue collar work.

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PM: 'No' to wage shock therapy

PM Lee rejected Prof Lim Chong Yah's "shock therapy" idea, explaining that it was better to apply sustainable measures. -myp

Small and medium-sized enterprises (SMEs) will be most affected if the wages of low-wage workers are increased rapidly, said Prime Minister Lee Hsien Loong in his May Day rally speech yesterday.
He added that SMEs that are not very profitable would either experience rising costs and pass this on to their consumers, or retrench workers.

Mr Lee was responding for the first time to the recent proposal for "shock therapy" by the well-known economist and former chairman of the National Wages Council, Professor Lim Chong Yah, to raise wages of the lowest-income workers by 50 per cent over three years.

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Rationale behind Lim Chong Yah's wage shock therapy

And there are similar risks, albeit on a different scale, to those critics say will assail Prof Lim's radical plan: the costs of restructuring may include companies folding if they fail to lift productivity quickly enough to stomach higher wage costs, and inflationary pressures.

Also, as median incomes rise, there is no stopping wage growth at the top from accelerating, hence keeping the income gap wide. It is even likely, since Singapore needs to remain a hub for global talent and will keep its tax regime attractive to top earners, in order to stay competitive.

Interestingly, Prof Lim's proposal comes two years after the Economic Strategies Committee's recommendations in 2010, and also after stronger measures to address Singapore's unhealthy reliance on low-cost foreign labour were unveiled this past Budget.

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Low-wage workers here 'underpaid': Lim Chong Yah
Addressing concerns brought up by Government leaders in recent days over his wage reform proposal - including the implications of productivity growth being outpaced by wage increases - former National Wages Council chairman Lim Chong Yah clarified his position yesterday: His proposal is premised on low-wage workers in Singapore being "underpaid by much more than 100 per cent of their pay when compared with their counterparts in countries with comparable national affluence like Hong Kong, Japan or Australia".

The "gross underpayment", said Professor Lim in a letter to the media, is "consequent on the unlimited influx of cheap foreign labour to Singapore".

He added that his assumption that such workers are paid 100 per cent less than their productivity contribution is "an underestimation" - even if their pay increases 50 per cent over three years, they would still be paid 50 per cent at the end of the restructuring, he said.

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Our Sg Wages
Wages, wages, wages!
Ideals and the man - Prof Lim Chong Yah
Parliament Debates Budget 2013
Tackling poverty the 'kuih lapis' way
Callings for a Poverty Line
Setting a poverty line may not be helpful
A minimum wage for Singapore?
The Poor & Homeless in Singapore
Other Side of The Singapore Story
No homeless, destitute, starving people in S'pore. Poverty has been eradicated
Singapore “Swiss” Standard of Living
Growing Up With Less
A minimum wage for Singapore?