A Balance of Everything : When Wage & Productivity increases, you need to lower business costs


3rd November 2012
At Pine Garden’s Cake Pte., Wei Chan used to have three drivers delivering chocolate and martini- flavored cakes around Singapore. Now, the head of the company transports the goods himself because he can’t get enough workers.
A government push to reduce the city-state’s reliance on cheap imported labor has led to an emerging shortage of workers and increased business costs. The squeeze has left Chan with only one driver, a Chinese national, after he failed to obtain new permits to replace the other two.
“I can’t accept new orders and my top-tier people are doing the lowest-end jobs,” said Chan, 40, whose managers also fill in for the lost drivers at his family’s 28-year-old Singapore bakery. “I’m fighting for survival and expanding is definitely not on the cards. Productivity is certainly compromised.”
Prime Minister Lee Hsien Loong has raised foreign-worker levies and salary thresholds after Singapore’s population jumped by more than 1.1 million since mid-2004, driving up property prices and stoking social tensions. The clampdown has driven the jobless rate to a six-quarter low of 1.9 percent, pushing up wages and constraining the central bank’s scope to combat an economic slowdown with monetary easing.
“We are not getting any cheaper as a location and businesses are getting squeezed from all corners,” said Wai Ho Leong, a senior regional economist at Barclays Plc in Singapore. “We may approach a labor cliff in about eight years when the workforce starts to shrink based on current participation rates and population growth profiles.”

Manpower Shortage

Singapore’s authorities said they rejected more foreigner work permit applications and renewed fewer existing ones in the first seven months of 2012. The labor-policy tightening and efforts to raise wages for service workers from nurses to cleaners has added to price pressures.
The central bank, which refrained from slowing gains in the currency in October even after the economy contracted last quarter, said this week Singapore’s economy will grow at below- potential levels for a second year in 2013 while a tight labor market and rising costs of goods and services will add to inflationary pressures. The island uses the exchange rate as its main monetary policy tool.
The economy is forecast by the government to expand 1.5 percent to 2.5 percent in 2012, from 4.9 percent in 2011.

Policy Constraint

“The Monetary Authority of Singapore has alluded that wage price risks are still there, which is one reason why policy cannot be loosened,” said Vishnu Varathan, a Singapore-based economist at Mizuho Corporate Bank Ltd. “The backlash would have been that they wouldn’t be able to do it preemptively or ahead of the curve.”
The Singapore dollar has climbed 6.2 percent this year, among the best performers in Asia, as the central bank refrained from joining neighbors from Thailand to the Philippines in easing policy to counter the faltering global economy.
In Europe today, a report may show U.K. construction output shrank for a third month in October, according to a survey of economists. Manufacturing in Italy probably contracted at a faster pace in October, a separate survey showed. In the U.S., a Labor Department report may show the nation’s jobless rate rose to 7.9 percent in October, according to economists surveyed.

Growth Curb

Singapore’s tighter labor regime means the country will forgo 1.3 percentage points of growth this year in an economy that narrowly avoided a recession, Bank of America Corp. predicts. The island’s nominal gross domestic product has doubled since 2004 as the population grew more than 26 percent to 5.3 million.
The population explosion boosted property prices and strained transportation services in an island about half the size of Houston, fuelling public discontent that led the ruling party to its smallest electoral win last year since independence in 1965. The government responded to citizen dissatisfaction by imposing tighter regulations on the inflow of foreigners, while increasing its engagement with citizens on their concerns.
The crunch has led to scams including so-called phantom workers, where companies pretend to hire locals to boost their foreigner quota, while others falsely inflate wages to apply for permits in categories that are subject to less stringent requirements, the government said.

Sacrificing Opportunities

The foreign workforce excluding domestic helpers increased by 34,100 in the first six months of 2012 to 1.03 million, compared with a 79,800 gain for all of 2011, according to the Ministry of Manpower. Unit labor costs will probably rise 4 percent to 5 percent this year and 3 percent to 4 percent in 2013, the central bank said. It climbed 3.4 percent in 2011.
“Businesses are constantly complaining about a shortage of workers, and inflation and wage pressures are building,” said Chua Hak Bin, an economist at Bank of America. “Singapore is sacrificing opportunities and the costs would be larger when the world economy booms again.”
The economy would add about 36,000 more jobs this year than it is currently creating if the government accommodates employers’ demands for more overseas workers, Chua estimates.
The government is encouraging companies to turn to locals to fill the gap. Finance Minister Tharman Shanmugaratnam said in February the government will partially reimburse businesses for older Singaporean workers on their payrolls.

Wooing Women

Singapore is subsidizing training for workers to upgrade their skills and make them more productive. It has also urged companies to implement flexible arrangements to encourage those approaching retirement age to stay at their jobs and entice women with families to rejoin the labor market.
The resident unemployment rate was 2.8 percent as of September, matching the lowest level since 2007. Sixty percent of residents who were retrenched in the first quarter found jobs by the end of the second, compared with 50 percent in the previous period, the Manpower Ministry said in September.
“The resident labor force participation rate has likely reached a record high in 2012 and there is probably limited scope for it to rise much further in the short term,” the central bank said this week. “Demand for low and mid-skilled workers will run up against a number of supply-side constraints.”
The government is persisting with its policy shift as it seeks to meet the goal it set in 2010 to at least double its productivity growth to between 2 percent and 3 percent annually until the end of this decade. In an interview with the Straits Times newspaper published last week, acting Minister for Manpower Tan Chuan-Jin signaled new areas his ministry will next target for tightening.
Risky Strategy?
“The government is strenuously telling us there is no turning back,” said Kurt Wee, a vice president at the Association of Small and Medium Enterprises. “We have told the government they’re running a high-risk strategy that will eventually lead to higher prices for consumers and higher living costs. Policy has been pushed beyond what it should be and it’s getting vicious out there.”
Chan of Pine Garden’s Cake calls the government’s actions a “horrible recipe.” His labor costs climbed to as much as 35 percent of sales from under 30 percent less than a year ago.
“When you have a piece of sugarcane and you continue squeezing it, by the end of it, you’ll have nothing left to squeeze,” he said. “That’s exactly how I would describe the situation in Singapore.”
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
This story was originally posted on Bloomberg.com on Nov 2, 2012 10:40 AM GMT+0800
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As I mentioned in my previous articles, you need a balance of everything, when wages and productivity increases, you need to balance with a drop of business costs to stay competitive, and the only way is to play with the Supply side of things, like creating a new breed of Micro and Shoebox housing models for HDB flats to ease the rise in property prices, like increasing the supply of COEs for goods vehicles to bring it down the total costs to below S$40K, to increasing the supply of industrial land to all kinds of mix use developments, to creating new commercial shops space in new HDB towns to compete with retail shopping centres, I can think of a host of other methods like reducing diesel, CNG tax, but the best is to moderate inflation to below 3%. The Old Singapore model of trying to generate huge income from the public will not work anymore, there are now so many projects that will generate an ROI of between 16-40%, why waste your time and get negative public opinion?
– Contributed by Oogle. 

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The entire US Debt will be written off when I get to the UN, will Obama accept my terms?

by Clive Crook

With a week to go and Hurricane Sandy bringing fresh uncertainty and new opportunities for gaffes, the United States presidential election still looks tied.
Last week, I argued that the contest need not have been this close, that Mr Barack Obama could have won comfortably if he had governed and campaigned as the centrist he said he was in 2008 and not the thwarted progressive he turned out to be.
This week, I want to argue that, despite this failure, Mr Obama is still a better choice than Mr Mitt Romney.
The incumbent has achievements to be proud of. The fiscal stimulus, flawed as it was, helped prevent what would have been an even worse recession. Mr Obama’s signature initiative, healthcare reform, addresses the most egregious failure of American public policy: The country’s inability to insure all its people against illness, something just about every other advanced economy has managed to do.
The Affordable Care Act is flawed, just as the stimulus was flawed, but it upholds a vital principle. It should be built on, not repealed.
Sadly, in domestic policy as in foreign policy, the President led from behind and healthcare reform never had the champion it needed. It remains unpopular, hence capable of being undone by a Republican President and a Republican-dominated Congress. If you hope to see the healthcare reform survive with improvements, as I do, that’s reason in itself to support Mr Obama, as disappointing as his failure to lock the policy down might be.
WHERE OBAMA WENT WRONG
Mr Obama’s biggest mistake was to abandon his efforts – never very strenuous – to work with his Republican opponents or, failing that, to expose them as irresponsible extremists.
To do this, he had to occupy the centre that the Republicans had vacated. Instead, despite the Democrats’ drubbing in 2010, he tacked left, further polarising the country. In this, he probably followed his instincts. Unlike Mr Bill Clinton, a centrist by conviction, Mr Obama’s intellectual loyalty is to the progressive wing of his party. His campaign’s class-war anti-capitalist rhetoric – not a great vote-winner in the US, even after the Great Contraction – has seemed all too sincere.
In that complaint, of course, lies the case for Mr Romney. The disinterred former Governor of Massachusetts stands close to the US political centre of gravity. Would he take up the opportunity Mr Obama missed and bridge the divide in Washington?
Somebody needs to try. For the past four years, Democrats and Republicans in Congress have settled for talking past each other and past much of the country, too, advancing rival fantasies of a transformed country that few Americans actually want.
One vision is collectivist, stressing redistribution and a permanently enlarged role for government; the other is radically individualist, seeking to eviscerate the federal government and roll back the welfare state. Activists on both sides may be all fired up, as Mr Obama likes to say. The rest of the US despairs.
Most voters, I am convinced, want to see the US mended, not transformed. If I am right, more ballots will be cast next week to block the outcome that voters fear most than to affirm a future they actually support. Both campaigns – especially Mr Obama’s -have been directed to this end.
Whatever the outcome, therefore, this election will deliver no mandate. That is the price of polarisation, a measure of Washington’s failure, and it points to continued deadlock: A clash of grand ideologies signifying nothing, leaving the country’s eminently fixable problems unaddressed.
US POLITICS ARE BROKEN
Could Mr Romney be the answer? It is possible. Critics say he is a man without conviction. In my view, that is his main advantage: Washington already has a surfeit of true believers and the last thing the country needs is one of either stripe in the White House.
If the real Romney is the former Governor of Massachusetts, as I suspect, not the man who campaigned for the GOP nomination, he would fit the bill. His audacious pivot from the severe conservative of the primaries to the pragmatic moderate who turned up for the first presidential debate suggests he understands what the country, as opposed to his party, is looking for: A manager, a fixer, a consensus-builder, a maker of deals.
To be that President, however, Mr Romney would have to be willing to thwart the ambitions of Republicans in Congress. That will not be easy. He has promised to start dismantling the Affordable Care Act – the national equivalent of his own Romneycare – on Day One. He cannot easily go back on that. He has also adopted the mindless Republican opposition to any and all tax increases, despite knowing that higher revenues will be needed to get public borrowing back under control.
President Romney might want to swing all the way back to Massachusetts moderate. I can even imagine him hoping for Democrats to do well in the 2014 mid-terms to make this easier. But in 2013, he would at least have to go through the motions of making common cause with Republicans in Congress. That is an alarming prospect. If the choice is between an empowered Republican Party in its present radicalised form and continued paralysis, I would reluctantly choose paralysis.
Whatever America decides, there will be little to celebrate on Nov 7. The country’s politics are broken. Mr Obama has claimed during the campaign that, if he is re-elected, the Republican fever will abate and the deadlock in Washington will give way to productive engagement. Rubbish.
Suppose Mr Obama wins narrowly – the best he can hope for, if polls are to be believed – and a Republican majority is returned to the House. Things will stand much as they have for the past two years. When such an outcome is the best that can be expected, it is hard to be optimistic about the country’s prospects.
I want Mr Obama to win. Even if he does, I will need a drink to celebrate the coming of the New World. BLOOMBERG
Clive Crook is a Bloomberg View columnist.

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This is a very serious matter and I do not like to joke about it, the present US system is flawed and there is only one solution to bring everything back to order, that is, the entire US debt needs to be written off to start from a clean slate, but will Obama accepts my terms once I get to the UN? Don’t worry about the EU, the problem can easily be solved with reforms to plug the loopholes before funds are released to make sure it is effective or everything will be drained away, Germany has the necessary power for the downpayment, and with the EU’s stability mechanism and the contributions of IMF/World Bank, by end 2014 there will be no problems anymore. PS : It takes time to implement reforms especially since EU has many states.
– Contributed by Oogle.

Progressive Wage Model will only work if you do not setup a timeframe

Cleaners who keep offices, F&B outlets and housing estates spick and span may soon see a progressive increase in wages. -BT
Zeinab Yusuf Saiwalla
Sun, Oct 21, 2012
The Business Times

CLEANERS who keep offices, F&B outlets and housing estates spick and span may soon see a progressive increase in wages.
Labour movement NTUC, along with the Tripartite Cluster for Cleaners (TCC), yesterday announced that 10,000 cleaners in these three sub-sectors will be the first to come under the Progressive Wage Model (PWM) proposed for the cleaning industry.
Eventually, the wage model for the cleaning sector will apply to some 46,000 local cleaners.
PWMs have already been unveiled in the transport and logistics, hospitality and healthcare sectors.
The TCC, which comprises NTUC representatives, employers and government agencies, recommends $1,000 as the entry-level basic wage for cleaning jobs in offices and commercial buildings and in the F&B establishment sector; cleaners in the conservancy sector start at $1,200.
Records from NTUC’s Building & Facility Management Services Cluster indicate that cleaners in these positions earn between $675 and $950.
In addition to the entry-level wage, the PWM also draws up three wage ladders to give cleaners a pathway up a salary scale – provided they raise their skill level, become more productive or take on higher responsibilities.
The wage ladders show how they can earn more over time, which will motivate them to improve their skills and raise their value-add, said Zainal Sapari, leader of NTUC’s Building & Facility Management Services Cluster.
Commenting on the recommended changes, NTUC deputy secretary-general Heng Chee How said: “With workers that are better paid, the service providers can look forward to better staff morale, leading to lower staff turnover and happier workers, who will in turn be more productive. Service providers will then be able to grow their business and increase their business competitiveness.”
The NTUC’s Building & Facility Management Services Cluster is seeking the support of the government for the PWM by getting the public sector to take the lead in best sourcing and to encourage its cleaning-service providers to adopt PWMs. 
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Progressive Wage Model cannot be implemented with a timeframe, it will be more superior to minimum wage if the execution is carried out swiftly to move all low income workers who has undergone re-training to get higher wages, and real productivity will compensate for higher wages and increased business costs, Singapore cannot afford to have many unskilled labour anymore due to increased costs and must move up the productivity ladder.
– Contributed by Oogle.