atans1

An outdated economic Hard Truth

In Economy on 05/12/2013 at 5:19 am

Uncle Leong wrote recently, “How many more years and how many times must we hear the same old pledge and rhetoric that with productivity, the pay of low-wage workers will go up?”

The PAP has at least since 1965 stressed that productivity and wage rises must go hand in hand (BTW, taz not the case when they came into power in 1959. If you read the book I reviewed here, there was a huge increase in strikes when the PAP came into power, and workers and their employers tot the PAP was pro-labour.In 1959, 26,000 man-hours* were lost as a result of strikes, in 1960 125,000 man -hours were lost. a 481% increase.

How times have changed. Actually as late as 1971, as this book shows, activists tot of NTUC and the PAP govt as pro-labour: a minister, no less, assisted in a strike that brought ST to its knees.)

Sorry for the digression. Back to the Hard Truth that wage rises and productivity go hand in hand. It’s Economics 101:IMAGINE the proceeds of economic output as a pie, crudely divided between the wages earned by workers and the returns accrued to the owners of capital, whether as profits, rents or interest income. Until the early 1980s the relative sizes of those slices were so stable that their constancy became an economic rule of thumb. Much of modern macroeconomics simply assumes the shares remain the same. That stability provides the link between productivity and prosperity. If workers always get the same slice of the economic pie, then an improvement in their average productivity—which boosts growth—should translate into higher average earnings. [Emphasis mine]

(http://www.economist.com/news/leaders/21588860-labours-share-national-income-has-fallen-right-remedy-help-workers-not-punish)

Well it may be Economics 101 but it ain’t the reality, the article goes on: More recently, however, economics textbooks have been almost the only places where labour’s share of national income remains constant. Over the past 30 years, the workers’ take from the pie has shrunk across the globe (see article). In America, their wages used to make up almost 70% of GDP; now the figure is 64%, according to the OECD. Some of the biggest declines have been egalitarian societies such as Norway (where labour’s share has fallen from 64% in 1980 to 55% now) and Sweden (down from 74% in 1980 to 65% now). A drop has also occurred in many emerging markets, particularly in Asia. [Emphasis mine]

So the PAP’s Hard Truth that productivity goes with wages is not going to solve the problem of stagnant wages. The Economist gives two suggestions:  Govts should focus on improving the prospects of the low-paid and low-skilled. And they should aim to spread capital’s gains more widely.

The govt here has always talked the talk of improving the prospects of the low-paid and low-skilled. As to whether it has walked the talk, ask yrself are TRE readers right to fret that S’pore is threatened by inequality and rampant, uncaring capitalism and the govt? They are insecure and fearful. They feel poor. They feel so poor that TRE has problems raising money to fund itself: http://www.tremeritus.com/2013/12/04/tre-to-cancel-one-of-its-servers-to-remain-within-budget/.

On the latter, privatise Temasek?

*Bang yr balls, AWARE When are the gals going to bitch that MoM should not use the the word Manpower in its name?

Advertisements
  1. […] Thoughts of a Cynical Investor: An outdated economic Hard Truth – SGbangla: You didn’t get the Job because you Suck! – Mothership.sg: 30 reasons why […]

  2. This was precisely the reason that singapore’s pursuit of GDP at all cost doe not benefit its citizens. Unless the proportion of labour’s share and business’ profits to GDP would be equitable or higher, then improvements of the lives of ordinary Singaporeans would not come.

  3. “*Bang yr balls, AWARE When are the gals going to bitch that MoM should not use the the word Manpower in its name?”

    On the same subject, no feminist organisation has ever objected to the words “manhole” and “manhole cover”. I wonder why.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: