Ministerial salaries – 2nd upward revision soon

By Andrew Ong and Andrew Loh

On the 9th of April 2007, Minister in charge of the Civil Service, Teo Chee Hean, announced in Parliament:

“Salaries at the MR4 Grade are currently at 55% of the benchmark. Given the large gap, it is not realistic to close the gap fully in one go. Instead, we will close half of the current gap, that is, from 55% of the benchmark, to 77% of the benchmark by the end of this year.

This will be effected in two steps – one step now, and another step at the end of this year. Next year, we aim to close half of the remaining gap, bringing salaries to 88% of the benchmark by end-2008.”

The first revision took place on 1st April 2007. The second revision is expected to take place anytime from now till the end of this year, as the minister said. Given that it is uncertain if Parliament will sit in December, one wonders if the second revision will be debated or discussed in the chambers.

How will Singaporeans react if and when it is announced?

Booming economy, inflation woes

The economy is booming. GDP growth for the whole year is projected to be between 7.5 per cent and 8 per cent (CNA). On the job front, according to a study by IBM Consulting Services:

Singapore created 598 jobs per 100,000 last year, making it the top-ranked country in terms of job creation productivity, far ahead of even the second-placed Czech Republic, which had 389 new jobs per 100,000 residents last year.” (MFA)

However, not everyone is enjoying the fruits of what MM Lee called “Singapore’s golden period”. Besides the widening income gap, inflation has also crept into the equation.

The latest report on the Consumer Price Index makes for depressing reading for many Singaporeans. October’s CPI was 3.6% – the highest in 16 years. (See here).

Daily necessities are rising in cost with no end in sight. Everything from public transport to flour, from chicken to eggs, from petrol to housing prices, from milk to electricity have shot up, some to record levels. PM Lee’s recent assurance that inflation is “well under control” is little comfort to those who are struggling to keep up.

(See TOC’s aggregation of the price hikes for 2007: The relentless rising cost of living.)

Inflation for 2008 is expected to reach 4%. (Straits Times)

Inflation – falling off the chair

With last Saturday’s Straits Times frontpage headline- “October inflation hits 16-year high of 3.6%” – grabbing the attention of many Singaporeans, it is clear that cost has not only risen but is also a major worry for Singaporeans.

The ST reported in that article that DBS Bank’s Irvin Seah “fell over his chair” when the figure was revealed. “This is way beyond market analyst expectations,” he further added. “We knew inflation would go up. We just didn’t know it would come so quickly.”

This piece of news was a confirmation of the dreadful reality that the average Singaporean is already aware of – and living daily. What was disturbing about the news is that the 2 per cent hike in the goods and services tax (GST) in July was cited as one of the causes for the rising cost of living.

This is definitely not good news, especially for the lower income group.

The GST hike in question

When Prime Minister Lee Hsien Loong first announced his plans to increase the GST from 5 percent to 7 percent on 13 November 2006, he explained it thus:

“Speaking in Malay, Mandarin and English, Mr Lee explained that the hike was necessary to finance the enhanced social safety nets, needed to help the lower income group and he emphasised that the offset package would more than counter the rise in GST.

While Singapore’s current model to tackle the widening income gap is sound, Mr Lee said the government would take on two approaches to deal with the new environment – to strengthen the safety nets and tilt the balance in favour of the lower-income groups who do not benefit from the fruits of economic growth.”

However, from the recent article by Reuters titled “Singapore’s economy boom widens income gap” and with the figures of the record inflation presented to us, things do not seem to be happening in favour of the lower income group at this point of time as planned.

In fact, it appears that things are worse than before – the gap widening more and the lower income struggling to make ends meet or to keep up.

It looks like it is the lower to middle income (the mass) groups that are truly footing the bill for the economic development in Singapore with the high income group continuing to reap the “juiciest” fruits of our economic growth.

Good time to revise ministerial salaries again?

In light of the above, is it a good time to revise – upwards – ministerial salaries again? Government ministers have said, when defending their pay hike, that there never is a good time to increase salaries. That may be so but there also should be consideration for moral leadership.

In the April announcement of ministers’ pay hike, revisions were also made to bonuses for ministers. On GDP Bonus for ministers, Mr Teo said:

“We will increase the bonus to a norm payment of 3 months if the economy grows by 5%. The minimum payment will remain at zero if the economy grows by 2% or less. The maximum will be increased to 8 months if the economy grows by 10% or more.” (link)

On Performance Bonus for ministers:

“We will increase the Performance Bonus by 2 months for officers at this level, to a norm of 7 months.” (link)

Thus, it would seem that ministers would be getting a windfall this year-end. A second upward salary revision, a 7 months Performance Bonus and a 3 months GDP Bonus – since GDP is expected to be between 7.5 per cent and 8 per cent.

For the average Singaporean, he can expect continued competition with foreigners for jobs, the lower-skilled Singaporeans continue to have their wages depressed by cheaper foreign labour, he can also expect record inflation leading to an even higher cost of living next year, as some experts are predicting.

It is little wonder then that there have been no public announcements of the 2nd revision of ministers’ salary so far. It is undoubtedly a politically sensitive issue. One wonders if any announcements will be made at all, with the year ending soon.

We have slightly more than one month to wait to find out.

Read also: Annuities for Singaporeans, pension for ministers?

And: “Singapore less attractive to expats: Survey” by TODAY.

And: “S’pore enjoys record employment, higher wages” by The Straits Times 


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