Wages have not kept pace with fare increases. By Leong Sze Hian.

Fare increase not fair to lower income

Leong Sze Hian / Columnist

PTC should use median wage and not average wage in fare formula

In its press release of 10th July 2008, the Public Transport Council (PTC) said that, based on its new fare pricing formula, the increase in the cap on fares will be three per cent this year.? A few days after that, on 14th July 2008, PTC Chairman Gerard Ee told the press that fare hikes were likely to be under 1.8 per cent or even under 1 per cent.

If the PTC knew that the fare hike was likely to be under 1.8 or even under 1 per cent, why did it not say so, in its original press release?

How did it now derive a fare increase of under 1.8 or 1 per cent that was different from its original cap of 3 per cent? Did the new formula change in just four days?

Moreover, since the transport operators had not even submitted their fare increase applications by 14th July 2008, how did the PTC know in advance that the increase will be under 1.8 or 1 per cent?

Lower-income groups hardest hit

It is the lower-income groups who are likely to use feeder bus services, as they may just want the cheapest way to get to the nearest supermarket, polyclinic, etc.

Charging more for direct bus services may also hurt lower-income groups more as they generally prefer direct services because they are more concerned with cost rather than time (i.e., cheaper costs of using direct bus services rather than potentially quicker travel time by transferring to the MRT).

Furthermore, if the 'cost burden' of the transport operators' loss in revenue due to the PTC's proposed increase in the transfer rebate has to be shared, perhaps the Government should shoulder part of it.

The Government has ample resources to do so.? The revenue from motor vehicle taxes and excise duties (such as those on petroleum products and motor vehicles) increased from $2.3 billion in FY 2005 to $3 billion in FY 2007.? This is an increase of 30 per cent, or about 14 per cent per annum.

Record wage growth?

But have wages kept pace with fare hikes? I refer to the article  Wage rise hits 7-year high in 2007(New Paper, 1st July 2008).

It says that wages rose last year by 5.9 per cent - a seven-year high, but after adjusting for inflation, the increase was 3.8 per cent.

If we consider that smaller companies generally pay less than bigger companies, or that the private sector pay is generally higher than in the public sector, then the average and median wage increase may be even lower.

Furthermore, since the number of part-time workers has more than doubled in the last decade or so and, according to the latest available statistics, their average wages have stagnated at about $500 a month, the wage growth for a significant portion of the working population may in fact be far lower.

Relentless growth in prices of necessities

Perhaps what is even more important is how much the prices of basic necessities like food, utilities, public transport, healthcare, and new HDB flats have increased, relative to median wage growth.

I estimate that about 30 per cent of all Singaporean workers have had no real increase in wages for the last 10 years or so, even with inflation now at 7.7 per cent over the last 13 months.

In comparison, a minister/senior permanent secretary?s remuneration was $968,000 in 2000. By 2007, it had grown to $1.9 million, an increase of about 96 per cent in 7 years, or an annual compounded increase of about 10 per cent per annum.

Fare hikes unfair to lower-income groups

Therefore the PTC's fare increase formula may not be very fair to lower-income groups, as it is based on the average wage increase. Those who take public transport tend to have a lower wage increase than those who don’t, generally.

I suggest that the median wage, rather than the average wage, be used in the PTC's pricing formula with a downward adjustment to reflect the lower-than-median wages of lower income groups.