Of Budget, cost of living, and a reality check

By Howard Lee
This week has been mostly about Budget 2014. And as if on cue, some international think tanks also decided to talk about Singapore and money, which created a little storm in our political leadership circles.
Both the Economist Intelligence Unit and Savills have recently published studies that put Singapore in the top ten in terms of cost of living. The response from our political leaders have been swift, but not out of the ordinary – denial, citing of other figures to prove otherwise, and offering general broad assurances that Singapore remains affordable for its citizens.
Finance Minister Tharman Shanmugaratnam openly declared that the EIU study, which crowned Singapore champion (in a very bad way) in terms of cost of living, is meant to provide foreigners with a means of gauging the feasibility of settling in Singapore, measured against the currency strength of their country of origin.
He is not the only one. Minister in the Prime Minister’s Office Grace Fu went on her Facebook page and cited an online analysis (yes, our political leaders do believe in what they read on the Internet, despite it being touted as a place for unhappy people) that basically debunks the EIU study.
What is odd in their response, which differed greatly from earlier responses on such cost of living issues, is the focus on what is really a domestic issue – allaying citizen’s fears that the price of things will go up for them. The thinking among the political elite usually reflects a concern that, should Singapore wish to remain competitive in our bid to attract talent, low cost of living is an essential factor for those who wish to settle here for at least the mid-term.
Perhaps this is a quiet acknowledgement that the government is now more interested in appeasing the frayed nerves of citizens, rather than go all out to persuade foreigners to our shores?
Perhaps not. Media also recently reported that Singapore is still an attractive destination for the super-rich, where millionaires have no qualms about parking their money with us, in terms of property purchases and using our financial services. We also have no lack of remindes from international media that Singapore is a playground for the super rich.
Clearly, any increase in cost of living would matter little to this group of the ultra-wealthy. They are either transient tourists, or have so much money that it really does not matter. Nevertheless, it is this group that clearly have an immense impact on our economy, as much as they are responsible for the demand in goods that in turn lead to EIU’s prognosis.
The narrative that face us on cost of living, then, resides on two planes. The first is that citizens can still make ends meet, so they have really nothing to complain about. The second is that for those who wish to move here, such increases are not significant for them, so they also have nothing to complain about.
Focusing on the first plane of argument, we might be inclined to examine its inadequacies. The factors that affect “real” cost of living for citizens is not ebbing much. Indeed, just as recently, Minister Tharman announced in Parliament that spending on healthcare is likely to increase at a much faster rate than expected.
While the Pioneer Generation Package can help to defray such costs for the elderly, the government does nto seem to have a plan to address what the sandwiched class will have to eventually face, 10 to 20 years down the road. The political leadership has alluded to the need to increase premiums, and this will be a substantive real cost to Singaporeans.
Healthcare is undeniably a real cost of living item – even if you were to forgo a car, you cannot escape from falling sick, either today or in the future. Our healthcare costs does not affect transient foreigners in the long term, as most might not stay here for their sunset years or already have healthcare benefits parked in their home country.
But of those who choose to stay and count themselves as citizens, it cannot be denied that the cost of living is increasing and will likely affect all of us. To merely deny claims by EIU and Savills is to ignore the elephant in the room that even the Finance Minister made reference to.
There are definitely more examples of such real increases in cost of living, which affect citizens intensely. Public housing is one such example that has often been named, and while we are seeing a decrease in HDB flats, this hardly indicates affordability in comparison to the real wage increase of Singaporeans. There is also rising utilities costs, public transport fare increases and others to contend with.
What is even more worrying is that there could be other hidden price increases that might not affect citizens directly, but nevertheless do impact their everyday cost of living.
Member of Parliament Inderjit Singh has indicated in his speech on the Budget that businesses, especially SMEs, are facing an overall increase in costs such as labour, rental, utilities and transport.
Indeed, as the government cuts down on foreign labour supply for small businesses and they turn to locals to fill their workforce, there is a high likelihood that, in trying to maintain the bottom-line, companies will choose to pass on these cost increases to their workers.
What is evident from this example is that citizens are not affected just by the increase in the cost of daily necessities, but also in how much disposale income we might end up. Indeed, statistics from the Ministry of Manpower indicates that our national median wage and annual wage changes has been registering an overall downward trend in the past five recorded years.
The truth is that citizens are indeed facing real pressure in some of the most basic essentials of their lives – healthcare, a roof over their heads, basic utilities, etc. This upward pressure on cost of living is matched by the downward pressure on wages, which makes it all the more difficult to get by.
It would thus be misguided for the government to state that cost of living is a manageable affair for citizens.
Indeed, continuing to deny that citizens do face a crunch is to risk what MP Sitoh Yih Pin said, perhaps tellingly, in his speech in support of the Budget. He cited the dangers of politicians who are out of touch, who are unable to build meaningful relationships with their voters, because they are not able to empathise with how we feel. Our hopes and anguish lay opaque to them.
We can only hope that Mr Sitoh is not referring to the policy makers who were seated with him in Parliament. Sadly, their continual denial of the monetary pressures that plague Singaporeans, and their unending defence of our cost of living as reasonable, is an unfortunate sign.