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Ex-Dean: If Sweden allows immigrants to work, wages of Swedish bus drivers will immediately go down

It was earlier reported that a CPF member, who would be turning 65 in May this year, recently received a mail from the CPF Board.

It informed him that he would be eligible to receive $250 per month for about the next 8 years when he hit 65. It also told him that should he want to get his payouts starting at 65, he must inform the CPF Board. Otherwise, CPF Board would only start disbursing his payouts at age 70.

Regardless, his payouts would only be $250 per month for about 8 years. This means the amount of money left in his CPF account is very little, calculated to be less than $30,000.

It’s not known why he has so little in his CPF account. Perhaps he started working a few years in his earlier years before becoming a self-employed rich “towkay”, since a self-employed person does not need to contribute to his CPF. Or perhaps he was just an unlucky odd-job laborer, going from job to job his whole life.

Whatever the case is, there exists a large group of elderly Singaporeans with little CPF savings in their account.

Almost half don’t meet Minimum Sum

Last year, in response to a question asked in Parliament, Manpower Minister Josephine Teo revealed that for the cohort who reached 55 in 2016, only 53% of active CPF members “met their Full Retirement Sum in cash and pledge at age 55 in 2016 (i.e., able to set aside the Full Retirement Sum fully in cash, or met Basic Retirement Sum in cash and provided sufficient property pledge or charge)”.

That is to say, 47% or close to half of the 2016 cohort did not meet the Full Retirement Sum (i.e, the Minimum Sum under the old terminology). And even for those who met, a substantial portion of them had to pledge their property, which means in terms of cash, it is half of the Minimum Sum.

The Minimum Sum for the 2016 cohort is $161,000. But since 47% did not meet FRS or BRS plus property pledge, that means the cash they have in their CPF accounts is less than $80,500. Hence, we can safely conclude that for the cohort who reached 55 at 2016, almost half had less than $80,500 cash in their CPF account.

Some may argued that since CPF contributions are tied to pay and pay is tied to ability, perhaps these Singaporeans who have little in their CPF only have themselves to blame since they are not capable enough to earn more.

This myth, however, has been busted by former Associate Dean of LKY School of Public Policy (LKYSPP) Donald Low (he resigned from LKYSPP last year).

Former Associate Dean: If Sweden allows 3rd world immigrants to work, wages of Swedish bus drivers will immediately be depressed

Dr Low once wrote an article to debunk this myth. Dr Low noted that incomes of middle- and low-wage Singaporeans have been growing very slowly in the last decade.

“There is some evidence to suggest that Singapore’s workers in the service industries are less productive than their counterparts in other rich countries. Cleaners, bus drivers and construction workers are probably more productive in Sweden than they are in Singapore,” he wrote.

“But the question still remains: why has inequality increased at a time when quality education in Singapore has become widely available? The democratisation of education suggests that differentials in productivity should have narrowed, which in turn suggests that wage differentials should also have been reduced.”

“Why should lower-wage Singaporean worker, who has benefitted from the state education system, be less well-paid than his Swedish or Swiss counterpart doing a similar job? Is it possible that something else other than individual productivity determines our wages?” he asked.

Dr Low opined that one important determinant of market wages in rich countries is immigration. Low-skilled workers in many European countries earn more because of their tight immigration controls.

“If these countries were to import large numbers of low-skilled workers from poor countries, it is hardly conceivable that their low-skilled workers can earn the wages they do now, their relatively higher productivity levels notwithstanding,” he said.

“A Swedish bus driver for instance earns 50 times his Indian counterpart. If Sweden were to allow Indians and other immigrants from poor countries to enter its labour market, simple economics tells us that the wages of bus drivers in Sweden will be immediately depressed.”

Therefore, in the case of Singapore where immigration policy is much liberal, Dr Low attributed the low wages which our low-skilled workers are getting to high intake of low-skilled foreign workers.

“Too rapid an inflow leads not only to more competition for jobs and reduced wages, but also stretches the country’s physical and social infrastructures,” he added.

So, with the high intake of foreign workers into Singapore, it’s no wonder the incomes of many middle- and low-wage Singaporeans are depressed, resulting in having little savings in their CPF to retire.