Reply to KRC Regarding UBS Report

I rarely make lengthy posts about my political views but today marks an exception. It was triggered by an article from Kent Ridge Commons that was retweeted multiple times. What drove me out of my usual energy-saving mode was the fact that:

1. I found the snippet of information presented by Vincent Wijeysingha on CNA's political forum to be interesting, and was disappointed that he was not given the opportunity to comment on the "many faults" of the report as explained by Tharman Shanmugaratnam.
2. KRC took the effort to reply to every person who had retweeted the original link with an article discrediting the original one, and then apologizing to its readers.

This is a response to the article “Singapore does NOT have Third World Living Standards”, submitted to Kent Ridge Common (KRC) by Koh Choon Hwee.

Koh Choon Hwee discredits the article submitted by Christopher Ong (“UBS: Singapore has third world living standards”) on grounds that the UBS Price and Earnings Report 2009 does not make the assertion as claimed. While this is true, the Satay Club article (“UBS: Singapore has Russian standard of living”) that was referenced by Christoper does try to substantiate that claim using information from the UBS report.

Koh Choon Hwee questions the methodology used in obtaining the figures in the UBS report:

“Secondly, as Michael Moore noted, 400 people in the US currently possess more wealth than half of the US population combined. WHOSE domestic purchasing power are we really counting in these statistics? That of these 400 rich people and their families, or one of your union protesters in Wisconsin? One should also note that New York is taken as the bar for this set of UBS’ statistics, hardly a “midway point” on an international level if you ask me.”

The criticism insinuated here is that the domestic purchasing power index offered by UBS does not take into account factors such as a wide income gaps, hence the average reported by UBS is not indicative of a good cross-section of society.

However, UBS clearly states the methodology used in their report on the first page (excluding the cover page and list of cities involved):

“To determine city specific wage levels a weighted average across the 15 professions’ salaries was calculated. The weights used for this calculation was set to be as representative as possible for the average of all cities covered in the report. However, specific weights in some cities may still differ from the ones applied here.”

And later on page 5:

“Calculation is based on the wage, social insurance contribution and working hours data for 15 occupations worldwide to arrive at a net wage level after taxes and payroll deductions.”

While not mentioned in the 2009 report, we can look at the 2006 report for a better understanding of focus of their study. The professions used in their 2006 study were:

Industrial sector

• Car mechanic
  
• Building labourer
  
• Skilled industrial worker
  
• Factory worker
  
• Engineer
  
• Department head
  

Services sector

• Primary school teacher
  
• Bus driver
  
• Cook
  
• Personal assistant
  
• Sales assistant
  
• Call center agent
  
• Bank credit officer
  

And what are these “goods and services” mentioned? Also on the first page (emphasis my own):

“The questionnaire used for the survey covered 122 different goods and services, and included 112 questions pertaining to wages, payroll deductions and working hours for 15 different occupations. Over 30,000 data units flowed into the survey evaluation. Since our basket of goods contains only a limited selection of goods and services, we adjusted the individual components based on their weighting in the European consumer price index. The weightings of the individual items in the basket were designed so that all the prices added up to the approximate monthly consumption of a European family of three.”

Now, before someone argues that the basket of goods and services used by UBS may not accurately reflect those required by Singaporeans, I should mention that some of the goods and services listed in their 2006 report include the price for food, clothing, housing, and public transport.

Like Koh Choon Hwee, I am no expert in economics. But from a layman’s perspective, the report seems to be asking the following questions:

1. What is the average wage that is being paid to these professions in these countries?
   
2. How affordable is this basket of goods and services given this weighted average?

Now refer to what Tharman said about the "many faults" of the UBS report:

"[Singapore is] quite different from Russia, quite different from the places that the UBS report talks about..."

"median incomes in Singapore, average incomes, when adjusted for inflation, are much higher than anywhere else in Asia, apart from Japan, and by some measures higher than Japan."

In light of the above-mentioned, Koh Choon Hwee's comment that “400 people in the US currently possess more wealth than half of the US population combined” and Thaman's "higher median incomes when adjusted for inflation" have very little relevance to the discussion at hand.

In fact, I would say the UBS report on the wages of these professions are a good indication of the ability for a typical Singaporean to acquire the goods and services required in order to live here.