That elusive Swiss standard of living

April 8, 2011
Singapore Democrats

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John Tan

Now that you have seen how outrageously the ministers are lavishing themselves with bonuses (see here), and how flawed the pegging of salaries to our Gross Domestic Product (GDP) is (see here), it is time to look at the what we, individuals in the economy, are getting.

We have been promised the “Swiss standard of living”. We have been told umpteen times that we should be grateful because the PAP Government has transformed our homeland from a piece of swamp to a First World country. 
But what is this Swiss standard of living and what makes us a First World country? Both of these notions, we are told, are measured by our Gross Domestic Product (GDP) figures.

The (GDP) is a macroeconomic measure of the value of output economy. It gives us the big picture of how much our economy produces. But it does not tell us anything about individuals and their economic well-being.

Similarly the GDP per capita, which is derived from dividing the GDP by the total number of people in the country, gives us the average output per individual. It is not an indication of the income level of workers.

 

Our current GDP per capita of $59,8131 is impressive indeed. It is higher than Switzerland’s and the United States’. But it does not mean that the average Singaporean earns more than the average Swiss or American.

 

In order to get a sense of our standard of living, we need to at least transform our wages into goods and services. To work out such a measure, we need to take into consideration not only the wage levels of a society but its price levels as well.

 

Domestic purchasing power

 

The Domestic Purchasing Power (DPP) is such a measure. It is derived by taking the average income of workers and dividing it by the average price of a basket of goods. In other words it tells us is how much we can buy in exchange for the salary that we earn in a given period of time.

A report, Prices and Earnings, published by the UBS computed and compared the DPP of 73 cities across the world. It turns out that the average Singaporean’s purchasing power (38.8) is one of the lowest, we are ranked 25th from the bottom. We trail behind other Asian Tigers (Taipei 60, Hong Kong 55, and Seoul 52.9).

Here’s how we can interpret the numbers from the DPP. Let’s suppose you have a friend in Taipei, Hong Kong and Seoul.

The four of you worked for a day, and decided to spend all the money you have made for that day.

Your Taipei friend is able to purchase 6 items using his day wage, the Hong Konger 5.5, and your friend in Seoul 5.29. You would be able to purchase only 3.88 items.

We even trail Kuala Lumpur (39.3). In other words with what they earn (which may be less than us), workers in the Malaysian capital are able to buy more in KL than us here in Singapore. Is our standard of living really higher than our counterparts in KL?

 

Now back to that Swiss standard of living. The DPP for Zurich is 110.5. That’s 3 times more than ours. In other words, for the same amount of work that a Singaporean and a Swiss put in, the Swiss can buy three times more goods and services than the Singaporean.

This is the truth about our Swiss standard of living.

The hard truth

Do not be dazzled by the numbers the PAP throws at you. They don’t give you the real picture of how we the ordinary folks live. Here are a few more hard truths:

Hard truth #1: The PAP Ministers have delivered the Swiss standard of living for themselves, not for the rest of us.

Hard truth #2: In fact, they have caused our lot to regress. Now we are behind even our “poorer” neighbor in KL.

Hard truth #3: There is only one way to tell them to stop shortchanging you. They listen only to your vote.

John Tan is SDP’s Assistant Secretary-General. He also teaches statistics.