What is "affordable housing"? The minister for national development said in Parliament that new HDB flats are still affordable and has produced studies to prove his point. Critics have brought up arguments from the other side to show that HDB flats are expensive for the working people. I shall be writing to give my views of this point within the next few days.
In the meantime, I invite you to share your comments.
Saturday, March 6, 2010
Productivity and related issues
Singapore is now embarking on a strategic thrust to improve productivity and reduce reliance on low cost foreign workers. A few people has asked, "What is productivity? How do we measure it?"
In its simplest form, productivity means to do a given quantity of work in less time, or to do more work in a given time. in both cases while maintaining the same quality of work.
We need to go to the next level and define, "If workers are more productive, should they earn more for their time and how much of the gain should go to the worker?". To answer this question, we have to recognize that the productivity comes from all factors of production - labor, capital, entrepreneurship and property. If the labor content is say 50%, then it is fair that 50% of the productivity gain should go to the workers.
We have to address another social question. If the productivity increases 100% and one worker can do the work previously done by two workers, who will provide the work for the displaced worker? The classic answer is "leave it to the free market". The displaced worker can find other suitable jobs in the market.
But this classic answer has proved to be false. During the past decade, the global economy was able to provide a lot of good paying jobs in the financial services sector, especially in creating "innovative" products. These innovative products are used to create bubbles in real estate, stock market, foreign exchange market and in other forms of financial speculation. The bubbles have deflated during the past two years, causing massive loss of jobs. While new bubbles can be created in other markets, history has shown that they will eventually lead to disaster. In the meantime, many countries will find it difficult to create new jobs in the real economy. This is why many economists hold the view that the recession in America will take a long time to recover.
Here is my perspective. Each person needs only a certain amount of goods and services. The global demand will be limited by the population size and the time available to enjoy the goods that have been produced. If people are working too hard, they do not have the time to enjoy the products, while unemployed people do not have the income to spend on these products. This is why the disparity of income in the past two decades have brought disaster to the global economy.
The answer to higher productivity is straight forward. With improved productivity, we should reduce the hours of work for each working person so that the total demand and necessary work is shared fairly by all available workers.This could mean a 35 or 30 hour week. The incomes do not need to be equal, but the disparity should not be so wide.
Tan Kin Lian
In its simplest form, productivity means to do a given quantity of work in less time, or to do more work in a given time. in both cases while maintaining the same quality of work.
We need to go to the next level and define, "If workers are more productive, should they earn more for their time and how much of the gain should go to the worker?". To answer this question, we have to recognize that the productivity comes from all factors of production - labor, capital, entrepreneurship and property. If the labor content is say 50%, then it is fair that 50% of the productivity gain should go to the workers.
We have to address another social question. If the productivity increases 100% and one worker can do the work previously done by two workers, who will provide the work for the displaced worker? The classic answer is "leave it to the free market". The displaced worker can find other suitable jobs in the market.
But this classic answer has proved to be false. During the past decade, the global economy was able to provide a lot of good paying jobs in the financial services sector, especially in creating "innovative" products. These innovative products are used to create bubbles in real estate, stock market, foreign exchange market and in other forms of financial speculation. The bubbles have deflated during the past two years, causing massive loss of jobs. While new bubbles can be created in other markets, history has shown that they will eventually lead to disaster. In the meantime, many countries will find it difficult to create new jobs in the real economy. This is why many economists hold the view that the recession in America will take a long time to recover.
Here is my perspective. Each person needs only a certain amount of goods and services. The global demand will be limited by the population size and the time available to enjoy the goods that have been produced. If people are working too hard, they do not have the time to enjoy the products, while unemployed people do not have the income to spend on these products. This is why the disparity of income in the past two decades have brought disaster to the global economy.
The answer to higher productivity is straight forward. With improved productivity, we should reduce the hours of work for each working person so that the total demand and necessary work is shared fairly by all available workers.This could mean a 35 or 30 hour week. The incomes do not need to be equal, but the disparity should not be so wide.
Tan Kin Lian
Buying a life annuity for a parent
Dear Mr Tan,
My father is going 58 and has only $30,000 in his retirement account. I was thinking of helping him to purchase either the NTUC Income Classic Annuity or the Growth Plan.
Since both plans require a SRS account, I thought of buying a Growth Plan for my Dad using his retirement account to earn a get a greater return, by registering with one of the SRS operators and subsequently use this SRS account of $29K to buy Growth Plan.
Can I do that? I am not sure because I understand that there is a so called minimum sum required in RA and RA cannot be used to buy anything except annuity.
REPLY
The money in the CPF Special Account (or Retirement Account) now earns interest at 4% plus a bonus. The return from the Growth plan is likely to be 3% or less. The agent who made this recommendation is probably giving bad advice, either intentionally or by mistake.
Please ask the agent to give you a benefit illustration for the Growth plan and send it to me at kinlian@gmail.com.
It is better for you to help your father by topping up his CPF Special Account. You will enjoy tax savings on the contribution and allow him to earn a higher rate of return of 4%. When he reach age 62, it is better for your father to buy the CPF Life, instead of a life annuity from an insurance company.
You can read a chapter on life annuity and CPF Life from my book, Practical Guide on Financial Planning, which can be ordered here:
My father is going 58 and has only $30,000 in his retirement account. I was thinking of helping him to purchase either the NTUC Income Classic Annuity or the Growth Plan.
Since both plans require a SRS account, I thought of buying a Growth Plan for my Dad using his retirement account to earn a get a greater return, by registering with one of the SRS operators and subsequently use this SRS account of $29K to buy Growth Plan.
Can I do that? I am not sure because I understand that there is a so called minimum sum required in RA and RA cannot be used to buy anything except annuity.
REPLY
The money in the CPF Special Account (or Retirement Account) now earns interest at 4% plus a bonus. The return from the Growth plan is likely to be 3% or less. The agent who made this recommendation is probably giving bad advice, either intentionally or by mistake.
Please ask the agent to give you a benefit illustration for the Growth plan and send it to me at kinlian@gmail.com.
It is better for you to help your father by topping up his CPF Special Account. You will enjoy tax savings on the contribution and allow him to earn a higher rate of return of 4%. When he reach age 62, it is better for your father to buy the CPF Life, instead of a life annuity from an insurance company.
You can read a chapter on life annuity and CPF Life from my book, Practical Guide on Financial Planning, which can be ordered here:
Robert Kennedy on GDP
Robert Kennedy was assassinated in 1968 while running for nomination as the US President. Someone sent to me the following quotation (which I am not able to verify) from him about GNP:
QUOTE
... Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children.
Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.
UNQUOTE
In our drive to increase the GDP of Singapore, we may be making the same mistake mentioned by Robert Kennedy, that we are degrading the quality of life for the people.
Tan Kin Lian
QUOTE
... Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children.
Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.
UNQUOTE
In our drive to increase the GDP of Singapore, we may be making the same mistake mentioned by Robert Kennedy, that we are degrading the quality of life for the people.
Tan Kin Lian
Friday, March 5, 2010
Contact person for Kirby McInerney
Dear Mr. Tan,
Of late, I have received calls from a few investors (who have read your blog about me) that they have been approached by an unknown person saying that he also represents Kirby McInerney interests and that he could also help to facilitate.
For all intent and purpose, perhaps you could inform all investors in your blog to direct their queries and address their concerns only to me. They should not be talking to anyone else in Singapore who may mislead them. Thank you
Teo Guan Hock
email: tguanhoc@singnet.com.sg
Earthquakes are now quite frequent
I saw these news reports in Channel News Asia:
a. Taiwan quake causes millions of dollars in damage. A powerful earthquake that rocked southern Taiwan caused millions of dollars in damage to infrastructure and business operations, officials and companies said Friday.
b. Strong earthquake strikes off Indonesia. A 6.5-magnitude quake struck late Friday off the coast of Sumatra in Indonesia, seismologists said, but no tsunami alert was issued and there were no reports of damage or injuries.
We seem to have many earthquakes in recent years - starting form the earthquake that caused the Asian Tsunami in 2005 followed the big earthquakes in Sichuan, Haiti and Chile.
Any comments?
a. Taiwan quake causes millions of dollars in damage. A powerful earthquake that rocked southern Taiwan caused millions of dollars in damage to infrastructure and business operations, officials and companies said Friday.
b. Strong earthquake strikes off Indonesia. A 6.5-magnitude quake struck late Friday off the coast of Sumatra in Indonesia, seismologists said, but no tsunami alert was issued and there were no reports of damage or injuries.
We seem to have many earthquakes in recent years - starting form the earthquake that caused the Asian Tsunami in 2005 followed the big earthquakes in Sichuan, Haiti and Chile.
Any comments?
More grads join jobless queues
Read this article by Seah Cheang Nee published in The Star, Malaysia.
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