MTI disputes Economist’s costliest city ranking, questioning its accuracy in reflecting Singaporean cost of living

SINGAPORE: Recently, a survey published by The Economist magazine indicated that Zurich and Singapore are the most expensive cities in the world ahead of New York amid the ever-rising cost of living.

In response, the Ministry of Trade and Industry (MTI) of Singapore defended that the survey might not accurately depict the cost of living for Singaporeans.

On Thursday (30 Nov), a spokesperson for the MTI addressed the findings of the Worldwide Cost of Living survey published by the Economist Intelligence Unit (EIU), as reported by Singaporean Chinese media outlet 8 World News.

MTI asserted that the EIU’s survey aims to assist human resource and finance managers worldwide in calculating living costs, providing allowances for expatriates and business travelers, and formulating compensation plans.

The spokesperson emphasized that the consumption basket used in the survey does not align with the typical spending patterns of Singaporeans.

For instance, the basket includes luxury raincoats and foreign newspapers, which are not typically purchased by Singaporean households.

Furthermore, the survey converts the prices of goods and services in the surveyed cities into US dollars to facilitate comparisons between cities, said MTI.

“Our country’s strong exchange rate places us high in the rankings compared to other cities, but the strengthened currency does not raise the cost of living for Singaporeans earning income in Singapore dollars.”

“Conversely, a stronger Singapore dollar helps to curb imported inflation in Singapore by reducing import prices, subsequently lowering consumer prices.”

The MTI spokesperson emphasized that the Singapore government has taken additional measures to support its citizens to alleviate the impact of rising prices.

For example, in the 2023 fiscal budget, the size of the “Assurance Package” was increased from S$6.6 billion to S$9.6 billion.

MTI said In September of this year, the government also announced an additional S$1.1 billion in assistance packages to provide more aid to Singaporean families and further support low- and middle-income households.

Additionally, this package includes S$800 in measures beyond the budget, thereby raising the total amount of the Assurance Package to over 10 billion dollars.

“In summary, the assistance provided this year will fully offset the increased expenditures due to inflation and the increase in consumption tax for low-income families and substantially offset the expenditure growth for middle-income families.”

The MTI spokesperson emphasized that the Singapore government will continue to closely monitor the situation and provide support to its citizens to navigate through these challenging times.

MOM’s latest report highlights impact of high inflation on Singaporeans’ real incomes amid MTI’s dispute with EIU survey

Despite MTI’s dismissal of the EIU’s survey findings, a recent report from the Ministry of Manpower (MOM) revealed that in 2023, high inflation significantly affected the purchasing power of Singaporean residents.

This led to a 3% decline in real incomes for workers at the 20th percentile compared to the previous year. Median wage earners also saw a decline of 2.3% in their real incomes despite an increase in nominal wages.

The country also witnessed a decline in its employment rate among residents aged 15 and above, dropping from the previous year’s historic high of 67.5% in what was described as an “exceptionally tight” labour market to 66.2%, according to MOM.

Despite this decrease, MOM said the labour market in 2023 remained relatively tight.

SG Govt previously challenged “Minimum Income Standard 2023” report’s representation of basic needs

This is not the first time the government contested claims on the high cost of living in Singapore.

In September, Lee Kuan Yew School of Public Policy (LKYSPP) published a report, “Minimum Income Standard 2023: Household Budgets in a Time of Rising Costs,” unveiled figures detailing the necessary income households required to maintain a basic standard of living, using the Minimum Income Standard (MIS) method.

The report detailed that:

• The “reasonable starting point” for a living wage in Singapore was S$2,906 a month.
• A single parent with a child aged two to six required S$3,218 per month.
• Partnered parents with two children, one aged between seven and 12 and the other between 13 and 18, required S$6,426 a month.
• A single elderly individual required S$1,421 a month.
• Budgets for both single and partnered parent households averaged around S$1,600 per member. Given recent price inflation, these figures have risen by up to 5% in the current report.

The 2023 MIS report also proposed three significant income reforms: introducing a universal wage floor, revising the Central Provident Fund (CPF) model to better serve the elderly, and pegging assistance amounts to current inflation rates.

Several observations were made regarding wage work feasibility during specific life stages and the importance of public initiatives like cash transfers and retirement income policies. Within CPF, modest increases in retirement sums reportedly made a minimal impact on retirement income adequacy.

However, the Singaporean government, in a statement, contested the findings by suggesting that they “might not accurately reflect basic needs”. Instead, the findings should be seen as “what individuals would like to have.”

The joint statement also highlighted that the report factored in luxury items such as jewellery, perfumes, and overseas holidays when estimating minimum income standards.

Because the study’s focus groups included higher-income participants, its conclusions might not accurately mirror basic necessities.

The ministries expressed concern that the report might exaggerate minimum income while downplaying government support, particularly for lower-income households. However, they acknowledged the report provides valuable insights into Singaporean aspirations.

The ministries, while supporting the intent behind the reforms, expressed reservations about the universal wage floor, citing potential job loss risks, especially if positions could be automated.

Efforts to expand the Progressive Wage Model (PWM) were highlighted, indicating future wage increases for sectors like retail and cleaning.

The ministries acknowledged the existing CPF system’s limitations, especially for lower-income workers. Initiatives like the Majulah Package and Silver Support and Workfare were cited as ways to address these gaps.

On 7 Nov, Workers’ Party tabled motion advocating structural reforms amid cost-of-living concerns, PAP amends WP’s motion

On 7 November, Singapore’s Workers’ Party presented a motion to discuss measures addressing prevalent pressures.

They advocated structural changes, urging the government to reduce living expenses for Singaporeans and their families. This highlighted the urgent need for action.

However, the ruling party PAP MP Liang Eng Hwa had proposed modifications to the WP’s motion.

The amended motion read: ” that the House acknowledges the cost of living as a global concern, and call on the Government to continue pursuing policies that together lower cost-of-living pressures on Singaporeans and their families, without undermining fiscal sustainability and burdening future generations of Singaporeans.”

Workers’ Party chief Pritam Singh strongly opposed the amendment, stating it diminishes the government’s responsibility in addressing citizens’ burdens. He emphasized the party’s proposed system changes as more effective than current policies.

“We disagree, indeed we have proposed specific structure changes to the system we believe will work better than current policies.”

“The Workers’ Party MPs have made concrete proposals in several areas. We urge the Government to conduct a comprehensive review of its policies to better support Singaporeans and their families during this Cost of Living Crisis,” he added.

Despite the efforts of the Workers’ Party, the motion was eventually amended with the approval of the PAP-majority Parliament.

All eight Workers’ Party MPs, along with two NCMPs from the Progress Singapore Party, recorded their dissent against the amendment presented by the PAP MP.