Highly skilled but not highly paid

According to the World Economic Forum (WEF), Singapore has the second highest proportion of workers in high skilled jobs.

high-skilled-employment-top-10

Skilled jobs are defined by the WEF as managers, professionals and technicians. Now one would think that with such a relatively high proportion of our population working in skilled jobs, our average (or median) salary would rank quite high compared to that of other countries. That doesn’t seem to be the case. According to data by the International Labour Organisation, Singapore’s average monthly wage in 2009 is $2,616 in PPP dollars, which ranked 14th in the world. While average wages in Singapore most likely has risen since then, I doubt that we would have moved up much, if at all, the ranking of average wages by country.

This suggests that the highly skilled workers in Singapore earn less than those who aren’t highly skilled in other countries. Which begs the question: Why? What are the reasons for the wages of Singaporeans being depressed? I can think of three possible reasons. But I must qualify, these are merely suggestions of the possible reasons. I have no evidence to prove if any of the reasons really contribute to the relatively lower wages compared to other developed nations.

First possible reason: workers who are in “highly skilled” jobs aren’t adding enough value to the companies that they are working in. In other words, while more than half Singaporeans are in highly skilled jobs, they don’t do enough in their work to justify the company giving them a higher pay. For example, a technician in Singapore may only do work that contributes $6,000 a month to the company’s revenue. So the company can only justifiably pay the technician at most about $2,000 a month. While a technician in another country, say Luxembourg, may do work that contributes $10,000 a month to the company’s revenue and thus the company can justifiably pay the technician $3,000 a month.

Is there any basis to believe that this could possibly be the reason for our depressed average wage? Perhaps. According to WEF’s Human Capital Report 2015, Singapore ranks 24th in the Human Capital Index (HCI). That is an index that quantifies how countries are developing and deploying their human capital. Amongst other things, the index measures quality of education, attainment of education, workplace learning, and whether there is a mismatch of skills and jobs. It seems that Singapore does very well in the index for the age group of under 15, where we rank 3rd. But for the 15-24 and 24-54 age groups, our rank for the HCI drops to 22nd. For the 55-64 age group, we drop to 53rd. For the above 64 age group, it’s even worse. we drop to a dismal 63rd. So from the WEF Human Capital Report, it seems that we are doing quite poorly in workplace learning and we have quite a mismatch in skills and jobs. Perhaps that is why our workers aren’t as able to add value to the companies they work for compared to workers in other countries.

Second possible reason: Singaporean’s favourite whipping boy – foreign workers/talent. Because foreigners are willing to work for lower wages, they are usually less costly for companies, even after accounting for whatever levies. As a result, they could possibly be depressing the wages of Singaporeans doing similar jobs. But can we blame companies for wanting to hire someone who can do the job to a similar quality at a lower cost? What would happen if we stop companies from doing that?

A simple thought experiment. Imagine you just got married (congratulations). And you just got the keys to your spanking new four-room HDB flat (congratulations again!). You want to renovate the flat to make it the best possible home for your new family. You have shortlisted two companies to do the job for you. Company A says they can finish the whole job in 4 weeks for $50,000. Company B says they can finish the whole job in 3 weeks for $40,000. You have asked around and gotten feedback about the quality of work of both companies. And it seems that the quality of work of both companies is comparable, i.e. both will get the job done to a satisfactory level, but both will leave you with little things that will irritate you slightly, but not enough for you to make a big deal of (you know… contractors…). Which company will you choose?

I think most financially prudent Singaporeans will choose Company B. Of course, the assumption is that both companies give comparable quality of work. And if that assumption is valid, then I’m sure most Singaporeans will choose the company that does the work in a shorter time and for a cheaper price. Similarly, isn’t it reasonable that financially prudent companies will hire workers who can do better work, at a faster rate, for cheaper wages?

Third possible reason: employers are avaricious assholes creaming off employees. It could well be that Singaporean workers are generating significant value add and producing better quality work at a higher work rate than foreigners. If that is the case, then the only possible reason for depressed wages is that employers are keeping the lion’s share of the value add for themselves. And because Singaporean unions are pretty toothless, employers can possibly get away with doing pretty much whatever they want.

The three reasons I suggested above may or may not contribute to the relatively lower wages compared to the relatively high proportion of Singaporeans in high skilled jobs. There may well be other reasons. If you can think of any, do let me know. I think this is a topic that is worth exploring. Given our amazing education system (we are constantly ranked top, or near top, in international tests such as TIMS, PIRLS, PISA), and the high proportion of Singaporeans in high skilled jobs, I am sure we should be able to raise the wages of all Singaporeans.

[Featured image: WEF logo]

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