The era of cheap money, cheap labour and cheap energy is over, and Singapore must get used to higher prices as new cost structures emerge, says the managing director of the Monetary Authority of Singapore (MAS) Ravi Menon.
“There has been too much borrowing, too much inequality and too much carbon emissions globally. Interest rates are not going back to the zero lower bound that we have seen in the last two decades. The cost of borrowing will be higher, more reflective of time horizons and risk premiums,” says Menon at the launch of his book The Singapore Synthesis: Innovation, Inclusion, Inspiration.
Menon is the Institute of Policy Studies’ ninth S R Nathan Fellow for the Study of Singapore. His book collects the four IPS-Nathan Lectures he delivered last July.
Speaking on Aug 23 at the Lee Kuan Yew School of Public Policy in the National University of Singapore, Menon says Singapore faces a shrinking labour force, extended progressive wages for more sectors of the economy, and higher qualifying salaries for non-resident workers. “We can no longer rely on cheap labour to power our economy and society, and we should not, as we forge a more inclusive society.”
In addition, the energy cost can only go up as Singapore joins the world “in a race against time” to cap global warming. This noble endeavour may cost more in the short-term, notes Menon.
In July, the country’s all-items Consumer Price Index (CPI) rose to 7%, surpassing the 5% to 6% estimate by the MAS and the Ministry of Trade and Industry (MTI) for 2022. Month-on-month, CPI all-items and core CPI rose by 0.2% and 0.6%, respectively.
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“It is not a bad thing that money, labour, and energy are being priced to reflect their relative scarcities better,” says Menon. “The economy needs to adjust to these new cost structures. The most effective way is through pervasive innovation and skills upgrading as the basis for higher productivity and wages across the board.”
Inclusivity in Singapore
Inclusion must be the hallmark of Singapore society, says Menon. “To stay cohesive as one people, we must be a place where everyone has an opportunity to move up in life, and everyone is treated with dignity and respect. We must lift our low-wage workers, sustain median wage growth, temper wealth inequality and promote income mobility.”
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Menon also says that good jobs and rising wages will improve Singapore’s social inclusion.
We need safety nets, he adds, for a basic level of support through minimum wage and an enhanced workfare income supplement.
Among other things, Menon says Singapore needs “a trampoline to help those who have lost their jobs bounce back through re-employment support. We need escalators to enable people to move up a trajectory of rising wages.”
While low-wage workers will benefit from an expanded progressive wage model, middle-income workers will gain from reclaiming jobs from lower-wage foreign workers, continues Menon. “Across the spectrum, we must professionalise every job in Singapore … We must make lifelong learning a reality for all, from kindergarten to the end of our lives.”
Says Menon: “Finally, the true test of an inclusive society is about how well we look out for the least among us — our aged destitute, our disabled, our special needs children and our migrant workers.”
‘New equilibrium’
According to Deputy Prime Minister Heng Swee Keat, a plurality of views in Singapore is natural and should be encouraged as it aids policymaking.
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However, the city-state must not let a divergence of opinions lead to paralysis. “[Singaporeans] need to ensure that discourse grows the common space, not diminish it.”
Heng, who preceded Menon as MAS managing director from 2005 to 2011, spoke at the book launch as the guest of honour.
“We need to take a pragmatic and constructive approach to build common ground. While values may drive our conviction, taking an overly ideological approach could very easily lead to gridlock,” says Heng, who is also the Coordinating Minister for Economic Policies.
Speaking days after Prime Minister Lee Hsien Loong’s 2022 National Day Rally, Heng highlighted the discourse surrounding the planned repeal of Section 377A of the Penal Code, the colonial-era law that criminalises sex between men. “This is a long-standing and deep-seated issue, with strong views for and against a repeal.”
“PM [Lee] announced that we will work towards a repeal of S377A while amending the constitution to protect the current definition of marriage from being challenged in court. DPM [Lawrence] Wong also assures that the definition of marriage would not change under his watch, should the PAP be re-elected in the next general election,” he adds.
The government made the announcement after “extensive consultation”, says Heng, and Singapore is moving towards a “new equilibrium”.
He adds: “A new balance would not be possible if people insist only on pushing across their views or venture into polemics… Arriving at a new equilibrium on 377A will show that even for contentious issues, there can be room for accommodation. But we all need to do our part to carry out dialogue in a way that will move society forward and call out those whose actions undermine the harmony that we so treasure.”
Photos: Jacky Ho, for the Institute of Policy Studies, NUS
