THIRTEEN to 15 per cent. That is the government’s latest projection of GDP growth rate for 2010. To the casual observer, this looks like fantastic news. It makes for a great pre-election fodder.
However, just like fodder, it may turn out to be inedible to humans. This kind of growth rate is not natural, not least for a supposedly developed economy like Singapore. Even China, with all the talk about its economy overheating, is not expected to have more than 10 per cent growth this year. The reality may bite for ordinary Singaporeans in a few months time: Inflation is likely to shoot up; the prices of everything, from utilities to food to transport will continue on their dramatic upward trend. Yet a recruiting firm managing director interviewed by TODAY warned that those who expect a much higher salary from their current job may be disappointed, because many hiring managers still peg their salary figures against last year’s rates. PM Lee himself said that “you don’t want it to happen too suddenly. You have to manage it (wage increases).”.
Following the publication of the Economic Strategies Committee report earlier this year, we were supposed to be restructuring our economy. Growth was supposed to be slower, and led by productivity gains, not manpower inputs. Yet, the other headline today directly contradicts this: “100,000 foreign workers needed: PM”.
After a drop of just 4,200 foreigner numbers last year due to the downturn, the PAP’s “open-the-floodgates” immigration policy is back with a vengeance. So much for all their promises of “moderating” the inflow of foreigners.
Since we have this “fantastic” rebound in the economy, isn’t it the best time to ramp up our nation’s productivity drive, by forcing businesses to innovate and come up with better ways to achieve the same output without the over-reliance of cheap foreign labour? This “bitter medicine” seems to have been postponed. The government has reverted back to it’s habit of feeding our businesses steroids in the form of cheap labour, so they can generate more output and help boost economic growth.
Why does the PAP government have such an obsession for GDP growth? Don’t they realise that GDP growth does not necessarily indicate a healthy economy? Isn’t it more important to have equitable growth—where all citizens, especially the poor, benefit from growth?
It could be partly due to one incentive that drives many of their actions, whether consciously or subconsciously: The bonuses of all civil servants, Ministers and MPs are tied to GDP growth rates. This could explain why they are so reluctant to restrict the inflow of foreign workers, which could inadvertently end up applying the brakes on economic growth.
As a friend and former colleague, who was a human resource consultant, told me that this is a “big flaw” in the design of civil service and ministerial pay. She pointed out that people tend to focus on what they are rewarded to do. Monetary incentives tagged to a result focus attention on that result. She said that pegging politicians’ and civil servants’ bonuses to GDP is dangerous because it encourages behaviours that will over-emphasize GDP growth, and under-emphasize social justice objectives like housing affordability, wages, welfare of Singaporeans over foreigners and the like.
I have written previously about how we need to use alternative measures to measure economic progress. Perhaps we also need to come up with alternative incentives for our policymakers, like tying their bonuses to the median income or the income of the lowest 20 per cent. Or maybe a basket of items that include low inflation and wage increases.
What do you think civil servants’ and Ministers’ bonuses should be tied to, besides GDP growth and their individual performance ratings? Do share your thoughts in the comments beow.