The Associated Press February 17, 2011, 7:02AM ET

Stagnant wages, immigration fuel Singapore squeeze

Singaporean Ramzi Mohamed is tired of sleeping in the living room of the two-bedroom apartment he shares with his mother and older brother.

His problem is that housing prices in the city-state are up almost 70 percent since 2006 while the 29-year-old gym administrator's monthly salary of 1,200 Singapore dollars ($938) hasn't budged in five years.

"When I was 20, I thought I'd have my own place by 30," Ramzi said. "Now that I'm almost 30, I wonder if that will ever happen."

Like tens of thousands of others living in the tiny island nation that boasts one of the world's highest levels of GDP per person, Ramzi's failure to realize his modest ambitions is no accident.

A flood of cheap immigrant labor -- and stiff competition for manufacturing jobs from Asian neighbors like China and Vietnam -- has kept wages stagnant for many and widened the gulf between a very wealthy minority and the island's poorest. Housing prices have skyrocketed as rapid population growth outstrips supply.

At the same time, ostentatious signs of the wealth enjoyed by the elite have multiplied. That has put the government under pressure to loosen its tightfisted stance on welfare in the next national budget Friday as it tries to defuse criticism its policies have worsened the plight of ordinary Singaporeans.

The government must also call general elections by February 2012. Analysts expect the ruling People's Action Party, which has held power since independence in 1965, to maintain its overwhelming majority in parliament. But if poorer Singaporeans who feel left out of the country's prosperity bring their discontent to the polls, the government could find itself with a weaker mandate and the beginnings of a stronger opposition.

"The lowest income group has struggled to stay afloat," said Irvin Seah, an analyst at Singapore's biggest bank DBS. "Plainly, not everyone has benefited equally from the economic growth that has occurred over the past decade."

Singapore's economy -- which relies on manufacturing, finance and tourism -- grew a record 14.5 percent last year.

Despite rapid economic growth, the U.N says income inequality in Singapore has risen steadily over the last decade and is the second highest behind Hong Kong among developed nations. From 1998 to 2008, the bottom 20 percent of households saw their income drop an average of 2.7 percent while the salaries of the richest 20 percent rose by more than half.

To be sure, the poor in Singapore as a whole are better off than their counterparts elsewhere in Southeast Asia -- homelessness and hunger are almost nonexistent. The richest 20 percent of Singaporeans mostly live in private developments, and the rest of the population lives in housing built by the government, so slum areas of concentrated poverty don't exist.

The few opposition figures in tightly scripted Singapore are calling for more housing construction, a minimum wage -- and fewer foreigners.

"We've had over a million new people come to live in Singapore in the last 10 years with very little increase in the stock of public housing, so it's inevitable that prices have risen sharply," said Kenneth Jeyaretnam, son of Singapore's best known opposition politician J.B. Jeyaretnam, who died in 2008.

"We need to slow the intake of foreign workers and concentrate on raising the productivity and incomes of Singaporean workers instead," he said.

The government in recent years has also courted events such as Formula 1 -- a predominantly European sport with little local following -- and allowed two casino resorts, where citizens must pay a $78 fee per day to gamble, while foreigners enter for free.

"Some feel that we're creating this place to be a playground for the rich," said Eugene Tan, assistant professor at Singapore Management University. "There are people who genuinely feel that Singaporeans don't come first."

The PAP has long rejected policies such as a minimum wage or public retirement pensions, arguing welfare state-style policies would undermine competitiveness, foreign investment and economic growth. But it increasingly recognizes its hold on power will be undermined if a large section of society is left behind.

"Economic growth must benefit all members of the community," top government adviser and former Prime Minister Goh Chok Tong said last month. "Otherwise, our community may be divided by differences in income levels within it."

Analysts expect the government -- whose coffers are flush with last year's budget surplus estimated at about 7 percent of GDP -- to announce Friday increased retirement fund contributions, training for low-income workers, tax cuts, rebates and cash handouts.

Part of the reason for the jump in income inequality has been the success of Singapore's richest -- billionaires whose fortunes largely stem from banking and real estate development. According to Forbes' list of richest Singaporeans last year, eight of its 11 billionaires made their money in banking or real estate.

The island also has the world's highest percentage of millionaires -- households with at least $1 million in liquid assets -- at 11.4 percent of the country's 5 million population, according to a survey last year by Boston Consulting Group. Rolls Royce, whose least expensive model in Singapore costs about $850,000, said sales in the city-state soared 171 percent in 2010.

"The PAP has made it a central plank that it is a party for all," said Tan, the assistant professor. "Once enough people feel that is just rhetoric, then that would really undermine the government's legitimacy."


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