Friday, February 25, 2005

Follow the Money.

Those not interested in reading of my thought processes should skip this whole section to the ***.

Am still following on The King's Indian (formerly GK) blog post: How Do I Fit Into Singapore's Long-Term Economic Future?

[ The very short answer is I do not. The End. You can stop reading now if you wish. ]

Not long after I started this blog, I posted the Emigration Essay which attempted to summarise the reasons I was considering emigration. I reproduce the portion related to the economic aspect here.

I am considering emigration for economic reasons. I am emigrating because I wish economic security. Because I believe that the welfare of citizens should not be sacrificed on the altar of rapid economic growth. Because I believe age discrimination is wrong. Because I fear economic non-viability above the age of forty. Because I fear dying old, sick and destitute when I am unable to afford medical care in a society with no social safety net. Because I actually want to be a property owner and not a technical leaseholder. I am considering emigration because I ignore the mass media propaganda and try to actually understand the economic viability of immobile citizens in a topdown-managed tiny nation state in a rapidly changing world.
So far, I have yet been able to write a coherent (and hopefully complete) argument on why I feel the economic prospects in my future are better in Australia than in Singapore. From an economic standpoint. This blog article will most likely be just a more detailed version of the paragraph above.

I could just take a page from the book of Goh [ another terrible pun! ] and merely claim that "I can feel it in my bones". However the guiding principle remains that if I am unable to lay out the issue in an clear article for a third-party reader - then it is painfully obvious that my understanding of the issue is still very fuzzy in my head.

Recently a few events conspired in manner to clarify a line of thought sufficient for me to put them down on paper. Albeit in a rambling, and not totally coherent fashion.

First of all, unemployment has given me quiet time to intensively think and double-check my prior thoughts on the economic mertis of emigration. In between emailing resumes and job applications.

Furthermore the recent exchange at on Jeremy's project for a Humanist Welfare State, coupled by the long comments exchange on various different economic and social welfare systems on Adrianna's blog post Quantitative Analysis - provided good nucleation sites around which to crystalise this blog post.

Jeremy's apparently gibberish username (a*x+(1-a)*y; for all real x,y; a=[0,1] ) also served as a timely reminder that solutions are often only valid under well-defined constraints.

Which turns out to be the precise reason for the mental block in tackling this issue. I have been trying to describe an complex problem without sufficiently constraining the parameters. Information overload. Unlike in a rigorous mathematical proof, not all human problems have be considered for the general case first, before working it out for the specific case.


So let us restrict the considerations only to the economic case, putting aside the emotional, social and political angles for the moment. And we do not attempt to evaluate the case for the general case (i.e for all Singaporeans, or even for the average Singaporean) but only for one specific case - of this serf. For selfish me.

So what is the reference point that defines the norm? What human material of economic value do we have to work with? Who would employ this serf?

Basic degree mucking around with computers. No advanced postgraduate qualifications. No fancy industry certifications. Assorted general work experience. Equally comfortable crawling under desks setting network cabling, or debugging misconfigured / faulty data networking equipment, or dealing with irate corporate customers over the phone or on a field support call (on a regional scale).

I must clarify that I am not whinging here because it has been my choice to "go wide" (breadth of experiences) instead of "go deep" (specialisation) as endorsed by the Singapore government. From what I understand in the national press: Singapore needs dedicated specialists to power the economy, not generalists. I am sure I would have been much more employable if I had spent the time on skills specialisation. Time that I have happily wasted on other pursuits to try to become a more complete person.

A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects.
- Robert Heinlein

Now let us investigate the marketplace conditions in Singapore.

Like Budak, I have a problem with the Singapore government's quest to manage citizens as a commodity, "regarding them as economic units to be maximised".

There is an open-door policy which welcomes cheap foreign labour from India and China. Cheap due primarily to the disparity of the cost of living in Singapore to that of India / China, with regards to disposable income. Even in the skilled marketplace there is a preference for foreign labour over local labour, due to the local labour commitments of National Service, CPF contributions and the general perception that foreign workers are willing to work longer hours as they do not have families here. The trend will continue to accelerate given the large number of foreign students attracted to Singapore universities because of the general ease of obtaining scholarships, subsidies and ease of obtaining employment work rights after graduation.

We serfs can debate Singapore's labour policies or education policies until Jeyaretnam gets legally discharged from bankruptcy. But the harsh truth is that serfs have a negligible effect on the core government policies determined unilaterally by our rulers in the current political climate. Face it, nothing is going to change at the core beyond appearances. [ Hypothetically, even if this nation-state was to choose an insular and protectionist stance with regards to labour issues, it may only temporarily postpone the pain to citizens as corporations move out of Singapore into lower-cost regions. See Angell again. ]

Using this information as a baseline and looking at the trends on the labour market today, what would then be a realistic scenario of my future economic prospects remaining in Singapore? [ A realistic scenario aims at describing the most likely average (mean) case, barring exceptional circumstances like being struck down by disability or striking the lottery, etc. ]

Lifetime accommodation will most likely be in a 4-room HDB flat, on a 30-year loan. Given the high cost of housing in Singapore, I would most likely be paying for the HDB lease until the retirement age of 62 - assuming I do not upgrade to a bigger lease unit in the meantime. I have run some HDB scenario spreadsheets in the past and I am confident that the numbers support my assertion.

In the realistic scenario, having a long-term lease on anything more upmarket than a 5-room flat is very unlikely from an affordability standpoint. Full-time retirement from the workforce will not be possible before the age of 55, and highly unlikely before the age of 62 - given the financial commitments of the HDB leaving little, if any CPF funds to supplement private retirement savings.

The scenario also assumes that employment is steadily available beyond the age of 40, and at a wage level that is not significantly lower than wages obtaned below the age of 40. This assumption may be unrealistic considering that the Singapore job market (unlike in other job markets) has significant discrimation against mature employees. Employment becomes increasingly difficult beyond age 40, especially in the general IT field.

Long working hours are the norm in Singapore. 10 to 12 hour workdays (without overtime) are common, with work interruptions on weekends and holiday being expected occurances. If you are not willing to put in the required hours, you will not expect to stay employed for long. Or be prepared to get below-norm wages for the below-norm work effort.

Retraining opportunities to remain in the white-collar workforce are near non-existant. The economic and opportunity costs to go back to the university are prohibitive. In Singapore, there is a very dramatic wage gap between white-collar work and blue-collar work.

Old age pension does not exist outside of your CPF contributions (available only after age 62). No unemployment or social security safety net, outside of private medical disability insurance.

We have empirical evidence of the previous generation of workers being abandoned by the marketplace, once past their economic prime. There is no policy in place or evidence that indicates why it should not also happen to this generation of Singaporeans.

What do I hope to gain by relocating my base of operations to Australia?

Home ownership, perhaps even with a tiny bit of land. And not merely a tiny pigeonhole apartment in a high-rise. Even after factoring in the foreign exchange rates, it would be possible to own a real home for what it costs to lease a 4-room HDB flat for 99 years. In addition, the release of the CPF funds (of two working adults) upon surrendering citizenship would pay most of the cost of the home. This not very far from the Australian dream of owning your own home on a quarter-acre plot of land - a space of to call your own, to live as you please, to follow your love.

Car ownership (real ownership, not a 10-year lease) also becomes affordable. It is entirely possible to put a used car purchase on a credit card. In any case, cars are more of a necessity - not luxury - to get around the greater distances in Australia.

Some people have expressed the concern of being a second-class citizen in a strange land. However, from an economic standpoint Singaporeans are already a second-class choice in selection of employment candidates in a wide range of scenarios today. The notable exception would be the Singapore Civil Service which I am not qualified to join. (Human talent in the Singapore Civil Service is predominantly measured by academic achievement.)

Primary health care and medical costs are heavily subsidised to the point of being practically free. See Australia Healthcare Benefits where I have documented the details.

Old age support is also covered in the unfortunate scenario if you run out of private retirement funds. See Australia Centrelink Benefits where I have documented the details.

The option to retrain for a second career in mid-life also becomes available in Australia. Subsidised (as much as 75% discount versus international students) university education and interest-free loans are available for those who qualify. The government may even provide a cost-of-living subsidy for those pursuing a education in mid-life under certain circumstances.

In the employment marketplace, long hours of work (relative to Singapore) without overtime pay are not common. In addition, the existence of minimum wage legislation means that any healthy person not afraid of work will be able to etch out a subsistence living even without the benefit of an Australian education. A strong union - for many blue-collar professions - as well as the work culture does does not encourage a workaholic regime. (It is this same culture creates great inconveniences as a consumer due to the restricted business hours.)

There is high explicit income taxation as previously mentioned elsewhere in the blog. However as I am hardly a high-income earner, this will not have as much an impact on me. Am more than prepared to pay my fair share in Australia, as I have always done in Singapore.

An interesting observation surfaces from the monitoring of my expenses during my time in Sydney. My personal cost of living for Sydney is actually lower than Singapore when the category of luxury spending is excluded (for both cities). But the cost of living in Sydney skyrockets (comparatively) when all quality-of-life costs are included.

The implication is that at a subsistence level, Sydney would be cheaper than Singapore even after adjusting for foreign currency exchange. But Singapore is much cheaper to live in after you throw in the "fun money" category.

However this data point is not conclusive as there are too many differences between my lifestyle and spending patterns in Sydney versus Singapore. I do not have enough data to draw any conclusions for the Perth versus Singapore comparison. However it is very obvious that Perth is significantly cheaper than Sydney (before adjusting for differences in wage levels).


To conclude, these are my personal reasons - based on my individual circumstances, of my understanding of the labour situation and trends in Singapore, and focused on my specific skill sets and economic worth as determined by the Singapore marketplace.

Somebody else may run through the same exercise and will end up with completely different scenarios and totally different conclusions.

For this serf, the economic case is quite clear. In the immediate term (probably under 5 years), I would do better economically to stay in Singapore. In the long run, Australia wins on the economic front hands-down.


Anonymous Anonymous said...

You have managed to mentally and emotionally uproot yourself from Singapore, and one can't disagree with your economic rationale. One track bloody minded budaks, however, don't know how to handle the idea of [possibly permanently] detaching oneself from this region, even for the freedoms and opportunities in places like Australia. I will need to look at possibilities in neighbouring countries perhaps. - budak -

February 25, 2005 12:54 PM  
Anonymous Anonymous said...

Just a question, is there a place for anyone in this world who doesn't have expertise in anything? Even in Aus there are people whose specialty is in conducting hot air balloon tours. I was actually impressed by how people were so professional in what they do. I don't really think Singapore treats its citizens as economic units. Why not look at it from a different angle, we need to make singaporeans relevant to the external world, so we are encouraged to learn a skill. This way, even if we want to migrate, we would possess skills that can be used to get a good job in another country.

And as for the part about "specialisation is for insects", well if you want ur computer repaired, or u're going for an operation, would you want to go to someone who "kind of" knows what he's doing, but doesn't really know anything in detail and depth?

Your job doesn't have to be your life, you can pursue other pastimes in areas u're interested in.

February 25, 2005 2:40 PM  
Blogger ldsdtsunami said...

I particulary agree to your view that solutions are often valid under well-defined constraint.

Today,I was advised by my boss's boss that in order to solve a problem, you must not RUSH to the problem...appreciate the probem at as a bigger picture will give you a better solution.

I think a "buy-in" on the final decision can be achieved only and until we really can list the benefits/limitation.

But then again, is this a "risk-averse" behavior that is typical for an average Singapore when confronting issue.

Based on your final comment that in the long run, AU wins on the economic front hands-down, then I hope you will not feels that it is a "Sacrifice" over staying.

As sacrific is of giving up something for something of "lower value".

I asked for courage to all of us facing such decisions..stay or leave.

LDSD Tsunami

February 25, 2005 6:37 PM  
Blogger Calamity Man said...

firstly, your choice of a white background is hurting my eye.

2ndly, about your blog.

you're a very technical person. you actually take every point out and break them down into little pieces in order to justify your future decision.

i respect that.

if anyone was to ask me why, i wouldn't go that far to explain myself as i only want 3 words: quality of life.

February 25, 2005 9:05 PM  
Anonymous Anonymous said...

I have enjoyed the articles you've written in your blog very much. I felt that you really crystallized the thought processes for leaving Singapore "in a nutshell". You have written what I have exactly felt all these years.

The economic reasons for emigration were indeed very well presented and should be sufficient warning to those who "could" or "should" emigrate to do so now or regret late in life.

FYI, I've settled in Australia since last year and find that living here is extremely pleasant. The quality of life here is indeed very good.

I think you have made the right choice with your personal decision and also to publish this blog as a public service to Singaporeans.

March 01, 2005 2:18 PM  
Blogger KnightofPentacles said...

The deleted comment from ldsd tsunami of February 26, 2005 4:48 PM is the full contents of the SG Review article dated 20 March 2003 titled Singapore has World's Highest Immigration Rates.

Blog comment linked and deleted for housekeeping.

March 03, 2005 12:26 PM  
Blogger True Flight said...

I do think you generally present a very detailed, reasonable explanation of your views in this blog.

However, in this particular post, I felt that you glossed over the point about Australia's very high income tax rates.

You only wrote this:

"There is high explicit income taxation as previously mentioned elsewhere in the blog. However as I am hardly a high-income earner, this will not have as much an impact on me. Am more than prepared to pay my fair share in Australia, as I have always done in Singapore."

I wonder how carefully you've considered Australia's tax rates?

Of course I am no tax expert. But let's do some rough numbers.

Suppose in Singapore your assessable income is about S$50,000. Then suppose in Australia you do a similar kind of job, earn approximately the salary, and have around the same amount of assessable income - S$50,000 or AUD$38,460.

In Singapore, you would pay 2% on the first $7500; 5% on the next $12,500 and 8% on the rest of your $50,000. That works out to be

(0.02 x $7500) + (0.05 x $12,500) + 0.08 x (50000 - 7500 - 12500) =


In Australia, for assessable income of AUD$38,460, you would fall into the second tax tier, for which the rates are:

$6264 flat, plus 30 cents for each $1 over $21,600;

that is,

$6264 + 0.30 x ($38460 - $21600)
= AUD$11,322

In Singapore dollars, AUD11,322 would be around $14719.

In other words, for the same assessable income, you would pay in Australia more than 4.5 times the income tax you would pay in Singapore.

March 04, 2005 9:25 AM  
Blogger True Flight said...

Let's run some alternative figures and make you a significantly lower income-earner. We'll slash your SGD $50,000 assessable income by 50%, to $25,000, and run the scenario again.

In Singapore, you pay:

2% on the first $7500; 5% on the next $12,500 and 8% on the rest of your $25,000. That works out to be:

SGD 1175

In Australia, your assessable income of SGD25,000 transforms into AUD19,231. You're now taxed at the rate of 29 cents for every AUD dollar. You pay:

AUD 5577, or SGD 7250.

In other words, for earning the same amount of money, you pay six times more tax than you would in Singapore.

Note in Singapore that there is no capital gains tax. In Australia, there is. That is another significant component to worry about, especially if you actually invest your money. Which all sensible people should.

March 04, 2005 9:41 AM  
Blogger KnightofPentacles said...

Nobody would refute that Australia has higher explicit income taxation rates than Singapore. Dollar for dollar of declared income, you would always expect to pay more tax in Australia.

Having said that, three other factors must be considred to understand the overall economic picture.

* Lower cost of housing with wider options for housing. Lower cost of owning (leasing) and operating a car. I model the HDB/CPF scheme and the COE/ERP scheme as a form of implicit taxation. You may not agree with the model.

* Higher wage levels in Australia. Australia minimum wage is at A$12.30 an hour. Using standard hours, works out to A$24,370 a year. Minus under A$3,500 in tax at this level, leaves about A$1739 per month. Note that this is minimum wage. There is no minimum wage in Singapore. I am know of driven Singaporeans at the S$50,000 wage level making over A$100,000 after successful efforts to obtain local certications and work experience. However, this is mere anecdotal evidence and may not apply for everybody. In addition, the higher cost of living in cities like Sydney must also be considered.

* The Australia system offers significant benefits which are nonexistent in the Singapore system. See Australia Centrelink Benefits and Australia Healthcare Benefits.

Your point about CGT (capital gains tax) is a very important point for high-net-worth individuals seeking to relocate. Being a low-net-worth serf I do not to debate this point at length, beyond the coment that anybody successful enough to accumulate significant wealth is also most likely intelligent enough to exploit the options available in the tax code. More realistically, why would a high-net-worth individual still accumulating assets want to relocate to high-tax Australia for economic reasons?

I would agree totally with your implicit argument that Singapore is a much better place that Australia to accumulate wealth if you have skills currently in demand by the marketplace. By international standards, Singapore is indeed a tax haven.

March 04, 2005 8:28 PM  
Blogger True Flight said...

I suppose at best we can only make guesstimates, with a lot of room of error. But a couple of other points did pop into my head ...

Going back to the example of the person who can choose either to earn SGD50,000 in Singapore, or to earn AUD$38,460 in Australia.

If he chooses to stay in Singapore, he enjoys a tax savings of:

AUD11322 - SGD 3175,

which at current FX rates, is about SGD 11544.

You have pointed out that if he goes to Australia, he would enjoy abundant health benefits.

On the other hand, I kinda feel that if he stays in Singapore and enjoys SGD 11544 in tax savings, then if he uses even 40% of his tax savings to purchase, say, two well-selected health insurance policies -

well, together with Medishield, I think the average individual in Singapore would pretty much achieve the same health coverage as he would have, in Australia.

The other thing is that if you have any significant pre-existing medical condition, I suspect you would have difficulty getting into Australia anyway -

and if you don't have such a condition, and are generally young and healthy, well,

you're probably just funding your own "free" healthcare in Australia, through your income tax, for years and years,

before you actually get one of those catastrophic illnesses that land you in an Aussie hospital.

March 05, 2005 11:46 AM  
Anonymous Ken said...

The King's Indian, for many who chose to migrate, I think monetary concerns are least on their mind. You may have tons of money in Singapore, but no quality of life. You may be poor else where but enjoy your every second.

March 09, 2005 11:21 AM  
Blogger KnightofPentacles said...

Update to comment by ldsd tsunami found at:
Singasingapore - Singapore's Net Migration Rates dropping?

April 29, 2005 3:32 AM  
Anonymous tapunan said...

Seeing as how said blogger is unemployed for several months now and being offered only S$2000 by job agencies - you can look at this another way.
If he can find a job in Australia that pays higher than what he can get in Singapore then the tax difference will be insignificant. Add a possibility of a less stressful and happier lifestyle - income tax difference will not be an issue at all.
I've a lot of friends how moved from Singapore to Australia and they're completely happy.

May 24, 2005 5:44 PM  

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