$3,100 median income goal

Recently, at the recommendations dialogue for the Economic Strategies Committee, our dear Mr Tharman said this:

IN 10 YEARS' time, an economy with top-quality skills will boost the real median incomes of Singaporeans by 30 per cent from $2,400 to $3,100, Singapore will have more internationally competitive local companies and will be one of the most liveable cities in the world.

'We think we can raise incomes, raise the wage of the average worker, by one-third in the next 10 years. That means moving from a median wage of about $2,400 today to about $3,100 in 10 years time,' said Finance Minister Tharman Shanmugaratnam at a dialogue at Suntec City on Friday. Accounting for inflation, the figure is $3,800, he added.

With this goal spelled out, Mr Tharman provided the final piece of the puzzle for Singapore's economic direction in the next 10 years. Even before Mr Tharman verbalize the goal, I can already see some actions here and there that point towards that direction. The actions can be better appreciated if we have some understanding of basic economics.

To increase the real wage rate, we need higher skilled labor force. That can be achieved by either upgrading the whole labor force as a whole, or getting rid of the low skilled labor force and importing higher skilled labor force. But before we do that, we must have an economy that can make use of the higher skilled labor force.

That means we need to get rid of low value businesses, and increasing the number of high value businesses in Singapore.

I can see that Singapore government has started to introduce higher value businesses in Singapore since the financial crisis of 2008. You can see EDB starting to sponsor an increasing number of on-the-job training programs for higher value jobs in the recruit section of The Straits Times.

The government is also preparing the nation's labor force for higher value businesses. Courses that encourage citizens to upgrade their skills have started appearing since 2008. For example, if you enrol in the Financial Industry Competency Standards (FICS) program, you'll get 90% funding support from the government.

While all this is happening, inflation will still work in the background, presumably caused by demand-pull, due to low interest rate and growth of money supply that's faster than growth of real GDP. A 20% increase in price level over 10 years is expected. That works out to about 2% per year. Not an unreasonable estimate.

Well, Mr Tharman has done his homework before he speaks =)