17 Sep Wage and price divergence have financial, economic and social effects
This post is written as a brief comment to an article published on Today Online titled: Property cooling measures safeguard ‘well-being of Singaporeans’ amid economic crisis: Desmond Lee (16 September 2020).
“The property market must be viewed with an intergenerational lens. The surge in prices in the 1990s, then again in 2005 to 2008 resumed in 2010 and it took 7 rounds of cooling measures before ‘braking action’ took some effect.
Today, despite the worst recession in Singapore’s history, prices are still headed upwards. This is irrational and not entirely attributable to ‘pent up demand’. It also has to do with very low-interest rates and the psychology nurtured by the government that property as a measure of ‘net asset accumulation’ reflected progress.
However, wages and prices have diverged significantly in public and especially private markets. This is consequential.
Financially, it indentures Singaporeans to banks for their entire working lives.
Economically, it means that the purchasing power of every succeeding generation is less.
Sociologically, these effects make Singaporeans risk-averse in their careers.
Speculative action is far from ‘eradicated’. That prices may fall is a good, not a bad thing.
First of all, it would reduce the wage-price divergence.
Second, if it does so on an intergenerational trajectory it would restore purchasing power.
The government should not let a good crisis go to waste and stick to its guns. It may not get another chance to do so.”
– Devadas Krishnadas