Wong Chun Han -

Used under Creative Commons licence

Singapore should cut its focus on economic growth and measure its progress with socio-economic indicators apart from the gross domestic product, a nominated member of parliament said Monday.

“The changed circumstances today require a broader framework where policy makers have the benefit of being prompted by socio-economic indicators other than GDP,” Mr Viswa Sadasivan told lawmakers in a speech during Monday’s parliamentary sitting.

Alternative indicators measuring productivity, job satisfaction, household consumption, income distribution, welfare, quality of life and general well-being could be used.

The government could collect information on citizens’ “priorities” to formulate these indicators, then use the social and economic indices to analyse the effectiveness of its policies, he said.

“Economic growth and general well-being must be seen as equally important societal goals…the end goal of economic policies should be to benefit the citizens and improve their well-being and give happiness.”

“It is difficult, even for the best intentioned policy makers to develop this reflex, if the GDP remains the default indicator.”

GDP – the market value of all final goods and services officially made within a country in a year – is a measure of a country’s economic output.

It is not a measure for standard of living, but is often used as such on the thinking that citizens would gain from their country’s increased economic production.

But Mr Sadasivan questioned the viability of such use.

“Used on its own, [GDP] can be a misleading indicator of economic progress and welfare of the individual Singaporean.”

“Some of the socio-economic dysfunctions we see in Singapore have been exacerbated by a combination of a strong focus on GDP growth and the inherent limitations of and the skewing effects of the GDP figures,” he said.

He noted that the use of GDP masks the fact that many Singaporeans are not benefiting from the growing economic output, and also does not reflect the growing income gap.

For instance, profits account for 46 per cent of Singapore’s GDP – much higher than in other developed economies, he said, adding that half of this profit goes to foreign-owned companies with local operations, so Singaporeans do not benefit much from it.

Citing Singstat figures, Mr Sadasivan noted that Singaporean workers’ wages account for only 43 per cent of GDP, while in other developed countries wages take up more than 50 per cent, like in the US (58 per cent) and Japan (57 per cent).

Singapore is also one of the most unequal societies with a Gini coefficient of 48.10 (out of 100; the higher the number, the more unequal the income distribution), according to the CIA World Factbook.

Income inequality is greater here than in Asian countries like China, Malaysia and the Philippines, and is similar to that of many under-developed countries, Mr Sadasivan said.

Focusing solely on economic growth also generates social and ecological costs, such as poor work-life balance, high stress levels and low job satisfaction, he said, citing several studies.

For example, a 2007 Grant Thornton study said Singapore had the sixth most stressed population globally, while a 2009 Robert Half Singapore survey said Singaporeans had the second lowest job satisfaction level worldwide – only 53 per cent.

Another downside is the loss of “peripheral vision” in policy making, resulting in “short-sightedness that could lead to short-cut solutions,” he said.

“Take the policy of importing foreign workers in large numbers into Singapore.”

“Yes, our GDP has risen as a result of this policy – but it has, over the years, systematically depressed wages of lower-skilled workers, caused a surge in rental costs, and contributed to inflation.”

To keep policy makers focused on the importance of meeting social objectives, formal measures have to be created, Mr Sadasivan said.

“If we do not develop a formalised framework for analysis, these other indicators will continue to play second fiddle to GDP, instead of being considered together…with the same level of importance.”

He also stressed the importance of increasing the transparency of Singapore’s performance in the new social indicators – possibly via quarterly reports.

This will “provide greater clarity in policy formulation, resulting in policies and programmes that resonate better with the ground,” he said, adding that the government should not shy away from increased public questioning that is likely to result from greater transparency.

“This inconvenience must be seen as an investment in building trust between the government and the people, and evolving a more engaged society.”

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Related posts:

1. Paradigm shift in focus required – from economic growth to economic development
2. The fallacy of “growth at all costs” (part three)
3. Myths and misconceptions about pursuing high growth indefinitely
4. The PAP’s obsession with GDP growth (By Gerald Giam)
5. Labour Day: Economic growth should benefit all, not just the rich

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