Thursday, February 24, 2011
Among working men, the median wage in 2009 was about $37,000 annually. Toward the upper end of the distribution, the 90th percentile wage was $86,000 annually. Even for “blue collar”, the top 90% are earning more.
In terms of wages by educational bands, there is a clear widening of the gap between Bachelor degree holders and high school diploma. The CBO report provides some reasons for this divergence, namely:
- Changes in the demand for and supply of workers with different levels of skill.
- From the 1980s, people entering the workforce did not have significantly more education than those retiring and leaving the workforce.
Something I am particularly interested is the impact of foreign born labour, especially graduates. According to the CBO, many foreign-born workers have high levels of educational attainment: 31 percent hold at least a bachelor’s degree, just a little below the 35 percent of native-born workers who hold at least a bachelor’s degree. Having a greater number of highly educated workers has offset some of the upward pressure on wages in the upper part of the wage distribution.
The last statement from the CBO report is intriguing. What it is saying is that the foreign born workers prevent the difference between high school diploma and the graduates from increasing. This has the impact of reducing inequality. Conversely, the wages of graduates would have risen more if this modulation was absent.
If such dynamic applied to Singapore, the effect of foreigners who are graduates may well have the same effect, in modulating wage increase for the local graduates. This means that the “middle band” of society remains less unequal because graduates lack pricing power – graduates being held down. At the top end, the top 10% are getting relatively richer which probably accounts for the overall inequality increasing.
The winner is still the business sector. More on that another time.
* Dorling et al (2009) The global impact of income inequality on health by age: an observational study http://www.bmj.com/content/338/bmj.b829.full