2/14/2007

the poor rich middle class

'They often feel ignored and mercilessly squeezed.' Said Christie Loh. This is the strongest language ever appeared in a main stream paper. If she wrote this a few years ago, wonder what kind of reaction she will get. Christie is referring to the middle class group that have been left out of all the assistance by the govt and unable to find jobs. And also the sandwiched class, a group that earns between $2,990 and $7260. And they need help. My god, with this type of income they need help! How then do one expect those on govt aid to live with $230 or even $400? And their problem extends to not being able to find jobs or jobs that will pay them half of what they used to get. The PMET, Professional, Managers, Executive and Technicians, the fallen talents of our own citizens, cannot find jobs when unemployment is passe, when we have created so many jobs. What is wrong? Why are our talents not employable and we need to find more foreign talents to replace them? Old? 50 or 60 considered old? Leaders like LKY, Chok Tong and Boon Heng should conduct lectures to all the CEOs and HR Managers about the value of being old. Wisdom, experience, contacts, networks, are what age comes with. Oh they are untrainable? Why train them to do new stuff when they have acquired so much skills and experience in their profession? Can't they be recruited to do what they were doing before? Are those jobs extinct or taken over by younger foreign talents? And old cocks cannot learn new skills? Boon Heng should tell them what he is doing now. A completely new portfolio, to look after older workers, a silver industry. Was he in this field before? Definitely not. And it is new and he can do it. What the....

1 comment:

Matilah_Singapura said...

This is no surprise, so why all the fuss?

Look at the economic snapshot:

The working middle classes have always been the main staple of The State. They are the consumers, and the producers. Virtually none of them own private property in any significant amount such that they can live well just from the cash flow of their assets. Therefore everyone in the "middle-class" WORKS for a living.

A significant proportion of these people are nett consumers: i.e. they consume more than they produce, as evidenced by the debt they carry — car loan, house loan — that is about standard. After servicing the loans, they pay to live — kid's education, running their household, etc. So a fixed wage goes pretty darn quick.

These folks are producers too — in the sense that they trade their specialised labour services for money — wages. Therefore their "capital" is themselves, and most of the time only themselves.

If we contrast that to a rich individual — the rich individual has loads of passive income derived from the the productive allocation of his capital stock — land, buildings, capital equipment, successful businesses, income from intellectual property and so on.
[My definition of "rich" is being able to stop working for wages for at least a year, without making sacrifices in "lifestyle", and the value of the capital stock doesn't depreciate in the time choosing leisure over labour.]

Being both consumer and producer, and so busy and tired most of the time, make the middle class wage-slave ripe for the pickings by the government.

This is done by taxation on both consumption and production activities.

The government taxes:

1. Consumption — GST, "Sin" taxes, COEs, road usage etc.

2. Production: Income tax, company tax, payroll taxes, social security taxes (CPF)

So what's the big deal? Some may ask. The rich gets the same taxes applied to them.

Yes, but the rich don't (generally speaking) draw down on their capital stock, and they have the means to shield their assets and the revenues derived.

The economic reality is that the less wealthy you are, the more you will be affected by TAX, even if you are not directly taxed.

Consider this scenario: a socialist government applies a super tax on the rich and almost zero taxes on the less well off. (unlikely, but this is a hypothetical reality). Lets say the super tax was 70%.

What would happen would be that investment would dry up. Holders of capital will say: "If I back this venture, I could lose 100% of my contribution".

But say the investment performs. What's the point? I now lose 70% of my earnings, making it a lousy nett return. Considering the risk I'm exposed to (100% loss), it just isn't worth it.

Then, investment dries up and the owners of capital seek out opportunities which may be more worth their while. When local investment dries up, people lose their jobs, and don't have many alternatives (because investment drying up will be throughout the economy).