Cutting wages may not be the best way to save costs

Nov 08, 2012
 
ASK: NUS ECONOMISTS
 
By liu haoming for the straits times
 

Does a pay cut always reduce labour cost?

WHENEVER a firm faces financial difficulties, reducing labour cost is always one of the most frequently considered options. But does it always serve the purpose?

If an employer cares only about the amount of money paid to his employees, then the answer is obviously "yes". However, the answer is less straightforward if he cares about unit cost - or the cost of producing one unit of output.

The difference is largely because a salary cut generally has a negative effect on an employee's work effort. The essential question here is whether the cost savings accrued from a reduction in salary is large enough to compensate for the reduction in labour productivity.

Let's use a specific example. Consider a computer store that hires only one worker, Peter, and pays him a monthly salary of $2,700. He is happy with his current pay. On average, he sells 100 computers a month. The labour cost for each computer is $27.

Seeing that the business of selling computers is highly profitable, a rival firm opens a new store nearby. As a result of the increased competition, Peter can sell only 90 computers a month. The labour cost of selling one computer has increased to $30. As such, can Peter's boss benefit from cutting his monthly salary to $2,430 (90 computers multiplied by $27)?

If Peter can still sell 90 computers a month after the salary cut, then the cost of selling one computer will be reduced to its previous level of $27.

However, if Peter is unhappy about the salary cut, he will be less enthusiastic about his job. As a result, he might be able to sell only 60 computers a month. In this case, a salary cut actually increases the labour cost of selling one computer from $30 to $40.50.

To make things worse, an unhappy Peter might quit his job, and the salary cut makes his job search easier. This is because finding a job that pays more than $2,430 a month is much easier than finding one that pays more than $2,700. To fill the vacancy, his boss will have to spend extra time and money to look for a replacement.

For firms with many employees, a salary cut also puts them at the risk of losing their most productive employees, a phenomenon called "negative selection" in economics. This is because the most productive employees also have the best options waiting for them outside the firm.

Using salary cuts as a cost-saving device also hurts a firm's reputation, particularly in the information age, when bad news can spread quickly. Nobody wants to work for firms that tend to cut their employees' salaries. Therefore, firms with a bad reputation generally have to pay higher salaries than their competitors as and when they need to hire again.

In economics, "efficiency wage" theories analyse the impact of wages on labour productivity. While the theory sounds reasonable on paper, one might wonder whether it applies in the real world.

A textbook example of the efficiency wage theory can be found in the early success story of the Ford Motor Company.

In 1914, the Ford Motor Company reduced the length of its workday from nine to eight hours, and more than doubled the wage from US$2.34 to US$5 a day.

As a result of these changes, the turnover rate dropped from 370 per cent in 1913 to 16 per cent in 1915, the absenteeism rate fell to 2.5 per cent, productivity per worker increased between 40 per cent and 70 per cent, and profits rose by about 20 per cent.

[This may be an argument for minimum wages. Unless a statutory requirement for minimum wages nullifies the effect?]

In addition to increasing worker productivity and reducing labour turnover, paying a higher wage may also reduce a firm's monitoring cost.

It is not rare to see a manager monitoring two or three workers at the workplace. If these workers are paid higher salaries, extensive monitoring might become unnecessary.

This is because the higher the salaries, the higher the cost of losing their jobs. As long as workers know they might be caught and fired for shirking work, the higher pay could potentially prevent them from doing so. Consequently, salaries and the need for monitoring are negatively correlated. The savings from reduced monitoring could potentially exceed the increase in workers' salaries.

Moreover, since most people dislike being constantly monitored, a reduction in monitoring could have a direct positive effect on workers' productivity as well.

So when your business faces unusually strong headwinds in the future, rushing to cut your employees' salaries might not be the most effective way to save the boat. It might make more sense to raise them instead.

The writer is an associate professor of economics at the National University of Singapore.

Voting for hope and change: Part 2

Nov 08, 2012
 
U.S. PRESIDENTIAL ELECTION
 
By Thomas L. Friedman
 

IN OCTOBER 2010, Senator Mitch McConnell, the Republican leader, famously told The National Journal: "The single most important thing we want to achieve is for President Barack Obama to be a one-term president." And that's how he and his party acted.

Well, Mitch, how's that workin' out for ya? No one can know for sure what complex emotional chemistry tipped this election Mr Obama's way, but here's my guess: In the end, it came down to a majority of Americans believing that whatever his faults, Mr Obama was trying his hardest to fix what ails the country and that he had to do it with a Republican Party that, in its gut, did not want to meet him halfway but wanted him to fail - so that it could swoop in and pick up the pieces.

To this day, I find Mr McConnell's declaration appalling. Consider all the problems we have faced in this country over the last four years - from debt to adapting to globalisation to unemployment to the challenges of climate change to terrorism - and then roll over that statement: "The single most important thing we want to achieve is for President Barack Obama to be a one-term president."

That, in my view, is what made the difference. The GOP lost an election that, given the state of the economy, it should have won because of an excess of McConnell-like cynicism, a shortage of new ideas and an abundance of really bad ideas - about immigration, about climate, about how jobs are created and about abortion and other social issues.

It seems that many Americans went to the polls without much enthusiasm for either candidate, but, nevertheless, with a clear idea of whom they preferred. The majority seemed to be saying to Mr Obama: "You didn't get it all right the first time, but we're going to give you a second chance."

In a way, they voted for "hope and change" again. I don't think it was so much a ratification of health care or "Race to the Top" or any other Obama initiative. It was more a vote on his character: "We think you're trying. Now try even harder. Learn from your mistakes. Reach out to the other side, even if they slap away your hand, and focus like a laser on the economy, so those of us who voted for you today without much enthusiasm can feel good about this vote."

And that is why Mr Obama's victory is so devastating for the GOP. A country with nearly 8 per cent unemployment preferred to give the President a second chance rather than Mr Mitt Romney a first one. The Republican Party needs to have a real heart-to-heart talk with itself.

The GOP has lost two presidential elections in a row because it forced its candidate to run so far to the loony right to get through the primaries, dominated by its ultra-conservative base, that he could not get close enough back to the centre to carry the national election.

It is not enough for Republicans to tell their Democratic colleagues in private - as some do: "I wish I could help you, but our base is crazy." They need to have their own reformation.

The centre-right has got to have it out with the far-right, or it is going to be a minority party for a long time.

Many in the next generation of America know climate change is real, and they want to see something done to mitigate it. Many in the next generation of America will be of Hispanic origin and insist on humane immigration reform that gives a practical legal pathway to citizenship for illegal immigrants.

The next generation is going to need immigration of high-IQ risk-takers from India, China and Latin America if the United States is going to remain at the cutting edge of the information technology revolution and be able to afford the government we want.

Many in the next generation of America see gays and lesbians in their families, workplaces and Army barracks, and they don't want to deny them the marriage rights held by others. The GOP today is at war with too many in the next generation of America on all of these issues.

All that said, my prediction is that the biggest domestic issue in the next four years will be how we respond to changes in technology, globalisation and markets that have, in a very short space of time, made the decent-wage, middle-skilled job - the backbone of the middle class - increasingly obsolete. The only decent-wage jobs will be high- skilled ones.

The answer to that challenge will require a new level of political imagination - a combination of educational reforms and unprecedented collaboration between business, universities and government to change how workers are trained and empowered to keep learning.

It will require tax reforms and immigration reforms. America today desperately needs a centre- right GOP offering merit-based, market-based approaches to all these issues - and a willingness to meet the other side halfway.

The country is starved for practical, bipartisan cooperation, and it will reward politicians who deliver it and punish those who don't.

The votes have been counted. Mr Obama now needs to get to work to justify the second chance the country has given him, and the Republicans need to get to work understanding why that happened.

NEW YORK TIMES

Cleanest fight in US history

Nov 07, 2012
 
By noah feldman
 

NOW that the candidates have left the hustings (whatever those are) behind, it can be said: This was the cleanest presidential campaign in recent memory, perhaps in American history.

Before you get exercised about Mr Mitt Romney's sketchy tax maths or President Barack Obama's attacks on Bain Capital Partners, take a deep breath and look at the evidence.

If Americans step outside their preferences for their own candidate, they will see a good, clean, hard fight - one focused overwhelmingly on the issues and informed by the fundamentally decent competitive impulses of the candidates. Both wanted very much to win, but neither was willing to ride dirty to get there.

Start with character. For the first time in decades, no candidate insinuated or allowed his supporters to insinuate that the other candidate was fundamentally fraudulent. There was no swiftboating and, other than mogul Donald Trump and a handful of other attention-seekers and fringe conspiracy-mongers, there were no "birthers" darkly hinting that one candidate was Manchurian.

Yes, Mr Obama pointed to Mr Romney's flip-flopping and suggested he had no core principles, but that was very different from alleging that Mr Romney had concocted his past out of whole cloth. Some pro-Romney ads depicted Mr Obama as a self-loving celebrity, but this was a legitimate line of attack against a president who received the Nobel Peace Prize just for showing up.

Then there's religion. Remember that issue? It's not only that neither candidate insisted God was on his side and his side only, in the way former president George W. Bush managed to suggest in two different elections. No, this was a race between the two most religiously outre candidates in United States history, offering nearly infinite opportunity for a faith war. Yet it never came.

Four years ago, commentators (myself included) wondered seriously whether the public would ever accept a Mormon president. Yet the Obama campaign did not emit even the most subtle hints about Mormonism's polygamist past or its outlying present beliefs and practices.

When was the last time you heard somebody talking about Mormon garments, an irrelevant topic that nonetheless came up repeatedly in the 2008 primaries? Nor was there any attempt to invoke the (non-canonical) White Horse Prophecy associated with Joseph Smith, which predicted that the US Constitution would someday be saved by a heroic "white horse" associated with the Church of Jesus Christ of Latter-day Saints.

Mr Romney deserves equal credit for saying exactly nothing about Mr Obama's former pastor Jeremiah Wright, an intellectual inheritor of black liberation theology.

Mr Romney also distanced himself from even subtle implications about President Barack Hussein Obama's Muslim family background or his childhood in Indonesia. He refused to tap into growing anti-Muslim sentiment in the heartland that can be seen in proposals for preposterous anti-sya-riah laws in several states.

A cynic could plausibly claim that religion was a potentially radioactive topic for both candidates, dismissing their discretion as nothing more than self-preservation. I don't buy it: Each side could reasonably have calculated that it had more to gain from subtle religious aspersions than it had to lose.

A much more probable explanation is that Mr Romney and Mr Obama, both buffeted in the past by illegitimate religious sentiments, were genuinely unwilling to use bigotry as a weapon. Besides, the combination of self-interest and principle is the base on which religious tolerance was built in the West. It is to be admired, not disparaged.

What about the White House's insistence that Mr Romney was lying about the President's record, or Mr Romney's displeasure that Mr Obama attributed to him the private sorrows of individuals who lost their jobs after Bain Capital acquired their employers?

The short answer is that such distortions are part of the altogether permissible political game of dramatic overstatement and policy imprecision.

Sure, Mr Romney wasn't exactly telling the truth when he accused Mr Obama of "apologising" to the world.

But it was true that Mr Obama came to office with the express strategy of reassuring America's allies that he wasn't MrBush, and that the swashbuckling, "time of our choosing" nightmare of foreign policy disasters was over. Any democratically elected politician in any country on Earth would be inclined to characterise this stance as "apologetic" to win votes.

A pro-Obama ad (not produced by the campaign) that told a heartbreaking story of a woman's fatal cancer after her husband lost his job in a Bain Capital firing was also not, strictly speaking, true. (It turned out that five years had elapsed, and that she had her own health insurance from a separate job until that job disappeared.) But the point of the ad was to suggest that a man who got rich acquiring firms and resizing them for resale was unlikely to feel sympathy for those who became unemployed as a result.

Show me a politician who would not take this approach against a private-equity millionaire, and I will show you a person who couldn't win an election for dog-catcher.

People in finance and private equity may feel offended by the ad, but that is because they aren't running for anything.

In the 1800 presidential election, John Adams' supporters said that Thomas Jefferson was an atheist who was having an affair with his slave, Sally Hemings. Of course, both of these charges were more or less true.

But that isn't the point: Mudslinging of the personal, character-assassination type is a long- standing and persistent feature of our electoral politics.

This time around, however, two basically decent men took the high road.

In this highly polarised, highly partisan moment in our political history, Americans should allow ourselves a moment to appreciate just how impressive this really was.

Well done, candidates. May the best man win.

The writer is a law professor at Harvard University and the author of Scorpions: The Battles And Triumphs Of FDR's Great Supreme Court Justices.

BLOOMBERG

[Interesting and heartening perspective.]

TIGHTENING FOREIGN LABOUR INFLOWS

Nov 03, 2012
 
Have we gone too far?

How big a price is Singapore paying for tightening the tap on foreign manpower? Insight reports on economic growth forgone, jobs lost and the potential outflow of business and investments.
 
By Robin Chan & Janice Heng
 

WHEN a North American company thought of starting an operation in Asia this year, Singapore was one of its top choices.

After being wooed by the Economic Development Board (EDB), it plumped for Singapore early this year.

To its horror, the Ministry of Manpower (MOM) rejected its application to bring in seven foreign executives on high-skilled Employment Passes (EPs).

It was only after the EDB stepped in and talked to the MOM that the company finally secured those seven passes.

For foreign firms which come to Singapore expecting a smooth run, such hiccups can come as a surprise.

After all, the city state ranks at the top for ease of doing business on various surveys. It is also consistently ranked as one of the most competitive economies in the world with easy access to labour.

But that story of one company's brush with a tighter foreign manpower regime - in place since 2009 - was one Mr Shanker Iyer shared, to illustrate the growing fears among foreign companies and even the larger multinational corporations (MNCs) about the policy's impact on their ability to plan ahead.

Mr Iyer is chairman of the Singapore International Chamber of Commerce (SICC), which represents more than 700 global companies based here. He says that as Singapore continues to tighten the tap on foreign workers, some firms are starting to think more carefully about what investments they want to sink here.

"MNCs with heavy investments look long-term. But with the changes in foreign worker policy, they are concerned with how exactly to look ahead," he says.

Since the start of the tighter regime in 2009, small and medium- sized enterprises (SMEs) have been loudest in their protests.

They have complained of rising costs and the difficulty in finding local workers to do low-skilled or service jobs.

But at an SME convention last week, Mr Phillip Overmyer, the chief executive of the SICC, upped the ante for Singapore by warning that even MNCs may have to invest elsewhere if the tightening continues with no end in sight.

The process of tightening was always going to be a painful one, hence the Government's emphasis on careful calibration.

But as the effect of manpower woes ripples across the economy, it is timely to ask how much more Singapore can afford to tighten the tap on foreigner inflows. And are the benefits of this policy commensurate with the costs in terms of lost competitiveness and economic growth?

Losing SMEs will be painful, as jobs and livelihoods are on the line, but the impact will be doubly hard, and perhaps irreparable, if a big, global firm decides to quit Singapore.

Looking elsewhere?

THE Government has reassured businesses that the foreign labour tap will not be turned off.

Yet it has also repeatedly said there will be "no U-turn" in its efforts to slow foreign labour growth. The aim is to spur companies to invest in raising productivity so that wages and economic growth can go up in a sustainable way.

The MNCs say their beef is not with these new stricter limits on foreign worker inflows, but the way in which the change in direction has been carried out. It has struck them as being piecemeal and unpredictable since its start three years ago.

The foreign workforce supply has been tightened in phases since mid-2009. Foreign worker levies have been raised and the criteria for S Passes and EPs made stricter.

Dependency ratio ceilings, or how many foreigners a company can hire for each local worker, have also been lowered across both manufacturing and services.

But still more measures have been added and have yet to kick in. This year, the income level for expatriates who want to bring in their dependants was raised from a monthly income of $2,800 to $4,000.

And in a recent interview with The Straits Times, Acting Manpower Minister Tan Chuan-Jin said that more measures to further limit the growth of S Pass holders here are in the works.

Says SICC's Mr Overmyer: "There is no clarity in the process of tightening. So an MNC will ask itself: Can I afford to set up this operation here, and then find out later that it doesn't work because I cannot get the people? These are issues that companies are looking at."

Cheap foreign labour aside, most of the impact seems to be at the level of middle-income foreign workers, who fall in the SPass or lower-level EP categories.

S Passes, for mid-level jobs such as technicians, are restricted to 20 per cent of a company's workforce. And a young graduate has to make at least $3,000 a month to qualify for an EP.

Recruitment firms say it is getting harder for foreign fresh graduates to secure employment here as a result. The change has also hit some senior hires at lower salary levels.

Mr Pan Zaixian, general manager at Singapore-based HR firm Kerry Consulting, says: "For junior roles, or salary-sensitive roles where the income is near the qualification limit for the work pass, there is no guarantee that they can get the pass."

The concerns are already forcing some companies to move operations out, such as those in manufacturing or research and development.

Smaller local and foreign firms have been some of the first to move. They are relocating, in some cases, to the Iskandar region in Johor, where land costs are significantly lower and there are no quotas on foreign workers.

They can operate from there and yet be close enough to their home bases in Singapore. A recent study by the Association of Small and Medium Enterprises found that almost 30 per cent are thinking of relocating due to the labour crunch.

Could MNCs soon follow suit?

Mr Manoj Vohra, director for Asia-Pacific at the Economist Intelligence Unit, warns that stricter limits on foreign manpower may cost Singapore its competitive advantage over its neighbours. "Singapore will have a lot of competition from other investment centres in the region, and so if it gives away its edge, then it raises questions over its long- term competitiveness," he says.

He believes that some MNCs may have slowed their growth here, or had their investments in new sectors impeded because of the policy tightening.

Dr Chua Hak Bin, economist at Bank of America Merrill Lynch, says: "The fear is that this could also lead to more knowledge- based, capital-intensive companies - which actually bring in good jobs for Singaporeans - choosing to set up shop, invest, and make large commitments elsewhere, if Singapore's foreign labour policy is not clear."

Among Singapore's rivals are Hong Kong, which also wants to be a hub for financial services and regional HQ offices, and the emerging Iskandar region, which has an abundance of cheap land for manufacturing and heavy industry.

Mr Iyer, who was at a recent dinner with representatives from Hong Kong, says they are eager to pounce on companies that no longer have the patience to wait out the uncertainty in Singapore.

"Hong Kong has zero issues with this. They told me it is to their benefit that this is happening," he says.

Mr Keith Martin, chief executive of Global Capital and Development, which is developing Iskandar's Medini business district, says the region can be a complementary, cost-effective solution for many MNCs and SMEs in Singapore.

He says: "Quite simply, Singapore cannot fully realise its growth targets without more affordable business space in close proximity."

MNCs, by virtue of their global nature, have the ability to move their operations to the most competitively advantageous countries.

And if MNCs leave Singapore or move their operations elsewhere, the consequences will not be confined to their direct employees. MNCs employ less than a third of Singapore's workforce. But they are important clients for many local SMEs, which not only provide jobs to many locals, but also generate half of gross domestic product (GDP).

A toll on growth

LAST week, Dr Chua issued a report that said Singapore's tight foreign labour policy could cost the economy 1.3 percentage points of growth this year.

By his calculations, if firms could hire all the workers they wanted, job growth would be 150,800 this year, up from an estimated 115,000.

This would add $4.2 billion to GDP. Growth would hit 3 per cent, rather than the 1.7 per cent average of the first three quarters. Another $1.1 billion in taxes would be collected - which could mean more for social spending.

Dr Chua says of his estimates: "It was intended to show that the policies do have real negative consequences which may outweigh the marginal benefits."

Coming at a time when Singapore is flirting with a recession and struggling to contain rising costs, he believes that the Government can afford to be more flexible in its tightening of foreign manpower.

But other economists believe Dr Chua may have over-estimated the impact. They are more sanguine, with Dr Tan Khay Boon, senior lecturer at SIM Global Education, saying "the current trade- off is a short-run situation".

"Labour productivity needs a long time to grow as workers need to be trained, technology takes time to be acquired and incorporated in the production process," he says.

If anything, a tight foreign labour policy is necessary to raise productivity - by incentivising companies to "move up the value chain", says Credit Suisse economist Michael Wan.

Their view is that growth lost now due to insufficient manpower may be a necessary sacrifice for productivity-driven growth in the future.

Government ministers have also moved to temper job growth expectations, with labour chief Lim Swee Say warning this week that "the days of strong job growth of 80,000, 100,000, 120,000 a year are not going to happen too often in the future", and more moderate job growth of 65,000 to 75,000 a year should be expected in the future.

Still, most experts doubt that a mass exodus of firms from Singapore is on the horizon. In the short term, the choices for MNCs that want to be in Asia are still fairly limited, they said.

"I don't think we necessarily need to be overly concerned," says Credit Suisse's Mr Wan. "Singapore is still pretty attractive as a hub."

Barclays economist Leong Wai Ho thinks the probability of MNC flight "is low at this stage, although it is rising" due to other issues such as rising business costs. "Many firms base themselves in Singapore for reasons other than costs - for good security, good connectivity, intellectual property rights protection and for the spectrum of skills available here. For this group, the probability of moving will be low," he adds.

American software company Red Hat says its strategy will remain the same in Singapore, where it has had its Asia-Pacific regional headquarters since 2000.

Mr Damien Wong, general manager for Asean at Red Hat, says: "There are reasons that we have put our regional HQ in Singapore. Those factors haven't changed. The fact is that the infrastructure is solid, things generally work well, and there is a stable environment. Those are still factors that hold true."

But he adds: "We won't rule out possibilities. We are still considering how the environment is changing and what suits the company best."

Asked whether the EDB was concerned Singapore would lose competitiveness and foreign investments, its assistant managing director Alvin Tan says the agency has received feedback from companies on the tight manpower situation and is monitoring it closely, but that "companies will have to make adjustments in the way they operate and manage their manpower pool".

"The Government's tightening of foreign worker controls since 2009 is a deliberate and planned approach towards steering the Singapore economy towards higher productivity-driven growth. Singapore still needs to rely on a complementary foreign workforce, but will continue to raise standards in terms of skills and quality," he says.

"Singapore continues to remain attractive to investors due to its strong economic fundamentals including a stable business environment and good connectivity to other markets in the region and around the world. We remain confident that companies with an active interest in tapping the growth of the pan-Asian market will continue to put Singapore on their radar screen."

Still, that Singapore can continue to maintain its competitiveness in the next decade and beyond is not a given, which is why it is imperative to raise productivity.

Dr Pasha Mahmood, a professor of strategy and Asian business at the Swiss IMD Business School, which publishes the yearly competitiveness rankings of economies, says that the only way forward is for Singapore to keep tightening its foreign workforce and to raise productivity.

But what if MNCs want to leave in the meantime?

What Singapore can do to stay attractive, he says, is to "keep the tax rates low, have good infrastructure, and educate people and equip them with the right skills to stay competitive".

As for how this may affect Singapore's standing in the rankings, he says that the annual report looks at more than 300 indicators of competitiveness, so foreign labour is unlikely to change the overall picture very much.

Mr Overmyer says what companies need is predictability.

"There needs to be a structure in place, so that companies know what is going to happen two or three years from now, or more," he says, adding: "Right now, EDB can't commit to anything."

He thinks more clarity may result from better coordination between the different government agencies and ministries.

But there may be a limit to how exact the Government can be, since it needs to take in political, social and economic factors in a situation that is fluid.

Mr Vohra says: "How do you balance the demands of the local population with growth and competitiveness? That is the tricky question. If a bunch of economists was making all these decisions, then it would be easy. But the political climate and a whole host of other factors have to be taken into account."

Says Dr Mahmood: "How high the foreign worker levies are may not even matter to businesses in the future because the make-up of industries will have changed and they no longer need those workers."

It would therefore be unwise for the Government to commit to a specific number or proportion, they argue.

For companies, their best bet may be to trust that the end goal of a restructured, highly productive and competitive economy will be worth the present muddling through.

Florida Early Voting Fiasco: Voters Wait For Hours At Polls As Rick Scott Refuses To Budge

11/04/2012

Florida Early Voting
Huffpost

Florida Gov. Rick Scott (R) has refused to extend the state's early voting hours, despite long lines at the polls.

WASHINGTON -- Once again, Florida and its problems at the polls are at the center of an election.

Early voting is supposed to make it easier for people to carry out their constitutional right. Tuesdays are notoriously inconvenient to take off work, so many states have given voters the option of turning out on weekends or other weekdays in the run-up to Election Day.

But in Florida this year, it has been a nightmare for voters, who have faced record wait times, long lines in the sun and a Republican governor, Rick Scott, who has refused to budge and extend early voting hours.

"People are getting out to vote. That's what's very good," said Scott.

People are getting out to vote -- but many of them are having to wait in line for three or four hours to do so. One contributor to DailyKos claimed it took 9 hours to vote. In Miami-Dade on Saturday, people who had gotten in line by 7:00 p.m. were allowed to vote; the last person wasn't checked in until 1 a.m., meaning it took some individuals six hours to cast a ballot.

"We're looking at an election meltdown that is eerily similar to 2000, minus the hanging chads," said Dan Smith, a political science professor at the University of Florida.

Miami-Dade attempted to deal with the problem on Sunday by allowing voters to cast absentee ballots in person between 1:00 and 5:00 p.m. However, after just two hours, the Miami-Dade elections department shut down the location after too many people showed up. People outside the locked doors were reportedly screaming, "We want to vote!"

"They didn't have the infrastructure," filmmaker Lucas Leyva, who was among those turned away, told The Huffington Post's Janie Campbell. "We read the press release and everything that went out this morning, promising we'd be able to get absentee ballots and vote. We got here and there was a line of hundreds of people all being told the same thing, that that wasn't true anymore. You could drop off [a ballot], but they could not issue one."

And if getting turned away from the polls weren't enough of an indignity, some of those 180 people ended up getting their cars towed from the parking lot across the street, according to a Miami Herald reporter.

On Twitter, former Republican governor Charlie Crist -- who is now an independent -- responded to news of the office's closing, writing on Twitter, "Let the people vote!"

“We had the best of intentions to provide this service today,” said department spokeswoman Christina White. “We just can’t accommodate it to the degree that we would like to.”

About 30 minutes later, a Miami Herald reporter tweeted that the Miami-Dade location was reopening its doors.

Palm Beach, Pinellas, Orange, Leon and Hillsborough Counties also opened up in-person absentee voting on Sunday.

President Barack Obama's campaign and some of its supporters were attempting to keep people's spirits up -- and discourage them from abandoning the lines -- by bringing in food, water and even local musicians and DJs as entertainment.

North Miami Mayor Andre Pierre brought 400 slices of pizza to voters in line at 10:30 p.m. on Saturday night at the city's public library, according to an Obama official.

While many Democrats viewed it as a victory when a few offices opened absentee balloting on Sunday, the process is not the same as early voting -- and could result in more individuals not having their votes counted.

"Absentee ballots have a much higher rejection rate for minorities and young people, if you look at the Aug. 14 primary," said Smith.

A major reason there are so many problems at the polls is that last year, Florida's GOP-controlled legislature shortened the number of early voting days from 14 to eight, meaning all early voters are trying to cast their ballots in a shorter window. Previously, Floridians were allowed to vote on the Sunday before Election Day -- a day that typically had high traffic.

But losing that final Sunday isn't the only problem. Smith said that he and Dartmouth professor Michael Herron found that in 2008, voters 65 or older were much more likely to cast ballots in the first five days of early voting than members of other age groups, alleviating some of the pressure at the polls in the remaining days. Those extra days, however, are gone this year, leading to a compression that the system has been unable to handle.

Scott has refused to extend early voting hours, essentially arguing that there is no problem, despite calls from Democrats, independent groups and even a Republican elections supervisor. He is arguing that he can extend early voting hours only when there is a true emergency -- like a natural disaster -- that warrants it.

"I'm focused on making sure that we have fair, honest elections," said Scott. "One thing to know, these early voting days and on Election Day, if you're there by the time the polls close, you get to vote."

Scott has some of the lowest approval ratings of any governor in the nation. In recent Quinnipiac poll, just 39 percent of Floridians said they approved of the job he is doing. Scott, unlike many other GOP governors, has not hit the campaign trail much on behalf of Mitt Romney.

As Florida Democrats have pointed out, the state's previous two Republican governors -- Jeb Bush and Crist -- both extended the hours. A spokesman for Bush didn't return a request for comment.

A judge extended the hours in Orange County after the state Democratic Party sued for more time. The location was closed for several hours on Saturday when everyone was evacuated due to a suspicious package.

Democrats are traditionally more likely to vote early, which is why many in the party have ascribed political motives to Scott's restriction of the process. According to a report in the Miami Herald on Saturday, Democrats were leading Republicans "by about 187,000 early in-person ballots cast" as of that morning.

On Election Day, there will be fewer polling precincts this year than in 2008 -- due to redistricting and budget constraints -- meaning traffic on Tuesday could also be a problem.

Florida is expected to be tight in this election. According to HuffPost Pollster's average of polls in the race, Romney is now leading Obama in the state by less than one percentage point.

Avoid feast and famine in housing

Nov 04, 2012

Better to have stable supply of new homes every year than try to predict property cycle
 
By Han Fook Kwang
 

When I bought my first property, I didn't know I would still be living in it 27 years later. I had bought it soon after getting married after a year of house-hunting.

I don't remember it as being an eventful year for property then and I don't recall being particularly anxious about whether we were buying it at the right time in the property cycle. We needed a place to call home, we liked what we found and the price was within our budget.

As it turned out, it was not a bad buy. The house has appreciated in value about 10 times since, which works out to an increase of about 9 per cent every year compounded over 27 years. I can't think of anything I have bought or owned which has risen as much in value or as rapidly.

As an individual, this must count as a good thing and a source of some satisfaction. In fact, my experience is not untypical of many in my generation and I would think those who bought around the time I did would have seen similar appreciation in values, some more, others perhaps less, depending on location.

Singaporeans have generally felt good about how property prices have moved over the years, barring the occasional dips in every economic cycle.

Until quite recently, that is.

There has been a discernible shift in public attitude towards ever-rising property prices over the last few years and it is important to understand why this is taking place and what can be done about it.

For a flavour of the negative views being expressed, here is a recent sampling from the Internet:

• Low property prices favour citizens as they help everyone have a roof over their head. High property prices favour only developers and rich people as they can make super normal profits and collect rent instead of working hard and creating value.
• The Australian government takes care of citizens and imposes strict restrictions on property purchases by foreigners, for example, when they leave, they have to sell, when they sell, they have to sell only to locals, etc. Why doesn't the Singapore Government take effective steps and also contribute to raising property prices?
• The property owners of today are only raiding the future earnings of the next generation. How? Well, all these gains in property prices must come from somewhere. It will come mostly from the next generation. But this will net the wealthy much more as they own many more and higher-value properties.

These online comments are in response to recent news that some executive condominium units had been sold for more than $1 million. As with many Net postings, they are often not logically argued and are laced with an extra dose of negativism. But the sentiments they represent are real and shared by an increasing number of people here.

Indeed, rising property prices were an issue at the general election last year. In response, the Government introduced several measures, mostly increasing the supply in both the public and private housing markets.

Prices, however, have yet to come down.

According to the latest data reported last week, private home prices rose by 0.6 per cent in the third quarter, while the Housing Board resale price index climbed 1.3 per cent.

This public sourness over property prices is a relatively recent phenomenon given the history of rising prices here, which has been generally welcomed by the public.

It shows there is a point beyond which resentment sets in, even if the majority see the value of their homes going up.

They worry whether their children will be able to afford these prices in the future, and whether they themselves will be able to upgrade.

Worse, they perceive it as largely favouring one class of people over another.

It used to be said that property prices cannot rise by too much, otherwise who would be able to afford them? In other words, prices cannot run too far ahead of income levels.

This link between prices and incomes is, however, broken when the market is open to foreigners whose salaries have no connection to those of Singaporeans.

When rich Chinese, Indians, Indonesians and Malaysians account for a significant number of the purchases here, prices can run away from the local population's ability to pay.

The Government's recent measure to make it more expensive for foreigners to buy property through the additional stamp duty was aimed at cooling the market.

But the Government has never made clear if this will be a permanent feature of its policy on foreign purchases and the extent it will allow them to influence prices.

There is clearly a tension between wanting Singapore to be a global city attractive to foreigners (which includes how open it is to them buying homes here), and preserving the link between home prices and Singaporeans' income levels.

Getting this balance right is critical to having a successful property policy which is politically acceptable.

How much should the Government protect local buyers from the purchasing power of foreigners?

This is an especially important issue with so much surplus money flowing round the world after so many rounds of loose monetary policies, with central banks printing money to stimulate their domestic economies.

Should Singapore go the way of Australia, for example, and force foreigners to sell property back only to citizens?

[So foreigners can buy property but they can only sell back to locals, so when they make an offer, they have to take into account the constraints of the local demand. So if they are here for the short term, they would rent. Only if they are here for the long term should they buy, and even then there is the chance that they would lose on the buy and sell. It would in fact curb speculation. This should be more targeted and be limited to HDB, HUDC, EC, and DBSS flats.]

One word of caution though about the Government's ability to get the property market right. Its track record of trying to match supply to demand has in fact been patchy.

In the early 2000s, it was saddled with a record surplus of 25,000 unsold HDB flats when it overbuilt and demand collapsed following the Asian financial crisis in 1997.

[This is a bigger problem than just having too many flats. Depreciation, and need to maintain "ghost towns" were not happy problems to have. When the flats were finally sold, the lease was considerably shorter than 99-years.]

And the sizzling market of the last two to three years in both the public and private sectors was clearly the result of it underestimating demand, which rebounded after the slump of the 2008 financial crisis.

Governments, and not just in Singapore, are often behind the curve when trying to read the market.

This being the case, the better approach is to aim for a stable supply of new homes every year and to not try to predict too closely the ups and downs of the property cycle.

There is a steady underlying demand for homes from new households being formed every year, and even when it falls because of an economic downturn, the pent-up demand will likely return in subsequent years.

Better to aim for a predictable and transparent policy on how many homes to build so as to avoid a feast-and-famine situation.

Fortunately, public housing is available for the large majority of Singaporeans in a market that is largely protected from foreign funds.

These estates today enjoy some of the best facilities - markets, hawker centres, MRT stations, bus interchanges, sports stadiums and shopping malls, and most have been upgraded to high standards.

Because of the convenience of having these facilities nearby, Singaporeans are prepared to pay relatively high prices in the resale market for these flats.

We take this for granted but it could have turned out completely differently, with few takers, had they become urban slums.

And because the resale market is open to all Singaporeans regardless of income levels, the prices these flats command reflect their true market worth.

But there is one tweak to this market which may be needed to make sure it remains affordable to Singaporeans.

At present, permanent residents are allowed to buy resale HDB flats - this door was opened to them in 1989, presumably to make the country more attractive for PRs.

But it might have inadvertently caused prices to move up and, more critically, weakened the link between local wages and resale prices.

The PR numbers are in fact not insignificant - it was reported last year that they accounted for 20 per cent of all resale transactions in 2010.

That's one fifth of all sales, enough to move prices significantly.

Making the HDB market - both for new and resale flats - exclusively for citizens is the best safeguard for the future to ensure that public housing prices will always remain within reach of the majority of Singaporeans.

[The other problem in the resale market is the Cash Over Valuation (COV) the cash component over and above the official valuation of the flat. There is no cap on the COV. Perhaps COV of up to 10% of the valuation of the flat can be allowed without any restrictions. However beyond 10%, every dollar of COV will be taxed as "Windfall" tax, or even considered part of income tax of the seller.

Beyond 20% of valuation, every dollar paid by the buyer must be matched with a dollar of tax to the govt to be paid by the Buyer. i.e. 100% tax.

So if a flat is valued at $400,000, the seller may ask and receive up to $40,000 as COV tax free.

If the COV is $45,000, the seller will be taxed on the $5000.

If the COV is $100,000, the first $40,000 will still be tax-free, but the seller will have to include $60,000 as part of his income tax. The buyer in addition to the COV of $100,000 will also be required to pay the govt $20,000 for a total of $120,000.

This effectively puts a loose "cap" of 20% of the valuation for COV, as beyond 20%, the buyer has to pay 100% tax.]

Flip side of parental pressure

Nov 04, 2012

Singaporean parents push their kids hard, but more are letting them go with what they are happiest doing
 
By Ignatius Low
 

I was sitting in a food court the other day eating my prawn noodles when I heard what I have come to recognise as "the sound of PSLE".

Sometimes it's the sound of a mother with despair in her voice, wondering why her child seems to have suddenly stopped absorbing anything into her head a couple of weeks before the exam.

Other times, it's the sound of office colleagues madly reeling off cut-off scores for top secondary schools like they were seasoned sports commentators.

That day, however, it was the sound of a father talking intensely to his 12-year-old daughter - his deep booming voice resonating within the half-empty eating area.

The girl's mother and older sister were also looking intently at her as Daddy gave a long lecture. The young girl was the only one of the four eating, looking up at everyone as she balefully slurped her noodles.

We are into the period after PSLE now. The kids have done the exams and everyone is waiting for the results, so this particular conversation seemed to be some sort of scenario planning, an analysis of "what ifs".

I wasn't sitting close enough to hear everything that was being said, but I caught bits of it.

In a slightly hectoring tone, Daddy - a seemingly high-powered grey-haired man of about 50 - laid out the options in a no-nonsense way, like he was addressing a boardroom full of company directors.

These are the best Integrated Programme (IP) schools, but some are very competitive, he said. If you go to one of the top schools, we will have to get you extra help, maybe tuition in certain subjects.

But there is also the International Baccalaureate (IB) programme, he added. That is prestigious as well but it is tough in a different sort of way. If you choose that, we will need to get you another type of help, a different type of tuition, and so on.

At one point, the girl raised her head and mumbled something about "Sota" (The School of the Arts). Daddy didn't seem very keen, but explained the pros and cons anyway, trying his best to sound neutral. At the end of it all, he announced that he really had to get back to the office (it was 2.20pm after all).

I was ready to write him off as yet another overly kiasu parent, but then he turned to his daughter, kissed her on the forehead and said quite tenderly: "Anyway, dear, you go and think about it carefully and let us know what you decide, okay?"

The girl nodded. He then kissed his wife on the lips (how rare!) and trundled off.

I don't know why but that little incident stuck in my mind, particularly during this period of intense discussion about school admissions and the role of the PSLE.

It reminded me that however awful or unreasonable some Singapore parents' behaviour might seem - the horrible stress they put on their kids and themselves, the fierce complaints they have about the system - the bottom line is that they really do love their kids and just want to do right by them.

It also reminded me of the time I did the exam in 1984.

I remember there being less stress. My parents did not take leave to help me through the exam period. There were just lots of bottles of Brands Essence of Chicken to gulp down in the morning.

There also wasn't that much discussion in the house about my preferences after the PSLE. I remember there was an admissions form on which my parents had to indicate six choices of secondary schools. Being from St Michael's Primary, first choice was naturally the affiliated St Joseph's Institution.

My parents and I filled up the other five places without much fuss. We simply picked five schools that were near to our HDB flat, which was in Holland Drive at the time.

Then, a few weeks later, the results came in. I don't remember feeling particularly nervous and my parents didn't seem nervous either.

When we opened up the slip, we saw that my score had qualified me for the Special Assistance Plan (SAP), which was a new elite scheme that emphasised the study of Chinese. The decision over where to go after that was straightforward.

Special stream is better than Express, so you should go for Special, my parents reasoned. We are Catholic - and among the SAP schools, Catholic High is better than Maris Stella - so you will go to Catholic High.

That was how a Peranakan boy who spoke only English and Malay at home ended up utterly terrified and lost in a roomful of Mandarin-speaking teachers and classmates on the first day of school.

My parents couldn't have picked a worse fit for someone like me. I don't quite know how I survived, but I did.

Comparing the two PSLE stories that are 28 years apart, I wonder whether things are better now for kids, or worse.

Back in the 1980s, there was less stress partly because there were far fewer options on the table.

And without the sort of incessant discussion over the pros and cons of these options that you now get online, there was less of a fear that one's choice might not be optimal.

But there was also an unhealthy preference for whatever was the best option on the table - whether it was a triple Science combination or a degree in medicine or law.

Today, the reverse seems true.

There seems to be much more stress around the PSLE and the school admissions process. People take special leave, read up on way too much useless information and go to great lengths to game the system and give their kids the widest possible number of options.

But having done that, a softer side of the Singapore parent emerges, just like that father in the VivoCity food court.

Instead of insisting on the best option on the table, I find more and more parents listening and going with whatever their kids are happiest doing.

Maybe it is a symptom of a maturing and more financially secure society starting to put more value on the non-material aspects of life.

Perhaps it is simply that the generation that is now in their forties doesn't want their kids to have the same regrets they have: choices gone wrong or preferences left unspoken.

I guess it would be too much to ask for the best of both worlds.