25 January 2012

Ministerial Salaries Review — Do Most Roads Lead to Rome?

Almost everyone has his own opinion on how to determine the salaries of political office holders, especially cabinet ministers.

Do most roads lead to Rome (figuratively not literally)?

20 January 2012

When Cash-Over-Valuation Analysis Is Inconclusive

Minister for National Development Khaw Boon Wan provided the following information on median cash-over-valuation ("COV", or cash premium over valuation, paid by the buyer to the seller) for transactions involving resale Housing and Development Board apartments in Q4 2011:








If Mr Khaw was trying to prove to the public that private property owners, rather than permanent residents, were pushing up the COV and resale prices, I think he failed.

First, COV is typically correlated to the transacted price, which in turn is typically a function of the size of the apartment (all other factors e.g., location, orientation, age, condition, etc. being the same).  This relationship may be seen from HDB's webpage (Median COV by Town and Flat Size).  What is relevant is the median ratio of COV-to-valuation for each buyer group.

Second, for each apartment size, the median COV varies from town to town.  For example, the median COV in Q3 2011 for 5-room HDB apartments ranged from $33,000 in Sembawang and Woodlands to $66,500 in Bishan.  Unless the distribution by buyer group for any apartment size in question is approximately uniform (or, the difference is not statistically significant) across all towns, the COVs attributed to the respective buyer groups have limited meaning.

Third, how many resale transactions were attributed to each buyer group?  If, for instance, the number of transactions by private property owners was small relative to the total, the COV attributed to them may have limited impact on median overall transacted prices.

Fourth, HDB last July stopped disclosing data on the median overall COV for all HDB resale transactions during each calendar quarter because the figures could be misleading.  If the median overall COV could be misleading, wouldn't the median overall COV for the five buyer groups be equally if not more misleading?

11 January 2012

Ministerial Salaries Review — Salaries for a Capable and Committed Government

This article examines some of the details in the report "Salaries for a Capable and Committed Government" dated 30 December 2011.

THE PROCESS

The Committee's view is that $1.10 million in 2010 would have been fair salary for a MR4 political office holder, placing him at the 1,400th highest income position.  Why $1.10 million?  Because the Committee thinks that salaries must be competitive — that competitive — to attract talented people to serve as political office holders.

It is arguable whether talented people — as determined by the salary they earn or indeed by most other measures — are the right political leaders for Singapore.

It is arguable whether people who need ministerial salaries much higher than those for a reasonably comfortable lifestyle to step forward to serve the country in political office are the right political leaders for Singapore.

Once the Committee decided not to benchmark ministerial salaries against the salaries of world leaders, the entire exercise became subjective.  Who was to say whether MR4 should be $1.1 million rather than $1.5 million or $0.5 million?  Moreover, it is arguable whether the Committee was in a position to determine what constituted the right political leadership for Singapore, and in this respect, the Committee probably used the incumbents as its target candidates.  Did the Committee tailor the proposed salaries to fit the incumbents?  [This paragraph was inserted on 13 January 2012.]