[Note to readers: This post is not about inflation. The rate of inflation is a little bit subjective, but much less subjective than the cost of living.]
In my previous post, I discussed Singapore. Today’s FT has an article on Singapore, which contains this interesting fact:
The city, one of Asia’s main financial centres, has been ranked the world’s most expensive for nine of the past 11 years by the annual Worldwide Cost of Living survey from the Economist Intelligence Unit.
That surprised me for a couple reasons. First, I’ve been to Singapore on several occasions and didn’t find it to be expensive. Second, I recalled some IMF PPP comparisons that suggested Singapore was actually quite cheap. When I doubled checked, my memory turned out to be correct:
If you divide 88.45 by 133.74 you get 66.1%. In plain English, the IMF estimates Singapore’s cost of living to be an astounding 33.9% lower than the cost of living in the US. Not 33.9% below NYC, rather 33.9% below the US average. There’s an almost crazy disparity between the IMF’s claim that Singapore is a very cheap city and surveys showing that Singapore is literally the most expensive city on Earth. What gives?
Fortunately, the FT links to a useful linked article that explains the reality of prices in Singapore. The TL/DR synopsis is as follows:
1. Singapore is a really expensive city for expat business people who wish to rent a private apartment in fashionable central neighborhoods, have a private car, and have membership in a golf club.
2. For average Singaporeans living further out and not owning a car, the cost of living is quite reasonable.
The article matches my observations. I recall that subway fares were low and restaurant meals were cheap. I presume that lots of other services that use imported low skilled temporary workers (say nannies, nail salons, home remodelers, etc.) are also cheap. Here’s what the linked article says about transport costs:
Owning a car in Singapore is certainly pricier than in other countries – no argument about that! This is because the certificate of entitlement (COE) that every car owner must purchase averages a whopping $75,000 for a sedan – and that excludes the cost of the car, road tax, fuel, and insurance.
It’s a major contributing factor to Singapore being ranked the most expensive city in the EIU survey.
There’s a reason for it, though. Given Singapore’s small size, the volume of traffic on the road is carefully controlled to ensure we meet sustainability goals as well as avoid traffic gridlocks common to dense cities.
Paired with Singapore’s compact size, an efficient and affordable public transport infrastructure means there is no need to own a car. This is unlike larger cities where driving an hour or more to your destination is common.
If you really need a car from time to time, rental services like GetGo are an affordable alternative that starts at $2.20/hour and go up to $65.50/day. Longer-term rentals start at $283/week for non-luxury models.
Taxis and ride-hailing services like Grab, CDGzig or Gojek are readily available in Singapore for around $11 to $26 per trip, less if you opt for shared rides.
It should be noted, however, that this article is a government sponsored rebuttal to the cost of living survey that claimed Singapore was extremely expensive.
In my view, the truth is somewhere in between these two estimates. Recall my earlier post arguing that Newport Beach was America’s best place to live. That claim was based on a survey that showed Newport Beach to be America’s most “unaffordable” city (of more than 100,000 people.) The basic idea is that a highly desirable place becomes “unaffordable” as people bid up housing prices to a high multiple of average incomes. Unaffordability is an index of “revealed preference”.
Central Singapore is extremely desirable, especially to expat business people who want to be close to the action. So the high “cost of living” there is essentially a measure of its attractive amenities.
But all of Singapore is relatively attractive, at least compared to most other Asian nations. Thus real estate in even the outlying districts is much more expensive than in most of the US. An American family with a 2500 sq. foot home, a nice yard, and 2 SUVs in the driveway, would have a difficult time recreating their lifestyle if transplanted to Singapore. They would view the IMF estimate as an almost absurd underestimate of Singapore’s cost of living.
On the other hand, Singaporeans do enjoy a relatively low cost of living in most things, including some areas that are much more important than restaurant meals and nail salons. Health care is quite inexpensive and income taxes are very low.
My general sense is that Singapore does fairly well on service-focused measures of living costs (and perhaps some imported goods), and the US does relatively well on “physical goods” based measures of living costs.
Within the US, dense coastal cities like New York are particularly expensive for people that want big houses and cars. It wouldn’t surprise me if studies even found a political dimension, with Republican consumption baskets skewing a bit more toward things, and Democrat consumption baskets skewing a bit more toward services.
The cost of living is thus highly subjective: The cost of living how?
PS. Singapore also does well on many “intangibles” that don’t show up in price indices. Subways are clean and efficient. Crime is very low. There is much less pollution and traffic congestion than other Asian cities. On the negative side, there is less freedom of speech. After my previous post, Jim Glass provided a very astute comment on Singapore’s excellent health care system, and the political barriers to translating that success to other countries.
PPS. Even service quality is highly subjective. Americans who like to eat steak and potatoes in a big restaurant with plush chairs might not like the hawker’s markets where many Singaporeans eat. Tyler Cowen loves these eateries:
PPPS. Yesterday, a New Zealand tourist was murdered during a holdup at one of Newport Beach’s most elegant shopping malls. This is a reminder that even America’s safest areas would not be viewed as all that safe by Singaporean standards. Indeed, even Canada’s murder rate is almost 20 times higher than the rate in Singapore.
READER COMMENTS
Jon Murphy
Jul 3 2024 at 6:24pm
Suddenly the $1,000 Louisiana charged me to register my car sounds great.
Matthias
Jul 3 2024 at 7:55pm
Keep in mind that the government doesn’t set the price for the COE. The government sets the total volume (which is a bit more than one million cars in total at the moment).
The COE lasts for ten years. So every month about 1% of them run out, and the government auctions off replacements. These auctions set the price.
Because this is Singapore the auction design makes sense: every participant submits one sealed bid per COE they want to get. Say there are n certificates to auction off, the auctioneers sort the bids in decreasing order. The first n bids win, and all pay the the n+1-th bid plus a dollar.
Basically every winner pays the highest unsuccessful bid plus a dollar.
Scott Sumner
Jul 3 2024 at 9:38pm
It’s so weird to see a government that actually understands economics. Surreal.
Matthias
Jul 3 2024 at 11:06pm
Of course, every so often you see populist calls for changing to a system where everyone pays what they bid, ‘because’ somehow that would help the little men pay less than the big corporations.
Naturally, the opposite is the case: with the current system you don’t need to do any market research and can just bid your true valuation.
Jon Murphy
Jul 3 2024 at 9:45pm
Wow! What a fascinating system
Matthias
Jul 3 2024 at 11:07pm
We also have one of the first (if not the first?) congestion charging systems for our city centre. Later famously copied by London.
Mark Brophy
Jul 5 2024 at 9:41pm
The US government should sell H1-B visas that way. Like the right to drive in Singapore, a visa is very valuable and shouldn’t be given away free of charge. Our government is corrupt while Singapore is managed well.
Craig
Jul 4 2024 at 1:02pm
Just curious was the $1k to register the car or did the car registration include some kind of sales/use tax because you were bringing the car into LA?
Jon Murphy
Jul 4 2024 at 1:34pm
The latter. Sales tax of 6% on the value of the car (LA sales tax of 10% minutes the 4% Maryland alread charged me 3 years ago), plus registration fee, plate fee, and a fine for not registaring it within a month of moving to LA.
Rodrigo
Jul 3 2024 at 8:46pm
So live in flushing eat at hotdog stands and ride the subway everyday. Surely this will be comparable to living in outskirts of Singapore and eating at local market.
I am from el salvador, studied in boston (took your class which I very much enjoyed) lived in nyc then Madrid now Miami and visited hong kong, Tokyo, Bangkok and other east asian countries recently.
My two cents is each country/city can be as cheap or expensive as you want it to be. But yes, US will always be more expensive because labor (even cheap illegal labor) is like drugs, once it crosses the border prices rise exponentially, 10x for domestic work relative to home country. But most importantly and this is hard to quantify, so my opinion only, ceteris paribus on ppp basis, taking up say 10% of take home to 20% or 30% of take home for same domestic labor (or lesser). Rent is also much lower proportionately to take home in third world because, well, it’s not manhattan, miami or central hong kong and local economy cannot sustain higher prices.
Scott Sumner
Jul 3 2024 at 9:44pm
Good to hear from you again.
Matthias
Jul 3 2024 at 11:10pm
Our local hawker centres have a lot more variety and quality than just hot dogs. Some of the stalls have Michelin stars.
We use a lot of foreign labour in Singapore. I’m one of them. Though for most people the foreign construction workers and maids are more important than white collar workers like me.
Matthias
Jul 3 2024 at 8:52pm
Scott, you mention a murder. But it’s not just safety from violent crime, but there’s also a virtual absence of more minor offenses.
When I’m traveling abroad in, say, London, I always need to allocate ten percent of my brain power to make sure to keep track of all of my belongings, to make sure no one is nicking my phone or my wallet, because I left them next to me on an outdoor table at a cafe or so while reading a book.
In Singapore that part of your brain can do something more useful instead. No one would steal your wallet, even if you left it on the table unattended while going to the toilet.
Some people even use their smartphone or wallet to reserve a table at the hawker centre. (Though packs of tissue are more commonly used.)
There’s also a lot more social cohesion in general. A striking example, I find: we have a lot of playgrounds dotted around residential areas; and people still just hang out on the benches surrounding them and feel free to occasionally interact with the kids. In much of the western world men would be afraid of being branded pedophiles or worse for this normal activity.
Scott Sumner
Jul 3 2024 at 9:42pm
Very good comment about stress levels. Japan’s also a very safe place.
It’s so sad the way the western world (especially the US) has become so overprotective of kids. I wonder if the childhood I had is even possible today.
Matthias
Jul 3 2024 at 11:34pm
Singapore is a weird place in this regard.
(Perhaps) Because it’s so safe, and more importantly also seen as so safe, kids probably still get more independence than in the US. But not more (and perhaps less) than I got growing up in the late 1980s and 1990s in (former) East Germany.
However, the workload from school is pretty brutal. Hours are long, and then there’s homework on top. (And the teachers actually check whether you’ve done the homework.) Most Kindergartens already start with academics, some of them even have homework, too.
The demand for this kind of high pressure systems seems to come (perhaps indirectly?) from the parents.
There seems to be a bit of cultural variations between our ethnic groups, with the local Chinese pushing their kids the hardest. (On average. Lots of individual variation, of course.)
Homeschooling is almost completely banned, and locals need special permission to go to a private school. (Though most of the private schools are just as much of a hot house.)
Matthias
Jul 3 2024 at 11:36pm
P.S. Approximately no one in Singapore nor Japan needs to stress about safety of body or belongings. But people in both places still find plenty to stress about.
My other comment already mentioned education as a stress generator. But work is equally demanding for most.
steve
Jul 4 2024 at 11:43am
I saw the same thing in Riyadh. In the gold markets, souks, they had gold just hanging on the walls. Punishments were pretty severe, including cutting off a hand if caught stealing. Couple of my guys went to watch them do it as its is done publicly. Very safe but there was a price for that.
Steve
Scott Sumner
Jul 4 2024 at 12:48pm
I’m also opposed to those high stress educational systems. From society’s perspective, it’s a negative sum arms race.
MarkW
Jul 4 2024 at 7:02am
It wouldn’t surprise me if studies even found a political dimension, with Republican consumption baskets skewing a bit more toward things, and Democrat consumption baskets skewing a bit more toward services.
Yes, this seems logical. But that would mean Republicans should experience lower inflation in the current U.S. and be more in favor of imports and less angry about inflation. Well, maybe they would be if their guy was in office. By the same token, those living in cities who are much heavier consumers of local services and lighter consumers of stuff should be experiencing higher inflation than those in the burbs. And then there’s safety where there seems to be an inverse correlation between potential exposure to crime and concern about it (with urban Democrats most exposed but least worried vs suburban and rural Republicans).
Scott Sumner
Jul 4 2024 at 12:52pm
“Yes, this seems logical. But that would mean Republicans should experience lower inflation in the current U.S. and be more in favor of imports and less angry about inflation.”
Republicans are not (primarily) angry about inflation, they are angry about Biden. They use terms like “inflation” and “crime” to express their anger. If you don’t believe me, look at how Republican ratings of the current condition of the economy correlate with which party is in office. It’s absolutely crazy.
Dylan
Jul 4 2024 at 2:58pm
I was in somewhat rural California a couple of months ago shopping in a grocery store and my wife had just commented on how cheap everything seemed (compared to NYC) and then a guy leaned over and said out of the blue, “those are Biden prices.” I was pretty confused by that, since I hadn’t seen groceries that cheap since the 90s
robc
Jul 5 2024 at 4:01pm
Cost of living conversation from my past: When I lived in Switzerland I commented to my Swiss boss how expense things were compared to the US. He was surprised and said he didn’t notice much difference when he lived in the US. I asked him where he lived. He said, “San Jose.”
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