Staple Trade, Real Wages, and Living Standards in Singapore, 1870–1939

ABSTRACT

This paper examines the impact of Singapore’s rise as a staple port on the city’s real wages and living standards during the late nineteenth and early twentieth century, when this British colony acted as the heartland to surrounding hinterlands. Based on an analysis of newly reconstructed nominal wage and price time series, it is shown that real wages in Singapore fluctuated substantially over this period, rising and falling with the port’s staple trade in tin and rubber. As the city transformed itself into a commercial and financial hub during the interwar period, however, Singapore’s real wages rose, though this was accompanied by a widening skill premium. Compared to its peers in Asia, the city appears to have enjoyed a relatively higher average living standard before 1900, and possibly by the late 1930s as well.

Keywords:

• staples
• real wages
• living standards
• colonial Singapore

JEL Codes:

• N35
• N75
• O13
• O15

We are grateful to Alexander Apostolides, Anne Booth and participants at the World Economic History Congress 2015 held in Kyoto, Japan for useful comments. The suggestions of two anonymous referees for improving the paper are duly appreciated. The views expressed in this paper are solely those of the authors and should not be attributed to the Monetary Authority of Singapore.

Notes

2 For the broader literature on the economic history of Southeast Asia, the reader is referred to the studies by Booth (2007), Brown (1997) and Van der Eng (1992).

3 The staple theory was very much a Canadian innovation, its principal progenitors being Innis (1930, 1940) and Mackintosh (1923). Schedvin (1990) provides a good review of the theory’s applications.

4 See Watkins 1963 and Hirschman 1977 for elaborations of the spread effects that may be generated by staple development. The former distinguished between backward, forward and final demand linkages, referring respectively to input production, staple processing, and induced consumption. The latter postulated the existence of an additional fiscal linkage, deemed to occur when the state taxes the new incomes of primary producers for the purpose of financing investments elsewhere in the economy.

5 Findlay and Lundahl (1994) viewed this development as resulting from a ‘vent-for-surplus’ situation.

6 See Huff (2002) for an explanation of why industrialization failed to take off in pre-war Singapore and Malaya. His analysis suggests that an uncompetitive real exchange rate due to ‘Dutch disease’ effects in a boom and the small domestic market in a bust was the main reason.

7 The rate applied only to painters and blacksmiths in 1870, while bricklayers were replaced by masons after 1919. These minor changes in coverage are disregarded.

8 Appendix 1 provides details of the computations and additional data sources. In most cases, lacunae in price time series are filled by recourse to substitute products or interpolates.

9 According to the household budget survey of 1949, the shares of firewood – the fuel commonly used for cooking – in the total expenditures of Malays, Chinese and Indians were 3.3, 2.6 and 6.7%, respectively, giving a population-weighted average of 3.2%. Due to the sparsity of price observations on firewood, however, the price of kerosene was used as a proxy.

10 Specifically, such comparisons are problematic because some prices are simply not available in one region or the other. Allen et al. (2011) circumvented the difficulty through the use of close substitutes and a superlative price index.

11 A brief explanation of the methodology for constructing the consumption baskets of the major ethnic groups is given in Appendix 2, based on the more detailed account in Sugimoto 2011.

12 Published figures on remittances are hard to come by, but according to Huff (1994), the value of remittances from Singapore was considerable, with about 250 shops acting as remittance agents in the 1920s. Hamashita (2015) estimated that the approximately four million Chinese living in Southeast Asia in the early twentieth century sent about US$57 million annually to their homeland.

13 The source of the ratios for Asian unskilled workers is Allen et al. (2011), who have made their data available at the Global Price and Income History website: http://gpih.ucdavis.edu/ (accessed 15 April 2015).

14 Moreover, the nominal wage of Indian rubber tappers could be understated because lodging was provided for such workers. Booth (2012) concluded from data on per capita rice availability and expenditure on cotton cloth that consumption standards were higher in British Malaya by the latter part of the 1930s than in the other colonial territories of Southeast Asia and Thailand. In contrast, Bassino and Van der Eng (2006) found that Bangkok had higher welfare ratios for both skilled and unskilled workers than Singapore and Penang, while these cities in turn fared better than Hanoi and Saigon.

15 The Blue Book gave the range as $0.50–2.60, but Huff (1994, p. 172), citing a US Department of Labor study, had it at $0.80–1.20. It appears that the limits of the colonial estimate corresponded to unskilled and skilled labour, while Huff’s range referred to only unskilled workers. The Blue Book range for building trades was $0.50–1.30.

Additional information

Funding

This work has been financially supported by JSPS [Grant-in-Aid for Scientific Research C: No. 26380442].