Reading the Straits Times today (actually, it’s not a Straits Times originated article that I will be referring to, but a Straits Times reprint of a Financial Times article), I came across a very interesting article by Lawrence Summers, the ex-president of Harvard. He was writing on the state of the middle class in America, and he was of the opinion that the middle class is suffering from a lack of growth of real wages.

While I am not sure of the growth of real wages in Singapore, judging by the amount of discussions in the political arena and blogosphere in recent weeks, it is clear that our middle class too are facing a squeeze. The impending increase in the GST is a good case in example. It hurts the middle class most as the poor gets assistance to cushion the impact, while the rich probably wouldn’t flinch at the increase because they can well afford to pay for it. The middle class are deemed sufficiently well-to-do to be given assistance, but yet, they are not rich enough to overlook the increase in the cost of their consumption.

In Summers’ article, he wrote that “college graduates have been particularly hard hit”. In Singapore, I believe that our graduates are going to experience the same thing in the not so distant future. Already there are telling signs, as evident from the retrenchment phenomena that Derek Wee famously blogged about, resulting in the whole Wee Shu-min affair. As a soon-to-be graduate, this issue is clearly disturbing to me.

This middle class graduate sandwich issue is not just a personal or social issue, but it’s a big political issue. As Singaporeans continue the drive to get a degree, in a decade, graduates will form a huge voter bloc. According to MOE statistics (requires Adobe PDF reader), in recent years, the local universities are producing 10,000 graduates annually. The actual figure should be higher if we account for those who get a degree overseas, or through private schools in Singapore. The figure is set to increase with local universities expanding their enrollment, and the Singapore government continuing to woo foreign universities to open campuses in Singapore.

While the older generation of Singaporeans may be more pro-PAP because they experienced the fruits of PAP leadership through the early hardships of post-independence Singapore, the younger and well educated Singaporeans are unlikely to be as staunch in their support for the PAP because they are conditioned to the success of PAP leadership, and if the PAP slips up, they are going to be less forgiving.

Therefore, what options are available to minimise the negative impact of the middle class graduate sandwich? The first step, which is probably the hardest step, is simply to make Singaporeans face the brutal reality. The romantic notion of study hard, get a degree and a well-paying job for the rest of your life has to go out of the window. This notion might well be true in the times of our parents, but it is not true today.

With increasingly powerful communications technology, it is increasing easy for companies to outsource jobs to countries with lower labour costs but yet not affect productivity (an example would be how many hospitals in developed countries are outsourcing radiological services to India, where a professional Indian radiologist can provide the same service at a faction of the cost and relay the information back instantly through the Internet). Well-educated Singaporeans must realise that this is the reality of life today, and that job stability is no longer possible. Unfortunately, recognition of the reality is hard to achieve because our parents still harbour the romantic notion of yesteryear and perpetuate it.

Recognising the truth is just the first step. What then can Singaporean graduates do to prevent themselves from being sandwiched right in the middle? I think the answer lies in developing knowledge industries. The Singaporean government clearly recognises that in its drive towards the life sciences, and more recently, digital media. While there has been some criticisms of Singapore’s push to be a leader in the biomedical industry, the underlying idea is sound. In the knowledge industry, labour cost is less of a consideration compared to other industries. There may be various reasons for this, but I suspect that the biggest reason is because profits in such industries are made not by cutting costs, but by generating more and more products.

Knowledge commodities are usually protected by patents for a number of years, usually numbering in decades at the minimum. With patents insulating the product from competition, high profit margins are assured, resulting in lesser reasons to cut costs. In addition, the generation of quality knowledge commodities require quality input, which does not come cheap. Those in knowledge industries recognise that they have to pay more in order to generate quality output. The key to profits in the knowledge industry is to generate more and more patented products, and not scrimping on labour costs.

Therefore, I think that the Singapore government must try and alter the mindsets of the young people and get them to aspire for jobs in knowledge industries. This should start in secondary schools and junior colleges, with programmes designed to help stimulate interest in research work. And, research work should not be narrowly defined to just the laboratories of the physical sciences. There are other fields where creative research are profitable and valued as well, such as entertainment and gaming. At least for the next generation of Singaporeans, the knowledge industry still provides a good option for graduates to avoid being squeezed by the negative impact of globalization.