How Miserable Are We?
By TAN Kee Wee
(MediaCorp 938LIVE’s Money Talks, Thursday, 21 August
2008, 7.50 am and 7.20 pm)
1. The economic outlook is
negative. Slower growth means less bonuses and less shopping
for many of us. But for others, there could be real
2. The issue is how do we
measure the overall state of the economy? Calculating the Gross
Domestic Product is one method. Today I shall introduce another
method which was fairly popular in the US in the
3. This is the Misery Index.
It measures how miserable we feel. It was first coined in the
1970s by the late economist Arthur Okun of Yale University.
This index is calculated simply by adding the unemployment rate
to the inflation rate for any given period of time.
4. For instance, if the
unemployment rate is 4% and the inflation rate is 2%, then the
Misery Index would be 4 plus 2 equals 6 points. When the Misery
Index goes up, it indicates that the economic climate is
worsening. When it goes down, it indicates that the economic
climate is improving.
5. Taking the US data for
the month of June 2008, the US Misery Index currently works out
to 10.5 points. Is this high? Looking back over the past 50
years for the US economy, the Misery Index was at its lowest of
around 3 points in 1953. That’s because those were the
6. But in 1980, the US
Misery Index shot up to 22 points. That followed almost a
decade of high inflation and unemployment. Relatively speaking,
it appears that US consumers today are not as miserable as they
were in 1980, at least not yet.
7. How do Singaporeans fare
on this index? Let’s look at the data. For the second quarter
of this year, our Misery Index works out to 10.4 points. This
is just below the 12 points recorded in 1980, during the last
oil crisis. So it appears that Singaporeans too are not as
miserable today as we were in 1980, at least not
8. But can we compare the
Misery Index like this? The answer is “no”. This is because,
due to changes in calculating inflation and unemployment over
the past two decades, these numbers are not very meaningful
when we try and compare them this way.
9. Take it as just a guide.
But it’s a good guide if you use it on yourself and try and
compare yourself one year ago and today. Try this.
10. Look at how much your
cost of living is today compared to a year ago. Take into
account all your shopping bills and taxi fares. If your cost of
living has gone up 20% compared to last year, then you must add
20 points to your personal Misery Index.
11. Next, look at your
business. If your business is down 10%, then it’s like your
unemployment rate has gone up 10%. In total, your Misery Index
today would be 20 points for inflation and 10 points for
unemployment which equals 30 points.
12. Of course, if your
business has failed completely, or you have just been
retrenched, or you have just retired, then your unemployment
rate shoots up 100%. Your new Misery Index would be 20 points
for inflation and 100 points for unemployment which equals 120
13. That would make you very
miserable indeed. But don’t worry. Help is at hand. The
government has come out with numerous financial schemes to help
14. And since children are
always a blessing and a joy to any household, there are many
incentives to help us bring up more children to brighten up our
15. Unfortunately, the
government can only do so much. The rest is really up to
16. Three women have raised
Singapore’s honour in the Olympics. Now women, you need to play
your part. Because after the credit crunch has brought the cash
balance of your man right down, it’s going to be very difficult
for him to individually stir up any interest to make