More should be done about Singapore’s distributive inequality

According to the Singapore Department of Statistics, Singapore’s GINI coefficient had increased in 2012 to 0.478. It can be difficult to compare GINI coefficients with other countries due to the methodological differences of the sources. Nevertheless, it has been observed that Singapore’s GINI coefficient is high by international standards.

Bloomberg Businessweek, based on a report by the United Nations Development Program, said that Singapore was the second in rank, of countries with the largest gaps between the rich and the poor.

A common measure of income inequality, a GINI coefficient of 0 would mean perfect equality, where everyone has the same income, while a GINI coefficient of 1 would mean perfect inequality, where one person has all the income. In general, the higher the GINI coefficient, the greater the income inequality.

A natural reaction to this statistic is to be concerned. After all, high levels of distributive inequality are said to translate into less well‐being, more health and social problems and lower levels of happiness for society. Further, high income inequality could mean less social cohesion.

One plausible explanation ties the high level of distributive inequality to the economic growth and high levels of wealth of the country. It is inevitable that Singapore, one of the wealthiest countries in the world, is also one with the highest inequality of income.

Politicians might explain the high levels of distributive inequality in terms of Singapore’s foreign policy. An ageing population and lower fertility rates leads to a decline of numbers in the labour force, thus requiring a relaxed immigration policy in order to replace the labour force and to maintain economic growth. Highly skilled ‘foreign talent’ is procured to develop R&D so that Singapore can compete globally, while low skilled migrant workers are deployed to lower costs for so-called menial jobs. This foreign policy seems to increase the GINI coefficient. As such, Singapore’s high GINI coefficient is justified.

It might also be argued that some level of inequality is needed to spur people to work hard. If income was distributed equally no matter what, then the level of free‐riding would increase as there would be no incentive to work harder. Implicit in the argument is the thought that some inequality is needed for working hard, a pre-requisite for economic growth. Since an equal distribution of income can lead to lower motivation to work hard, some inequality in Singapore’s income distribution is not out of place.

Yet commentators have argued that there is no clear or obvious relationship between inequality and economic growth. In other words, it is not obvious that inequality leads to economic growth, or that economic growth leads to inequality. If this is right, we need to stop making excuses for our high levels of income inequality.

Action must be taken to close the large gap between the rich and the poor, but what action? Our meritocratic system is supposed to make society a fairer place by identifying and cultivating talent, and enhancing social mobility. For example, individuals can win prestigious scholarships independently of their socio‐economic backgrounds. This means that the infrastructure has been put in place, so a person from straitened circumstances can move upwards, financially and socially.

In reality, however, those with better socio‐economic backgrounds, whose parents are university graduates and professionals, are more prepared for educational challenges and are more likely to win these scholarships, and hence, to gain more opportunities in life. Those who are worse off are likely to remain worse off. The reality of meritocracy suggests that inequality is in this way perpetuated, rather than curbed.

Another way of closing the large gap and benefitting the lower income workers is to introduce a minimum wage, alongside other measures. One argument against this has been that smaller businesses can be hurt by such a policy. If there was minimum wage, many smaller businesses may have to close down.

In other words, the move to promoting inclusive growth via minimum wage will be at the expense of the middle income business owners. But surely, solutions can be developed to help these business owners with their labour costs?

Fundamentally, the argument against minimum wage is associated with pressing on for economic growth. However, being an already wealthy country, it might not hurt and indeed, it would appear beneficial in terms of health and social reasons, for Singapore to re-consider how it would go about lifting the poorest of its society.

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