Close income gap in sustainable way

With income inequality a social and governance challenge everywhere, it is encouraging that Singapore is making some strides in raising the lot of its bottom earners. This is indicated in this group's rate of income growth and better living standards, captured in the Household Expenditure Survey for the 2008-2013 period. Targeted state support helped, along with higher rates of wage increase for low-income workers - a goal of the Government and unions.

These gains are hard won. The wealth gap will remain formidable, mitigated as much as it is fiscally possible for the Government to do so through subsidies and direct transfers. The point to note is that state support has to be matched by a willingness on the part of lower-income earners to help themselves by raising their value to employers and, thus, their income.

Against the composite 5.3 per cent rise in income growth over the five-year reporting period, the bottom 20 per cent achieved the highest rate of 6.6 per cent annually (against 4.5 per cent in the previous five years). They were also spending on typically middle-class items like cable TV, broadband and smartphones, besides meals out and the occasional vacation. Workfare payments and subsidies for rent, health and education formed a good part of household income. For one- and two-room HDB families, transfers and subsidies were equal to household income per member. These are numbers that deserve to be pondered on by all.

Such aid replicated across the spectrum of the least-endowed workers is a state commitment that can be sustained only if the economy remains strong. So far, it has been good. But the people have been primed to expect slower growth in Singapore's qualitative phase, where there will be less reliance on foreign-labour input in favour of smart processes and productivity gains. The cries of dismay from sectors that have grown accustomed to cheap labour suggest that the conversion will not be without pain. As for lower-income workers, there is no substitute for raising skills. As noted, there is an array of state programmes available to them. Regrettably, a good number of employers are still not accommodating enough to make time for what they see as "disruptions" to operations.

One factor that is beyond control is inflation as it will erode lower earners' spending power. The annual average inflation was 3.1 per cent in the Household Survey's sampling period. This was manageable relative to the income growth of the bottom fifth. Efforts to control imported inflation by keeping the dollar strong are in hand, but the low-income band will be exposed if creeping inflation begins to run ahead of wage growth.