As the Singapore economy pivots from its worst-ever recession to recovery, Finance Minister and Deputy Prime Minister Heng Swee Keat has the unenviable task of coming up with a Budget that simultaneously addresses multiple challenges: an increase in inequality amid income losses, a still fragile job market and the need to accelerate the transition to a post-Covid-19 world. On Monday, the Department of Statistics reported that the pandemic reversed some of the gains made in narrowing income inequality in recent years. While overall median household incomes fell last year by 2.4 per cent in real terms, the bottom 20 per cent was the worst hit, with the poorest 10 per cent experiencing a 6.1 per cent decline. Last year's budgets helped to mitigate inequality here, but pre-tax and transfer inequalities did widen. Part of the income losses, which were also felt by middle- and upper-income groups, may have stemmed from workers switching to lower-paying jobs or gig work, working fewer hours or taking wage cuts.

Whatever the reasons, the data suggests that despite the economic recovery in the second half of last year, the job market remains fragile. Many economists point out that the headline numbers indicating a progressive decline in resident unemployment (to 3.2 per cent in December, from 4.5 per cent last August) may mask a significant degree of under-employment, as a result of some workers having to take up stop-gap jobs for which they are overqualified. Layoffs and income losses may also rise as some assistance under various schemes expires this year, together with bank forbearance and reliefs from contractual obligations, which could result in more insolvencies.