Tackling inequality vigorously: Academics give their views

Academics give their views on the one change that will make a difference, following President Halimah Yacob's pledge on Monday night that her Government will tackle inequality vigorously.

Don't silo it into a low-wage or education problem

Teo You Yenn: Associate Professor and Head of Sociology at Nanyang Technological University and author of This Is What Inequality Looks Like (Ethos Books, 2018).

In President Halimah Yacob's address, she spoke of the importance of tackling inequality vigorously, emphasising in particular giving every child a good start in life.

To tackle inequality, we must take seriously its holistic nature and resist the urge to quarantine it into neat containment areas. Inequality is not a problem only of children and education, nor one tackled only by targeting the low-income. Public policy in many areas of life must prioritise redistribution and universal access to ensure everyone can meet their needs.

Needs must be made central in any approach. This means, for example, that we consider what a family needs, before we talk about affordability or balancing various interests. A family has basic material needs -food, shelter, clothing. Families and individuals also have needs for social participation, for dignity and respect, for security, for information, for work-life balance. Every person also has needs for a certain degree of autonomy and choice, so that he or she can exercise true agency.

Seen from this perspective, paying attention to children and schooling is necessary, but far from sufficient. Children's needs cannot be separated from their parents' needs. When people live together as a family, one person's struggles are naturally another's.

So giving education subsidies to support a child in school while denying that child's mother secure affordable housing, such that the family unit's shelter needs are precarious, is flawed social policy that intensifies rather than reduces the impact of unequal life circumstances.

Inequalities currently manifest and are created not only in education, but throughout the life course and in many areas of everyday life.

A sincere attempt to tackle inequality vigorously requires us to examine whether systems and practices intended to address the full range of people's needs do so in a way that replicates or worsens inequality, rather than mitigating it. The big-ticket items that most profoundly affect people's ability to meet their needs are public housing, healthcare, education, childcare and retirement security.

These should be thought of as public goods. They require large-scale coordination to produce and distribute, and they must be made accessible to everyone because they contribute to collective well-being in very deep and fundamental ways.

The Pinnacle@Duxton was launched in 2004 at prices ranging from $290,000 to $440,000. Those home owners have been amply rewarded, as flats at the Pinnacle have sold recently for close to a million dollars. ST FILE PHOTO

While they appear to be consumed by individuals, they in fact have societal implications - when a society has adequate income support for older persons, for example, they can better contribute to our shared well-being as neighbours, community members, role models, mentors.

Conversely, when older persons are unwell, this has negative implications for our healthcare infrastructure and the well-being of others within their social and familial networks.

In Singapore, access to public goods is currently tightly linked to market mechanisms to an excessive degree. This means that inequalities in wages also map onto public goods, and public goods end up replicating and compounding market inequalities instead of mitigating them. How well or poorly people meet needs for housing, healthcare services, and retirement income vary greatly depending on how much they accumulate in their Central Provident Fund accounts.

The quality of service they receive is moreover determined not by specific baseline standards or dependent on what they need but primarily by what they have earned over their lifetimes. Similarly, in the area of education, the importance of private investments in tuition on the part of parents means wage inequalities lead to unequal outcomes.

We need reform which de-centres this market orientation. Our policies should be anchored in the principles of redistribution and universalism.

Comparative evidence, reported in studies such as The Commitment To Reducing Inequality Index, The World Inequality Report, and In It Together: Why Less Inequality Benefits All, point out that markets have generated massive inequalities globally over the past decades.

The reasons for this include exploitative and monopolistic practices, as well as distorted patterns of remuneration that do not reflect the true contributions of different individuals to society. Vast numbers of people who do wage-work, or who give labour to unwaged social roles - as caregivers, for example - are regularly under-compensated for their labour, even though these productive activities are crucial components of functioning societies and economies.

Proper compensation for labour is not only fair, but it is also necessary to sustain the economy. Economists such as Robert Reich point out that a strong middle class is necessary for the economy, as they are the ones who buy the goods and services produced in the world.

In a world where income and wealth differentials are huge, in ways that do not reflect people's contributions, state policies based on redistribution and universal provisions are necessary.

Countries such as Sweden and Norway have kept inequality levels lower through higher levels of social spending in programmes that are broadly directed at their populations, rather than targeted at only a small group. They do this through progressive, redistributive tax regimes. In other words, lower levels of inequality require sustained commitment and deliberate and concerted effort towards redistributing the resources generated within any given society.

The divisiveness in many societies today, and which threatens ours, is caused by real material differences in people's abilities to meet their needs, and the deep material inequalities that separate people's opportunities and access.

Public policies designed to address everyone's needs equally can be the start of building a culture in which we experience ourselves as members of a society who see our mutual obligations to one another. The material differences must be addressed before people can feel that they belong to and have a stake in society.

I hope the bold changes that President Halimah speaks of will be changes that place front and centre people's needs in various areas of life. Redistributive and universal policies are good for building a strong shared ethos, a sense that people are, as the report cited earlier terms it, "in it together".

To tackle inequality, policy mindsets must change

Ng Kok Hoe: Assistant Professor Lee Kuan Yew School of Public Policy, National University of Singapore.

President Halimah Yacob's recent address draws a line in the debate on inequality in Singapore. It signals that our society and policymakers now accept that inequality is a key problem, and that we are ready to talk about solutions.

The greatest challenge is that the major drivers of inequality are systemic and structural. Different social welfare models operate on different assumptions, implement different responses, and therefore produce widely varying but predictable results.

Singapore has a residual welfare system, which refers to a welfare regime where state support is a last resort, available only when other forms of help have been exhausted. This explains why assistance is strictly targeted, with eligibility and assessment regimes that create barriers to access. Unfortunately, this also incurs huge administrative costs.

One weakness of such a residual welfare model is that help kicks in when hardship is sufficiently severe and when the odds of overcoming disadvantage are much poorer.

While it stresses individual responsibility and self-reliance, sometimes couched as "tough love", such a model overlooks systemic challenges that impinge on individual life chances. As a result, social support is often too little and too late. It should not therefore be surprising that mobility will slow and inequality will build up over time.

One of the most worrying aspects of this approach to social welfare is its tendency to encourage competition and individualism, and weaken community and solidarity. As public sentiment echoes the tone of public policies, the narrative of self-made success dominates in Singapore and sometimes motivates public objections to more generous help for people facing disadvantage.

For those at the bottom, the experience of material inequality is steeped in a sharp sense of public moral judgment. This is one of the symptoms of societal fracture that the President cautioned against.

A good entry point for addressing inequality is to re-centre standards and needs in policymaking. Standards emphasise what is common to all citizens rather than single out people who need help. Needs remind us that husbanding help resources is a secondary constraint and not the primary objective of social policies.

Take public rental housing for example. As a residual housing option of last resort, rental flats are persistently under-supplied and the stock consists only of one-and two-room flats. The income ceiling of $1,500 disregards household size and was last revised in 2003, when it was 33 per cent of median household income. It is now equivalent to just 17 per cent.

Unusually for social housing, eligibility for public rental housing here does not take into account housing needs such as overcrowded or unsafe living conditions or indeed homelessness. Therefore rental housing is difficult to access and housing mobility is not high. A survey I conducted with more than 1,000 households in 2016 found that 40 per cent had already been living in public rental housing 20 years ago.

A different approach would be to put housing standards and housing needs at the forefront. Housing standards that respect minimum requirements for space and privacy would make it clear why larger flat types are needed for bigger households and why it is not appropriate for two single, unrelated persons to share a one-room flat.

Taking housing needs seriously also means assessing incomes fairly, pegging the ceiling to population income levels, and taking into account current living conditions such as homelessness.

For families with young children, longer-term tenancies, up to when the youngest child completes school for example, can ensure housing security and more conducive conditions to focus on studies. These changes can improve the stability of the living environment and the chances for people to do well.

The effects of inequality cut across different aspects of life. Similarly, policies that bear on inequality straddle multiple domains. Small piecemeal corrections are unlikely to have a significant impact. Instead our social welfare model as a whole and its fundamental assumptions must be reexamined. In other words, first, policy mindsets must change.

Effect of home ownership policies on wealth gap

Walter Theseira: Senior Lecturer of Economics Singapore University of Social Sciences

The greatest challenge in tackling inequality, in Singapore and everywhere, is that wealth begets wealth. Because inequalities in wealth are often an accident of birth, this threatens Singapore's vision that what we do, rather than what we started with, determines who we will become.

This is not an original view: economist Thomas Piketty, among others, has written on the implications of wealth on inequality more carefully, but I discuss here the particular implications for Singapore.

The most visible sign of inequality lies in the differences between the homes we return to. Inequality is evident in every advertisement for a new property launch, or every price record broken by a collective sale.

Perhaps we need to examine whether our longstanding policies of helping Singaporeans build up housing assets are helping correct inequalities in wealth, or whether they also inadvertently and unintentionally widen inequality.

Our policies have helped make Singapore a society with one of the world's highest home ownership rates - an achievement we can justly be proud of. But asset enhancement is a ladder that may bring to greater heights those who start a few rungs up - because they already have the capital to make a larger investment, and to hold their investment through good times and bad.

When the Pinnacle@Duxton was launched in 2004, at prices ranging from $290,000 to $440,000, it took more than a little capital, and courage, to book one of the most expensive Housing Board flats launched to date.

But those home owners have been amply rewarded, as flats at the Pinnacle have sold recently for close to a million dollars. By encouraging substantial investments in housing, we have helped many less well-off Singaporeans own their homes, but we may have inadvertently helped those who started a bit higher up, get even further ahead.

Some might argue that wealth begetting wealth nonetheless results from carefully considered investing, no different from the hard work and hard choices that contribute to success in Singapore.

But as much as we wish to believe we are astute investors, asset enhancement often depends on accidents of choice. In 1990, the average resale price for five-room flats in Yishun was $110,000; in Ang Mo Kio, $125,000.

Last year, the corresponding average resale prices were $461,000 in Yishun and $698,000 in Ang Mo Kio. Are we to believe that home buyers in Ang Mo Kio were risking their additional $15,000 investment to generate over $200,000 more in returns over the next three decades? If only we had such foresight - or perhaps, it is better if we do not.

A HDB flat is a home, a connection with community, and a place to raise a family. It is also an investment, but our society is surely richer the less we think of it as one.

No simple steps can eliminate the self-reinforcing effects of wealth on inequality. Our existing Central Provident Fund (CPF) policy may encourage excess investments in property, because withdrawing CPF for housing is one way of tapping CPF funds that are otherwise safeguarded for retirement. Thinking about redesigning CPF, by cutting contribution rates to focus on retirement and health, and less on asset enhancement through property, may help.

The CPF tax deduction also helps the well-off invest in property more cheaply, and inadvertently widens the gap. Every CPF dollar invested in property is tax free, giving higher income Singaporeans an effective discount on their investments at their marginal tax rate. While such tax deductions for home ownership are common worldwide, the nature of tax relief benefits is that they tend to enhance existing inequality, rather than reduce it.

A more serious look at taxing capital gains and wealth - as many other societies already do - may place the returns to wealth on a more equal footing with the returns from work.

Singapore is not unique in facing the social challenges of rising inequality. But more than most societies, we have the opportunity to make meaningful changes to reduce the structural impact of starting differences in wealth on long-run inequality.

Eradicate poverty with universal minimum income for bottom 20%

Chua Beng Huat: Provost Chair Professor

Department of Sociology National University of Singapore

The issue of intensifying income inequality has been in public discussion for many years.

During his days as prime minister, Mr Goh Chok Tong raised the spectre of a permanent underclass. Yet, there did not seem to be much urgency to deal with the problem directly, let alone at root cause, until recently, indeed after the 2011 general election.

Witness the expansion of subsidies for early childhood education and the development of state-run quality pre-schools for the low and middle-income only recently.

There are two possible reasons for the reluctance to deal comprehensively with inequality. First is the Government's long-standing ideological resistance to social welfarism.

Second is the intractable nature of inequality. Capitalism thrives on competition which produces winners and losers as its logical outcome; inequality is the logic of capitalism.

As a capitalist economy, inequality is unavoidable in Singapore. The problematic issue is poverty, which is one consequence of but is not synonymous with income inequality.

Unlike inequality, poverty is not unavoidable. Poverty is the result of an absence of sufficient income to maintain a minimum reasonable quality of life, given a specific national economic context. Poverty can be eliminated through income security through various ways.

The current practice is to provide welfare assistance, minimally and in a targeted and piecemeal manner; for example, pro-rated conservancy rebate for public housing households, Pioneer Generation healthcare subsidies, rebates for utilities consumption and as the last resort, cash, when it is absolutely unavoidable.

Finally, the Government's effort is supported by public contributions to charities. Problems with charities as a mode of social distribution are well-known, including the loss of dignity of those in need.

In contrast, the radical suggestion currently being debated and experimented on is universal minimum income. As one of the wealthiest capitalist nations in the world, Singapore has the financial means to eliminate poverty in our midst.

Taking the lowest income level at which wage supplement is provided, we can suggest that minimum income necessary for a reasonable standard of living is around $2,500 per month for a family of four.

A rough estimate is that about 20 per cent of income earners fall into this category. If the support level is pro-rated, the total cost is a minimal portion in the annual national budget. What stops the Government from taking this radical solution is the above mentioned ideological resistance.

Simply put, poverty in Singapore is an ideological issue, not a financial issue.

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A version of this article appeared in the print edition of The Straits Times on May 11, 2018, with the headline Tackling inequality vigorously: Academics give their views. Subscribe