Why Singapore gives top priority to fighting income inequality

In Parliament yesterday, Mr Gan Thiam Poh, MP for Ang Mo Kio GRC, asked whether the income gap in Singapore has widened in the past 10 years and whether an inter-ministerial committee can be set up to look into better integration of all social classes. The response as given by Prime Minister Lee Hsien Loong:

We must keep Singaporeans together. Maintaining social harmony is very much at the top of the Government's priorities.

There are three aspects of this issue: income inequality, social mobility and social integration. They are inter-related.

Over the last half century, income inequality has increased in almost all developed economies, including Singapore. The problem is most acute in large cities, for they tend to be where a country's wealth is created and concentrated.

Singapore is both a city and a country. Our Gini coefficient is higher than that of many other advanced countries. But it is similar to or lower than other large metropolitan centres such as Beijing, Shanghai, London, New York and San Francisco.

Despite the longer term trend of growing inequality, over the last 10 years, income inequality in Singapore has declined slightly. The Gini coefficient has fallen from 0.470 in 2006 to 0.458 in 2016. After we account for government taxes and transfers, the 2016 figure was even lower at 0.402.

And unlike in many developed countries, the real per capita household income of the lowest quintile increased by 40 per cent over the same period, keeping pace with the median household.


As globalisation and technological disruption have widened income inequality, the Government has over the years intervened more aggressively to support the less well-off.

In the long term, quality education, home ownership and affordable healthcare are the fundamental means by which our citizens, especially those from poorer backgrounds, can improve their lives.

In addition, we have many targeted, means-tested assistance schemes which provide transfers and subsidies to lower-income groups. For example, the Workfare Income Supplement scheme tops up their cash earnings and CPF accounts, and helps them build up their retirement savings.

Over the years, we have made significant changes to our system to fund this increase in social expenditure - from the introduction of GST in 1994 to the increased reliance on Net Investment Return Contributions (NIRC) as a source of revenue.

NIRC is now our largest revenue source, exceeding any single tax, including the GST. But though we have far more extensive social safety nets now than we did in the 1970s and 1980s, it is important to strike the right balance: Providing sufficient transfers to support those who need extra help so they can help themselves, but without diminishing their incentive to work or discouraging enterprise.


The second aspect of this is social mobility. Some degree of income inequality is natural in any economy. It gives people the motivation to strive to do their best and improve their lives. But in a fair and just society, this inequality must be tempered and complemented by social mobility.

Every citizen, no matter what his social background is, must have the opportunity to do better and move up in society, based on his efforts and talent. Nobody should feel that his social position is fixed based on his parents' income level or position in life.

Many government policies are directed at improving social mobility and countering the tendency of a mature society to stratify. Education is a critical plank of the Government's efforts.

We have made major investments in our pre-schools and school system to ensure that every child has access to quality education and a good start in life, regardless of income. MOE's Financial Assistance Scheme, and substantial bursaries and subsidies, make quality education affordable to all.

There are countless examples of children from low-income families who have risen to the top in the professions, academia, government and the private sector with the support of these schemes. New programmes like KidStart will further strengthen the support system for children from lower-income and vulnerable families.

We are also investing in our people through SkillsFuture to ensure that Singaporeans can continue to improve themselves and their prospects throughout their lives.

Because of these measures, our social mobility is good compared with other countries.

One study, looking at the proportion of children from the 20 per cent of households with the lowest incomes who do well in life and later reach the 20 per cent of households with the highest incomes, found a higher proportion in Singapore making this transition than in the United States or Denmark.

We must not and will not let up on maintaining social mobility, because it will get harder to narrow and bridge class divisions as our society matures.


The third aspect is social integration. We want Singaporeans to feel that we are one society; that we share experiences, values and outlooks; that we identify with and care for one another; and that we are united and will fight together in the face of adversity.

Moderating income inequality and ensuring social mobility will help to strengthen our cohesion.

In Singapore's multiracial, multi-religious context, we have to do even more to reinforce our shared values, and actively create opportunities for interaction and integration both across different social classes and between different races and religions. Only by living, working, studying, serving, playing, mourning and celebrating together do we become one people, one nation.

In Singapore, we are deliberate and proactive in our approach on social integration.

The Minister for Culture, Community and Youth has responded in a separate reply on our measures to promote social mixing and integration. In particular, our urban planning and public housing policies have enabled ethnic and social integration, and distributed access to good schools, healthcare, parks and recreation across the island.

We design shared spaces within our neighbourhoods, such as the playgrounds and parks, shopping malls and hawker centres, and sports facilities, in order to maximise social interactions.


Hawker centres are a uniquely Singaporean institution where people of all backgrounds mingle and enjoy good, affordable hawker fare. We have a good mix of flat types in each HDB neighbourhood. The People's Association organises all sorts of activities in our neighbourhoods and precincts, bringing together people from all walks of life.

In national service, Singaporeans train and serve together in the defence of our nation, strengthening our national identity and fostering cohesiveness.

The issues of mitigating income inequality, ensuring social mobility and enhancing social integration are critical.

If we fail - if widening income inequalities result in a rigid and stratified social system, with each class ignoring the others or pursuing its interests at the expense of others - our politics will turn vicious, our society will fracture and our nation will wither.

This is why this Government will strive to keep all Singaporeans - regardless of race, language, religion or social background - together.

There is already a concerted and coordinated effort among government ministries to tackle these challenges together in various fora. It is, therefore, not necessary to set up a specific inter-ministerial committee to look into these issues.

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A version of this article appeared in the print edition of The Straits Times on February 06, 2018, with the headline Why Singapore gives top priority to fighting income inequality. Subscribe