New stats on wealth, income and social mobility should spark national debate on inequality: Observers
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Singapore will need stronger redistribution tools to gauge what the appropriate levels of inequality should be, says an analyst.
ST PHOTO: KUA CHEE SIONG
- Singapore released new reports showing falling income inequality but higher wealth inequality, comparable to advanced economies.
- Observers urge national discussion on acceptable inequality level, redistribution, and tax adjustments to support workers and relieve middle-class anxieties.
- PM Wong said there will be fresh approaches to renew Singapore's social compact, enhance opportunities, and support workers and lower-income families.
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SINGAPORE – Singaporeans now have a fuller picture of incomes and social mobility
With more data, Singaporeans could better agree on the amount of redistribution and assistance that society should have, and the accompanying trade-offs, which could include changes to taxes, education and housing policy, the experts added.
Two reports that the Government released on Feb 9 had, for the first time, included non-wage income into the tabulation of annual household income trends, as well as an estimate of Singapore’s wealth Gini coefficient.
Income inequality here fell over the past decade and was at a record low
However, the Republic’s wealth inequality was higher than its income inequality, and was comparable to other advanced economies such as the United Kingdom, Japan and Germany.
Jalan Besar GRC MP Shawn Loh said the data showed that Singapore could be close to the ideal range for income inequality, but that policy moves are needed that target extreme wealth and the passing of assets to the next generation.
With the global trend being towards greater wealth inequality, driven by the “winner-takes-all” effect of tech-driven economic systems, Singapore would need stronger redistribution tools over time, added Mr Loh, a former Budget director.
“As a society, we need to have some national consensus over what the appropriate levels of inequality should be... Overall, the paper is a good first step in sparking a national conversation on what this consensus could look like.”
Institute of Policy Studies deputy director Christopher Gee agreed that the additional data should prompt a discussion on what it means for Singapore to become a more just and equitable society, while providing a basis for comparison with other countries.
For instance, the statistics showed “staggering” income growth for lower-income households over the past decade, and that the bottom 20 per cent here have positive household wealth and home equity, unlike in many other countries.
At the same time, what is missing in the statistics is that the broad middle here is increasingly anxious about their standing in society, he added.
Observers said addressing such anxieties will require Singapore to provide greater assurance to workers, and this includes asking fundamental questions such as whether a low-tax environment will result in good jobs that benefit a broad base of Singaporeans.
Nominated MP Terence Ho said one of the Government’s policy objectives is to keep taxes fairly low, particularly for the broad middle, to encourage work and enterprise.
But Mr Gee said that, given Singapore’s tax-to-income ratio when compared with countries such as Finland and the UK, there is fiscal space for the city-state to adjust taxes to do more to help mid-career workers affected by disruptions to the labour market.
“If you are doing retraining, you still need to pay your mortgage, put food on the table... and training allowances to give people such buffers to enable these transitions can be managed better,” he said.
Singapore University of Social Sciences economist Walter Theseira noted that Scandinavian countries have considerably lower inequality than Singapore, partly because their social compact is for higher taxes and more redistribution. This may not be the outcome preferred by other countries which do not want such high taxes, he added.
“Put another way, inequality numbers are really not the same as something like, say, global public health numbers,” said Associate Professor Theseira, who noted that there would be other trade-offs, such as to Singapore’s ability to attract investments.
The Ministry of Finance paper also found that while the Republic has done well on intergenerational mobility compared with other advanced economies, there were signs of gradual moderation in relative mobility for children born to lower-income families.
Fresh schemes to combat these issues could be on the cards.
In a video posted on social media on Feb 9 alongside the reports, Prime Minister Lawrence Wong said the Government is refreshing its policy approach and renewing Singapore’s social compact “so that every Singaporean has real and meaningful opportunities to progress”.
Acknowledging Singaporeans’ concerns about jobs in the face of rapid technological change, the authorities will also do more to help workers manage job transitions and have the skills to stay competitive, PM Wong added in a separate video on Feb 11.
The experts also anticipate more support for children from lower-income families.
Prof Theseira said that lower-income households face challenges in areas such as school attendance, awareness of educational pathways, and ways to supplement their children’s education.
The Government could be looking at new ways to provide those from lower-income backgrounds with more opportunities to offset the advantages enjoyed by their more affluent peers, Associate Professor Ho said.
The MOF paper measured outcomes from children born between 1978 and 1989, and does not capture the significant increase in the “educational arms race” over the last two decades, Prof Theseira said.
“Today, the problem isn’t actually the availability of public education, but the ability to use it well,” he added.
