Collective efforts from
firms, government and citizens will reduce income inequality in Singapore in
the long run.
In his TED talk, Goldin (2009) mentions that ‘the glory of globalization
could also be its downfall’. According to him, among the problems that follow
globalization is growing inequality among the population. This issue is not
unfamiliar in Singapore. Despite having enjoyed positive real economic growth
since 2009[1],
the income gap between the higher and lower strata has remain steadily wide[2].
Nevertheless, the government has been implementing measures and policies to
curb this problem. Among those that are being actively employed are subsidies
on consumption products such as utilities, public transportation and education.
In fact, the Department of Statistics Singapore (February, 2014) reported that
the Gini coefficient in 2013 decreased from 0.463 to 0.412 after accounting for
government transfers and taxes, which include provision for these subsidies.
However, such provisions are not economically and socially sustainable in
varying degrees and some may even worsen the income distribution gap in the
long run.
The GST Voucher scheme, which was introduced in 2012, is a point to
illustrate. Through this annual scheme, the lower-and middle-income earners are
entitled to a certain amount of cash reimbursement for payable goods and
services tax as well as a one-time subsidy for their utility bills (Government
of Singapore, 2014). The purpose of this scheme is to support their daily
expenses. But such benefits fall short of generating long-term benefits for the
society and individuals. There are indeed other schemes as well, such as the
Workfare Income Supplement Scheme (Central Provident Fund Board, 2013) and
Post-Secondary Education Scheme (Ministry of Education Singapore, 2014), which potentially
generate more positive spill over in the long run by encouraging workers and
students to enhance their skills and employability. All these schemes have
common characteristics. Although they are beneficial for the low-income
earners, they are formulated based on an unstable fiscal framework of
redistribution of wealth. This means the transfer of money, in the form of tax
payment, from higher earners to the less wealthy. This social fallacy is
detrimental to the well being of the society in the long run because the
high-income earners would receive diminishing incentives to produce more goods.
It favours the low-income earners over the former.
In the effort to alleviate the prevalent issue of income inequality,
instead of putting heavy reliance on wealth distribution, the responsibility to
narrow the income gap has to be jointly shared among three parties: private
firms, the government and the low-income earners.
In order to remain relevant, local private firms need to break away from
the traditional business model that focuses solely on making profits. Being
socially involved is now one of the keys to business growth. This idea stems
from the term ‘connected capitalism’. Coined by Isdell, former chairman and CEO
of The Coca Cola Company, it has now become a global effort by firms to
re-orient capitalism into a mechanism not only for profit, but also for social
good (Isdell & Beasley, 2012). Translating this in Singapore’s perspective,
the local technological based start-ups can help workers to keep up with
technological advances by providing basic interactive programming tutorials
online for free. This is a method endorsed by Code.org (2014), a social
organization that aims to provide the opportunity for every student to learn computer
programming. For the local firms, they can still generate profits through other
sources of revenue such as offering intermediate programming classes. By
integrating this social cause to the business model, the national technological
literacy will eventually see great improvements. The current workforce will be
able to better match the growing demand for higher skilled workforce thereby
improving the real wage.
The government is the key supporter in this tripartite social framework.
Besides providing schemes to assist the low-income earners, incentives such as
the Productivity and Innovation Credit are also rewarded to firms that provide
training accredited by Singapore Workforce Development Agency to their
employees (Inland Revenue Authority of Singapore, 2007). It is essential for
the government to place more investment on schemes that encourage the
lower-income earners to attend skill-upgrading courses while limiting schemes
that only have short-term beneficial outcomes such as the GST Voucher Scheme.
Not only is this system a well-regarded justification for the redistribution of
wealth, it is a strategy that will alleviate income disparity in the long run.
The ultimate source of responsibility has to come from the low-income
earners and their willingness to improve. Instead of heavily depending on the
government for subsidies on necessities, low-skilled workers need to be open to
changes and equip themselves with the skills and knowledge that are relevant in
today’s workforce. Their attitude towards acquisition of such valuable assets
determines the state of their income.
In conclusion, sustainable inclusive growth of low-income earners
requires the collective efforts of the three parties. This framework of
interdependency may not be as easy to achieve because there are immediate
sacrifices. Businesses have to allocate resources for the social good.
Individuals have to spend the time off work to enrol in classes. The government
requires sufficient revenue to issue the subsidies. But if everyone involved
believes in the common goal of building a better community, the long-run
trade-off is worthwhile. Moving forward, Singapore will be able to build a more
sustainable economy that will benefit all the three parties by mitigating
income disparity.
(Word count: 878 words)
References
Central Provident Fund Board. (2013, December 18). Workfare Income Supplement (WIS) Scheme. Retrieved March 08, 2014
from http://mycpf.cpf.gov.sg/Members/Gen-Info/WIS/WIS_Scheme.htm
Department of Statistics Singapore. (2014, February 20). [Graph
illustrates the real economic growth of Singapore from 1999-2013]. Retrieved
March 08, 2014 from http://www.singstat.gov.sg/statistics/visualising_data/chart/Real_Economic_Growth.html
Department of Statistics Singapore. (2014, February). Key Household Income Trends, 2013, 12. Retrieved
from http://www.singstat.gov.sg/Publications/publications_and_papers/household_income_and_expenditure/pp-s20.pdf
Goldin, I. (2009, July). Navigating our global future [Video file].
Retrieved from http://www.ted.com/talks/ian_goldin_navigating_our_global_future
Government of Singapore. (2014). GST
Voucher Overview. Retrieved March 08, 2014 from http://www.gstvoucher.gov.sg/overview.html
Inland Revenue Authority of Singapore. (2007). For Companies > Productivity and Innovation Credit. Retrieved
March 08, 2014 from http://www.iras.gov.sg/irashome/picredit.aspx
Isdell, N., & Beasley, D. (2012, October 16). Inside Coca-Cola: A CEO’s Life Story of Building the World’s Most
Popular Brand. London, UK: St. Martin’s Press.
Ministry of Education Singapore. (2014). Post-Secondary Education (PSE) Scheme. Retrieved March 08, 2014
from http://www.moe.gov.sg/initiatives/post-secondary-education-account/
[1] The total annual economic growth in
Singapore in 2009 was -0.5% while the succeeding years up to 2013 have seen
positive growth rates (Department of Statistics Singapore, February 20, 2014).
[2] The Gini coefficient of the country was
generally 0.40 to 0.49 between 2003 and 2013. It is equal to zero in the case
of total income equality and to one in the case of total inequality (Department
of Statistics Singapore, February, 2014).
