Monday, March 10, 2014

Essay Draft 2


Collective efforts from private firms, the government and low-income earners will alleviate 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 entail this progress 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 been steadily immense[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. 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 and Post-Secondary Education Scheme, 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 – 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.

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. 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, 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 support 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. 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: 832 words)


References

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

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.


[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).

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