Can income inequality be reduced in Singapore?

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on October 1, 2018

Can income inequality be reduced in Singapore?

Income inequality is a growing concern in many developed nations including Singapore. The pressing issue can lead to innumerable social evils such as rise in crime, social unrest, poor health, and so on. While the rich continue to grow their finances, the masses belonging to the lowest socio-economic class face the brunt of poverty, hunger, and lack of opportunities for growth. Why does this happen? And, how grave is the problem in a country like Singapore?

According to ValuePenguin.sg, the GDP per capita of Singapore is S$79,697 that makes Singapore one of the richest nations in the world. But, the offset of this prosperity is the wide income gap between the rich and the poor. No doubt that Singapore’s income inequality is not as bad as it is in countries like the U.S. and China. But, there are other countries that seem to have done better than Singapore in this regard. Some of them are South Korea and Japan. So, can the problem of income inequality be reduce in Singapore? Let’s find out.

The current scenario

Undoubtedly, reducing Singapore income inequality is one of the topmost agendas for the government in Singapore. In February this year, Prime Minister Lee Hsien Loong said that ”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 interrelated. 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.”

Income inequality has increased in the past 10 years, but recently there has been a slight decline in the numbers. Globalisation and technological disruption are the major reasons for Singapore’s income inequality and the government has aggressively worked towards helping those who are not well-off. But, there still seems to be a lot that can be done to help the situation.

Ways to reduce income inequality in Singapore

Bring about changes in the taxation system

Singapore cannot consider changing its economy to match that of China. But, it can certainly bring about changes to its taxation system to ensure there is the redistribution of wealth to the low-income groups in Singapore. Increasing consumption tax, such as GST, can actually increase the burden on the lower income groups. The reason for this being, they tend to purchase more goods and services on which GST is applicable. So, increasing GST means increasing pressure on the low-income groups. On the other hand, rich people are financially capable of saving and investing a large portion of their income, and a relatively lower percentage of money will be spent on the consumption tax. The Singapore government needs to find a way to rebalance the amount of taxes the rich pay to the government and reduce the tax burden on the low-income groups.

Make changes in the education system

Another way to reduce income inequality in Singapore is by removing streaming the education system. According to a post by Money Smart, streaming begins as early as Primary 4 when students are placed in the EM1, EM2 or EM3 streams according to their results in the exams. In Primary 6, students are sorted into secondary schools according to their PSLE results. Obviously, streaming students so often and so tightly at such early age clusters all the academically stronger students. These students are group together in elite schools that have better resources than regular schools.

Streaming will further increase the income divide in Singapore. This is why a lawyer or a businessman will never have friends who do blue collar jobs.

Empower the workforce at the lowest levels.

The government should come up with ways to increase the income of people in the low-income groups. Initiatives such as the Workfare Income Supplement scheme has increased cleaners’ minimum income to $1000 a month or $1200 a month for that cleaning hawker centre. We need more such initiatives to reduce the income gap. And corporations should work to ensure the incomes in the lowest paying jobs don’t stagnate. They too deserve growth and opportunities to earn more than what they have been earning. In an attempt to reduce the income gap some nations have reduced the use of foreign labour in their countries. Singapore may not have to follow suit, but it can surely start prioritizing Singaporeans who do blue collar jobs.

Usually, businesses have a tendency to keep the wages low for the low-income groups. The government needs to come up with policies that can uplift the interests of the people who are not doing well in the society.

Bridging the income gap is a lengthy but continuous process. It is key to establishing a harmonious and prosperous society.

 


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