From The Straits Times
By Jeremy Au Yong
Published 3 Mar 2011INCOME inequality may be inevitable in a global city, but Singapore is confronting the situation with measures to prevent an underclass from forming.
Finance Minister Tharman Shanmugaratnam said the Government has worked hard not so much just to close the income gap, but to raise the incomes and living standards of Singaporeans.
Speaking at the end of the Budget Statement debate in Parliament yesterday, he laid out Singapore's approach to social mobility.
While acknowledging that Singapore's Gini coefficient was high, that measure of income inequality was not the only thing that counts, he said.
'Income inequality is not irrelevant... but what matters most is not income inequality itself, but whether we succeed in raising incomes and living standards for all Singaporeans, including and especially the lower income groups,' he said.
'Whether we can keep providing opportunities - so that all Singaporeans regardless of their family background or starting points, have the chance to fulfil their potential and aspire to a better future. Those are the key issues,' he added.
In fact, a high Gini score was unavoidable for global cities, he noted. Such cities are exposed to the pressures of global competition and the nature of their economies dictates the need for a significant pool of highly skilled, highly paid workers.
These workers are 'what make these cities tick and they compete with each other on that basis', he said.
Cities such as New York and Hong Kong have Gini scores above 0.5 while Singapore's is 0.480 in 2010, having climbed steadily from 0.444 in 2000. The score ranges from zero to one with a higher score indicating more inequality.
Singapore's model, therefore, was to alleviate the consequences of income inequality while maintaining social mobility.
To do this, Mr Tharman outlined three main engines the Government was investing heavily in: education, work and housing.
In each, there are many aid programmes, such as the Workfare Income Supplement scheme and HDB grants that Singaporeans can tap on.
Taken together, the amount given out is not to be sniffed at.
Mr Tharman used the example of a low-income couple in their mid-20s with two children. They would receive about $490,000 worth of aid in their lifetime - or about 60 per cent of their lifetime income.
'This is not a small-minded Government when it comes to intervening to help the low-income group,' he said.
Over the course of the three-day debate, many MPs had voiced concerns about the widening income gap and the state of social mobility.
Mr Tharman assured the House that the Government's efforts were bearing some fruit.
For instance, he said, real median household income in Singapore grew by 1.7 per cent a year from 2000 to 2009. The period excludes last year's extraordinary economic performance, which would have boosted the figure further.
Still, it surpassed real median income growth in successful Asian economies such as Hong Kong, Taiwan, South Korea and Japan.
It shrank on average by 0.5 per cent a year in Hong Kong and 2.2 per cent a year in Taiwan over that decade. Between 2003 and 2009 - the period for which comparable data for Japan and South Korea are available - median Korean incomes grew on average by only 1.1 per cent a year while those in Japan dipped by 1.2 per cent.
Singapore's income growth extended to the bottom 20 per cent of earners. Real household income growth per household member in this group grew 8.1 per cent between 2000 and last year.
But median wages in Singapore still lagged behind those in developed countries such as Switzerland, the United States and Britain, he said.
'We've done better than most of our peers, the relatively advanced Asian countries, but there is still headroom, some way to go.
'That's why we want to grow our incomes further and significantly in the next decade - 30 per cent growth in median incomes.
'If we achieve that, we would have caught up with the developed countries' standards of living.'
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