SINGAPORE: The Government must and will continue to extend assistance to the disadvantaged, but self-reliance is a more dignified option over “easy and unconditional” handouts, said Minister for Education Ong Ye Kung on Tuesday (May 15) in Parliament.
In a speech on tackling inequality, Mr Ong described it as a problem Singapore has wrestled with since its birth, and which remains unfinished business today.
But each country’s situation is different, and unlike the growing underclasses and stagnating economic outlook of many developed countries, Singapore’s median income continues to rise.
“Low- and middle-income families continue to experience real income growth and social mobility,” he said. “Singaporeans have been enjoying a rising standard of living and are motivated to do well. This is both a result of our culture - who we are - as well as public policies.”
He acknowledged that such transformation has created a set of problems as well, with a rising middle class facing difficulty in material progress due to Singapore’s high base; low-income families struggling to uplift themselves and some higher-income segments becoming socially distant from the rest.
Mr Ong warned, however, that universal welfare was not the solution to all these problems.
“Proponents argued that with universal welfare, there will be no stigma associated with social assistance, and the dignity of the low-income will be preserved,” he said. “A few countries have implemented universal welfare. But make no mistake, no handout is actually free. Someone has to pay for it.”
He pointed out that in these countries, average income tax is about 30 per cent, with Goods and Services Tax (GST) at 20 to 25 per cent.
“In Singapore, half of our population do not pay personal income taxes, and GST is still single-digit. If we want universal welfare, taxes on ordinary folks, including the middle-income, will have to be much higher,” Mr Ong explained.
A better way forward would be to enable people to help themselves, he said.
“What’s the difference? We make help available to them, but we also preserve their motivation, so that they continue to strive, instead of being passive recipients of welfare,” Mr Ong noted.
GAP, CORE, CHURN, MIX
Earlier Mr Ong outlined four dimensions to inequality: The income gap; middle-income core; mobility from bottom up and interaction between different groups.
On the income gap, he reminded the House how Singapore’s progressive tax system and other policies have worked to moderate disparity.
He then stressed the importance of a strong middle-income core, pointing out how Singapore’s Gini coefficient is about 0.36, which is better than the US (0.39) and about the same as the UK, but higher than other European countries and Japan owing to their welfare systems. The closer it is to zero, the more equal the society.
“The strongest evidence of a healthy middle-income group in Singapore is our changing lifestyles over time,” said Mr Ong. “Birthday and festive celebrations in restaurants, living in bigger HDB flats and ECs, family vacations overseas – these are not enjoyed by an exclusive few, but a broad middle.
“The challenge ahead is that many middle-income families hope to do better, and for their children to be better off than them. But given the high base we are at, the climb is getting harder. We will still improve, but it will most likely be in steps and not in leaps,” he added.
“We should also not define a better life purely in economic and material terms, but also other aspects of a holistic quality of life – from a more pleasant and greener environment, to a more cohesive and caring society, and with a greater pride in being Singaporeans.”
On mobility, Mr Ong noted that 14 per cent of young Singaporeans, whose parents were in the lowest income quintile when growing up, managed to move up to the top quintile. This is a higher rate than the 7.5 per cent in US, 9 per cent in UK and 11.7 per cent in Denmark.
Contributing factors to this include Singapore’s belief in meritocracy and public policies such as home ownership and universal access to good general education.
“But the success of our policies have led to a new set of issues. Families who did well are able to pass down the privileges to their children, through better coaching, enrichment classes, and exposure to the world. Their children have a head start,” he acknowledged.
“For families who cannot move up despite the strong and better support, we find their circumstances more dire and challenging than poor families of the past. Social stratification is starting to become entrenched.”
Mr Ong then moved on to social mixing, noting how three public policies - housing, National Service and education - help nurture and reinforce a Singaporean culture of being “blind” to race, income and family backgrounds.
“People are free to choose their friends and who they want to be with. But when groups are predominantly formed along socio-economic status – whether one is rich or poor - it is the start of stratification and that will poison society over time,” he stressed.
“Our policies will need to work against this trend, to actively bring Singaporeans of all backgrounds together.”