November 13, 2022

In a speech on 13 November 2006, PM Lee Hsien Loong remarked that Singapore treats ‘welfare’ as a dirty word. Indeed, Singapore is not a welfare state. Although Singapore’s Gini index, a measure of income inequality, is lower than many developed countries, it becomes the word’s second highest after taking state taxes and transfers into account. But in recent years, local studies about inequality and overseas political turmoil have rendered Singaporeans more nervous about inequality.

‘Self-Reliant Wealth and Trickle-Down Welfare: The Singapore Story in 200 Years?’ (in Navigating Differences: Integration in Singapore (2020)), by Associate Professor Irene Y. H. Ng (NUS Social Work), argues that self-reliance with minimal welfare has been Singapore’s governing principle since the colonial era. Singapore’s modern institutions not only distribute less welfare compared to other developed countries but perhaps even reinforce inequality to incentivise hard work. A/P Ng argues that even though the government has rolled out more support for the less well-off, the transfers are still small, suggesting that there are other important policy goals which prevent greater redistribution of wealth.

Firstly, Singapore has one of the lowest tax rates among industrialised and neighbouring countries. Its spending on social welfare is also low relative to other countries. Despite signals of higher taxes, actual tax changes have been incremental, coupled with continued warnings that higher taxes would drive businesses away. A/P Ng infers that the state continues to prioritise the vitality of the economy over reducing inequality.

Secondly, Singapore replaces unemployment insurance and minimum wage with indigenous schemes such as the Workfare Income Supplement and Progressive Wage Model (PWM).  While the PWM appears similar to a general minimum wage, it applies only to selected industries and is tied to training and productivity improvements. On the other hand, the increasing prevalence of part-time and short-time contracts have made employment more precarious.

Thirdly, Singapore students with different social-economic statuses tend to attend different schools and educational streams, resulting in more educational stratification. The education received in turn influences students’ achievements, aspirations, and careers.

Fourthly, while 79% of Singapore households live in HDB flats, the variety of HDB flats is diverse. More expensive and spacious flats tend to concentrate in the same blocks, and the same goes for cheaper and smaller ones. Despite HDB’s ethnic quota policies to avoid concentration of certain ethnicity in a neighbourhood, there has still been class concentration in residential neighbourhoods.

Fifthly, Singapore’s healthcare system is prized for efficiency, but this comes at the price of asking patients for co-payments and structuring health services based on people’s willingness to pay. Consequently, those willing to pay a higher price will get faster and better healthcare.

A/P Ng argues that these examples illustrate that income has become crucial to one’s life chances and experience. She postulated that a worst-case scenario would be when all efforts to tackle income inequality fail, resulting in acceleration and intergenerational entrenchment of inequality. Finally, A/P Ng observes that Singaporeans are at a decision point regarding inequality.

Read the chapter here: https://bookshop.iseas.edu.sg/publication/2435