Income Inequality In Singapore

On 5 February 2018, in answering Mr Gan Thiam Poh’s query at Parliament on the income inequality in Singapore, Prime Minister Lee Hsien Loong expressed the government’s determination to fight the problem.

Before we delve into the topic of income inequality, we must first study the background. If you read The Straits Times, you may be able to draw a link between Mr Gan’s query and a report published by the Institute of Policy Studies (IPS) in December 2017, sounding alarms on the widening social divide in Singapore. According to the IPS report, people of a similar educational background (from elite or non-elite schools) and same housing type (landed property, condominium or HDB) tend to share common social ties. This issue was brought under the spotlight again with the launch of Teo You Yenn’s book “This is What Inequality Looks Like” in January 2018. It was followed by heated debates on how Singapore’s education system could fill the gap. Indeed, study showed that Singapore provided a more conducive environment for children of humble backgrounds to succeed, as compared to the United States. Nonetheless, this is the minority.

The Extent of Income Inequality in Singapore

Students have been taught in school or in economics tuition by their economics tutor the various adverse effects of income inequality. Singapore is known for having a wide income divide. In terms of Gini coefficient, the widely used measure of income inequality, Singapore fares better than other developed countries like the United States and Germany. Indeed, the income inequality in Singapore has slightly improved over the past 10 years. However, the Gini coefficient in Singapore is still above the 0.40 threshold even after factoring in the various wealth transfers like taxes and government subsidies. In contrast, the effective Gini coefficients in the United States and Germany are much lower after wealth transfers. This is probably due to the lower tax rates in Singapore. Singapore government charges a much lower corporate tax in order to attract foreign direct investments in Singapore. In addition, the rates of personal income tax are also lower as compared with other developed countries. You may want to sign up for a trial economics tuition class with a quality economics tutor to learn more about Gini coefficient and income inequality. The economics tutor will be able to teach you the various wealth transfers in Singapore, the Unites States and Germany which are meant to reduce the income inequality. A good economics tutor will also be able to explain the effectiveness of these wealth transfer measures.

According to the recently released data from SingStat, growth in monthly income slowed down in 2017 despite the sterling economic performance in Singapore last year. More importantly, the lowest earning households in the bottom 50 percentiles registered lower income growth as compared with households in the top 50 percentiles.

Income inequality is a common and unavoidable problem that all developed countries are facing. To mitigate the problem, governments around the world, including Singapore have allocated a significant amount of their financial resources to measures aimed at transferring wealth from the rich to the poor.

Progressive Taxes

An example of progressive tax is personal income tax. People earning a higher income are subject to a higher tier of tax, as compared with people earning a lower income. The government can then channel the revenue collected from its tax payers to various government subsidy schemes in support of the poor. These include GST voucher scheme based on housing types, SkillsFuture scheme that offers affordable training programmes for workers, as well as KidStart programme to fund the education of children from underprivileged families. According to Singstat, families staying in one-room and two-room HDB flats received a subsidy that was more than double the average subsidy across all housing types. In consultation with your economics tutor in economics tuition, list out a few other schemes of such type.

In closing, it remains a challenge for the Singapore government to bridge the income gap in Singapore. By applying what they have learned in economics tuition from economics tutor, students may find solutions to this long-time problem in future.

Christopher Lau

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