Singapore poor’s woes not alleviated by low level of social transfers from government

Singapore poor’s woes not alleviated by low level of social transfers from government

By Chris Kuan

The article “550,000 workers worse off than 8 years ago?” by Leong Sze Hian ought not be a surprise.

Any high income economy would have experienced this, especially those highly dependent on trade and manufacturing. A very good example is Germany – the weak Euro played a huge role in its stupendous current account surplus (bigger than China on per capita basis) but a significant factor was the series of Hartz reforms 10-15 years ago which reduced labour costs, effectively impoverishing the bottom 20-25% of workers.

But looking at earned income alone is only half the picture. The truer picture is total income which comprised earned income and benefits received in cash and in kind. It is difficult to make like for like comparison between data based on workers’ earned income in Leong Sze Hian’s piece and government social transfers of which Singstats provide figures based on households in HDB flat types.

Households living in 1-2 room HDB flats received $9,318 a year while those in 3 room HDB flats $3,723. These two types of dwelling comprised close to 24% of total dwellings and can reasonably be assumed to be the bottom quartile of households. In the UK, a country not particularly known for the generosity of its welfare state, the 2 lowest quintiles (each 20%) of households received an equivalent $18,000 of state transfers.

Low wages for the bottom quintile or quartiles are indeed a problem but not an uncommon one for a high income country. The real problem peculiar to Singapore is the low level of social transfer to help the lower quintile or quartile cope with their low wages. Leaving aside regressive methods of raising revenues such as excess returns on Central Provident Fund and sale of public housing, the mirror opposite of low government transfer for the bottom quintile is the comparatively low taxes on the top quintile. This explains the large income inequality in Singapore, no matter how it is measured.

Blame free trade and globalisation if that is your cup of tea but the real blame lies in the unwillingness to help the poorer segments of society. But then…. it is a tall order for millionaires to enact policies in which they have to part with more of their wealth through higher taxes, right?

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