Growing Income Gap Threatens Social Fabric

Forty years ago, there was a very different Singapore. Singapore was a third world country with a GNP per capita of less than US$320. The city’s population was then growing rapidly, unemployment was rising at over 13 per cent per year and its infrastructure was poor. To add to these woes, more than two-thirds of its population was living in slums and squatter settlements on the city’s fringe.

It was then that Singapore embarked on a rapid industrialisation programme to create new jobs and to promote economic development. The government of Singapore also gradually adopted neo-liberal economic policies which seemed to benefit Singapore society as a whole. Singapore was soon transformed from a colonial urban slum into a first-world city.

However the same neo-liberal economic policies and the export-oriented economics, which contributed to the emergence of Singapore to be one of the richest countries in the world, has disproportionately lifted the top-tier of society while leaving a growing number of low-wage earners in the economic lurch.

Income gap – an expanding gulf

Between the years 2005 to 2007, the income for families in the upper echelons grew by 6 to 11%, whereas those in the bottom, only saw their income increase by between 3 and 4%. Official data which showed that 20% of the national households were suffering from declining income was released just after the last general elections. When Mr. Brown, a Today newspaper columnist, questioned why this data was released after and not before the elections, his regular column in the newspaper was abruptly terminated.

But the fact remains, income disparity in Singapore has grown markedly in Singapore, far more than most developed countries in the region like Japan, Korea and Taiwan and even developing countries which have also experienced long periods of growth. A November 9, 2007 Reuters Article, “Singapore’s economic boom widens income gap”, by Melanie Lee, highlights this inequality by comparing two very real people, who live in the opposite ends of the income disparity spectrum.

Although some may argue that the growing income disparity is but the effects of the inevitable need for globalisation and because of the open nature of the economy of Singapore, there are other factors which have made this inequity more acute.

Government policies

One major factor is the education policies, which is strongly biased towards the cognitive elite. Statistics show that well-educated families provide better opportunities, encouragement, exposure and developmental support for their children. As a result, children from these well-to-do Singaporean families enter better schools, gain university education and benefit from various study options and so continue to command high salaries and continue the upward spiral; while the children who are not from the cognitive elite are down-trodden and are limited in each step, pushing them into a downward spiral. The utilitarian ideals of meritocracy in education, which has limited the options for large numbers of school goers, does subtly distort the social fabric of Singapore by creating two extremes that may never meet, except with appropriate interventions and affirmative actions.

Another factor which contributes in a major way to the growing income inequity is the recent adaptations to the tax structure. The recent reductions in the personal tax base benefits the higher income groups more than the lower income segment. This is further exemplified by the exemption of interest from income tax. The corporate income tax has also been progressively reduced over the years, from 40% in the 1960s to 18% currently. With the reductions to the personal and corporate income taxes, the government implemented the Goods and Services Tax (GST) in April 1994; and since then has raised the GST from 3% to the current 7%. Like any other direct consumption tax, GST is regressive in nature as it undermines the equalizing role of the taxation policy, as it equally affects the rich and the poor. Even the GST offset packages do little to ease the pain of the low and middle income households.

The government’s manpower policies towards attracting foreign talent are another major factor which contributes to the growing income gap. The number of foreign workers has tripled between the years of 1990 to 2005. Foreign workers currently make up 30% of the labour force in Singapore. Although the spillover effect from the expatriates has helped to increase the salaries of the locally trained professionals and the managers, the same spillover effect of workers from under-developed or developing countries like India, Sri Lanka, Bangladesh and the Philippines, has artificially kept the salaries of the Singaporean semi-skilled and the unskilled workers low.

The efficiency with which law and order is dispensed in Singapore is one of the main reasons why Singapore is placed at the helm of the globalised world. The growing income inequality, if left unchecked, can have profound ill effects, which may affect the good standing of Singapore in the globalised world. This is especially so for a service-oriented economy and a multi-religious society like Singapore. Perceived biases from those in the lower end of the income disparity spectrum could trigger social unrest; and crime and mortality rates may also increase due to the sense of vulnerability felt by this group.

Some suggestions

So, what should the government of Singapore do to arrest the growing income disparity? Of course there are no easy solutions. The introduction of the Central Provident Fund (CPF) Life Scheme by the government is one move in the right direction. But more should be done and the following are good suggestions:

1. A Living Wage Scheme should be explored and implemented to reduce inequality of incomes.
2. Adopt a progressive tax structure for personal, corporate and Goods & Services taxes. In addition, the government of Singapore should consider adopting Earned Income Tax Credit (EITF) with graduated tax rates, which has been used by the United States of America successfully to deal effectively with income disparity since 1975 lifting more than 5 million people since its implementation from federal poverty lines; and have since been adopted by other countries like United Kingdom, Ireland, Canada, New Zealand, Austria, Belgium, Denmark, Finland, France and the Netherlands.
3. The Central Provident Fund which in essence is a single-tiered social security and pension system is not able to meet the ageing challenges of Singapore. As such, there is a real need to develop a multi-tiered social security and pension system, which could stunt the growth of income inequality and would also ensure that gains from economic growth are more widely distributed.

The growing income disparity is an issue that cannot be altered, but it is also an issue that cannot be ignored, as it threatens to tear the social fabric of Singapore. History does show that there is only this much the poor and oppressed can bear before they start fighting for sustenance and relief from abject poverty. It would be good for the government of Singapore to learn from history and provide the necessary relief to those at the lower levels of society lest we return to the state we were in 40 years ago, to the era of pre-independence.

Family Under Strain

A Today article reports, "During the Asian Financial Crisis in 1998, when 27,000 jobs were lost, the number of marital splits — divorces and annulments — jumped by 16 per cent to 5,651. The figure eased to 5,090 cases in 2001. But the next year, when the Singapore economy went into slowdown, the number of breakups shot up by some 14 per cent to 5,825...So far, it is early days to tell if the current downturn will have the same impact on families."

Read the entire article HERE.

Past Performance? No Guarantee!

ARTICLE BY TONY JACKSON HERE!

Rights are not mere advisory!

The following is the script of my speech in the Speakers' Corner on 13 December 2008 in support of Maruah's call to make a commitment to treat all workers with dignity:

There are an estimated 200,000 contract and part-time workers in Singapore. In 2005, both Mr. Lim Swee Say and Mr. Lim Boon Heng called for more protection for contract and part-time workers. They even urged government to crack down on employers who exploit them, and also pointed out that labour laws cover such workers as well.

Both argued that these workers should at least get their CPF, medical needs, annual leave and training. Mr. Lim Swee Say also added, “A growing number of contract workers may be deprived of these because of market practices”.

What is strange is that both Lim Boon Heng and Lim Swee Say are part of the government and yet they “urge” the government to protect the contract and part-time workers, who are often the lower-income workers?

As rightly pointed out by both men, these contributions to CPF, medical needs, annual leave and training, are not just the aspirations of the contract/part-time worker, it is but a RIGHT enshrined not just in the international labour rights declaration but also in the labor laws of Singapore.

So, if they are enshrined in the labor law of Singapore, how did the ‘market forces' determine that these rights could be ’taken-away’ from the workers?

Contract workers are often employed in jobs such as production operators, office cleaners, store-men, and security guards. They earn very low-wages and are in a very vulnerable position and are not able to negotiate terms and conditions with their employers. Very often, being ignorant of their rights as well, they accept their conditions of employment as 'standard' practice.

In 2007, a total of 35 employers were prosecuted by the Ministry Of Manpower for Employment Act offenses. The CPF Board prosecuted 181 employers for CPF Act offenses in the same year. But the question remains, “how many of those prosecuted were prosecuted for violating contract workers' rights?”

The government, the employers themselves and the unions have a duty to protect the rights of contract and part-time workers by:

1. Ensuring that Singapore's employment laws like Central Provident Fund Act, Employment Act and Workmen's Compensation Act are included in the contracts.

2. Ensuring that all contract workers have a written contract, which specifies their rights like appointment, working hours, salary, benefits, etc.

3. Not awarding a project to the highest bidder, but check if the bidder has sufficient cash outflow. This will prevent the problem of financially distressed employers not paying their contract workers.

4. Abolishing the law which says that a contract worker has got to be in employment for a minimum of 6-months before he or she can qualify for employment benefits.

And these pointers should not be mere guidelines or 'advisory', but should be enforced as regulatory as it is already enshrined in the labor laws of Singapore.

Many contract workers, work as 'equals' with permanent workers and there is usually very little difference in their job scope and responsibilities. The contract workers also give the employers great flexibility in the management of their businesses, especially in times of economic uncertainty. As such, the contract worker and his contributions has got to be valued at least as much as the permanent worker.

International labour rights calls for the right to work with equal pay with just and favourable conditions and for remuneration that ensures an existence of human dignity with protection against unemployment. This also extends to the right to form trade unions and to rest and leisure time, including periodic paid leave. All of which builds to a standard of living adequate for the health and well being of the employee and their family. These rights are also those of the contract workers.

Challenges for 'Post-Crisis' Singapore

Citigroup in a recent report, "Surviving Recession, Re-thinking Globalisation - Confronting Challenges of a 'post-crisis' world says, "Challenges that face Singapore in the 'post-crisis' future - falling demand, cost-competitiveness, structural relocation, widening income gap - are daunting".

Interview on Razor TV

I was with Poh Kwan and Daryl on the show Point Blank on Razor TV. The topic was 'Blogging'. With me on the show were prominent Malaysian blogger Ahirudin Attan (aka Rocky), co-founder of Nuffnang Cheo Ming Shen, blogger and Singaporean blogger Princess Sabrina. The group discussed the impact, be it good or bad, blogging has had in recent years, particularly in the fields of politics, technology, culture and lifestyle.

PART ONE



PART TWO

PART THREE

Things that I did not say...

In the New Paper article, "Welfare shoppers & their excuses", Genevieve Jiang writes, "The women and her three young children had been living in a shelter for homeless families for the past three months. But something was amiss. The husband whose husband was in jail, told staff at the shelter that she was getting financial help from a family service centre (FSC). But Mr. Ravi Philemon, manager of New Hope Shelter for Displaced Families, sensed something was not quite right. Said Mr. Ravi: "it was suspicious because she was constantly making calls and trips to two different FSCs. I suspected that she was a 'welfare shopper' who was getting help from various sources." When Mr. Ravi checked with the FSCs, he found out the help the woman was getting had been duplicated - she had also been getting aid from the Straits Times Pocket Money Fund for a few months. He alerted the FSCs. One of them stopped the funding. Said Mr. Ravi, "some needy families or individuals can be very resourceful in seeking help. They know their way about the system and can sometimes abuse it." The problem of welfare shoppers is not new, Mr. Ravi said, and it has not improved over the past few years. Some develop a "crutch mentality". Out of more than 30 families staying at the New Hope Shelter, there are usually three or four who refuse to help themselves and choose the easy way out, he said."

Genevieve is usually quite balanced in her reporting. But I think in this instance, she had misquoted me and had even said that I said things which I did not say.

Although I did speak with her about the family with three children, whose husband is incarcerated and had said that she was getting financial aid from two different FSCs. I did not reflect this person as a "welfare shopper", in fact the word "welfare shopper" is not even in my spoken vocabulary. For one, there is no way where I would be able to track if she was "constantly making calls and trips to two different FSCs", for me to make such a statement.

And during the phone interview, Genevieve did ask me if the number of "welfare shoppers" had gone up. I replied that I see no such increase. The intended meanings change drastically when this reply is misconstrued to say, "The problem of welfare shoppers is not new, Mr. Ravi said, it has not improved over the past few years."

When Genevieve asked me if there are people who abuse the helps offered by the shelter, I replied that many are actually thankful for the helps that we provide and that only 5 - 10% of the people in the shelters, actually are 'challenging' clients. Again, this was misquoted to say, "Out of the 30 families staying at the New Hope Shelter, there are usually three or four who refuse to help themselves and choose the easy way out". The two statements reflect entirely opposing views.

The Right to a Dignified Life!

The following is my script of the multi-disciplinary talk delivered at the National Library which was an event organised by Maruah to commemorate the United Nation's 60th anniversary of the Declaration of Human Rights:

Article 23:3 of the Universal Declaration of Human Rights states that; Everyone who works has the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection.

Are the socio-economic rights of every individual respected and upheld by the government of Singapore? Because this question is essentially one of justice and ethics, it is important to make a few, basic moral assertions:

* First of all, human beings have dignity, weight, and worth. All human beings, regardless of gender, race, creed, or ability, are deserving of respect and justice.

* Secondly, human beings have the ability to be creative. Our needs are met and our humanity is realized when we can apply our intellect and creativity to the nature of things.

The Roman Catholic Pope John Paul II once said, "Work is a good thing for man - a good thing for his humanity - because through work man not only transforms nature, adapting to his own needs, but he also achieves fulfillment as a human being and indeed, in a sense, becomes more a human being."

Every men and women on earth should realize the importance of work. But what good is work, when wages for the work are insufficient to pay for rent, food, utilities, taxes, health care, transportation, and childcare? And, how do we view those earning low-income and suffering the consequences poverty? Do we see them as rights-holders or as objects of charity? We need to accept the fact that individuals have legitimate claims to rights and a dignified life. And that it is the ability to earn sufficient wages, which gives an individual this capacity to live a dignified life. There is a real need today in Singapore, to seek justice in wages!

The Singapore government’s various policies have disadvantaged a certain segment of the population, which causes them to earn minimal wages that is further suppressed by cheap foreign labour. Therefore, it becomes the responsibility of the same government, to prop up the earning capacity of this segment of the population, through living wages.

What is a living wage? A living wage is an income which will provide this disadvantaged segment of the population with minimally satisfactory living conditions, to the context of Singapore. It is different from minimum wages, as those drawing minimum wages, could still live in poverty. Living wages, will give the disadvantaged a right to life, liberties and opportunities.

I was at the Budget 2009 Feedback session recently, which was chaired by Dr. Amy Khor and Mr Ng Wai Choong Deputy Secretary (Policy), Ministry of Finance, and there were some people from the business community who were there to advocate that the government should make it easer for ‘talented’ foreigners to come to Singapore to work as they demand a lower salary. One businessman actually said that he needs to pay a top rate chef from China only $1200 per month but no Singaporean top rate chef would work for that salary. Another business person said that China workers are willing to work for $2 per hour.

This argument to bring in more ‘talented’ foreign labourers is flawed. Singapore only has a resident population of about 3.5 million people. China and India combined has a population of about 2 billion. There surely must be 1% of the population of these countries, or 20 million people who are more ‘talented’ and ’skilled’ and more ‘educated’ than Singaporeans. If Singapore starts accepting ‘foreign talent’ based on the ‘fact’ that they are more ’skillful’ and more ‘educated’, the entire resident population has got to be displaced and Singapore has got to find ways of expanding geographically. What then will happen to the Singaporeans? And of course some foreigners would be able to work for $2 an hour as they may not have the overheads of the resident population like paying for accommodation, needs of the family, transportation, etc.

In this present era where businesses often try to shirk their corporate citizen responsibilities, a supplement to the suppressed income of those that earn low wages is essential. This is the reality. But is this reality being ‘masked’ by those that are in power? The government pays lip service to this reality. In the year 2007, the government spent 460 million dollars in workfare bonuses and rebates for living expenses, for those who earn $1500 or less. This is just an average spending of $105 per month per person, for the 362000 low-income workers.

The Straits Times reported on 29 December 2007, about Yeo Jee See then aged 52, who earns $1,000 a month and lives in a three-room HDB flat in Whampoa. She is a sole breadwinner, who is already dipping into her savings to look after her 79-year-old mother, who is recovering from breast cancer, and a 13-year-old son. The spending of the average of $105 per month, not even in disposable income, but through medisave top-ups, and rebates, is an insult to hardworking people like her.

I believe every eligible citizen should be entitled to a living wage. What is a living wage and how much should it be? My thoughts are that it should be capped to price of renting a room from the open market. Cost of average rental room in the open market-divide by 30-times 100. Why? Because, nobody should spend more than 30% of their income on accommodation, as then they become cost burdened and may have difficulty affording necessities such as food, clothing, transportation and medical care.

And it should be the responsibility of the businesses to pay this living wage to the workers. And if the government would not direct businesses to pay living wages arguing that competitive wages and a flexible labour market are necessary for business to remain competitive and to stay in Singapore, then it becomes the responsibility of the government to prop up these artificially suppressed wages.

By paying people a `living wage,' we show respect for them and what they do and we enable them to give something back. The have the income to spend more, local businesses, professionals, school districts and, even religious organisations, benefit. We also benefit as a community because people who are able to meet their basic needs by working a 40-hour week have time and energy for their family, their faith community, and civic life.

We the Citizens of Singapore!