Singapore as a country has seen tremendous growth since gaining independence in 1965, achieving first world country status in a relatively short period of time. Despite market headwinds, we all enjoy a stable economy and comfortable incomes. But there is a concern amongst many Singaporeans that they are being priced out of the market as the “rich gets richer”.
Income inequality and a widening wealth gap is a major concern for most countries as it can cause social unrest and a division amongst the people. The Singapore Department of Statistics produces annual data on household income and it shows that the income gap between those in the bottom 10% and top 10% of households has actually widened since 2009. In 2010, the difference in average income between the bottom 10% and top 10% was $9,288 and in 2020, the difference grew to $12,840, reflecting a widening income gap. This is a matter of concern for the government as well and they are taking steps to address it.
In recent months, ministers such as Deputy Prime Minister and Coordinating Minister for Economic Policies Heng Swee Keat and Deputy Prime Minister and Minister for Finance Lawrence Wong have spoken about the dangers of Singapore’s rising income inequality and widening wealth gap. In a recent survey by Ipsos, a global leader in market research, the top areas of concern for Singaporeans are the job market & unemployment (48%), healthcare (42%) and poverty & social inequality (33%). Despite measures taken by the government to reduce income inequality and sustain social mobility, many citizens believe that more can be done.
In February this year, the government increased taxes for the 1.2% top income earners and raised duties on real estate and cars, in a way, making the rich pay more taxes. It is also looking into the possibility of introducing a “wealth tax” for those who earn more, to contribute more. They see it as part of measures to ensure income inequality. In addition to the “wealth tax”, Singaporeans are also getting a helping hand in improving their employability and earning potential so as to close the wealth gap.
Some examples of measures that are already in place include the government investing heavily in the education of young children and youths, from the preschool years, to schooling years and working life. For adults, there is the SkillsFuture programme to upgrade and learn new skills to better fit in the new economy. With an opening SkillsFuture Credit of S$500 in 2015, subsequent top-up of another $500 and a one-off Additional SkillsFuture Credit of $500 for Singapore Citizens aged 40 to 60 in 2020, citizens will have up to $1,500 to reskill and upskill to seize opportunities in the future economy. For lower-wage workers, there is the “Adapt and Grow” initiative to help them acquire new skills and take on better paying jobs. All these in addition to the CPF and MediSave top-ups, GST vouchers and cash payouts announced in the Assurance Package and Household Support Package.
The above measures seem to be working as seen in the reduction of the Gini coefficient, which measures income inequality or the wealth inequality of a country. A Gini coefficient of 0 expresses perfect equality where all values are the same, while a Gini coefficient of 100 is the opposite (maximum inequality). Singapore's Gini Coefficient Index is 65.5 measured in 2019. For comparison, the USA has an index of 58.6, the UK at 64.9 and Denmark at 71.8.
The government recognizes that a high level of income inequality will create social unrest and unhappiness among its citizens and will continue to implement measures and support to close the gap. But there is only so much the government can do. Ultimately, it is up to individuals to better themselves and improve their employability and earning capacity through lifelong education, continuous skill upgrading and being in control of their financial situations. That is the surest way to close the widening wealth gap.