Ong Ye Kung: Cracks Showing in Social Mobility

President Address
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by REACH Singapore

15 May 2018 06:00PM

Minister of Education, Ong Ye Kung, said that there are four dimensions to unpack the issue of inequality to Singapore: income gap, middle-income core, social mobility and social mixing. He emphasised that it is important to carefully unpack the issue, as it is different from that of other nations. Minister Ong added that income disparity here is being moderated through policies, especially with a progressive tax system. He noted that social mobility is high in Singapore, compared to other countries like the United States and Britain. However, this may lead to inherited wealth where families who did well are able to pass down the privileges to their children.

Source: “Parliament: Inequality not so bad in Singapore, but cracks showing in social mobility: Ong Ye Kung”, The Straits Times, 15 May 2018

The Straits Times 2018. © Singapore Press Holdings. Reprinted with permission.

The Straits Times article

Parliament: Inequality not so bad in Singapore, but cracks showing in social mobility: Ong Ye Kung

SINGAPORE - Singapore has one of the smallest education underclasses in the world. And to further equalise education outcomes, it has two options - reduce academic rigour or help the bottom move up.

The choice is clear, Education Minister Ong Ye Kung said on Tuesday (May 15) in his speech during the second day of debates on the President's Address.

 Singaporeans, who are hardworking by nature, can continue to move up in the system, though it can be improved so that they can work smarter, he added.

At the opening of Parliament last week, President Halimah Yacob said income inequality and social stratification have broken the social compact in many countries, and the Government would tackle inequality "vigorously" before it becomes entrenched in society.

 In his speech, Mr Ong said it is important to carefully unpack the issue of inequality carefully, which is different from that of other nations, as he sketched out four dimensions of how the issue can be understood.

These would be the extent to which there is an income; whether there is a strong middle-income core; whether there is mobility, especially from the bottom upwards; and whether different groups interact well with one another.He summed these up as "gap, core, churn and mix".

On most of these fronts, Singapore is doing relatively well, said Mr Ong. But many are concerned about cracks that are starting to show in social mobility and social mixing, and these need to be addressed, he pointed out.

INCOME GAP

On the income gap, Mr Ong showed data that showed that a Singapore household in the top decile earns on average 5.8 times as much as a household in the bottom decile. While this is higher than South Korea, Britain and Finland, which has a ratio of about 3, the ratio is not "out of kilter" compared with other major cities, he added.

Mr Ong added that income disparity here is being moderated through policies, especially with a progressive tax system. The top 10 per cent of income earners contribute about 80 per cent of personal income tax revenue, he said, which are in turn redistributed to lower-income Singaporeans through schemes like the Workfare Income Supplement.

Families in the bottom 20th percentile in Singapore receive about $4 in benefits for every dollar of tax that they pay, he said, while it is $2 of benefits for every tax dollar for middle-income families. This is a higher than the $1.30-$1.40 that middle-income households received for every tax dollar in Britain, the United State s and Finland, he added.

High income earners also continue to give back to society through philanthropy, he said.

"With the muscle of progressive taxation and redistribution, and the spirit of giving back, we can moderate the effects of an income gap," he said.

Mr Ong noted that after taking into account government transfers and taxes, Singapore's Gini coefficient - which measures income inequality from zero to one, with zero being most equal - is currently about 0.36.

This is higher than the United States at 0.39 and similar to Britain, though lower than in other European countries and Japan, which have comprehensive welfare systems. It has moved down from an estimated high of 0.5 in the 1960s as a result of industrialisation efforts, foreign investments, and improvements in housing and education.

Mr Ong said while there were spikes in the Gini during the 1997 Asian Financial Crisis and the bursting of the US dot.com bubble in 2001, income inequality has moderated over the last 10 years. And contrary to studies which showed that GDP growth exacerbates inequality, the fall in Singapore's Gini coefficient coincided with periods of growth, as a result of Singapore's model of inclusive growth, he added.

MIDDLE-INCOME CORE

Median household income has also grown by 3.4 per cent in Singapore between 2006 and 2016, compared with countries such like the United States, Japan, Britain, Denmark an Finland which have seen stagnating or close to zero growth over the same period.

"And this is a result of income growth across the board, including the lower income," said Mr Ong, adding this is reflected in Singaporeans' changing lifestyles.

"Birthday and festive celebrations in restaurants, living in bigger HDB flats and executive condominiums, family vacations overseas - these are not enjoyed by an exclusive few, but a broad middle," he said.

But it could be more challenging for many middle income families to do better, given the high base that society is at. "We will still improve, but it will be in steps and not leaps."

A better life should also not be defined purely in economic and material terms, but from a more holistic perspective: a more pleasant and greener environment, a more cohesive and caring society, and a greater sense of Singaporean pride, he said.

SOCIAL MOBILITY

Social mobility is also high here, said Mr Ong, raising a Ministry of Finance study which showed that 14 per cent of young Singaporeans in their 30s who were in the lowest income quintile when they were growing up managed to move up to the top quintile of income earners. This is higher than the 7.5 per cent in the United States, 9 per cent in Britain, and 11.7 per cent in Denmark.

And when it comes to educational performance, Singapore's 15-year-old students from disadvantaged backgrounds did much better than peers in developed countries in literacy and numeracy, and also soft skills such as collaborative problem solving in the Programme for International Student Assessment (Pisa) 2015 test.

Singapore also has one of the smallest proportions of low performers in the Pisa test, said Mr Ong - in other words, one of the smallest education underclasses.

Over the years, social mobility has been achieved by giving students broad access to tertiary education and through high home ownership rates, said Mr Ong. There are also new schemes, such as the Fresh Start housing scheme and the Tenants' Priority Scheme, to help more from public rental flats move into their own homes.

However, cracks are starting to show.

The success of these policies in the past have led to a new set of issues, said Mr Ong. " Families who did well are able to pass down the privileges to their children, through better coaching, enrichment classes, and exposure to the world. Their children have a head start."

Social stratification is also starting to become entrenched, he added, with families who cannot move up despite strong and enhanced support facing circumstances " more dire and challenging than poor families of the past".

SOCIAL MIXING

As for social mixing, common spaces, a diverse spread of housing types in all neighbourhoods, community events, schools and National Service have contributed to Singaporeans being relatively blind to race, income and family backgrounds, said Mr Ong.

But there has been a "perceptible reduction in social mixing in recent years", with a recent study by the Institute of Policy Studies sounding the signal on a nascent class divide.

"Our policies will need to work against this trend, to actively bring Singaporeans of all backgrounds together," he said.

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