The Problem of Income Inequality in Singapore

Income inequality is the uneven distribution of income throughout the whole population of a country. The Gini coefficient is established by comparing the total number of the population of a country versus the total income earned; with 0 being income earned within the population is in equality and 1 being income earned within the population is in inequality (Ling, 2017). The consequence of income inequality may be severe as it may bring about social problems in the country and the group which is at the most disadvantaged is the lower classes of the society. This creates a gap between the rich and the poor, thus cohesion in the society will be affected. Usually when a person feels underprivileged because of circumstances, that person will naturally try to figure out the reason why it is so. When it comes to income inequality, that person will eventually blame society as the cause for their predicaments.

The presence of income inequality will create a social gap between those of the lower class from the upper class. Furthermore, research conclude that income inequality leads to or corresponds with other social problems such as rising crime rates, decrease in physical and mental well-being, a fall in racial unity and a decrease in cohesion between the population and the government (Williams, 2011).

In Singapore, many workers do not have an income which allows them to support his or her family substantially and with any self-respect. Singapore does not have minimum wage, as the government believes that minimum wage will kill jobs and drive investments from overseas away. Another example of a social issue caused by income inequality is the children from the lower class backgrounds are disadvantaged as compared to the children from upper class backgrounds. Although Singapore is backed by a high quality, robust and dynamic education system, children from the lower classes do not have money for their daily expenses. Around S$42 million have been allocated to 128,000 youths who were in financial need since 2000. This shows that even though the economy is doing very well, there are still children and families that are abandoned by the progress (Chan, 2015).

Also, the stratification of the different races’ contribution to the economy is the result of income inequality. In the case of Singapore, the majority race, which has governmental powers, may use the necessary means to enhance their social and economical standings, by sacrificing the standings of the other minority groups. Most of the self-employed of the Chinese and Indian heritage are of high statuses compared to the Malay heritage, as not many proprietors of sizable enterprises are Malays (Pang, 1982).

There are a few sociological theories that can be accounted for the causes of income inequality. One of them is social stratification. It is how people in a society are classified into groups based on their wealth, influence and social position. In some cases, a person’s talent is nurtured from young with the help of their family which includes financial support and positive influence from family members. They might even inherit their family’s business which will then contribute to his or her personal wealth and thus allow his or her social position to go upwards. On the other hand, a promising youth may not be allowed to recognize his or her full potential as opportunities may not be as easily accessible to them as compared to a person with backing financially and power. Furthermore, these youth’s family backgrounds may not be as privileged. This brings back to the income inequality between the upper class and the lower class stratifications. As jobs held by people of the upper classes such as doctors and scientists bring in significantly higher salaries as compared to farmers, tree cutters and cleaners, there would still be a pay gap that exists between these classes.

Research established that the middle and the upper classes had the most increase in their earnings in between 1998 to 2008. This corresponds to the progress of the middle class in the rising economies and the centralization of top earners in leading economies. (Lakner, Milanovic, 2013). Furthermore, the lower classes had a rapid loss of income at the same time (Krugman, 2014). Thus, the categorization of the upper and lower classes plays a part in income inequality.

Another theory to be considered for the presence of income inequality is social power. Social power is the person’s ability to impel on other’s thinking, behavior and perceptions. Social power is usually possessed by leaders of any type of organization, legal or illegal. These powers can be used to either benefit or be of disadvantage to the people under their rule or policies. Also, socially powerful individuals thrive on capitalism with the purchasing power that they acquire. Income inequality plays a major prerequisite for all social power systems, as those with social power can use their money and influence to climb their way up to top social statuses (Schutz, 2015). Therefore, income inequality takes place when implementations that would immensely benefit the socially powerful, are enforced upon the people under those with the social powers.

With governments being responsible for issues at home such as unemployment and rising standards of living, income inequality too can affect political stability of the country. In Singapore, the government is said to be successful in bringing down income inequality or rather the Gini coefficient from 0.412 in 2007 down to 0.380 in 2016. This is due to the assistance mainly given to low wage workers by enhancing salaries and retirement funds. The Workfare Income Scheme boosted the net earnings of low waged employees by giving money and CPF supplements. The Productivity and Innovation Credit and SkillsFuture schemes also helped employees with skills enhancements to match up with workers of various pay grades. The government also imposed heftier taxes on the rich which benefitted low-income families and these low-income families also receive annual GST vouchers which will help them with expenses (Ling, 2017). This shows that the Singapore government, which the majority of politicians are from the leading political party, the People’s Action Party (PAP), has carried out measures to help the lower income families so that they will not be left behind, thus shrinking the gap that creates income inequality. This gave an impression that the government is constantly helping its population, especially those in need of guidance and support.

In retrospect, if income inequality has not been addressed and dealt with, because of a man’s natural instinct of survival in his dire circumstances, the population might turn against the government and might turn hostile, resulting in riots, vandalism, larceny and other felonies. As a result, investment prospects might shy away from setting up business in Singapore, as these foreign investors will have a bad impression about the Singapore economy and political stability. This is to say that for the sustenance of economic growth, Singapore is highly dependent on foreign investments from nations such as the United States of America, Malaysia, Japan and many other countries. Therefore, the degree of economic growth and the gravity of income inequality are closely connected to Singapore’s political stability.

For the possibility that these foreign investor’s investments might fail in Singapore because of political instability, they would not want to set up base in Singapore. A survey in 1985 by the Straits Times proved that some production enterprises stated political stability as a key factor for running their business in Singapore. In late 1984, then Prime Minister, Mr Lee Kuan Yew, appealed voters to support the PAP in an election rally so as to influence foreign investors that Singapore is politically stable (Quah, 1988). In conclusion, income inequality can affect political stability by thwarting the economy from flourishing.