Poverty and Welfare in Singapore

The Straits Times  Published on Nov 15, 2013

A multi-layered approach tailored to the diverse needs of poor families can lift them from their 'dark valleys'.

 By Robin Chan And Ong Hwee Hwee

Minister for Social and Family Development Chan Chun Sing called for the interview at the office of his ministry last Friday in the hope of resolving once and for all a contentious debate over how best to help the needy.

First, he makes it clear, any measure - be it the Gini co-efficient that tracks income inequality, or an absolute or relative poverty line to measure the number of poor - has its flaws or quirks and can give a very false picture of the situation in a country. 

Second, any solution to helping those in need must go far beyond the numbers as each individual and family has complex problems that numbers cannot decipher.

Singapore's approach too cannot be too simple. A single definition of poverty such as a poverty line based on a fraction of median income may create more problems than it solves, he says. Instead of a single poverty line or even a single layer of assistance, Singapore favours giving multiple lines of assistance to help Singaporeans across the spectrum, in help schemes that are layered and overlapping with one another.

Going down the list, he says: "100 percentile for education, 80th percentile for housing, 67th percentile for some of our schemes like childcare subsidies." He is referring to the proportion of Singaporeans who qualify for each of these subsidies. "Next, you have Workfare. Then you have the national ComCare assistance scheme, followed by Public Assistance." Workfare tops up the income of workers earning less than $1,900 a month and ComCare provides short- and medium-term assistance for those who are temporarily unable to work and have a monthly household income of $1,700 and below or a per capita income of up to $550.

Public Assistance (PA) is for those who cannot work and have no family support, usually the elderly. A single adult gets $450 a month, while a household of two adults and two children gets $1,480.

What this all means is that while Singapore has no official measurement of what constitutes poverty here, there are in fact many yardsticks as indicated in his hand-drawn, rainbow-coloured kuih lapis.

"This is our philosophy of having multiple lines of assistance across the entire spectrum rather than having one line," he says.

In September, the Hong Kong government drew its official poverty line at half the median household income level. In one stroke, about 1.3 million people, a fifth of its population, are now deemed to be living under it. The poverty line is HK$7,700 (S$1,240) a month for a two-person household and HK$14,300 for a four-member household. 

The question of the poverty line has also been raised no less than three times in the last two months by different MPs - Non-constituency MP Yee Jenn Jong, and Nominated MPs Laurence Lien and Tan Su Shan. On Monday, the Lien Centre for Social Innovation released a paper that called for more measures of poverty, using absolute, relative and subjective methods. The paucity of data, in their minds, raises the question of whether sufficient government resources are being targeted at the right people who need them most.

To him, one line does not help because "who is poor and why they are poor is a multi-dimensional issue". The line can also result in mathematical quirks. A line that is defined as 40, 50 or 60 per cent of the national median income, will, by mathematical definition, always yield one "magic number" under which everyone is considered poor. But if the median income rises very quickly because the whole economy is doing very well, then Singapore ends up with more relative poor by the definition of the line, he says. "So now does that mean that in that situation, we should have more resources spent on that?" he asks. On the other hand, if the median income is declining because the economy is contracting, then Singapore actually ends up with fewer poor as defined by the poverty line.

"Then does it mean we need fewer resources to take care of these people?" he says.

"It's paradoxical. So I'm not saying that it's not useful. I'm just saying that before we use it, we must know the quirks and interpret the thing."

Rather than one figure, Singapore's approach is to look beyond the numbers when identifying who needs help, to understand the causes that lead to people needing help, otherwise "you don't get any policy prescription that treats the symptoms and the root cause". "That's my fear," he says.

In fact, in countries like the United States and Britain, where an official poverty line has been drawn, he says, the line has yielded more problems than solutions. The US tried to define a line but found that it has no practical value because it did not help the authorities to identify who are the poor or help them to know what to spend more on, said Mr Chan. Neither has it helped the British government be more varied and more targeted in its assistance, he says. "They realised that actually (having multiple lines) is the correct thing to do. And if that's the case, actually every society requires multiple lines."

The US has an absolute poverty threshold set at three times the cost of a minimum food diet in 1963. This is updated annually for inflation. But this absolute measure has been criticised for being outdated and a simplistic statistical exercise as it has also tended to have fluctuating numbers of poor, depending on recessions and economic booms.

Who are the poor?

BUT having debunked the usefulness of the poverty line, questions still remain: Who exactly are the poor in Singapore and how many of them are there? To that, Mr Chan says there are two groups that need help the most.

One is the temporary poor, those who for different reasons fall into hardship. They can be helped out of poverty through some temporary assistance such as ComCare.

The second group is the one that is more worrying and most challenging for the Government. These are the people who are poor for a very long time and have a problem getting out - the chronic poor.

Here, the problem is much more complex to understand because their poverty could be because of many factors such as drug abuse, poor financial management or ill-health. And it is more worrying if they are young, Mr Chan says, because they and their children could get stuck in a cycle of poverty.

"You can be poor in one generation, but you must not be poor in every generation," he says. Stabilising these families is not just a matter of transferring money to them, but requires a multi-faceted approach from sorting out their housing situation, to helping them get a job and making sure their children go to school.

This is to give them "holding power" so that they do not fall back into the cycle, he emphasises.

"We are not talking about a one-year or two-year problem. These are the people that require five to 10 years of assistance to get them out of the dark valleys", he says. "And on top of that, we are not talking about just money... We are talking about having enough volunteers to come and hand-hold them and mentor them out of the situation. That is our greatest challenge."

Which is why his ministry will be launching a coordinated approach to package help for this group of what the Government calls "vulnerable families". They will start with "the most intense cases", such as families who end up in trouble because of drug problems. Help will be extended to others.

But when asked how many such families there are, Mr Chan declines to give a figure, saying he would rather not draw a line at where the help will stop.

Complicating matters is that there are still people who likely need help but fall through the cracks and do not show up in any statistics - the "false negatives" or people wrongly identified as not needing help, who would actually benefit from it. "You try to reach out to as many as you can but there will be some who don't want your help for pride or other things. Then you have got to be very careful," he says. 

"But you don't want to end up in a situation whereby people are saying, 'Okay, I can't get help because the system is very complicated or I can't get help because it's not coordinated or people complain that the help is going to a group of people who are less deserving from the rest.' But those are value judgments that you have to make." 

He admits that having a poverty line or focusing on numbers might actually be more politically palatable, but he says it would be simplistic and disingenuous. "Let's say today we have 3,000 PA candidates, and tomorrow I have 2,500, should I pat myself on the back? It gives you comfort, right? But is it true? Overnight. Is it true? Where did the 500 go? Have they died?" And if a group of people has moved out of a particular line of assistance, it does not mean they no longer need help, he adds.

"I don't want to be politically expedient. I understand it is easy to have a (politically) correct headline, but that is not what I am here for, and I hope I never get into that position. We continue to do useful things, continue to do purposeful things for the people, whom we care for, not just because it's expedient to do so." Instead, his true mark of success is in continuing to raise the middle-income level and prevent people from falling into poverty in the first place.

"Your question is how many people are there (in poverty)? My question is how many people have I avoided getting there because they have jobs, because they have housing, because they have medical care. That is the real big question to ask." 

Not "social astronomers"

MR CHAN says while he welcomes the debate on how to better reach out to those living with less, he hopes that Singaporeans will not lose sight of other challenges confronting the nation, some of which are driven by global forces such as competition and technology. 

The critical challenge, he says, is looking for ways to grow the income of the middle class, so that "today's middle income" will not end up as "tomorrow's bottom". Calling it a problem faced by most countries in the developed world, he notes: "If you look at the middle class in the United Kingdom, the real median income has not changed... In Taiwan, it has slowed down. And in Hong Kong, it has stagnated. Singapore has done relatively better. There is still some growth."

While there will likely always be an income gap - a fact of life given Singapore's fate as a competitive city-state attracting top talent - he acknowledges that "if the gap opens up too big, it makes for an unstable society and it is not good for people".

The Government's approach to this is five-pronged - providing jobs, education, health care and transport, and using social transfers as the "last line of defence".

Asked about the Singaporeans Against Poverty campaign led by Caritas, the charity arm of the Catholic Church, which aims to raise awareness of the situation of those living with less, he says: "I have no issue with people creating more awareness but I hope it does not stop at that. I say don't be social astronomers. "Go beyond discussing the one line or many lines. Come forward and do something, and understand how we have structured the system to take care of our people.

He says that it is not an indictment on anybody that Singapore has poor people - every society has them.

"But the circumstances don't define us. Our responses to the circumstances define us. That's the message we want to give. So I hope people don't ask, 'Are you hiding (poverty), do you not dare to define it?' No, what's there to hide? You want to know, I will tell you everything."

Prime Minister Lee Hsien Loong

Singapore is past the point where a poverty line is useful, Prime Minister Lee Hsien Loong indicated yesterday, as its groups of needy now take shifting and multi-faceted form. Hence, the Government's "kueh lapis" approach to social assistance, he said, summoning a metaphor that Minister of Social and Family Development Chan Chun Sing used to describe the multi-layered help it provides to those in need.

Speaking to reporters after a Commonwealth summit in Sri Lanka, Mr Lee weighed in for the first time on recent calls to establish a poverty line in Singapore, after Hong Kong did so in September.

He said that a poverty line like the World Bank's measure of $1.50 a day was irrelevant in Singapore as there are no "dead poor" here, by which he means those who are starving and unsheltered.

Rather, the poor here range from those going through temporary setbacks to families suddenly felled by illness, to the needy elderly and low-skilled workers.

Each of these groups needs a different sort and scale of help, and often, "men and women of good sense" are required to assess what assistance is desirable and necessary in each case.

This cannot be accomplished by a rigid poverty line, he said, which might be polarising and leave some outside the definition of poor.

"To say as an ideological matter that 'I must have a proper definition, and I want to reduce this group to zero' - I think we have moved beyond that point and I don't think that a definition will help us to improve our schemes," he said. Mr Lee also dismissed suggestions that a poverty line would help "focus minds" on the issue of the poor in Singapore. "What is important to us is not about whether we can find a definition with which we can focus minds on the problem, because our minds are focused on the problem," he said.

There are many people doing social work of various kinds in Singapore, he added, a diversity of effort that could actually be hindered by the establishment of an all-encompassing poverty line.

The topic dovetailed with discussions at the Commonwealth Heads of Government Meeting, whose theme was "Growth with Equity". During retreat sessions with leaders of the 53-member grouping, PM Lee set out Singapore's approach to sustainable development, explaining why it is careful to spend within its means and not provide a false sense of well-being through deficit spending.

While it is right for governments to shield their people from the uncertainties and inequalities of the globalised world, it is hard to translate "noble intentions" and social spending into real gains, he said.

In some countries, heavy public spending has not solved the problems of unemployment and a lack of competitiveness but has led to growing debt, he said.

Singapore's approach is to live within its means so as not to leave the next generation indebted, pursue long-term growth strategies rather than deficit spending, and protect the environment, he summed up.

www.straitstimes.com Published on Nov 12, 2013

SINGAPORE has many helplines for people with differing needs, and the rules are flexible when they do not meet the qualifying criteria but are genuinely in need, said Minister for Social and Family Development Chan Chun Sing in Parliament yesterday. This assurance from Mr Chan came amid renewed calls for Singapore to identify an official poverty line after Hong Kong set one in September.

Some MPs had argued it would focus on the state of poverty here and track how it is addressed. But Mr Chan had rejected their argument at last month's parliamentary session. He said it risks a "cliff effect", where those below the poverty line get all forms of help while citizens who are genuinely in need but outside the poverty line are excluded. 

Yesterday, he defended again Singapore's multi-pronged help strategy as Ms Foo Mee Har (West Coast GRC), Ms Lee Li Lian (Punggol East) and Non-Constituency MP Yee Jenn Jong asked about the eligibility criteria of social assistance schemes. Handing out a rainbow-coloured chart of a range of aid that gives bigger sums to the low-income, Mr Chan said: "It shows how we share the fruits of our success with all Singaporeans by providing more for those with less."

On one end are broad-based subsidies for essentials such as housing and health care, and for development, which stretch from early childhood care to education and training. Such help covers a broader group of Singaporeans, and the lower-income get more support, he said, citing the Community Health Assistance Scheme for lower- and middle-income families with per capita household income of up to $1,800 a month. About 340,000 cardholders qualify for subsidies of up to $18.50 for a visit to the doctor for common ailments like a cold, and up to $80 a visit for chronic conditions like diabetes, with caps that rise to $480 a year. 

On the other end are targeted schemes for a smaller lower-income group who need more help. For instance, with ComCare, more than 8,500 citizens receive up to $108 a month in kindergarten subsidies, and more than 10,000 get wage supplements of varying amounts.

To be eligible for ComCare, the household income ceiling is $1,700 a month or per capita income of up to $550. But Mr Chan assured Mr Yee that ComCare has no "cliff effect" as those who apply are assessed not only by income, but also by family size, number of children in school and medical status. "It is not the case that everyone under ComCare gets the same amount," he said, adding that more than 1,500 households who did not meet the income criteria got ComCare last year.

While MPs acknowledged the Government's efforts, Ms Foo, Mr Zaqy Mohamed (Chua Chu Kang GRC) and Dr Intan Azura Mokhtar (Ang Mo Kio GRC) said such help did not always reach the needy, because they might not know of it or are daunted by the application process. Dr Intan said a wait of two to four weeks for ComCare frustrated her residents. She called for front-line staff to be trained to be flexible in giving help, and for better coordination among government agencies. Agreeing that more could be done, Mr Chan said: "I urge all Members of the House to join us in this, to mobilise the volunteers, to reach out to these groups of people so that... they do not need to go through the difficult moments in life alone."

chinlian@sph.com.sg

How some countries measure poverty

The Straits Times

 UNLIKE many developed countries, Singapore - along with Canada, New Zealand and South Korea - does not have an official poverty line. 

Singapore does have some estimates on numbers of the working poor, but there is no publicly available government data on how many non-working households there are who can be considered poor. Still, data on how many people fall below a certain level of income is useful as it is a simple yet effective gauge to track numbers of people who might need financial help - and whether their ranks are growing. This is why even countries that do not have official poverty lines, have unofficial ones.

Take Canada. Rather than a single line - which has obvious flaws - it has a more complex and comprehensive method of tracking numbers of the poor. A spokesman for the Canadian government's statistics agency told The Straits Times that it has three different benchmarks to measure how many "low-income" people there are at any given time. 

The first is the Low-income Cut-offs. These are income thresholds below which a family will likely devote a larger share of its income on basic necessities, such as food and clothes. The country keeps meticulous data on how many working and non-working poor fall below these thresholds. It is not a single income level, but is fine-tuned depending on a host of factors such as whether the person lives in an urban or rural area.

The second, the Low-Income Measure, is 50 per cent of the country's median family income, adjusted for family size.

The third, known as the Market Basket of Measures, measures disposable income.

These are treated as "de facto poverty lines", the spokesman said.

At last count, in 2011, there were between three million and 4.2 million Canadians - or between 10 and 12 per cent of the population - who were considered "low-income".

Absolute or relative?

OVER time, the way poverty has been defined globally has evolved and there are now three broad methods - absolute, relative and subjective.

Absolute poverty is the most simplistic. It fixes a level of income, below which it is deemed that the person or family is poor. In developing countries, the World Bank defines the absolute poverty line at US$1.25 (S$1.55) a day, and has set it at US$2 a day for middle-class developing countries. But it gets trickier in developed countries. The US has an absolute poverty threshold set at three times the cost of a minimum food diet in 1963 updated annually for inflation. But these absolute measures tended to have fluctuating numbers of poor depending on recessions and economic booms, according to economist Michael Forster from the Organisation for Economic Cooperation and Development (OECD).

Relative poverty is a measure more often used in developed countries, as it is set in the context of the overall distribution of income in a country. The OECD sets the mark at half the median household income, while Britain and Taiwan have thresholds at 60 per cent of median household income. But relative definitions of poverty, by definition, mean that some people will always be less well-off, regardless of how affluent a society becomes. So policymakers have to look at other yardsticks to ensure that the less well-off are not falling further and further behind those surging ahead, with some landing in a condition of being in dire need.

Subjective poverty, a newer concept, asks what it feels like to be poor, taking in cultural and societal attitudes to being "poor". This has led to new and more nuanced ways of measuring poverty, said Ms Sanushka Mudaliar, senior manager at the Lien Centre for Social Innovation. These include multi-dimensional poverty measures with indicators for poor health, lack of education and disempowerment; and an index used by the United Nations which tracks exclusion from social services, and civil and social life.

Yet another is Participatory Poverty Assessments, which involve engaging the community in creating a definition and measure of poverty that aligns with their experience, she added.

Some might argue that since relative poverty will always be a concern, the poor will always be with us. While that might be axiomatic, it should not distract society from seeking to understand the underlying causes which keep some members from breaking out of poverty and trying to give them a leg-up.

As Singapore strives to become a more fair and just society, one which is plugged into a fast- changing globalised economy, the key to maintaining its social cohesion will be efforts that are made - by Government as well as individuals - to help its weaker members stay with the pack that is racing ahead, rather than have them fall further behind.

According to latest official data, 10 per cent of Singapore's resident households, comprising an average of 3.5 members and with at least one working person, earn an average of $1,644. This figure is all the more surprising given that Singapore has one of the world's highest annual incomes per head, of $65,000.

Singapore has no official measurement of what constitutes poverty here, but the Department of Statistics found the average household expenditure on basic needs to be $1,250 a month for a four-person household two years ago. This is average spending on food, clothing and shelter for those living in a one- to two- room flat, according to a paper to be released by the Lien Centre for Social Innovation.

Given Singapore's rapid economic progress over the decades, poverty is a phenomenon that many do not encounter personally, or tend to wave aside because it is not part of their daily consciousness.

Indeed, in 2001, Professor Kishore Mahbubani, dean of the Lee Kuan Yew School of Public Policy, declared that Singapore had eradicated poverty. "There are no homeless, destitute or starving people in Singapore," he said, in remarks that some considered too sweeping.

Mind... the gap

The Straits Times Published on Apr 06, 2013

The nature of inequality is changing and the pressure to take from the rich to give to the poor looks set to grow. Rachel Chang dissects the challenges ahead.

THE millennium was a turning point for economic inequality in Singapore.

From the year 2000, an income gap that was narrowing turned the corner and began to widen. The wages of skilled, top earners began to pull away from unskilled workers at the bottom, whose incomes stagnated. This is the story of inequality in Singapore that the Gini coefficient alone - the most widely used measure of inequality - does not tell.

Singapore has always had a high Gini coefficient of over 0.4 due to its open economic structure. The Gini coefficient plots inequality from a scale of zero to 1, with zero representing completely equal incomes across a population. Singapore's Gini actually rose more briskly in the 1990s - from 0.408 in 1990 to 0.442 in 2000, than in the noughties, when it went to 0.472 in 2010.  But it is only in the past decade that a gulf has opened up between skilled and unskilled workers.

Globalisation and a technological boom have powered the "skills premium" that highly qualified workers command worldwide. In Singapore, it collided with local factors of an economic restructuring, a liberal intake of cheap foreign workers and an ageing demographic to explosive effect.

Singapore Management University economist Hoon Hian Teck's research shows that from 2000 to 2010, the economy moved decisively away from manufacturing to high-end services. For example, foreign direct investment in the manufacturing sector, as a ratio of gross domestic product, shrank from 36 per cent to 21 per cent over this period, but grew in its financial and insurance services sector from 36 per cent to 43 per cent. This exacerbated the skills premium for high-end workers as demand for them grew faster than supply, he explains. 

The millennial turning point is also reflected in the ratio of average incomes of the top fifth of earners compared to the bottom fifth. This fell from 14.4 in 1980 to 10.1 in 2000, before U-turning. It has risen through the last 10 years; as of last year, top earners made 13 times what bottom earners made. 

Thirteen years after its turning point, inequality has entered a new phase of urgency, say observers. Unlike in the past, notes Nominated MP Laurence Lien, income inequality is no longer set to a backdrop of a "rising tide that lifts all boats". Then, "most individuals and families felt that their plight was improving all the time and social mobility was higher", says the chief executive of the Lien Foundation. Now, there is wage stagnation and some depression, not just for those on a low income, but for a wider group.

The 'inequality' word

FROM 2000 to last year, as the wage gap grew, the word "inequality" was conspicuously absent from the Government's annual Budget statement.Competitiveness, rather than redistribution, was the order of the day. Following a global trend, top income tax rates were lowered throughout the decade from 28 per cent in 2000 to 20 per cent in 2006 for economic attractiveness.

But last year, the "inequality" word reared its head - three times at that, in Deputy Prime Minister Tharman Shanmugaratnam's Budget speech then. This year, he said it five times.

More noticeably, his rhetoric was sharply different.

In 2011, responding to MPs' concerns over the income gap, Mr Tharman said that "(income inequality) is something we should be concerned with. But what matters most is not income inequality itself, but whether we succeed in raising incomes and living standards for all Singaporeans, including and especially the lower-income groups".

In this year's Budget, which promised more social spending while hiking taxes on luxury cars and investment properties, Mr Tharman said that inequality is growing everywhere - but "it matters more to us because Singapore is not just a city but also a nation. We must take further steps to temper inequality". Observers see a new direction - and a new determination - in the Government's redistributive efforts.

In the past few years, it has curbed the inflow of foreign labour, cajoled companies to invest in enhancing productivity, and expanded its skills training programme to "upgrade" workers.  

It is also redistributing significantly straight from government coffers to low-income and older workers' pay cheques, through schemes such as the Workfare Income Supplement, the Special Employment Credit and the Wage Credit. 

"The Government deserves a lot of credit for really pushing the restructuring this time. There is a lot of resources being put in here," says Institute of Policy Studies research fellow Tan Meng Wah.

But economists and experts point to blind spots, and say it remains to be seen if the Government's new zeal can keep up with inequality's own momentum. The effort to boost productivity should raise incomes, but "this does not mean that nothing else needs to be done because rising wages is only one part of the problem", says the chief executive of Centennial Asia Advisors, Mr Manu Bhaskaran. The retired, elderly poor, for example, will not benefit from higher wages - but will suffer the inflation that comes in tandem, he notes. This group, who are both old and poor, will continue to grow in what Mr Tharman has said is a unique, local challenge.

Due to Singapore's rapid development, unskilled workers are largely also ageing ones. Of those who did not complete secondary school in the workforce, two- thirds are aged 50 and above. That Singapore is now on the ageing downswing overall has also made its inequality more visceral, says Dr Tan. "When you are 20 years old and you see large differences in income around you, it's okay. You're young, you can work harder and achieve that. But when you're 50, it's a different dynamic," he notes.

Inequality is a vicious circle of its own. Dr Tan notes that the income inequality of earlier decades has led to a "wealth gap" now, where the rich enjoy a steady stream of investment income that the poor do not. This wealth gap "has an even greater psychological impact because we live so close to one another", he notes. National University of Singapore economist Hui Weng Tat points to a perfect storm of high costs of living and high aspirations: "For a developed economy where educational and aspirational levels of a large proportion of the population are high, and affordability of major essentials such as housing and private transport seems to be slipping away... significant resentment will undoubtedly be focused on the extent of inequality that exists."  

Studies have found other psychological effects of inequality, such as reduced work morale and lower productivity, he notes. "The disillusionment and disappointment inevitably will be expressed at the polling booths."  Former chief statistician Paul Cheung says that a new "social distance" has emerged in Singapore in the last decade, one which may be unbridgeable. "In the past, you have HDB blocks next to the rich enclaves. Now you have enclaves that even the middle class can't access, such as Sentosa Cove and other 'high-class' places." 

Dr Cheung, now a social work professor at the National University of Singapore, adds: "Social class has become more distinct and stratified. This is a serious issue for Singapore as it underpins all political and social changes."

Tweaking social assistance

DURING the previous term of government, social spending rose from $13 billion in 2006 to $21.5 billion in 2011. Currently, low-income families get $4 in transfers for every $1 they pay in taxes. But there still exists a wide public consensus that the Government is not redistributing enough, and is too tight-fisted in its social assistance.

A part of this is philosophical. Still evident in its new progressivity is the Government's enduring ideological commitment to self-reliance and aversion to handouts. Almost all of its major new redistributive schemes are tied to being employed, and it has ploughed resources into early childhood education and adult skills training.

Its "humanitarian" assistance - that is, handouts - remains minimal. Public Assistance, given to the elderly with no one to depend on and who cannot work, is $450 a month, after a $50 increment in this year's Budget. The Lien Foundation's Mr Lien says that the Government can be much less conservative in how it manages its social assistance programmes, like in its use of endowment funds. It uses a percentage of investment returns from the reserves to set up such funds. Then, only a percentage of these funds is spent per year: a "doubly conservative" method that ensures that much less is spent on social assistance than is available to be spent, he says.

Mr Tharman has expressed the view that rather than being conservative, this guarantees such social assistance programmes beyond the current term of government - insuring them against the vagaries of populist pressures and economic cycles. While government transfers have grown in Singapore, this factor brings its Gini coefficient down by only about 6 per cent, from 0.478 before transfers, to 0.459 after. This is a far smaller magnitude than the 30 per cent downward effect that other Organisation for Economic Cooperation and Development countries achieve on average, says Prof Hui. Boosting transfers will help acceptance of income inequality, adds SMU's Prof Hoon. This is because inequality is then seen as a necessary way to generate the fiscal resources needed to subsidise the disadvantaged, he says. 

But some People's Action Party (PAP) backbenchers urge the Government to continue to stand firm against the political wind. "Big and broad transfers might give you a lot of political capital, but where does that take the country in 20 years' time?" says Moulmein-Kallang GRC MP Edwin Tong. He argues that social assistance needs to be targeted and means-tested, as opposed to blanket handouts. He says: "Once you start giving, it's much harder to scale back. Look at what's happening in the West. Why do we think we might be different?" PAP MP Liang Eng Hwa (Holland-Bukit Timah GRC) says the Government's expansion of social spending and redistribution may not keep up with growing public expectations because it must distil a general "call for more" into sustainable programmes.

In his response to MPs after the Budget debate this year, Mr Tharman emphasised that the Government will not attempt "progressivity or redistribution for its own sake"; spending better is as important as how much it spends, he added. "This 'Government must do more' thing is naturally everybody's call," says Mr Liang. "Every Budget debate, MPs call for more, and that's because we see that there are really those who need more. But it's also the Government's job to make sure that when you do more, you're doing something that's responsible and sustainable."

Ensuring a fair and inclusive society

Deputy Prime Minister Tharman Shanmugaratnam last Friday outlined how the Government intends to fund its new approach to broaden social safety nets. Speaking at an event organised by the Academy of Medicine, this is an excerpt of his speech:

OUR objectives are clear. We will do more to help those who start with less, starting from young, and ensure that every citizen has a fair share in Singapore's success.

We will do more to give the elderly a sense of security and provide special recognition to the pioneer generation of Singaporeans who worked with lower wages and built up the nation. And even as we intervene boldly, we will ensure that our policies can be funded and sustained well into our children's generation.

We have a good starting point. While the more mature economies built up large debts during their rapid growth years and when their populations were young, we did the opposite. We built up savings.

They will now have to take significant sums from their budgets each year - at least 2 per cent of GDP - to service these national debts. We are in the opposite position of being able to get 2 per cent of GDP from the income on our reserves to spend each year on our social and economic priorities.

Let's keep clearly in mind a few priorities as we go forward so that we ensure that policies for a fair society are not just for two or three electoral terms, but for generations ahead.

First, we should continue to target subsidies at those who need them the most, instead of committing to benefits for all.

Universal subsidies are not just wasteful, but inequitable. They are also hard to take away once given. Even in the UK today, despite severe fiscal pressures and with the Conservatives in government, they have found it too difficult to cut entitlements that benefit the upper middle class and rich elderly.

Second, we should design spending and subsidies in ways that reinforce individual effort and responsibility for the family, values that keep our society strong.

This is not about leaving things to self-reliance or about leaving families to face uncertainties on their own. It is a strategy of government support for efforts by individuals to learn and strive to achieve their aspirations to own a home by working and paying down a loan, and to save for their retirement needs.

It may be a paradox, but this paradox of active government support for self-reliance has to run through all our social policies. It is how we help people to stand with pride and contribute to society.

Third, the Government must, for the same reason, find every way to catalyse and support community initiative for a fair and just society.

One of the paradoxes of the welfare state has indeed been the way an active state has freed people from the social and moral bonds of family and local community. We must strengthen, not weaken, the values that drive us to be our brothers' keepers. Our tax incentives and grants must continue to support the community and civic sector, and aggressively so.

Fourth, we must maintain a progressive system of taxes and benefits.

It is in fact more progressive than meets the eye. For instance, take our income taxes. Our top marginal rate of 20 per cent is low when compared with many other countries. But in fact, our income tax schedule includes Workfare (WIS) or negative income taxes for lower-wage workers. If you are older and of lower income, you get a 20 to 30 per cent credit from the Government through Workfare.

So our income tax schedule is actually 50 percentage points wide - from 20 per cent for the top income bracket all the way down to minus 30 per cent.

This progressivity in our system is even more so when we add in housing grants, which are the second pillar of our social strategies. The housing grants provide significant mortgage savings for lower-income couples.

Taking Workfare together with these housing grants, we are effectively providing low-income couples at the 10th percentile of the income ladder with benefits equal to about 30 per cent of their lifetime incomes.

This is, in fact, a conservative estimate as it does not take into account the appreciation in value of their homes, which even with modest assumptions implies significantly greater lifetime benefits. It also does not account for other subsidies that they receive, which substantially outweigh the taxes they pay through the GST.

We will preserve and build on this progressive system of taxes and subsidies in future, even when eventually, in future terms of Government, we find it necessary to raise revenues to support our growing health-care needs.

Finally, we cannot think about a fair and inclusive society purely in wage or income terms, or in terms of redistribution.

It is also about people having access to a quality living in public spaces: for sports and arts, or just to relax in. We take public spaces seriously in Government, including providing green and blue spaces near our HDB estates.

Or about opportunities to keep learning no matter how old you are, even if you are not learning for the purpose of work, but because there is something inherently satisfying about learning.

It must involve developing a spirit of fellowship as our young grow up in schools.

It has to include a workplace culture that treats all employees with respect, including our blue-collar workers.

And it must include Singaporeans pursuing causes which they feel lead to a better society and doing something to help their fellow citizens see a better life.

So let me conclude. We are in transition as a society. We are no longer a developing nation, but we are not yet truly an advanced nation because our level of productivity, our skills and the wages of our ordinary workers are not there yet.

We face many challenges. Can we keep median incomes growing at a healthy pace and avoid what has happened elsewhere, not just in the developed economies but also in the Asian newly industrialised economies? Can we keep social mobility going, even as many among past generations of poor Singaporeans have already succeeded in moving up? There is no assurance that we will succeed, but that makes it all the more necessary that we put all we can into succeeding.

We are starting from a position of strength, not despair. We have one of the best education systems in the world and we have the most successful public housing programme in the world. We have, by international reckonings, one of the better health-care systems in the world. We also have the lowest rate of unemployment among developed societies, including Hong Kong, Taiwan, Korea.

But whether we do better at the end of the day will not just be a result of whether we've got the right policies and incentives and taxes and subsidies, but whether we retain a culture of responsibility in our society and the spirit of fellowship that I spoke about. We all play a part in keeping ours a fair and just society and taking pride in making it so.