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."

Accepting broader definitions of success

Education Minister Heng Swee Keat yesterday called on Singaporeans to rethink what constitutes success in life so that the education system can have meaningful reforms. Here are excerpts of his speech.

MANY parents and students feel that our education system is too focused on examinations and grades. This excessive focus has several consequences:

·        It may come at the expense of the development of well-rounded individuals, including the character and values of the student, which ultimately matters most.

·        It may come at the expense of learning as students "study to the test" and teachers respond by "teaching to the test" rather than to stimulate curiosity and a love of learning.

·        Students may choose subjects, and indeed, schools may offer subjects, based on how easy it is to score good grades rather than on their intrinsic value. The recent debate over literature, which Ms Janice Koh brought up, is a case in point.

·        Other forms of talent - in the arts, sports, music, leadership ability, applied skills using both hands and head, etc, are not sufficiently recognised. We should not just have an exam-based meritocracy. Rather, we should have a talent-centric meritocracy that recognises talent in a wide range of areas.

A major consequence of a single-minded focus on examinations is stress, in particular, stress related to competition and high-stake examinations such as the PSLE, which Ms Denise Phua and several others have spoken about. Mr Lim Biow Chuan also opened this debate by talking about stress. Some mothers take leave for an entire year or more to help their children prepare.

Many see entry into top schools as critical to their children's future and prepare their children very early, some as early as kindergarten, and even send them to two kindergartens. Many compete to get a place in popular primary schools or spend significantly on tuition, as Mr Low Thia Khiang mentioned.

Others worry about their children being streamed into normal streams, and suffer from the labelling and stigma associated with it. Some teachers who are committed to helping their students succeed may give a lot of homework or set tests that are difficult to stretch their students, but often with good intentions. I appreciate the stress that parents, students and educators feel. This is an important issue.

Is stress a necessary evil?

SOME are concerned about the effects of competition. Successful students may develop a narrow, competitive mindset. They may come to believe that: "I have succeeded because I have worked hard, so I deserve nothing but the best for myself."

While there are concerns about high-stake exams, I have also heard other views, and there are others who see merit in the current system. Many feel that the current system sets clear standards. Many students have told me exams challenge them to learn better. Teachers use exams to determine students' mastery of the different subjects and tailor their teaching strategies accordingly.

In a public education system, exams provide us with a standardised measure of progression and achievement, and ensure accountability across the system to uphold rigorous standards. In fact, this is one of the reasons why public examinations started. It also provides an objective way of determining entry into the next level of education. In Singapore, exams have helped assure a very high average among our students. That is why our students, even those who score average here, perform so well when they go overseas.

Some countries, such as the UK, Japan and Korea, and some states in the US that abolished exams or made these easier are now reversing course. Their experience has been that while removing exams was popular and brought short-term relief, over time, insidiously, standards fall. They are now concerned that their youth are not equipped to compete in the global marketplace. I should note that the people who suffer the most when educational standards drop in these countries are not the best students but the average students. That is why in some countries, while they say they have "high peaks", they also have "deep valleys".

As for the stress that comes with high-stake exams, many have observed that some amount of stress is almost unavoidable. While excessive and prolonged stress is bad, the right amount of stress can bring out the best in each of us. But what is optimal depends on each individual. Some parents have also said that some amount of competition is necessary - it is a reality of working life, and equipping our students to learn this early in life strengthens them for the future.

Singapore is not alone

INDEED, this issue of stress and competition is not unique to Singapore. Some of you may have read that in New York, parents queue to admit their children into high- end kindergartens, while a recent report noted that in the UK, rich parents pay up to £80,000 a year (S$150,000) to hire "well-qualified private tutors".

The common position is that we all want our children to get ahead in life. And the higher the aspiration, the greater the drive. The question we have to ask is, what exactly will ensure that our children can get ahead and be successful in the face of global competition and not just relative to other Singaporeans?

Social mobility

THE second area is that of opportunities, social mobility and inclusion. Some parents are concerned that without tuition, their children cannot cope or cannot do well enough to excel. Others, and Ms Mary Liew spoke about this earlier, whose children are doing well want them to do even better, and procure all sorts of tuition and enrichment classes to help them advance. Some are concerned that in some schools, students tend to come from similar social-economic backgrounds and have similar academic abilities.

Without the opportunity to interact with students from different backgrounds and academic abilities, our students may not develop empathy and our society may lose its cohesiveness. But some have also cautioned that if we mix up our students too much, it will be harder to cater to the learning needs of different groups. We will lose our peaks of excellence and also fail to support those who may fall behind without different approaches.

Policy options

IN THE next phase of Our Singapore Conversation, we can discuss the various policy options. For example, the PSLE serves as an objective benchmark for secondary school posting today. So important questions that we need to discuss include:

·        How do we maintain our rigorous standards and accountability and whether we can allocate all secondary school places without an objective benchmark like the PSLE?

·        Are there alternative posting systems that are still objective but can minimise the current over-emphasis on academic results, and enhance social inclusion?

·        To what extent should choice or proximity to school be a consideration in secondary school posting, as some have suggested?

Mr Gan Thiam Poh's suggestion about PSLE cut-off points is something that we can consider further. Ms Denise Phua spoke about a through-train model from pre-school to secondary school. Mr Yee Jenn Jong had other suggestions. As another example, streaming at the secondary level allows us to tailor instruction to the abilities and learning styles of our students. But some have questioned if we should re-think whether streaming is absolutely necessary.

So important questions to discuss in the next phase of Our Singapore Conversation include:

·        Can we ensure that every child can learn at his or her own pace if there is no streaming?

·        Will our schools be even less diverse if we did not have students from the various academic streams?

·        Can we replicate what we have done at the primary level, such as subject-based banding, at the secondary level? And that was the specific suggestion by Dr Intan Azura Mokhtar.

Whatever we do, we must be deliberate and thoughtful about what we need to change, how fast we can change and how far we can sustain these changes. We must have the resources to sustain any change. I have been watching the debates on resourcing education in various countries. Countries that have started with a big bang now have to make painful changes to cut back.

A long way ahead

EDUCATION is a long-term endeavour and always a work in progress. We should not rush into anything as the results, whether good or bad, are evident only many years down the road. And even as we seek to address current issues, we must be as thoughtful as we can.

It is also critical for us not to see our education system in isolation. Education alone cannot enable Singaporeans to realise our aspirations. If our society fails, the able will emigrate and the rest of us will be stuck here in failure. But if we stay and move together, we can succeed together. Education alone cannot give us a good life, and we need to be clear what a good life is. If a good life is simply about getting ahead of others and achieving the 5Cs (cash, condominium, cars, credit card, and country club), the competitive pressure in the workplace will define how we, as parents and teachers, view education. Then no amount of changes in the education system can alter the reality of each of us chasing after material and positional goods.

We cannot have broader definitions of success in education without our society accepting broader definitions of success in life. In many respects, the education system reflects societal norms and expectations.

The rise and rise of social issues

By Elgin Toh     The Straits Times    Published on Apr 06, 2013

AT THE close of the Budget debate last month, a social issue - abortion - emerged somewhat surprisingly as a subject of animated discussion among Singaporeans. Three MPs had called for adoption to be promoted in place of abortion, prompting many to jump in with their views. If one measures in terms of ink spilt, the issue can be said to have trumped many bread-and-butter ones, including, say, free early morning commuting, which arguably affects many more people. Forum letters on abortion published by the three most-read newspapers outnumbered those on free commuting by more than two to one. 

Abortion, of course, can be a lot more emotive than many economic issues. The latter tend to be impactful but dry. But it may be a mistake for us to miss the larger trend which this latest observation seems to be a part of. In the last few years, debates over social issues have been generating more heat than ever - confounding the traditional stereotype of Singaporeans as a cold, calculating, money-driven people.

"It's the economy, stupid!" should apply in Singapore more than in many other countries, according to the stereotype. And while I wouldn't go so far as to pronounce the death of that dictum here, it does look like some circumspection is in order.

The first major incident indicating this trend was the casino debate, which began in 2004 and has continued to the present time.

Supporters of the casinos saw the issue as an economic one, about jobs and revitalising tourism. But the "No" camp, led by religious groups, emphasised the social fallout - what it would mean for families and societal values. This group was far more active in its ground-lobbying efforts, forming online groups like Facts (Families Against the Casino Threat in Singapore) and distributing bumper stickers that said "Casi-NO".

Not long after this came the debate over Section 377A of the Penal Code, which outlaws homosexual sex between men. A parliamentary petition was submitted by then Nominated MP Siew Kum Hong, who had garnered 2,500 signatures. The grassroots on both sides of the fence became much exercised, setting up rival websites (repeal377a.com and keep377a.com) and organising more petitions.  The agitation shot through the roof, culminating in then NMP Thio Li-Ann - a strong advocate in the "keep" camp - filing police reports over abusive and threatening e-mails sent to her.

But even this argument did not surpass the next one in its level of unadulterated antagonism.

In 2009, a leadership struggle broke in the women's group Aware (Association of Women for Action and Research) over the group's stand on homosexuality and sex education, among other things. A final showdown between the warring factions was marked by disorder, fierce taunts and shrill heckling.

Finally, burgeoning interest in social issues is also reflected in the Pink Dot movement, which gathers at Hong Lim Park annually to champion equal rights for gays. It has, remarkably, managed to attract a larger crowd every year since its inception in 2009.

If it can indeed be said that Singaporeans are beginning to pay more attention to social issues - especially those related to values - then it has to be asked: What accounts for the phenomenon?

Our increasing affluence is one factor. When there is food on the table, people tend to focus on other concerns.

The parallel rise of religious conservatism and secular liberalism is probably an important factor too. The population census from 2010 shows that the two fastest-growing groups in Singapore are the Christians and those who profess no religion. It would be wrong to over-generalise on this point. There are religious liberals and secular conservatives and some of them may also be worked up about social issues. But anecdotal evidence from the big debates cited above tells us that more participants were probably drawn from religious groups on the conservative side, and from those who held a strictly secular vision of public life on the liberal side.

Furthermore, these groups sometimes engage in one-upmanship, with one side tending to galvanise its activists when it senses that its vision is in danger of being usurped or sidelined. One recent example was when a Christian group sought a meeting with Law Minister K. Shanmugam after learning that he had met gay activists.

These developments will not be lost on the political parties. The People's Action Party (PAP) has thus far been pragmatic. It is reaching out to all groups and pointing out sometimes that it is merely deferring - reluctantly even - to majority opinion.

It is not yet clear what the Workers' Party's (WP) strategy is. The party opposed the PAP on casinos, but decided not to oppose it on Section 377A, citing a lack of consensus within the party.

If social issues continue to rise in salience, then there may come a point where parties are tempted to take stronger stands on them for political advantage. An exercised segment of the electorate, after all, may be seen as a vote bank ripe for the picking - especially for opposition parties, who, being out of power, may engage in political entrepreneurship. And if one political party takes a position, it may be difficult for other parties to avoid doing so.

But there are potential pitfalls.

First, it is difficult for a party to jump onto the conservative bandwagon without alienating some liberals, and vice versa. They also risk turning off some moderate voters who may view position-taking on controversial issues as a sign of stridency.

Careful calculations will have to be made to ensure that any move does not lose more votes than it gains.

Second, parties will also have to consider internal dynamics before taking the plunge, or they risk a split. They will have to persuade members of the leadership to go along with the position or, in cases of deep personal conviction, to allow for individuals to dissent or to stay silent.

Whether parties finally decide to function as champions of a particular view or as neutral brokers between the camps, we will be strengthened as a nation if these issues are settled peacefully within existing political processes.

After all, in any society, politics is the final arena of negotiation between divergent values.

elgintoh@sph.com.sg

Singapore turns 48.

 It's a good time to reflect on our strengths and weaknesses - and to count our blessings  By Kishore Mahbubani For The Straits Times

SWOT analysis

SO, THIS is my final suggestion. Let us make creative use of our 48th year. Let us make it a year of deep reflection as we prepare for our 50th birthday in 2015. Let us do a collective SWOT analysis of Singapore: Strengths, Weaknesses, Opportunities and Threats. And if we can arrive at a collective consensus on the SWOT of Singapore, we would have made a major leap forward in understanding and dealing with the unhappy psyche of the Singapore population.

To kick off this SWOT analysis, let me suggest a few bullet points to consider under each limb of the SWOT structure:

Strengths:

·        Political stability;

·        Ethnic harmony;

·        Military and financial muscle;

·        Cosmopolitan culture;

·        Clean water;

·        Public safety;

·        World-class universities and think-tanks; and

·        Regional harmony.

Weaknesses:

·        Small size;

·        Demographic decline;

·        Emigration;

·        Volatile neighbourhood; and

·        Weak national identity.

Threats:

·        Rising political disgruntlement;

·        Weaknesses in public transport;

·        Rising housing prices;

·        Diminishing hope in future advancement;

·        Rising resentment towards foreign talent;

·        Rising competition from other Asian cities;

·        Melting Arctic ice; and

·        Geopolitical uncertainty.

Opportunities:

·        To become the New York or London of Asia;

·        Surfing the Asian cultural renaissance;

·        To become the epicentre of Asian wealth management; and

·        To become the intellectual and think-tank capital of Asia.

·         

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.