Controlling the Gini

oxford mushroom SG

Janadas Devan in his ST column on 26 Nov wrote an insightful article about the wage gap challenge facing Singapore; although Hong Kong and China also face the same problem. All are vibrant economies that have seen rising prosperity in a very short space of time. As he pointed out, the market is great at generating wealth but poor at distributing it.

Communist China used to be among the most egalitarian of all economies. Everyone was equally poor and everyone had access to the same low quality of healthcare. Now it is the world's fourth largest economy and has more millionnaires than Singapore. However, the price is the marked wealth inequality that pervades society. There are farmers who have to sell their children and they have lost even the low quality healthcare provided by barefoot doctors they used to have. The Gini coefficient ( a marker of wealth equality, 0=completely equal, 1= completely unequal) for China is around 0.4 and unofficial estimates suggest it is closer to 0.6 now. The same index for Hong Kong was 0.52 and 0.46 for Singapore in 2001. The latest figure for Singapore has risen to 0.517 (http://www.singstat.gov.sg/keystats/annual/ghs/r2/chap3.pdf) and probably higher for Hong Kong (http://www.hkcss.org.hk/cb4/ecp/pov_rate_91-05.pdf) .

Yes, there is rising wealth inequality in all the Asian economic powerhouses, from China to Singapore. The ability of national governments to control social unrest and maintain cohesion will determine future success of these nations. Communist China is probably able to suppress the rising rural unrest for some time, but not forever. The Chinese government is only too aware that it was hungry farmers who supported them to power against the KMT.

Singapore has to suppress the rising Gini index and keep it around 0.4. Studies have suggested that a figure between 0.3 and 0.4 is probably about right. A low Gini index in the 0.2s as in Scandinavian countries promote laziness, destroys the work ethic and erodes competitiveness. On the other hand, a high coefficient may lead to unrest and degrades social cohesion.

At risk of simplifying matters, you can lower the Gini coefficient by reducing the income of the rich or raising the income of the poor. The former will not work in a globalised world where funds and talent are highly mobile. Taxing the rich to create a more equitable society will only drive away the ones who pay the most taxes and provide the most jobs. As the PM said, Hong Kong has lower income tax than Singapore. Any move to raise taxes will make Hong Kong even more attractive.

The only way is to raise the income of our poor by increasing their skill sets and re-engineering low-skilled work to increase productivity. But low-income Singaporeans must get off their butts and accept training, work unsociable hours and in uncomfortable environments such as clean rooms. They cannot have it both ways.

eyebuzz SG

Originally posted by oxford mushroom:
.... The only way is to raise the income of our poor by increasing their skill sets and re-engineering low-skilled work to increase productivity. But low-income Singaporeans must get off their butts and accept training, work unsociable hours and in uncomfortable environments such as clean rooms. They cannot have it both ways.[/b]

Yah, right and HAVE NO LIFE! W/O the poor always working their butts out to make that measly dollar in order to pay MEDICAL, utility, transport, etc bills so that the elites can have an easier time running the country and be highly compensated! Why don't they try to get their own dues in their own ventures when they outta office like Bill Clinton and earn astronomical sum deserved commercially. Running a country and running a commercial organisation is still 'different morally' even if 'ethically same'. Don't the poor deserve quality life too whereas it was reported a minister starts his day having a game of golf, if I remembered reading that report correctly.

Give a man a fish and he will eat for a day.

Teach a man to fish and he will go out and buy expensive fishing equipment, stupid looking clothes, a sports utility vehicle, travel 1000 miles to the "hottest" fishing spot, and stand waist deep in cold water just so he can outsmart a fish. (Average cost per fish: $395.6 Cool Author Unknown
Laughing

fymk SG

If ministers can be paid so well , why not the workers?

If the workers cannot be paid well , then why pay the ministers millions to run the country?

oxford mushroom SG

If footballers can be paid hundreds of thousands per weekto perform well on the pitch, don't ministers deserve their high salaries to drive the nation's economy to greater heights?

Too much egalitarianism discourages work and competition. As Shakespeare said in 'Julius Caesar', "lowliness is young ambition's ladder'. If everyone earns about the same, there is little incentive to perform better, work harder and rise higher over his compatriots. Yes, too much inequality can damage competitiveness through social strife, but as communists nations have proved, flat income does not create wealth.

oxford mushroom SG

Wake up and look around you. Singapore is located among many cheap economies whose people are more than willing to come over to work ther butts out to make an even more measly dollar and YET able to save enough to send money home.

Unless you have skills that are far above these foreign workers you will lose out in the globalised market. If you don't want that job, others will. If you don't look after your customer, others will. Whining about it will not bring home the bacon.

BadzMaro SG

So in the end its not about the rift and widening gap. Its just about the determination and being able to save. Work at where the dollar is higher then thiers and send back.

BadzMaro SG

But then again , by becoming a professional work force in all levels just means that foreign investors will just look at cheaper labour somewhere else. America is a prime example of hour cheaper, foreign immigrants taking over jobs of americans. Factories moved to China where unskilled , cheaper labour cost. So its all about the moola.. about how much they can save down there to get rich up there.

oxford mushroom SG

That's why you must be able to provide a higher value service than foreign workers. A foreigner can work very hard and sweep 5 km of streets in a day, but if you can do 15km using a machine, it is still worthwhile to employ you. If the foreigner learns to use the machine as well, but if you can also maintain all the machines so the employer does not have to engage a mechanic, it may still be worthwhile to keep you.

The bottomline is: we have to be a step ahead of our competitors in every field, at all ages.

eyebuzz SG

Laughing Saving is a virtue, true... but but can we save and send our money to the Gahmen then have it doubled or tripled on the saved money for a decent terrace house and live in comfort with much leftovers in the latter years on retirement? Wink Try giving shoes to someone without legs and he/she will not whine but treat you like God, definitely!!! Laughing

BadzMaro SG

That means higher learning and also able to diversify. But that will take longer time to train , more money , and sometimes they themselves cant provide the funds to further enhance thier skills. But it all comes down to cost. 5 KM's for 5 bucks or 15km with machine that costs 500. But it all depends on cost effecient and whether those that employ would want to spend that kind of money to have that kind of quality work done or not. Unless there is stringent measures for quality, then maybe it will work. Comes down to standard of work.

fymk SG

Originally posted by oxford mushroom:

If footballers can be paid hundreds of thousands [b]per weekto perform well on the pitch, don't ministers deserve their high salaries to drive the nation's economy to greater heights?

Too much egalitarianism discourages work and competition. As Shakespeare said in 'Julius Caesar', "lowliness is young ambition's ladder'. If everyone earns about the same, there is little incentive to perform better, work harder and rise higher over his compatriots. Yes, too much inequality can damage competitiveness through social strife, but as communists nations have proved, flat income does not create wealth. [/b]

I beg to differ. Australian federal and state ministers are not paid millions but they have boosted the economy to the point of a boom and placed surpluses into a future fund to be used for the country. And let's note that Australia is a far bigger and complex country to run with a federated system.

The million dollar salary just doesn't cut it for the ministers in Singapore. Even the american president's salary is not that much.

kilua SG

No matter how the poor tries to upgrade their skills, opening a floodgate of foreigners would always depress their wages. There arent much skills that would not be depressed by floodgates of foreigner, other than those that are protected by professional bodies.

For upgrading of skills to translate to better income, there must be some protection from new entrants. A Japanese who upgrade his skills could be more certain of better wages, but a Singaporean who has upgraded his skill finds the floodgate of foreigners has depressed the value of his new skills.

There are many ways to close the income gap,like allowing people to peddle in the streets. If one is poor in taiwan, its easier to start a small business. The old man/old lady does not have to clean the tables or sell tissues to make a living like Singapore. Instead they sell wares like umbrellas on a rainy day or leather wallets in the streets. They can make decent living without having a need to pay rent.

Chelzea SG

in addition i wonder why so many minsters are needed for a tiny island state Rolling Eyes

Atobe SG

What is your own opinion on this article, or shall we take it that your posting without any comments of your own will signify your total agreement ?

Are you absolving the Singapore Government of the responsibility for the wide wage gap that is causing the shrinking in size of the Singaporean middle income group ?

Will it be of any surprise if the entire scheme of overpaying footballers is part of the grand design in igniting a secondary industry of its own making and momentum ?

From football bettings, to commercial support of the various football events, and spin off secondary industries for the football clubs and associations, there are money to be made by almost all sectors of the economy - simply by the publicity generated from overpaying the star footballers.

Can we say the same for our overpaid ministers ?

Are they making any money for the Singaporean Shareholders, when we can be thankful enough if they do not continue to overtax us, while losing billions of our Reserves in foreign takeovers that fall flat ?

While Communism may prove that flat income does not create wealth, at least there is equality in poverty, while - as your original article has indicated - the citizens of Communist China had at least the benefit of an affordable health care system.

What is progress, when wealth is not distributed and if it cannot be equally available; yet at the same time is unreachable ?

singapore's situation has reached this point, when progress has brought us to a Per capita level equal to the First World, and yet the majority of Singaporeans are cash weak - if not already poor.

Skill re-engineering can only be possible only to a particular educated or trained sector that can be suitably retrained.

This has been mentioned many times before, yet you persist with this idealistic propaganda that do not take the real world event into consideration.

Can we retrain a blue collar welder for the Bio-Science Industry ?

What is to become the large pool of human resource that have been geared for the shipbuilding and electronics industry of the 20th Century ?

How do we retrain this group of human resource for the 21st Century economy ?

What is the use of emphasising retraining for the Biomedical Industry, or the higher technology industry, when the majority of the population are ill equipped to enter this high end area of the future economy ?

Simple and idealistic visions can be made easily with a sudden spark of inspiration, but if not developed further to make it practical can only invite ridicule and scorn.

TooFree SG

It pretty seem that the Gini coefficient is calculated before the government taxation and benefits in kind. This means that the initial allocation of income is largely influence by market-forces.

This allows the government to solve the income inequality from a two-tier approach. However, due to the forces of demand and supply interaction in the market, it imposed a limitation on the government policy to leverage the income at the first preliminary stage. Low-wage Singaporeans would then have to opt for re-training and upgrading of their skills as what I shared with the writer so as to move up the career ladder in the company. Depending on circumstances and results, we are going to face a problem of having to fill the vacancy of the lower-end jobs that are left open and not prepared to be taken up by Singaporeans. This can be done so by the importing of foreigner workers.

In the second stage, the government may consider either to use taxation scheme or opt for welfarism system. The rise in GST might be a better option and feasible way at for this stage to fund Singaporeans from the low-income families as their spending are perhaps much less than those from affluent and middle-income families. Freshly quoted from today Straits Times is the mentioned of government extended help to do a match with something into the CPF account for every dollar that the low-wage workers earned. A move to suppress the rising Gini coefficient towards a comfortable level of 0.3-0.4.

Neutral

mistyblue SG

0. poor people want work, but the employers say they do not have the qualitifications.

1. the poor cannot affort to go to school for qualitifcations

2. and the poor also do not have the time since they have to work long hours just to make enough to live day by day

3. Being uneducated in the first place, and usually not young anymore, going back to school to study is like telling a old dying tree to start bearing fruit all over again.

The retraining, Its unrealistic. Studies showed that a person need to be trained at least 7 times at the same thing to remember it and perhaps change behaviour.

Anyways, these kinds of numbers don't show everything. Gini is derived by associating some number to certain factor. There are a ton of factors not considered. There are a ton of factors considered but does it fit this society?

sunny6110 SG

Is raising GST the only solution to this? I bet this is not gonna be the last hike in GST... Can the government ensure that there will be a smaller grp of the poor after the hike? If not, if the poor grp stays the same or grows larger, becoz of inflation, they will certainly need more in the future... so are we going to hike GST again to solve the prob? There is certainly a cap to how much GST can rise...

If this is so, are we pushing the present problems into the future...? Should we hv times in the future that we may oso face trade deficit like the US?

eyebuzz SG

GST or Credit Card... GST, has it caused anyone bankrupt? But the 'free' credit card has and have people >$2 billion in debt and increasing, no?, so the Gahman surely must be eyeing this pie, no, expenditure wat?! The problem is we now have the double edged sword in the GST Hike which causes more hardship (Ok lah after one year's credit from the Gahman), and Credit Card limits Wink lowering or not? and more people in debts' company? OK lah, blame the people for not upgrading themselves, for not working hard enough and for having or no poor financial management skills... so wherein lies the real harsh truth, increasing the commercial prowess of those in charge so that they can better manage in no other better ways except to raise tax and provide credit (living in borrowed times)?

No, no, not condeming the Gahman's efforts in its endeavour to help the people (Progovt and/or Oxford Mushroom should be happy about this bit) ... there are no easy solutions but are these the best options?

Money, money money, must be funny in a rich man's world. Laughing

oxford mushroom SG

Whether or not we will be successful will depend on the attitude of low-skilled Singaporeans. Unfortunately, many buy in to the Opposition's rhetoric that it is not their fault and they could just sit tight and expect the government to solve their problems while they complain. There is also the worrying problem of young people leaving school early without qualifications and the inability of parents to keep them in school. In a few years, these young punks will grow up to rant in Sgforums about the low salaries at the McDonald restaurant.

eyebuzz SG

The question is starked clear in the bewildered mind that if such increases are necessary shouldn't the honchos not add to these costs?