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The Agenda

NRO’s domestic-policy blog, by Reihan Salam.

Singapore and the Welfare State



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Chun Han Wong of the Wall Street Journal reports on new anxieties about social deprivation in Singapore, one of the world’s wealthiest countries:

Today, Singapore is the second-most unequal economy in the developed world, behind Hong Kong, having pulled in wealth over the past decade with investor-friendly and liberal immigration policies, according to United Nations data. More than 17% of the city-state’s resident households have at least US$1 million in disposable wealth, while its Gini coefficient—an income-inequality measure in which zero indicates total equality and one represents complete inequality—had risen to 0.478 last year from 0.442 in 2000, a faster increase than in other developed nations.

Meanwhile, the poor have been left behind. About 110,000 to 140,000 families in Singapore—between 10% to 12% of total resident households comprising citizens and permanent residents—earn less than 1,250 Singapore dollars a month (US$1,000) and are “unable to meet basic needs in the form of clothing, food, shelter and other essential expenditures,” the Lien Center researchers estimated using government data from 2011.

The situation appears worse when the Lien Center researchers applied a relative measure of poverty—set at 50% of median monthly income for Singapore resident families. By this indicator, the researchers estimate that between 20% to 22% of all households could be considered poor, earning less than S$2,500 a month, based on 2008 government data.

The researchers call for Singapore to establish an official poverty line, a step Hong Kong took earlier this year. And the ruling People’s Action Party, which began as a democratic socialist party, has moved to accommodate rising public support for a more extensive social welfare system:

The PAP has long spurned what it sees as extravagant Western-style welfare systems, designing instead modest social-support schemes to encourage employment and boost household savings. It has also staunchly refused to set a minimum wage, favoring instead a wage-supplement scheme to lift low-end salaries.

The ruling party, which has suffered a slide in support in recent elections, has relented slightly on its anti-welfare stance in recent months. For instance, the government has cranked up social spending to boost low-end incomes, expanded a state-backed health-care insurance scheme to provide lifetime coverage for all residents, and promised a broader and far-reaching review of its health-care system.

My concern is that Singapore might be recapitulating mistakes made in other affluent market democracies — not in building a strong safety net (Singapore has a well-functioning safety net that is in many respects the envy of the rich world), but rather in emphasizing inequality as such over social exclusion. Policymakers in Singapore, and the researchers at the Lien Center, seem sensitive to this possibility:

[T]hey propose that the government should set a poverty line and complement it with a broad range of non-monetary indicators.

By tracking outcomes such as living standards, nutrition levels, child mortality, access to education, and social exclusion, policy makers can glean “a more nuanced understanding of poverty” and better tackle root causes of the phenomenon.

But focusing on inequality as such fosters the illusion that the fact that Singapore has become a magnet for wealthy expatriates, and that the most affluent native-born Singapore families are accumulating great wealth, is a problem rather than an opportunity for bettering the lives of low-income Singaporeans.



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