The Income Inequality Gap In Singapore Economics Essay

The income inequality spread in Singapore declined from the mid 1960s to the mid 1970s due to the addition in employment through its economic restructuring attempts. In the early yearss of Singapore ‘s station independency, the authorities actively took advantage of the attempts by transnational companies ‘ to relocate their industrial activities to lower-cost states. A extremely successful industrialization scheme concentrating on labor-intensive fabrication was launched. This type of growing was favorable to bettering Singapore ‘s income distribution ; while the demand for workers rose across the board, the demand for low-skilled workers, whose skill sets were compatible with the demands of the economic system so, grew faster. Consequently, those at the underside of the income distribution were able to derive disproportionally. In 1998 the UN Economic Commission for Asia and Pacific even complimented Singapore for its enviable economic advancement accompanied by a stable income inequality. However, this form of ‘growth with equity ‘ , nevertheless, broke down due to the force per unit area from globalization and the aftershocks from the 1997 Asiatic Financial Crisis. The Gini coefficient leaped from 0.446 in 1998 to 0.481 in 2000.

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With full employment in 1972, industrial reforming was carried out and the economic system restructured off from low-technology, labour intensive activities towards higher engineering and value-added productions. This economic restructuring has doubtless favoured workers with higher accomplishments and put the workers with lower accomplishments at a disadvantage. This resulted in the beginnings of a widening income spread.

In retrospect, the authorities ‘s attempts in reconstituting the economic system have been motivated by a desire to better Singaporeans ‘ life criterions through sustained economic growing, coupled with a belief that the benefits of economic advancement would finally dribble down across all sections of the population. However, a paradox is involved: the further up the technological hierarchy Singapore ascent, the lower the part of labor costs as a factor of the overall production costs. The authorities ‘s speed in the implement of its restructuring attempts, every bit good as the graduated table of those attempts, has therefore augmented the negative effects of globalization and economic restructuring on those without sufficient technological competency and educational making.

The recession caused by the 1997 Asiatic Financial Crisis farther widened the income spread as the workers with low-paying occupations were comparatively more affected than workers with higher income. Although the authorities implemented personal revenue enhancement discount, discounts in HDB lease, public-service corporations and conservancy charges. A survey by the Department of Statistics showed that the addition in Gini coefficient has lowered after seting for these discounts from 0.021 to 0.016. However, these policies were non wholly successful as the lower-income families still experienced a negative alteration in income while the higher-income families enjoyed a positive growing in income. This is because although these redistributive policies were in topographic point, but the economic system still offered more chances to the higher skilled workers to cover with the recession while the lower skilled workers did non hold much chances of increasing their income.

Furthermore, the reconstituting plan entailed attempts to significantly change the nature of Singapore ‘s labour force through an injection of foreign labor. The authorities endorsed the influx of trained and professional work force in order to besiege the deficit of local skilled labor required for Singapore to travel up the value concatenation of production. This, in bend, involved puting domestic pay in line with those predominating in comparable business in the industrialised states. As a corollary, a big pool of unskilled and semi-skilled foreign labor was allowed to fall in the local labor force in order to maintain concern costs low. Between 1995 and 2001, the figure of foreign labors increased from 360,000 to 590,000. Of the 590,000 foreign workers, 500,000 were unskilled. The high proportion of unskilled labor, representing about 20 % of Singapore ‘s entire work force has led to greater compaction of rewards at the underside of the pay distribution. As a consequence, this skilled-biased in-migration policy may hold stretched the pay construction at both terminals of the occupational graduated table.

Chart 1: Ratio of Median Monthly Gross Wage of Occupational Group Relative to Cleaners, Laborers & A ; Related Workers for Workers Aged 35 – 39, 1991, 1997 and 2007 ( June )

Beginning: Ma, Quality of Employment Creation for Singapore Citizens ( February 2008 )

Between 1997 and 2007, 95 % of the occupations created for Singapore citizens went to professionals, directors, executive and technicians. The same group presently receives the highest mean income. They have besides seen the greatest absolute and comparative addition in rewards over the last few old ages. Concurrently, the employment additions among cleaners and laborers ( 27 % ) were offset by the losingss in works machine operators and assembly programs, and production craftsmen ( -9.3 % ) . Chart 1 above shows the broadening of the pay derived function between the highest paying group ( directors ) and the lowest paying group ( cleaners and laborers ) between 1997, 2001 and 2007. The addition in pay derived functions demonstrates that a turning pay premium accrues to businesss that require higher skill sets or heavier duties. Given that that inter-occupational disparity has a high weight in the overall inequality, these pay and employment tendencies are expected to hold of import deductions for Singapore ‘s degree of income inequality.

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