Reducing Income Gap

Mr Gan Thiam Poh asked the Deputy Prime Minister and Minister for Manpower what has been achieved and what are the challenges faced by the Government in reducing the income gap in Singapore.

Mr Tharman Shanmugaratnam: Rising income inequality is a global phenomenon driven by the forces of technological advancement and globalisation. As a city-state, we have to keep our economy open and competitive in international markets, as well as develop and attract the best talents in order to compete with other global cities. But this means that wages in Singapore are significantly influenced by international trends and competition, accentuating income differences.

Rising income inequality has been a serious concern for the Government. Our fundamental strategy in tackling this challenge is to ensure that all Singaporeans, especially the lower income groups, are able to share in our country's growth, earn higher incomes and enjoy better living standards. The Government takes a four-pronged approach to address the challenges posed by inequality.

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First, the Government is helping low-income Singaporeans upskill, take on better jobs, and earn better wages, so that they can improve their standards of living. I have shared with this House our approach to helping low-wage workers in some detail previously, so I will not dwell on it today.

Second, it is important that we preserve social mobility and give every child the opportunity to realise their potential and move up the economic ladder through his or her own efforts. The Government ensures that every child, regardless of socio-economic background, has access to a good education. Schemes, such as MOE's Financial Assistance Scheme and various bursaries and subsidies at every level of the education system, ensure that children from low-income families are able to advance and develop to their fullest potential.

Third, we are redistributing incomes in a targeted and sustainable manner to help low-income families. Net of taxes, Government transfers to lower income households over the last few years amounted to almost 20% of their incomes 2 . All in all, adding up the various transfers, benefits and subsidies that we provide to low-income households, you will find that for every dollar that low-income households pay in taxes, they get back more than four dollars in benefits 3 .

We have and will continue to increase social expenditure. For example, over the next five years, health expenditure will double. But it is not sufficient to rely solely on the Government's programmes. Therefore, our fourth strategy is to strengthen and work with community partners. We are building up the capabilities of our Voluntary Welfare Organisations. In 2011, the Government provided a funding of $133 million 4 to over 200 VWOs providing social services. To help build up their capabilities, such as through staff development and organisation capabilities, we will also increase the VWO-Charities Capability Fund (VCF) from $53 million to $100 million over the next five years. Further, the Government has set aside very substantial resources to co-fund private contributions to community partners. The Community Silver Trust, which will support contributions to the long-term care sector, is a good example.

Rising income inequality is a complex problem. In addressing it, we want to ensure that our measures are targeted at those in need, and sustainable, and in the long-term interests of all Singaporeans. This will enable us to build and sustain a society, for the current generation and future generations, where every Singaporean, regardless of background, can build a better future through his or her own efforts, and receive care and compassion when they are down.