Singapore Government Press Release
Media Division, Ministry of Information and The Arts,
MITA Building, 140 Hill Street, 2^nd Storey, Singapore 179369
Tel: 837-9666

Recently, many Singaporeans have expressed concern over the widening income gap. Their fear is that it will create envy, loosen social cohesion and bring about political problems. This concern is legitimate, but should not be exaggerated. Otherwise, it may lead to the wrong policy prescription.

Many countries have seen their income gap widen in recent years as a result of globalisation. So Singapore is not unique in this. For us, however, the widening income gap should not become a big problem for several reasons.

Firstly, our rich are not confined to a few families as in a feudal society. Nor are we a protected economy where a privileged class of businessmen prospers at the expense of the population.

We run an open, competitive economy. Those with talent, enterprise and drive can make it big, whatever their family background or social status. We have a wide spread of such successful people. They are not confined to graduates, professionals, or big businessmen. Many hawkers with culinary skills drive Mercedes cars and live in condominiums and landed properties. Bright children from poor families have won scholarships and gone on to become high-income earners.

Secondly, almost all families own the home they live in. Home-ownership is a major social stabiliser. Our homes are real and valuable assets.

Thirdly, we share our budget surpluses with every Singaporean. Relative to the annual income, these direct share-outs are very generous for the lower-income group. We shall continue to find creative and practical ways of re-distributing income to Singaporeans.

Fourthly, for the poor and needy, there are programmes to help provide a decent living. These include an array of programmes run by voluntary organisations. These programmes are funded by Government and public donations from companies and individuals.

Lastly and very importantly, we are pouring in millions of dollars to train and retrain workers and to inculcate the habit of lifelong learning.

Training and lifelong learning, in fact, are the only meaningful ways to ensure that workers are not hurt by globalisation. It is not possible to artificially close the income gap by increasing wages of workers beyond what the market will pay. If we do, businesses will simply relocate to other countries with lower wages and cheaper costs of production. This is particularly so in the case of MNCs and foreign investors. They are mobile, very sensitive to costs and averse to red ink. We have seen this happen before. As our costs rose in the last two decades, investors relocated their lower value-added operations to neighbouring countries, and even further afield to China, Mexico and Central Europe.

To narrow the income gap by capping the pay of high-income earners and the profits of enterprising businessmen is also not feasible. They will either relocate or work less hard.

Neither is squeezing the fat out of the rich an option. On the contrary, we have to lighten their tax burden because many countries are doing so in order to attract investments and talent. That is why the Minister for Finance has generously reduced company and personal income tax rates this year.

In short, it is better for us to concentrate on how to make the lives of our people better than to fret over the widening income gap. We have to recognise that as workers earn more, those with special abilities at the top will earn even more. It is a dynamic, not a stagnant, situation. In fact, it is the able and high-income earners who generate the surplus in our economy for the Government to re-distribute to the lower-income group. This way, the high-income earners help the lower-income Singaporeans to do better.

In the global economy, the services of the talented and the supply of ordinary workers must be seen in a global context. The demand for talent exceeds supply, while it is the other way round for unskilled workers. There are not many people like Bill Gates, while there are billions of unskilled workers in the world. As such, we have to accept the reality of a wide income gap between the high fliers and the average workers.

I do not see the process of globalisation slowing down. In fact, recent breakthroughs in areas such as IT and the life sciences promise to accelerate the pace of change. Hence, companies will have to adapt even quicker to changes in the environment. Product life cycles will shorten. Competition will be more intense.

The pace of creation and destruction of jobs will also pick up. Many existing jobs will disappear as companies restructure and reorganise their operations and business. New jobs will be created, but they will require new skills. In the early nineties, the level of retrenchments in Singapore hovered around 5,000 to 6,000 per year. By the mid nineties, this had gone up to about 10,000, even as about 100,000 new jobs were created annually.

In such an environment, unless workers have a broad range of skills, and are versatile enough to keep pace with technological progress, they will constantly fear for their livelihood. They will find it hard to take up new opportunities when their old jobs have been made redundant. Their market value and earning power will diminish significantly as their experience and skills become obsolete.

That is why we are emphasising lifelong learning. The Government has started building up a $5 billion Lifelong Learning Endowment Fund. Its income will be used to fund learning programmes for adult Singaporeans.

In addition, we have put in place many other programmes and opportunities for workers to upgrade themselves. For example, in April last year, the $200 million Manpower Development Assistance Scheme was established to support skills upgrading among our workers. The scheme has since been used to increase the reach of the Skills Redevelopment Programme. It has also been used to develop the Strategic Manpower Conversion Programme, which retrains skilled workers to take on jobs in key growth areas. We have also set up the National Skills Recognition System to help the lower skilled workers to upgrade.

Many community organisations and unions are also actively involved in promoting and supporting lifelong learning. The People’s Association, community self-help groups and CDCs have done a great deal to bring learning to the community.

The NTUC, in particular, has done an outstanding job helping workers to upgrade their skills. Its Education and Training Fund (ETF) is an individual-based fund supported by the Government. Its income is used to subsidise training fees for unionised employees. Union members pay only 10 percent of the course fees. The NTUC’s ETF and the government will pay the remaining 90 percent. I am pleased to note that from October 1998 to December last year, the ETF provided more than $800,000 to support the training of 31,000 union members. NTUC wants to double this fund from $20 million to $40 million so as to provide an average of 35,000 training places a year over the next five years. The Government welcomes this initiative. We will provide a 3-to-1 matching grant of up to $15 million, in addition to the first $15 million given earlier. In other words, if NTUC raises $5 million tonight, the Government will give it $15 million.

But the Government and NTUC can only provide the funds and opportunities for lifelong learning. It is up to the individual Singaporean to make actual use of them.

I am concerned that many Singaporeans have not fully understood the critical importance of lifelong learning to their employability. They have not fully realised that if they do not continually upgrade their knowledge and skills, their earning power will go down.

In a survey on adult training last year, it was found that only 1 in 3 Singaporean workers had engaged in any structured training over a 12-month period. Among the unemployed, the proportion was even smaller - 1 in 5. This is worrying.

Singaporeans must not think that after they leave school, they have all the knowledge and skills they require for life. Instead, they must realise that to improve their standard of living and insure themselves against redundancy, they must keep on learning.

Let me conclude by saying that it is pointless to merely lament about the widening income gap. To harp on this would be doing workers a disservice. It is better to explain the reality of the new economic environment and persuade workers to enhance their employability and earning power by continually upgrading their skills.

I commend NTUC for organising this fund-raising dinner to assist our workers to upgrade their skills. I am very heartened by the generous contributions from many member unions and private sector companies. I understand that the total sum pledged and donated so far exceeds $6.5 million. The funds raised from this dinner alone amount to $4.5 million. This means that the Government will have to "cough up" its contribution of $15 million. But we shall do so with pleasure.

Tonight's fund-raising event is a good example of cooperation between unions, companies and individual Singaporeans who have done well. So long as there is this sense of social obligation to help, I am confident that our workers will successfully overcome the challenges of globalisation.