National Conversation : Need for major mindset change...and a clear vision

I spent the last 2 weeks waiting and listening to understand how this National Conversation will be conducted. The govt says that thousands will get to participate, govt will listen, hard decisions will be made. How do you "listen" to thousands of people and make sense of this massive feedback? After that are we going to craft policies that will satisfy as many people as possible (commonly known as populist policies)? How are coherent sustainable policies going to emerge from all this?  It is strange how the PAP govt move from a completely top down approach ignoring the voices from the ground and now turn around to conduct a broad conversation with the thousands. I don't want to get too cynical about the whole thing but I think the public just wanted a more balanced approach to policy making and for the govt to address the know existing problems.

At this juncture, I would like to detour a little to point out 2 noteworthy opinions by members of the  establishment. The first is an article by Han Fook Kwang, former editor of the Straits Times,  urging the govt try harder to understand the people on the foreign influx issue:

"The large majority of Singaporeans in the heartlands, who worry about their job security and the future prospects of their children, will have a completely different perspective, and will be much less sympathetic to the argument that Singapore needs these foreigners to grow and prosper.

Policymakers and political leaders have to bear this in mind and try harder to understand the mindset of this large group of Singaporeans who feel threatened. It is a real and deep-seated fear that has to be addressed." - Han Fook Kwang, The Real Fear : Being pushed out of home

If you read Han Fook Kwang's article, you will find there is nothing new in his article about the ground level sentiment  . The points he raised have appeared in this blog several hundred postings ago, in various Internet forums and other parts of the Internet. What is new is for someone who upheld the govt view on this issue for so many years as editor of the Straits Times, to turn around and tell the govt that it has been wrong on this issue.

A former chairman of the Association of Muslim Professionals (AMP) yesterday critiqued the "myth of meritocracy" at the core of the Singapore system.

Mr Nizam Ismail, 45, also took issue with Minister of State Halimah Yacob's National Day Rally speech, saying it suggested that the reason the Malay-Muslim community has not succeeded "as much as we can is because we did not work hard".

Her statement took a "very broad-brush approach" that ignored real problems, he said, adding that meritocracy glosses over social inequality. - [Link]

During an AMP dialogue on the National Day Rally former AMP chair, Nizam Ismail,  criticized the "myth of meritocracy".  He took issue with Minister of State Halimah  Yacob's National Day speech that suggested that meritocracy is alive and well in Singapore and Malays have not succeeded as much as they can is because they did not work hard[Link] and that  "meritocracy also breeds elitism when those who succeed think they deserve it and look down on those who fail". Similar issues have been discussed in this blog about one thousand postings ago. It is often argued by the PAP that the income gap in Singapore is acceptable because our system is meritocratic and social mobility exists. A high level of social mobility exists not with the possibility of people moving up from the bottom to the top - such possibilities exists almost everywhere in the world - but when such movement is common - it is seen when the middle class is healthy and expanding, when there prosperity shared  and the hurdles for poor to move into the middle class not too overbearing. Today staying in the middle class is in itself challenging. We have a middle class that is feeling insecure and those living in poverty feeling hopeless. We have 400,000 workers locked into the Workfare that keeps their heads just above water and a middle class lifestyle eroded by rising cost of living. The advantages of wealth and inherited wealth is protected by low taxes and pro-business policies while the disadvantages of poverty passed down to from father to child in the name of "self-reliance". In order to break out of this negative loop, we must look beyond what individuals can do and look at what we can do to the system.

If there is just one thing to look at and monitor to know whether we are in the right track and the socio-economic system we have is in a healthy sustainable state, it is the income gap. 8 months ago, I posted a video of highly respected Yale economist Robert Schiller explaining why this is the single most important problem to solve[Link] - more important than the deep financial crisis we have seen in recent years.

Today in Singapore we have the highest income gap among developed countries. This "gap" is not spread across cities and rural regions but concentrated in an small island of 700 sq km. While other developed countries have in place safety nets, universal healthcare and higher progressive taxation, the Singapore system is build a different philosophy. It keeps taxes low and emphasizes self-reliance - you as an individuals shoulder the highest % burden of healthcare expenditure in the developed world, there is no national pension scheme and individuals take care of their own retirement. These schemes appeared workable and sustainable in the 90s.

If you examine the household income distribution of the last 10 years, you find that the bottom 10% saw income rising from $1332 tp $1580 about $25 per year while the top 10% saw income rising from $17,400 to $28K. The benefits of GDP growth has disproportionately gone to corporations and wealthy individuals. If you find it hard to cope with inflation, just imagine what it is like for the bottom 10% whose income rose by just $25 as the cost of living rose. By around 2005, it was clear a large number of families could no longer cope and Workfare Income Supplement (WIS) Scheme was introduced in 2007 to keep their heads above water. But Workfare does not address the root causes of the problem and perpetuates a system that is heading towards bigger problems. The large income gap also breaks the "self-reliance" model - with more and more people working full time jobs not earning enough for retirement and medical care. The PAP takes its self-reliance further by mandating that children have to be responsible for their aged parents (Parents Maintenance Act) - filial piety  is fine if you're in the top 10% but for lower middle income families earning $3000,  nursing home fees of $1K+ pushes these families into poverty. The system as it is amplifies the effects of the income gap.

Today Singapore is today the wealthiest nation in the world based on average income. Our average income is incredibly 10% higher than Norway.  Knowing this is little comfort for ordinary Singaporeans because our extremely high income gap means the median income which is a more accurate measure of what an ordinary Singaporeans earns is completely disconnected from our average income figures.

Mr Ghazali Salim, 42, who manages a cafe, said he doesn’t feel particularly rich on his income of $2,500.Said Mr Ghazali: “I’m not rich and there are still some Singaporeans who can’t afford their own homes as housing is so expensive.”

And that’s the thing about indices – it tells only one side of the story, experts say. - TNP, Is Singapore the richest and healthiest nation in the world?

How did income gap become so large in Singapore? If you go to a PAP MP and ask this question, they will give this standard answer that income gap is rising around the world.
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"Globalisation and technology will widen income distributions all over the world" - PM Lee., Speech to ESS[Link] 

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It is true that income gap has risen around the world. But that does not explain why Singapore has the highest income gap among developed countries. Norway for instance has a GINI of 0.25, roughly half of what it is in Singapore.  If you look at the data on this page : List of countries by income inequality, it lists the GINI index before and after taxation & transfers. If you compare the data, you will notice a number of countries have relative high income inequality before taxation & transfers but low GINI index after transfers e.g. Japan 0.46 pushed all the way down to 0.33. So there are only 2 ways to compress the income gap - tax & transfers or fairer/flatter  wages structure. If you don't want to raise taxes on the rich, make sure people get good wages when they work.  If you refuse to do either, you live with a rising income gap....history has shown that the masses will eventually reject such a system. In a democracy, they vote the govt out, in a dictatorship, they overthrow the govt.
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So why do we have such a wage structure in Singapore? Our bus drivers are paid half the wages of a bus driver in Taiwan. Our cleaners and supermarket cashiers are the lowest paid in the developed world but our politicians still the highest paid in the world.
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"Workers' wages account for less than half of Singapore's GDP. In contrast, wages take up more than half of GDP in developed countries." - Sue Ann Chia, 1st World country, but not First World wages?
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Remuneration (wages) as a share of GDP relative to company profits in Singapore is the lowest among developed counrties. In fact the share of wages to GDP has never crossed the 50% mark in our history.
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"Linda Lim said Singapore's economic growth model has tried to 'do too much, and achieved too little' in delivering returns for Singaporeans, relative to foreign firms and foreigners."[Link]
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In an earlier article I explained that the large influx of foreign workers mostly from 3rd world will negatively impact wages[Link] - it is almost common sense, allowing hundreds of thousands of cheaper workers to come into Singapore gives businesses access to cheaper labor to make higher profits - this is in effect a wealth transfer from workers to corporatiions and business owners.
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"The main reason for this sector’s low wages and productivity is the liberal import of unskilled workers in this sector. And it is not sustainable because the increase of such workers required to satisfy the growing domestic economy will be inevitably greater than the ability of infrastructure, such as transport and housing, to keep pace. This is now apparent to regular public transport users." - Ho Kwon Peng, [Link]

Ultimately, what is unsustainable will break and a socio-economic system with rising inequality will become polarised and fall apart due to rejection by the people. Today we see the old formulas breaking apart. The CPF Scheme and does not ensure that Singaporeans can enjoy a good retirement - it is projected that more than half cannot reach minimum sum requirements[Link]. The HDB no longer builds affordable homes - prices rising much faster than median income putting young families deeper in debt. Our healthcare system results in the heaviest financial burden for the sick and their families among develeoped countries.

The great mystery isn't how we can continue but how we have not already fallen apart with such a system. One aspect of PAP rule has been to keep information  and the mainstream media controlled so that the system appear healthy and the deep problems masked from the public. Take housing and healthcare as examples, we have been told repeatedly by the govt with the help of the mainstream media that they are affordable and everyone is taken care of - the 3Ms of our healthcare system ensures that everyone is okay under the system. If you're not looking to buy a home or get seriously ill, you can completely unaware of the problems. The PAP's ability to control information is now eroded by the new media/social media. Awareness of the problems have increased over the years and once people gain a better understanding of the system, they find it hard to accept and support. Take Han Fook Kwang, the ex-Straits Times editor as an example.The article he wrote so accurately reflects what is happening on the ground but we did not see such articles in the Straits Times when Han Fook Kwang was the editor...his vision suddenly cleared up once he left his position in the Straits Times.

There is a reason why the PAP is unable to perceive the problems in our society the same way as the rest of us. The man on the street calls it the "you die, your business" ideology.  The PAP thinking is highly elitist and sometimes, when convenient, influenced by market fundamentalism. For years, as the wages of the bottom 20% fell due to imported labor, they would argue that it is just demand-supply. If you can't take the competition, "you-die-your business" . When "shock therapy" and minimum wages were suggested, the PAP say that it is not good to interfere with market forces. However, when businesses, including GLCs and TLCs complained that they cannot get workers,  the PAP did not tell them it is demand-supply, they would have to pay more for workers....the PAP govt intervened by opening the floodgates to foreign workers.

What brings the PAP to this National Conversation is not their concern about the income inequality - this has been growing for years - or our beleaguered middle class but the willingness of Singaporeans to vote against them. If you go back the the early articles I wrote in 2005, there was more than enough data about the widening income gap and low wages in Singapore for the govt to be concerned about these problems. But once they received a strong mandate in the 2006 elections, the PAP govt raised GST and cut corporate taxes and taxes for high income earners. They also raised their own salaries and flooded the labor with more foreign workers. Common sense will tell you that these are not the type of policies to make when income gap is rising and there is enormous stress on low wage earners. But through their ideological lens these are not big problems. Their elitist views also drove them to believe they deserve the highest salaries in the world - this is hard to swallow in a country where kindergarten teachers, cleaners, bus drivers get the lowest salaries in the developed world. It is the PAP's own ideological extreme that make what is painfully unacceptable to ordinary people  okay for them.

Han Fook Kwang's advice to the PAP is go and understand the concerns of ordinary Singaporeans and not to dismiss and trivialize the challenges they face in their lives. The PAP should stop using the conversation to promote its thinking - they have had ample opportunity to explain their policies in the mainstream media and there is no lack of understanding of what they are doing and the outcomes of their actions. The more they explain why they needed to do what they have done, the less support they will gain on the ground because the last thing ordinary Singaporeans want to hear is justifications for going in a direction we have been going in the last 10 years - more and more people are willing to vote against this.

At the end of the day, what Singaporeans want is a clear vision of what the govt will try to achieve in the coming years and a concrete plan to get there. If this vision is aligned with what Singaporeans want for themselves and their families...and they are convinced the govt is serious about it, there is no reason not to support it. But to craft such a vision, the PAP needs to get out  ideological box, come down and really listen and understand the people...make the difficult tradeoffs that may run against vested interest linked to its power structure....the only way to motivate the govt to move in this direction is to indicate that, we too, are serious about change and our support cannot be taken for granted.