Income Inequality In Singapore Essay

Singapore has witnessed immense economic growth since its independence in 1965. The nation’s GDP increased exponentially, new industries were brought into the scene, and the country became more competitive in the global market. However, the nation’s incessant economic restructuring has come at a cost of severe income inequality. With her Gini-coefficient for income increasing exponentially from 0.422 in 1980 to 0.473 in 2011, Singapore’s income inequality has become a major concern.

If left untreated, the income inequality poses social, political and economic challenges. Social mobility is greatly reduced as the low-income group faces a higher glass ceiling, making it harder for them to reach the upper echelons of wealth. Political instability is generated as a result of social fractionalization. Free markets and open trades are affected due to lack of cooperation between the rich and the poor. The result is the stagnation of Singapore’s growth and the nation losing its competitive edge on the global stage. Thus, the government saw the necessity of formulating policies to resolve this income inequality crisis.

The government took the initiative to provide substantial financial support for the low to

The higher marginal tax rate of 12% to 20% adds on personal taxes and this discourages high-end investment. The investors are likely to take their capital overseas, which shifts the business frame outside Singapore. Consequently, there is less employment of low and middle-income group workers, which reduces their wage. The richer individuals can still thrive on the investments in other countries but the same does not occur for less privileged workers. Thus, the income gap rises and progressive tax model may be