Speech by Mr Ong Ye Kung, Acting Minister for Education (Higher Education and Skills) at Institute of Policy Studies Singapore Perspectives 2016 Conference 18 Jan 2016

Published Date: 18 January 2016 12:00 AM

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Janadas Devan, Director IPS

Ladies and gentlemen

Introduction

1. I have always enjoyed attpending IPS Perspectives. When I was a civil servant, I got to attend and would sit amongst you, listen and take notes. Thereafter I could clock this as training hours, which I have a target of 100 hours a year. Later on, I went to the NTUC, and I still got to attend and I never needed to take notes in NTUC. Then I joined a private company, some of you would know, which is always the platinum sponsor and we are treated so well at Perspectives. But I must say, these days it is not as enjoyable coming to IPS Perspectives. I am always somehow in the firing line.

2. And if my colleague Minister Heng Swee Keat is right, at some point in the next one-and-a-half hours, someone will say it all boils down to education. So we wait.

Inclusive Growth?

3. I would like to focus my speech squarely on the title, which is ‘Inclusive Growth’ with a question mark. I think we all have an idea what inclusive growth is. So I’ll talk about the question mark.

4. There are three possible questions. First, a question of definition - What does inclusive growth really mean? The second is a question of paradox - can you have inclusivity and growth at the same time? Isn’t it a trade-off, isn’t it contradictory? And third is a more optimistic one that if it is possible to have both, how do we achieve it?

5. First, on the definition of inclusive growth. We know what it is not. Growth without jobs cannot be inclusive growth because workers do not benefit from such growth. It also cannot be growth that is concentrated entirely at the top.

6. Today the overall theme is the concept of ‘We’, some of the speakers had used the pledge which I will also use. The Singapore pledge has two important words - “justice and equality”. I think our concept of inclusive growth revolves around these two powerful words. And our pledge went further to explain why justice and equality. It is so as to achieve happiness, prosperity and progress for our nation. I think this is our collective aspiration for Singaporeans, and our definition of inclusive growth.

7. Second, is the question of the paradox. It is very relevant because there is indeed a tension between inclusivity and growth. This is why the way we measure growth and inclusivity are all problematic. Let’s start with growth. We measure growth by GDP per capita which is a very flawed concept.

8. The numerator - GDP - itself does not measure welfare. Many things that make us happy and give us welfare cannot be measured or bought by money. Let me give an example. If you and I eat the dinner we cook for ourselves, there is no GDP. If you exchange our dinners, suddenly there is GDP because it becomes tradable. And chances are welfare may actually drop because I may not like your cooking and you may not like mine. GDP has its limits. It was essentially created in the 1930s by John Maynard Keynes who used it as a way to measure aggregate demand for tradable, monetisable goods and services.

9. And if you look at the denominator - per capita - we all know the problem of averages. It doesn’t measure the variance and disparity of income, which is a concern many of us will have.

10. The other alternate measurement of inclusivity is the Gini coefficient, which is also flawed. Many of us would know if the Gini coefficient is zero, it means everybody earns the same income. When it is one, it means one person earns everything. China has lifted hundreds of millions of Chinese out of poverty over the last 30 years, but at a cost of rising Gini coefficient. So is it good, or is it bad? But to be fair, China’s efforts have allowed the world’s Gini coefficient to come down.

11. Take another simple example. A family with all unemployed members has a Gini coefficient of zero. But if one person finds a job, it shoots to one. So which is better?

12. In addition, Inequality today is not just a matter between the middle income and lower income. In fact, the issue is now a matter between the top 1% and the rest of the masses. It goes beyond just income disparity, but is also about the power that comes with the money at the top. When we see the kind of money and campaign funding that goes into lobbying in some political systems, it calls into question the whole legitimacy and credibility of the government.

13. Having said all that, numbers are up to us to use. We can still use the numbers that are relevant, but must bear in mind their limitations.

14. The last topic is the question of how to get there. Here I will use the pledge again. There are many things we can do and I’ll categorise them into three groups of measures - happiness, prosperity and progress. I will describe them in reverse order, starting with progress.

Progress

15. I think a big part of progress is social progress, and the starting point is to keep our tax system light for the average worker, and at the same time, progressive. Singapore has done fairly well on this. 55% of Singaporeans do not pay taxes; and the top 20% of Singaporeans pay 55% of all the taxes. The average tax burden on the average Singapore worker is only 2%, compared to 36% in Denmark and 23% in Finland.

16. Second are the social programmes. I do not want to give a laundry list of social programmes we have, but over the last 10 years a lot has been done. GST Voucher has cushioned the impact of GST on the lower-income. There are also many other social programmes that help out with housing, transport, and medical care such as the Pioneer Generation Package or PGP, Medishield Life. And when workers have problems, they can undergo training and re-training, and receive ComCare assistances. Because of all these efforts in social redistribution, today for every dollar a middle-income worker pays, he gets back $2 of benefits. For a lower-income worker, for every dollar of tax he pays, he gets back $6.

17. Education and training is also an important part of progress. Education is such a critical social leveller, and we must make sure that we get our education system right and world-class. Today, ITE, Polytechnics and Autonomous Universities account for about 90% of each cohort. Over the years, the Ministry of Education has monitored and measured starting salaries to make sure that our higher education system continues to produce students that are relevant to the economy and valued by industry. If you look at average starting salaries for ITE in the last five years, it has increased from $1,500 to $1,800. Polytechnic students, post-NS, $2,000 to $2,400. For universities, $2,700 to $3,200. They all have increased, and even if you take into account inflation, there are still some real increases. This is possible only if the economy continues to grow, which leads me to prosperity.

Prosperity

18. Economic growth is critical. We no longer have the high single digit growth that we used to enjoy, but we can continue to have steady and modest single digit growth. Growth has delivered higher real incomes for Singaporeans. From 2004 to 2014, real individual income after taxes and transfers at the 20th percentile has increased 14.8%; at the median it is a bit more at 21.4%. If you take real household increase in income over the last 10 years after taxes and transfers, the number is 45% for the bottom 20%, and at the median, 38%. Compare these numbers with other economies - US, UK, Hong Kong, Taiwan - you will find that they are in negative territory or only slightly positive.

19. The combination of progress and prosperity allows social mobility. Students that used to be in the bottom 20th percentile households, and in their late twenties and thirties, a good proportion of them moved up to the top 20% of households. The number is in fact 14.3% - not bad at all.

20. But of course, our economy is at the verge of needing further transformation. It is a bit like Walt Disney. It used to market Mickey Mouse and Donald Duck; today it is in Marvel superheroes and Star Wars. The Singapore economy likewise has to go through such transformation to be more attractive and competitive. This is a big topic that the Committee of Future Economy (CFE) will have to discuss over the next one year. But we see some of the vision in the initiatives already coming out. SkillsFuture is one, the Research, Innovation and Enterprise 2020 or RIE2020 that has committed $19bn for the next five years, is another. These are all significant strategies to transform our economy and we will discuss this at the CFE.

21. Whatever it is, we need to bear in mind that many of us in this room, barring the students, have established careers and sometimes can afford to talk about inclusivity and redistribution. But amongst the young, the undergrads, polytechnic graduates, their biggest concern is their jobs and careers, and if there are sufficient opportunities for them. We cannot fail the young.

Happiness

22. The last category of measures is happiness. I use this to broadly describe everything that is less-tangible and has to do with the heart. One important part is philanthropy and volunteerism. We can have income disparity, but if people at the top volunteer to help, and people with wealth participate in philanthropy, we can narrow the psychological disparity.

23. The second part is social behaviour. All our measures to help uplift the lower income and vulnerable requires the collaboration and cooperation of the whole society. I just read Straits Times this morning - we are going to raise the fines for people who park in disabled lots. This is really sad. Why should someone even think of parking in a disabled lot? We can set aside resources and space to help the vulnerable, but if other people use it, our effort comes to naught. Social cohesiveness is hence important.

24. As another example, as a Member of Parliamet nt, we look at various improvements in our community. Sometimes I would suggest building a ramp or a path outside a HDB block so that it would be easier for the elderly to walk to the bus stop or the coffeeshop. Often HDB would advise me against it, because the ramp or path is directly under the windows, and they did not want the elderly to be harmed by killer litter. There should be more social pressures against such acts. The same goes for funding schemes. The more abuse there is, the less goes towards the lower income.

25. Lastly, happiness is also about choice. Over the past 10 years, the Government has done a lot and many people have described that as a move to the left. But if you look further left, there are still many policies on the table. For example, a national minimum wage as opposed to a sectoral minimum wage, unemployment insurance, or the definition of absolute poverty and helping Singaporeans below that definition to reach a certain subsistence of living and income. On the extreme right, there are also policies such as further restricting foreign immigrants, or nationalising some of our companies and making them contribute to national coffers.

26. While these policies are still on the table, we do not move left for the sake of moving left, and move right for the sake of moving right. We decide on what policies will best serve the welfare of our people, and help us achieve that elusive inclusive growth. Ultimately such choices are moral and political ones, and require collective decisions; which is why they are often contested.

27. Whatever the outcome of a contest, the people of Singapore will decide what package of measures is best for us, and where we stand in the whole spectrum. And whatever our choices, we must live with it, be satisfied with it, and be contented with it. With contentment, we get happiness; with happiness, we can then have progress and prosperity for our nation.

28. Thank you very much.

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