An estimate by Credit Suisse suggests that the top 20 percent of income-earning households in Singapore owns about 73 percent of Singapore’s wealth. Meaning that ,the remaining 80 percent of income-earning households as well as households with no income share less than 30 percent of Singapore’s wealth.
What’s even more shocking is that in 2019, while there were 207,000 millionaires in Singapore, there were more than 700,000 people with less than S$13,500 to their name. This highlights just how large the wealth gap in Singapore is.
Causes of wealth inequality
While the average Singaporean relies greatly on their labour income, the rich in Singapore gain a large part of their total income from their capital income. This includes, but is not limited to, rental income from their tenants, interest from banks and dividends on the shares they own.
Without taxes on inheritance, dividend pay-outs and interest, the rich in Singapore get by with close to no tax being imposed on their capital (only their property and rental income are being taxed very lightly). Furthermore, the Goods and Services Tax (GST) is imposed on everyone equally for their consumption, whether they are rich or poor.
With our Budget 2019 failing to impose new taxes on wealth nor increase the few existing wealth taxes, it is not shocking that the huge wealth gap continues to persist in Singapore.
Taxes are meant to reduce income and wealth inequality by redistributing wealth and income across the country. However, in Singapore, the failure to tax capital income ends up working against those of us who rely on nothing but our labour for an income. In fact, some of the rich in Singapore might actually be paying a lower effective tax rate than those in the upper middle class.
Impact of wealth inequality
One of the greatest impacts of wealth inequality is that it worsens social mobility. As children from wealthier families tend to have access to better education, they end up doing better in school. Furthermore, they tend to have more social connections to rely on too. Thus, they often secure higher-paying jobs and have more opportunities to accumulate more wealth. This gives the wealthy a great advantage against the poor which discourages the poor from working hard as they begin to feel that they will never reach the top.
Wealth inequality also makes it difficult for the poor to invest in their education. This translates to fewer poor people being able to graduate from university which reduces the number of skilled workers in the country. This worsens our human capital and reduces the economic productivity of the country.
In some cases, the rising tensions between the rich and poor due to wealth inequality could result in political and social instability. As a result, the confidence that foreign investors have in our country could fall. This might see potential investors deciding to start up their businesses elsewhere or even current investors pulling out billions of dollars from our economy. This coupled with the worsening human capital and economic productivity could greatly hinder economic growth.
"Wealth inequality worsens social mobility."
Tackling wealth inequality in Singapore
As mentioned previously, Singapore taxes capital income very lightly. This does little to tackle the issue of wealth inequality in our country. Instead, our government has always focussed on the idea of meritocracy and educating everyone so that we would all have an equal chance of reaching the top.
By providing $11,000 in educational subsidies to primary and secondary school students yearly, our government hopes to give every child access to a quality education. Furthermore, students from less-fortunate families would fall under the
Financial Assistance Scheme provided by our Ministry of Education (MOE). With this additional support, MOE hopes that students from lower-income families will still have the same educational opportunities as their other peers. This would ensure that they have equal opportunities to get good jobs in the future and accumulate wealth too.