Saturday, March 10, 2018

Why Singaporeans tolerate inequality.

You see that parade of academics and rhetoricians rail about inequality in Singapore. Social commentators, however, are less willing to discuss the actual solutions to reduce the effects of inequality.

My personal belief is that Singaporeans on the whole are fine with inequality.

Yes, some Singaporeans will become scholars and yet some turn out to be merely statistics.

Nicholas Taleb's latest book Skin in the Game shed some light about the kind of inequality that we tolerate against the kind of inequality that should not be tolerated.  As it turns out the gap between the rich and the poor is a distraction that liberations employ to justify massive wealth transfers between the rich and the poor.

The is a more insidious kind of inequality at work. The concept Taleb employs is ergodicity.

Singaporeans can tolerate inequality so long as access to the upper classes is not blocked. Another words, the son of a taxi driver or a single parent family can rise up in society to become a Minister today.

This not only means allowing smart and capable guys like Chan Chun Sing to rise, it also must allow the so-called rich to fall.

Four years ago I retired because I was effectively financially independent. As a deliberate tactic, I ensured that my monthly dividend flows were about the same as the Singaporean household income statistic when my whole family got off the salary bandwagon. Four years later,  after law school, my dividend flows have gone up and so has my portfolio size ( thanks to some of my dabbling with leverage ).

At this juncture, I can imagine a liberal reading this and declare that a passive income investors will need to be redistributed to the poor.

But as it turns out, my dividend flow has been dropping relative to the household income for the past 4 years. There is a steady $1000 gap between what I collect and what most households earn every month now. This is one of the reasons I want to return to the workforce in spite of spending well within my investment income, Singapore society is the kind of society that does not let it's people rest. Even financial independence mean a gradual dropping of one's ranking relative to others.

So I have to pick up a McJob to remain average and respectable in this society !

So while our system introduces a substantial gap between the haves and have nots. Membership of the haves is open to everyone.

Which brings us to solutions which can make us uncomfortable and require the sacrifice of political capital.

The government cannot just create a system where the poor can rise to the ranks of the rich.

The rich must be able to fall.

Like many of you investors, wealth redistribution is something I would never support. I earned my wealth and my family has been becoming "poorer" over the past 4 years while I retooled myself to become a lawyer. Getting rid of assortative mating and mandating RGS girls take on ITE husbands is also impossible given that assortative mating contributes to 40% of inequality.

For a start, I can think of two subtle changes :

One possibility is that legacy admissions must be banned in Singapore. It does not make sense for the ACS boys who bullied me in the 1980s get a free pass to admit their kids to the ACS franchise and continue to benefit from being part of such an illustrious and well-connected alumni. This has to be earned and should not be a right based on a person's bloodline.

Another possibility is that Government Gebiz system limit some bids to companies of a specific range of sizes rather than favour larger companies. If some tenders are so big that a company needs to meet a paid up capital threshold to bid for the project, we have to accept that some projects can be so small that only a company that is small is allowed to bid for it. Readers in government can confirm with me as to whether this practice already takes place.

You see, you don't see Kuik Shiao Yin fighting to discuss these reforms in Singapore society.

It's always about the problem, never about solutions beyonds raping our reserves.


Spur said...

The main problem I have with the "system" is that it allows people like CCS to rise to near the top. LOL!

Govt has long ago recognized that long term maintenance of "prosperity" for the masses is to do away with artificial retirement ages, and to promote working for as long as required. The problem was govt had to balance this with business demands ... no company likes being forced to hire oldies or to pay them well.

In recent years, govt has been made to realise the masses' unhappiness over the official policy dichotomy of working till drop dead versus no jobs / unlivable wages for oldies...

Hence all the taxpayer support e.g. workfare, subsidized "re-skilling", special employment credit, wage credit scheme, sectorial "minimum wage" etc.

Most of these taxpayer-funded policies were legislated after GE2011. No surprise also that the (up to 9 months) bonus for ministers & political appointees were also revamped after 2012 where 50% of KPIs depend on low- & median-income increases ... previously 100% of the KPI depended on just GDP growth.

Hence the slight change in tack favouring pro-wage-growth policies --- the biggest of which is tightening of S-passes & E-passes. That's the reason why median household income has been rising strongly since 2012 onwards. And that's why many locals are "bearing" it --- they have experienced better bread & better butter, and actually enjoying the fruits of national & corporate economic growth ... unlike many peers in developed countries.

Christopher Ng Wai Chung said...

And passive income investors are losing out in this game.

So I must get back into the employment business so that my standard of living will not be pushed down in the future !

Unknown said...

So govt policies are grabbing people by their balls & convincing them to actively contribute to GDP. As an investor of Singapore Inc, that's good news for me.