Monday, July 29, 2019
The Model Thinker (Final Episode) - Income Inequality
I can't believe that we've arrived at the final chapter of this 29-week long exercise.
In this final chapter, the author applies many-model thinking to the problem of income inequality. Applying different models to review the issue of inequality is something every Singaporean should try to understand because this is a priority for our 4G leadership moving forward.
Let's go through the perspectives one by one.
a) Technological changes favor educated workers
Using models of growth, we can theorize that one cause of inequality is that technological growth favors educated workers over unskilled workers. Making matters worse, increased supplies of unskilled labor keeps unskilled wages depressed. During Singapore's attempts to attract foreign talent, it was the polytechnic graduates who did not experience meaningful increases in starting salaries for a decade.
If you agree with this model, you should basically lobby to decrease our dependency on foreign unskilled labor. Have employers bid for unskilled labor through a COE-like system.
b) Positive feedback in the internet economy creates a winner-takes-all system.
Because we are so much more connected to each other, social influences matter a lot more these days. Folks who generate some profit will generate even more profits in the future. We tend to pick a vendor that other people prefer and information travels a lot faster. This strengthens the hand of any incumbent in the business world.
If you agree with this, then the government has to impose some kind of a negative feedback model to make the KPI for government tenders slant towards diversity in choosing vendors. But this may increase the risks of government projects significantly.
c) Political capture by CEOs
Pay for CEOs is determined by compensation committees who are also part of the same social strata of other CEOs. Increases in pay of a few CEOs will lead to higher pay for all other CEOs.
If you agree with this, the best solution is to introduce a member who represent the workers or the Unions in every compensation committee. On this note, I do not understand why everyone is so fixated on getting more women on corporate boards when priority should really go for more non-degree holders to join these committees instead.
Non-degree holders of both genders probably face more discrimination than women in Singapore society.
d) Thomas Piketty Rent-from-capital model
Where the market returns more than the growth in the general economy (r > g), capitalists will have significant advantage over folks who just exchange time for money. Thomas Piketty have yet to meet guys like me who back-test models and apply leverage to earn significantly more than most capitalists.
If you agree with this, then you, like the many SJWs and assorted assholes, you should fight for more investment taxes, or pushing for more wealth taxation if necessary.
(NB: I fight you tooth and claw at the ballot box to ensure that you do not succeed.)
e) Assortative Mating
For me, the biggest cause of inequality is that graduates marry other graduates. In fact, in law school, top students marry each other. If people marry randomly across the social strata, our GINI coefficient would have been 25% lower.
So when an SJW comes at me screaming about dividends taxes, I will ask her why she love ACS boys and refuse to marry ITE guys ? I will attack her husband's high educational qualifications and then declare her a hypocrite.
If you agree with this, then you will agree that a dating agency matching RGS alumni and ITE graduates should be set up in this country and paid by taxpayers. Another possibility is an MGS-Republic Polytechnic dating agency.
f) Inter-generational Income dynamics
This is not a cause of inequality but a system using Markov processes to model it. Singapore has done this exercise and we're still doing ok. Those at the bottom of the ladder still has a decent chance to get to the top. (For now...)
g) Persistent Inequality
This is the idea that children that grow up in low-income neighborhoods receive fewer opportunities. The schools along Bukit Timah road receives more donations and have better parent volunteers.
If you agree with this, then we need more rental HDB flats along Bukit Timah Road so that our rich friends get more interesting neighbors.
So That's the end of The Model Thinker
Wow ! I can't believe that this column is over after 29 episodes !
The Model Thinker is one of the hardest books I ever had to cover and I do understand that readership of this column is about a third of my usual articles. Still, I have grown quite a bit reading this book.
I will probably keep the next few weeks free before declaring the book that I will feature in my next weekly column.