2.15 But globalisation brings with it challenges for Singapore. We face a worsening of our income distribution and slow or no growth in wages at the lower end. Not just over the last few years or for now, but this will be with us for several years to come. It will be a key challenge for us, just as it is in most of the developed economies.
2.16 The reasons for the widening income spread are by now well known. China, India, Russia and Eastern Europe have doubled the global workforce, putting downward pressure on wages everywhere. Companies have more choices on where to invest, where to locate their plants based on where they can get the lowest cost or the best workers or the latest technology. At the same time, technology continues to advance, relentlessly. It is increasing the demand for workers with high skills and knowledge. And technology is making many types of workers redundant, especially those with low skills, and also making it easy for their jobs to be exported abroad to where wages are lower for the same skills.
2.17 The result is widening income gaps between the skilled and the low-skilled, between the young and old, between those who adapt quickly to the market and the rest. Incomes are stretching out in the developed world, with the top rising rapidly, the middle growing slowly, and the low either stagnating or declining.
2.18 In the US, the income gap has been widening for some time, especially in the last decade. In the last five years, despite strong economic growth, the wages of production and non-management workers have grown by only 1.7% in real terms over the period as a whole. The same is happening in Europe and Japan — incomes going up at the top, but stagnating or declining at the bottom. Even in China, with an economy growing at 9%-plus, workers in the bottom 10% have seen a decline in real incomes over the last decade.
2.19 Singapore is facing similar pressures. Because we are a much more open economy, compared to the US, China, Germany or Japan, we are in fact more exposed to these pressures of globalisation. Over the last five years, lower-income households have seen little growth in their incomes. In fact, in real terms, the lowest 20% of households has seen their incomes per capita decline from 2000 to 2005. Fortunately, in the last year, the strong pick-up in employment within the lower-income group has reversed the decline. In fact, it has a little more than reversed the decline of the previous five years. Nonetheless, household incomes at the top end are pulling away faster.
2.20 This is a key item on our agenda. Although our economy is growing well, incomes are only increasing slowly at the lower end, or not at all, and income gaps are widening. This is a problem for those at the bottom, but it is also a problem for the rest of society if those at the bottom feel left out.
2.21 The solution is not to grow more slowly, or to focus less on growth and more on redistribution — although some people think we should do that. If we do that, it will only hurt the people we are trying to help. Slow growth will make everybody worse off, but it will have the greatest impact on those at the bottom. Jobs will be lost and incomes will fall through the floor for those at the lower end of the workforce, while at the top end, talented Singaporeans and those with the ability to seize opportunities elsewhere will up and go. Slow growth will not assure us of a more equal society, as long as we live in a globalised world.
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