Friday, April 27, 2012

Can Meritocracy and Equality co-exist?

Lim Chong Yah’s “shock therapy” proposal has kick-started a much needed rethink on economic restructuring.

(There has been speculation, with family link even, that the impetus for this rethink might have be a deliberate strategy anointed by the highest levels of government.)

It would be easy to blame the media’s tendency to portray life at either end of the scale – because after all, who wants to reach about Mr and Mrs Average Tan just comfortably getting by in their 4-room HDB flat? – as having given rise to perceptions of increasing income disparities.  

However, these are not just perceptions, but a reality that is statistically supported by a widening Gini coefficient.  Our pledged national goal of building a society based inter alia on equality has indeed been slipping away this past few years. 

This is the thing.  Singapore has long been positioned as a meritocracy.  At the same time, we also want to build a society based on equality.  Can the two co-exist?

Meritocracy, in a nutshell, means that the people get chosen for jobs based on their own merits.  In the context of filling jobs, merits could include professional qualifications, inherent abilities/skills/traits or ability to work certain hours.

Pay is decided by a combination of factors – productivity is one factor, but the level of training/investment required and demand/supply for the said abilities/skills are also determinants of one’s income. Consequently, some jobs pay more than others. 

And because people have different abilities and take on different roles, a meritocratic society is inherently an unequal society. 

This said, an unequal nation is an unstable nation, and the government should take decisive action to curb this growing divide.  I would suggest 3 basic steps – they are by no means new, but IMHO, will have to be applied in larger doses if we are serious about our economic restructuring efforts.

1. Abolition/reduction of GST, which places a disproportionate taxes on the lower income; instead, introduce more progressive taxes on income (including passive/investment income).

2. Increase/extend education subsidies to all citizens who qualify for local universities/polytechnics/ITE colleges– to ensure those with the ability will have to educational opportunities to break out of the poverty trap.   Continuing Education for Singaporean adults should also be heavily subsidised. 

3. In specific industries/sectors which have retrenched/unemployed Singaporeans, introduce (higher) levies for hiring foreign workers, such that the cost of hiring a foreign worker would be the same as hiring a local worker.  This would have the impact of either (a) increasing productivity and/or (b) setting “minimum wage” for local workers in that industry.