Content area
Full text
This paper starts by tracing how Singapore's path of incessant economic upgrading and restructuring over the decades has led to the emergence of a two-speed dual economy characterized by falling productivity and a widening income gap. This is followed by an indepth analysis of government efforts to foster absolute inclusive growth through redistribution against recent suggestions of building relative inclusive growth through more equitable distribution of gains from economic development using a wage-shock approach. Finally, the paper explains why the Government's strategy of linking wage adjustments to productivity growth may be no panacea to bridging the income gap and how relative inclusive growth can be better achieved by adopting a more incremental approach of wage adjustments, starting first with businesses and workers providing non-critical services in non-tradable sector.
Keywords: Income gap, wage adjustment, productivity, Singapore.
Over the past four decades, numerous accolades have been sung about Singapore's economic success. Despite a bleak economic outlook at the time of its independence, the city-state went on to engineer an astounding transformation from a regional trading port in the 1960s to a low valueadded labour-intensive manufacturing base in 1970s and eventually ending up today as a high value-added, technology-intensive manufacturing base as well as a hub for providing professional business and financial services.
The success is not merely just in terms of economics. In almost all social, environmental and political aspects, Singapore has won adulations from not only the developing but also the developed countries. The achievements, however, did not come easy for Singapore. Given the lack of natural resources and absence of a large hinterland, Singapore had to stay ahead of its competition by incessantly upgrading its economic structure and investing heavily to build up its soft and hard infrastructures.
I. Incessant Upgrading of Singapore's Economy since the 1970s
Singapore underwent its "First Industrial Revolution" during the 1960s when it embarked on its export-oriented industrialization efforts to drive economic growth as proposed in the 1961 Winsemius Report.1 Efforts to upgrade its economic structure started as early as the 1970s. As the economy expanded and approached full employment, dependence on foreign workers grew. By 1970, there were a total of 72,590 foreign workers making up about 1 1 per cent of the work force.2 Increasingly, there were...