It was a home-coming of sorts for the public intellectuals and politicians who were involved in the creation of Singapore's premier think tank, the Institute of Policy Studies (IPS).

In 1998, Goh Chok Tong, then First Deputy Prime Minister and Minister for Defence, announced IPS's establishment to fulfil two major roles: 1) Provide a forum to stimulate lively discussions on Singapore's future; and 2) Undertake research studies.

And what better way to start IPS' 30th birthday with the erudite Tharman Shanmugaratnam and Tommy Koh.

Here, we bring you extracts of the Q&A dialogue with the Deputy Prime Minister and Koh, IPS Adviser and Ambassador-at-Large. 

Tommy Koh: DPM, it is a very great pleasure to moderate this dialogue with you. In order to secure this privilege, I shamelessly told Janadas (IPS Director) that I’m the chairman of the Tharman Shanmugaratnam fan club in Singapore. I requested Janadas to show us these two videos by Nas (Daily) because I agree that in only 53 years, we’ve built a wonderful country. It’s not perfect, but we have so many things that we can be so proud of. The second video is also important, which is to acknowledge that we are not perfect. We do have challenges and one of the challenges is inequality. So I would to begin the dialogue by looking at poverty in the midst of prosperity and the challenge of inequality in Singapore. I believe you would like to make some remarks.

Social mobility: Easier when the escalator is moving up

DPM Tharman: Thank you, Tommy. It is always a pleasure to be in a dialogue with Tommy. This is our third time, I suspect. Let me just say a few things to start the dialogue. Inequality is important. Social mobility is even more important. Social mobility is at the heart and soul of our ambition. Not just in Government, but it must be at the heart and soul of our ambition as a society. It is part of our identity, it has been part of our identity, it has to be part of the heart and soul of our ambition for the future. I’ll make three points about this challenge of sustaining social mobility, and managing inequality – making sure inequalities don’t become too wide.

The first point I want to make is that it is critical that we sustain a system where everyone is moving up. In other words, before we think about the issue of relativities, which is what inequality is about, we have to think about the issue of how can we make sure that everyone moves up including those in the broad middle of our society – the middle class. Because once that escalator stops, once the escalator that carries everyone up stops, the problems of inequality and all the problems of “me against you”, “this group against that group”, become much sharper, and this is exactly what has happened in a whole range of advanced economies. Once you get stagnation in the middle of society, over a long period of time, which is what has happened in the US, it has happened in a range of other advanced countries, inequality becomes a much sharper issue – much more brittle. The politics of inequality acquires a momentum of its own which makes it harder to solve the problems of a broken escalator. Once that escalator stops – just imagine it, we are all moving up on that escalator – once it stops, then it becomes a very salient issue, who’s ahead of me, who’s behind me, not just who’s ahead of me and moving further away from me, but who’s behind me and catching up with me. This too, is what we see – in a range of advanced countries – that pervasive anxiety of people in the middle as someone is catching up to them and someone is moving away from them. So keep the escalator moving.

Second reason why we’ve got to keep that escalator moving for everyone is that it makes it much easier to have social mobility with a moving escalator. There are more opportunities there are new skills to be learnt, new jobs to be obtained, it becomes much easier to achieve relative mobility when you have absolute mobility. What I get is not just at the expense of someone else; I can move up without someone else moving down, if the escalator is moving up. That is the first point I want to make. Singapore has done relatively well in that measure so far, because our median wages, the wages of those in the bottom 20 per cent have been moving up, unlike many other societies.

Social mobility: why it gets tougher

The second point I want to make, Tommy, has to do with social mobility itself, which as I say has been part of our identity and must be at the heart and soul of our ambition. It will get more difficult, it is already more difficult and it will get more difficult, precisely because we have succeeded in the past because we’ve had waves of mobility, from a population that largely started off poor, like many in this audience, like ESM – the exemplar of that Singapore story –start off poor, did well in education, work hard, do well in life. We’ve had waves of mobility, so those who were poor, or those whose grandparents were poor, had parents who were not so poor, and they themselves now are no longer poor, and are in fact quite well off. They invest in their children as much as they can so that their children can do well.

It’s in the nature of a meritocracy, it’s in the nature of succeeding in mobility, that it gets more difficult over time, because those who succeed try to help their children and those who haven’t succeeded find that the odds increase against them doing well in life. It simply means, and also in Singapore and elsewhere, that we have to work harder at keeping mobility going, by starting earlier in life, in fact I would say, starting in fact even in the prenatal months, before a child is born. Starting very early in life and continuing through life, to intervene to help people to do well for themselves. It requires a consistent effort in early childhood, through the school years and in work life; investing in people at regular intervals and taking very seriously the idea that everyone can grow. That growth mindset has to be what defines us. It doesn’t matter where you start, you can grow, you can improve and you can master your job. This is a major challenge, very few countries are succeeding. I just came back earlier this week from Finland. I was in Denmark and Finland – both relatively egalitarian societies, culturally, and in their education systems – but they’ve seen social mobility far short from what they desire. In fact, the persistence of social class in even the Nordic societies has been remarkable over the decades and they are the most egalitarian of the Western societies. We too will face these challenges. We are doing better than most societies for now in terms of mobility, but we’re going to face more of a challenge and we have to focus our minds on that.

Inequality: the generational difference 

The third point I want to make when we think about inequality is – we have to remember that a good part of inequality in Singapore is actually generational inequality. Think about it. I’m not even talking about the pioneer generation. Even if you talk about those in their 50s today, say aged 55 and above. Of Singaporeans aged 55 and above, the majority, in fact, well over 60 per cent have no more than secondary school education. These are people who are still in the workforce. They are not old; mature workers in the workforce, well over 60 per cent have no more than secondary school education. But we succeeded in transforming education and transforming opportunities for subsequent generations – those born later. And that has led to a generational inequality – those who started earlier with limited education by and large in simple jobs worked hard, their pay has gone up over time – in real terms – it is much better than in the old days. But they are now at the lower end of the escalator and subsequent generations have moved up. That was success, it was success in transforming societies but it has led to generational inequality. We have to focus our minds on how we can help older Singaporeans, and I say older not meaning the true elderly but mature Singaporeans who still have 40 years ahead of them. Those in their mid-50s, those in their mid-60s. They will have 40 years ahead of them to work for as they long as they wish, to work with dignity, to earn a decent pay, with the support of their employers, with the support of the government, and with the support of the public to be treated with dignity.

By the way, just before I came up, I had to go to the loo. I met a gentleman there, who was holding himself with some pride with his uniform. He was the attendant in the gents. We had a chat, I was struck by how good his English was. He started working here 8 years ago – full time job, all the benefits, started off with $1,200, now earning well above $2,000, employer sent him for training, including English language training with Kaplan, even had to sit for a test on a computer. He was working as an attendant; he was very pleased to be of help. I didn’t need help at the toilet but he was very pleased to keep me company and have a chat. But he was doing his job with dignity and earning a decent pay, with pay that goes up over time, employer takes him seriously and invests in him together with his team mates. That’s what it takes.

Treating fellow Singaporeans with dignity 

Koh: DPM, the important question is not whether he behaves with dignity, but whether people will enter the lavatory show respect and treat him with dignity.

Tharman: Absolutely.

Koh: And I would say in Singapore, the elite does not show respect for people who work as cleaners, gardeners, petrol station attendants, security personnel. One of the problems in Singapore is that these low wage workers are treated as invisible people. You are one of the few gentlemen who greets him and talks with him. But how many of you did?

Tharman: I think Tommy is right. I think ageism is still an issue in our society and ordinary blue-collared workers also deserve a lot more respect and regard. I don’t think this is only a problem for the elite, I think it is part of our social culture. We inherited a combination of a set of British institutions and the East Asian culture. Both of which were quite hierarchical, both of which tended to look down on ordinary manual labour. We’ve got to move past that and it means everyone – it means customers, it means ordinary members of the public, it means employers, critically, employers play a critical role, and with the support of the government.

Koh: Singapore had become increasingly stratified

Koh: Thank you DPM, thank you for those three very important points. My first question is about inequality and I would challenge your premise that inequality is a generational problem. You know, the old people like me fade away from the scene, the problem will disappear. It will not. Singapore had become increasingly stratified. We are unequal not only in wealth, income, occupation, housing type, the school you went to, the way you speak. As (Senior Minister of State) Janil Puthucheary’s documentary showed us, we live in a very class-conscious society but I want to draw three things to your attention. One, the UN Development Programme (UNDP) has a very well respected index, called the Human Development Index. The Human Development Index describes Singapore as the second most unequal high-income economy, after Hong Kong. And within the space of two days, we had two different reports about Singapore. On 9 October, Oxfam published its annual report on commitment to reducing inequality. Oxfam was very critical of Singapore, demoted us from 69 to 140 something, put us in the bottom 10 countries of the world. I think it is a very unfair report. But two days, later the World Bank published its first Human Capital Index, and the World Bank ranked Singapore number one for the development of human capital. My question to you is how do you reconcile the UNDP’s Index that says Singapore is the second most unequal advance economy, Oxfam’s report on us, and the World Bank’s very salutary report on Singapore.

Tharman: "I eat data for breakfast"

Tharman: First, you are asking someone who does spend some time looking at these surveys and the data. I actually like data. I eat data for breakfast, data with a little bit more data, and you can juice it as well. They say it is also quite healthy.

Let me start by saying that I disagree with Tommy that we are one of the more class-conscious societies around. In fact, I would say that if you talk about our social culture, we are much less class-conscious than many other societies I am familiar with, partly because we are younger, (But) we are at risk of becoming more class-conscious, and we must resist every tendency in that direction. So I just want to mention that point.

Second, I would say, I myself didn’t take the Oxfam survey very seriously not because of his conclusions, or anything like that. It is just that it was not very good; it was very weak, methodologically. I am someone who takes data methodology very seriously, it was not a good survey. I don’t want to spend time criticising it either.

But, we do have a very interesting question of whether we should be concerned about the fact that by most conventional measures – the most conventional one is named after an Italian statistician called Gini; don’t know when he lived but he has become famous. Everyone knows Gini because of the Gini Coefficient. By Gini Coefficients, before you talk about government actions, taxes, subsidies, transfers and so on, Singapore does not have an unusually high level of inequality. In fact, quite apart from the US which has a high rate of inequality; quite apart from the developing world. I mean, China and so on had much higher level of inequality. Even amongst the European countries, several including the Nordic countries, have a higher rate of inequality by Gini Coefficients before tax transfers. And what they do is have very high taxes for the ordinary person – typical ordinary person will pay something like 30 per cent income tax and about 25 per cent VAT, as many of you would know. Because they do not have too much savings, the VAT of 25 per cent is actually an income tax because you are consuming most of your income. So it is roughly 50 per cent tax on the ordinary person.

In our case, virtually no income tax for the person right in the middle. You pay GST, 7 per cent, and moving up by 2 per cent in a few years’ time. If you own a car, which the average person doesn’t, but some do because they need it, you pay significant COE, ARF, so on and so forth. But our taxes are far, far lower on the ordinary person, including the middle class and the lower income group than any other advanced country. Only Hong Kong is in the same league but Hong Kong, believe me, is living on borrowed time. Hong Kong is living on borrowed time. The property market is doing well for now, but Hong Kong is going to be an aging society like all of us and they are going to need revenue just like we need revenue.

Tharman: "We have a low tax regime that is highly progressive"

We are a low tax society, and as a result we have to think very hard about how we use those tax revenues. What we do is to use it very progressively. In other words, target our subsidies and our benefits on the poorest in society, on those who need it the most.

We have a low tax regime that is highly progressive in terms of where the benefits go. So if you are someone at the bottom twenty per cent of incomes, for every dollar of tax you pay, which is mainly GST, you get back about $4 of benefits, which is a very progressive scheme – more progressive than many other societies but at a lower level of tax. That is our system. Where does it end up – after taxes and transfers our Gini Coefficient is something like 0.36 for those who are familiar with this, which is not at the top end of the advanced economies, it’s certainly in the top third but not at the very top end. But critically, I come back to my first point. what matters is not just the relativities, but are people doing better over time? It is no point in being better off than someone else if in fact everyone is stuck in the same place. We have fortunately avoided the situation where you have middle class stagnation and where the lower-income group is also stuck. Everyone has been moving up. The escalator is still moving and we have got to keep it moving which is why economic policy is fundamental to social objectives. It’s not just social policies, not just redistribution and transfers and so on. Economic policy itself is central to our social objectives. How do we reconstruct Singapore for a disrupted world, as ESM put it in his speech, it’s fundamentally economic policy and if we can do that well, we keep the escalator moving for everyone.

Koh: I think your basic point that upward mobility continues to be strong in Singapore, is a good point and I agree with that. Inequality and poverty are related but they are not the same. So do you mind if I ask you a question about poverty?

Tharman: Please.

Koh: If we take per capita income I think we are one of the five richest countries in the world but there are many poor people in Singapore. There are two kinds of poverty – households that live in absolute poverty meaning that they lack the means to pay for basic human needs and families that live in relative poverty. The concept of relative poverty derives from taking 50% of their median income as the yardstick. Households whose income is below 50% of the median income is considered relatively poor. From the research I have done, I found that there are between 100,000 to 140,000 households living in absolute poverty. According to Ye Kung, 15 per cent, but from my research it looks like between 20 to 35 per cent of our household living in relative poverty. So my question to you is, what are the facts that you have about poverty in Singapore and what can we do to reduce the poverty in Singapore and make sure that people are able to live in dignity and material sufficiency?

Tharman: I share the aspiration that Tommy has laid out – you have got to make sure that everyone can live in dignity, live a dignified life at work as well as in the community and see the lives improve over time. There are poor people in Singapore; here are some people who are trapped in poverty. Our challenge is to help them escape that situation. They themselves, their children, and with the support of the community and the government. And this is a task –it’s not an ideological task, it is a practical task. We have got to find every way possible to help them to escape poverty and ensure you do not get a persistence of poverty across generations. There is a risk of that happening. There is a risk of it becoming entrenched and passing on from one generation to the next. So we got to work very hard at it and it is not an easy task because I know of no societies that has actually succeeded. There have been many attempts, particularly in the last 60 years since the 1960s, in the US, in the UK and in Europe. If It is merely a question of redistribution, it improves your Gini Coefficients but it doesn’t get people out of poverty. So how to get people out of poverty? How do you shape social culture for the better? How do you raise aspirations amongst the young, even if their parents or their uncles and aunts don’t imbue it in them? It’s a task. It involves teachers, empathetic principals, it involves peers, getting into a positive cycle of aspirations rather than a negative cycle amongst themselves, it involves all of us. So we have to work harder at this task and prevent poverty from being entrenched. The numbers who live in absolute poverty are much smaller in Singapore compared to elsewhere because our whole society has moved up. And we only have to remember what it was like in the old days. I am not as senior in years as Tommy is but I grew up in the 60s and early 70s. I actually remember very vividly what it was like. If you talk about today’s wages, and today’s prices, at today’s prices the pay of an average person when we became independent in 1965 it was about $550, it was actually much lower than that but I’ve inflated it for today’s prices - $550. For a lower income person in those days it was a couple of hundred dollars – $150, $200. The lower-income person then, compared to the lower-income person today, those in the bottom 20 per cent, the increase in standard of living, adjusted for cost of living increases, has been about five times – five times better off. So there are people who are struggling today but think of where we came from. It has been a dramatic transformation – a dramatic transformation in the middle of society. So we have progressed but we still have problems and the problems that will always be with us are the relative problems because by definition, depending on how you define relativity, you always have a proportion who are less well off than the others and I would not say that is irrelevant. It is relevant. We don’t want relativities to get too wide because it just affects the tone of our society.

A brief mention of 377A

Koh: DPM, before I take questions from the audience, may I briefly mention another challenge, with the challenge of inequality, challenge of poverty, there is a new challenge in Singapore – this is the challenge of growing intolerance. A mutual friend of ours was recently invited by one of our religious organisations to speak at a conference on a secular topic. He accepted, prepared his paper and then he was disinvited. Why was he disinvited? Because he signed a petition to repeal the 377A. You know, we can disagree, but there is no need to demonise each other. And I would make also a plea to the government to show greater tolerance. I hope that going forward, the government will no longer ban movies, withdraw book grants. Let’s be big hearted. We have reached a stage of political and cultural maturity, where we could accommodate different points of view. It is a plea.

Tharman: No one should feel demonised in Singapore – (it is a) very diverse society, we have to respect each other and make sure that whatever our views on specific topics, there is a solid core of shared aspirations and beliefs that holds us together.

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Tharman: The nice thing about these debates and the questions we’ve had – all the questions – is it shows that we are concerned about these issues. We are all concerned about inequality, we are concerned social mobility, we are concerned about every aspect of it – the healthcare aspects, income aspects, whether we take the trouble to interact with people from all walks of life. That’s not a bad starting point – that we are all concerned about this. The government is concerned, the NGOs are concerned, the academics and think-tanks are concerned and the public is concerned. Singaporeans, by and large, are by nature not very class-conscious and they like to make sure that no one is doing too badly and that we can all do well together and I think it is very important that we preserve that. And I say this not just because it is a good thing in its own right. It is a good thing in its own right that we should all take an interest in each other and want everyone to do well. But I also say because it is one of the ways in which social mobility is sustained. The culture of our interactions, the ease with which we interact and the way we treat each other, whether we treat each other as equals, as we grow up, and as we go through life, also shapes social mobility, because it spreads aspirations. Aspirations shouldn’t just be the province or the habit of the upper middle class or the wealthy. Aspirations spread through interaction and by having a common culture and the social mixing is something that also enriches those who start of from better off homes. That social mixing enriches all of us and that is the beauty of social mixing – it enriches all of us. Let’s keep that in our Singapore culture because it’s a good thing in its own right but it also helps us to keep aspirations moving up for everyone and each person taking an interest in the other in the same classroom, because we are sharing a desk beside each other, in the same basketball team or in the same team at work, taking an interest in each other is what helps the whole team to move up. Keep the escalator moving up because that is the best way you can get social mobility on the escalator itself.

Koh: Thank you for that important message. DPM, you were recently in Bali for the annual meeting of the World Bank and IMF and I noticed that at the meeting that you chaired, you summed up by quoting a famous “economist” Elvis Presley. I want to conclude this evening by drawing inspiration from your example. I want to close this evening by quoting from a famous “philosopher” whose name is Bob Dylan. In an important essay that Bob Dylan wrote, called Workingman’s Blues, he wrote, “There’s an evenin’ haze settlin’ over the town, starlight by the edge of the creek, the buyin’ power of the proletariat’s gone down, money’s gettin’ shallow and weak, the place I love best is a sweet memory, it’s a new path that we trod, they say low wages are a reality if we want to compete abroad.” Will you please join me in thanking DPM Tharman?

Tharman: That was a beautiful way to end, Tommy, and I just cannot resist adding, that what should always be in our mind is ‘he ain’t heavy, he’s my brother’.

[related_story]

Koh: Thank you DPM, you’re always inspiring.

Read the edited transcript here.

Top photo from Institute of Policy Studies Flickr.