Understanding Income Inequality in Singapore from Systems Dynamics Perspective

Abstract

The problem of income inequality is a growing issue in Singapore, one that has been seriously investigated by different scholars and policymakers. Internationally, the Gini coefficient is recognized an indicator to represent the income distribution of a nation’s residents and hence a measure of inequality, albeit its much-disputed flaws. A Gini coefficient of zero signifies perfect inequality while one expresses maximal inequality (Singstats, 2015). As of 2015, Singapore’s Gini coefficient stands at 0.463 (Singstats, 2016). Nevertheless, critics have raised salient points against any overreaction over the alarming high Gini coefficient, and their arguments would be elaborated in the later portions of the essay. Yet, when we look at the statistics, it is undeniable that growing inequality is prevalent in Singapore. In a forum, Singapore’s Emeritus Senior Minister pointed out that there was an urgent need to redistribute wealth as Singapore was increasingly becoming a much divided society owing to a wide disparity in income. Increasingly, the Government is recognizing the issue of income inequality and they are taking steps to mitigate the situation. This is so because income inequality is not only an economic issue but it is also a social issue which could potentially damage the social fabric of Singapore. This has motivated to centre this research paper on the issue of income inequality in Singapore. This paper approaches the issue from systems perspective and addresses the following objectives: (i) To identify the factors that contribute to the problem of income inequality in Singapore via an extensive literature review; (ii) To model the interconnections and interdependencies between the factors that impact income inequality using system dynamics tools; (iii) To analyse and discuss the possibilities of what can be done to mitigate the situation.