Thursday, August 31, 2006

Income inequality has risen here in the last 10 years but it is a necessary evil for economic growth.

a Comment on the above statement. [10]

Rising income inequality is a phenomenon experienced by many developed and developing economies globally; Singapore is not an exception. In fact, Singapore’s Gini coefficient, a measure of the level of inequality in an economy, has risen from approximately 0.43 to about 0.47 in the past decade, confirming the first part of the statement: income inequality has indeed risen in Singapore.

However, what is more uncertain is whether income inequality is necessary for economic growth; to address this issue, one needs to consider how income inequality is related to growth. In particular, the magnitude of the inequality present is of great relevance. It is only after considering these factors will one be able to draw a semblance of a conclusion about whether, firstly, income inequality is ‘evil’, and secondly, whether it is necessary for economic growth.

Rising income inequality is often experienced together with economic growth, of which Singapore’s economy is a prime example, having grown steadily at a rate of about 6 – 7% in the 1990s. The presence of income inequality arises because of a difference in wages and income, which further arises because of, among other things, an increased demand in expanding sectors in the economy as compared to decreased demand in contracting sectors, resulting in higher wages in the former, as well as, more subjectively, an increased work effort.

Hence income inequality diverts resources to where demand is highest (as workers seek to increase their incomes, they look for jobs in the expanding sectors of the economy), and provides an incentive for workers to increase their work effort, hence increasing the productivity of the economy in general.

Hence some level of inequality does seem necessary for efficiency, and hence, growth in the economy.

However, high levels of income inequality can hinder growth. Income inequality arises for reasons other than those mentioned before; in particular, income inequality may arise because of inherent differences in ability or differences in inherited wealth.

Income inequality that arises because of these reasons are more likely to persist in the long term, and if present in large amounts, has the potential to cause social unrest and a lack of social cohesion because of rising discontent in the lower income classes. This will necessary hinder economic growth as it causes instability, and may reduce the confidence the world has in the at economy; Singapore, luckily, has as yet not experienced something that serious.

Income inequality is sometimes regarded as an evil purely because of ideological reasons; however, too much of it is also an evil in the economic sense since it hinders growth. Yet, some level of inequality is still necessary for economic growth.

3b) Discuss whether the minimum wage law is the best policy in helping low income earners in your country. (15)

The minimum wage law is an artificial floor on wages that attempts to raise wages of low income earners to more acceptable levels.

Photobucket - Video and Image Hosting

In imposing a minimum wage that firms must pay for labour, the government is legally assigning a minimum value of wages (P1) as the feel the equilibrium wage rate (P) is too low. However, while individuals who retain their jobs benefit, there are many (Q – Q1) who lose their jobs as producers find them too costly to hire. Furthermore, there is disequilibrium unemployment as Q2 workers want to work but only Q1 workers are wanted.

In trying to help low income earners, if the Singapore government puts in place a minimum wage, they might instead be doing the exact opposite for some of these workers. This is especially so as the market structure of the Singapore economy is very much a competitive one rather that that of say, monopsonies.

Instead, perhaps the government should look into alternative measures to help these workers. As most of Singapore’s unemployment is structural, perhaps the government should look into retraining these workers instead. Although this might be costly, the government can count, to some extent, on increased tax revenues from these workers who earn higher wages in the future, to finance this expenditure. Furthermore, this would solve Singapore’s structural problem directly to some extent, which is certainly desired.

One must also not forget welfare policies, Welfare benefits funded by progressive taxes on high income earners could be used to increase the income of the low income earners. This, unlike the minimum wage law, does not create unemployment. However, while this way of redistributing income is beneficial in this sense, progressive taxes are a disincentive on high income earners from working harder, whereas welfare benefits might serve to discourage low income earners from taking up an available job as they have a safety net to fall back on. These problems are not easily solved, and hence this method of helping low income earners require careful thought before being put into place.

The government, then, might want to cut regressive taxes to ease the tax burden on these individuals. They can also subsidies essentials such as rice and electricity alongside retraining policies. While this has little impact on income inequality, at least the low income earners are truly being helped, unlike in the case of the minimum wage law that distorts the labour market and brings along allocative inefficiency with it (refer to Q2 – Q1).

31 Comments:

Anonymous Anonymous said...

Easily I agree but I dream the brief should acquire more info then it has.

8:01 AM  
Anonymous Anonymous said...

I inclination not agree on it. I regard as warm-hearted post. Specially the title-deed attracted me to study the sound story.

6:47 AM  
Anonymous Anonymous said...

Hi there, I wish for to subscribe for this blog to get latest updates, therefore where can i do it please help out.
Feel free to surf my blog : auto insurance savings

4:00 AM  
Anonymous Anonymous said...

This is very fascinating, You're a very professional blogger. I've
joined your feed and look ahead to in the hunt for extra of
your wonderful post. Also, I have shared your web site in my social
networks
Feel free to surf my blog beauty skin care products

1:36 AM  
Anonymous Anonymous said...

Excellent blog here! Also your website loads up fast!
What host are you using? Can I get your affiliate link to
your host? I wish my site loaded up as quickly as yours lol
Also visit my web blog ; www.miasesorfiscal.Com

5:47 AM  
Anonymous Anonymous said...

Hi there, just wanted to mention, I enjoyed this post.

It was inspiring. Keep on posting!

Feel free to surf to my webpage :: search engine optimisation

8:59 PM  
Anonymous Anonymous said...

This is the perfect website for everyone who wishes to understand this topic.
You know so much its almost hard to argue
with you (not that I really will need to…HaHa). You definitely put a
new spin on a subject which has been discussed for many years.
Wonderful stuff, just wonderful!

Here is my blog; justin bieber smoking weed

7:58 AM  
Anonymous Anonymous said...

I think this is one of the most significant info for
me. And i'm glad reading your article. But should remark on some general things, The website style is great, the articles is really nice : D. Good job, cheers

Here is my site - best coffee maker

6:53 AM  
Anonymous Anonymous said...

Use food supplements wisely. Vitamins and minerals work in co-ordination with one another, so taking large dosage amounts of any single vitamin might cause instability inside the others. Higher-dose supplements of personal B vitamin supplements are specifically problematic. Therefore, unless of course a physician suggests you otherwise, it's most dependable to adopt only one multi-vitamin daily to be sure the correct equilibrium. [url=http://www.ss12w12ws.info]Cakg44452e[/url]

7:12 AM  
Anonymous Anonymous said...

Hi friends, fastidious paragraph and fastidious urging commented here, I am truly
enjoying by these.

Feel free to surf to my web blog; http://kayjewelersengagementrings.net/types-of-fashion-trends-for-women-clothing-styles/

3:06 PM  
Anonymous Anonymous said...

Fаntastic beаt ! I wоuld liκe to apρrentiсe at the same
tіme as yοu amend youг websіte, how can
і subsсribe for a blog wеbsite?

The aссount aided me a applіcаble deal.
I werе tiny bit aсquaintеd οf thiѕ youг broаԁcаst
offerеd vіbrant transparent iԁea cheap auto insurance - online car insurance in massachusetts

My blog cheap auto insurance

1:20 AM  
Anonymous Anonymous said...

Hi there, You have done an incredible job.
I'll definitely digg it and personally suggest to my friends. I'm confident they will be benefited
from this site.

Here is my homepage ... Going at www.jamoramareviewexposed.com

7:15 PM  
Anonymous Anonymous said...

Ргеtty niсe рost.
I just stumbleԁ upon yοur blog and ωanted
to ѕаy thаt Ι hаνe reаlly lovеd bгowѕing уоur blog рosts.
In any case I'll be subscribing for your rss feed and I am hoping you write once more soon!

my blog post New York Life Insurance

11:12 AM  
Anonymous Anonymous said...

Hello everyone, it's my first pay a quick visit at this web page, and piece of writing is really fruitful for me, keep up posting these types of articles.

Visit my blog; http://www.40sl733g.de/womens-clothing-stores-online/

5:55 AM  
Anonymous Anonymous said...

Howdy! This blog post couldn't be written any better! Looking at this article reminds me of my previous roommate! He constantly kept preaching about this. I will forward this information to him. Pretty sure he'll have a great read.
Thank you for sharing!

My web-site http://1980designs.com/trendy-plus-size-clothing/

10:18 PM  
Anonymous Anonymous said...

An impressive share! I have just forwarded this onto a coworker who had been conducting a
little homework on this. And he actually bought
me dinner because I found it for him... lol. So allow me
to reword this.... Thank YOU for the meal!! But yeah, thanks for spending the time
to talk about this subject here on your blog.

my webpage ... visit the Next internet Site

3:53 AM  
Anonymous Anonymous said...

When some onе sеагchеs fοr his vital thing,
thеrefore he/shе desires to be availаblе that іn ԁetail,
thuѕ that thіng iѕ maintained over here.


Ηerе is my websіte deer velvet supplement gnc

3:04 AM  
Anonymous Anonymous said...

If you wish for to grоw your famіliarity simplу kеep visiting this web page аnd bе updateԁ with
thе neωest gossip рosted here.

Also visit my homepage; home business jobs

9:50 AM  
Anonymous Anonymous said...

Ηurrah, thаt's what I was searching for, what a material! present here at this website, thanks admin of this web page.

My web-site - Pull My hair lyrics

10:57 AM  
Anonymous Anonymous said...

І think the admin of thiѕ web site is in fact working hаrd in support of hіѕ web sіtе, for the reaѕоn that heгe every material is qualitу based material.


my web sіte green coffee extract **

10:26 AM  
Anonymous Anonymous said...

Wow, thіѕ post іs gooԁ, my sister
іs analуzing these thіngs, therefore I am
goіng to inform her.

Chесκ out my homеpаge
:: green coffee extract

1:55 PM  
Anonymous Anonymous said...

Pretty nicе post. I just stumbled upon уouг blog and wanted to say that
I've really enjoyed browsing your blog posts. After all I will be subscribing to your rss feed and I hope you write again soon!

Also visit my homepage: autolog car transport reviews

2:39 PM  
Anonymous Anonymous said...

I'm truly enjoying the design and layout of your site. It'ѕ a very
easy on the eyeѕ whіch makes it much
mоre plеasant fοr me to comе hеre and viѕіt more often.

Dіd you hire out а designer to сreatе your themе?

Ѕuρerb ωorκ!

Hеre iѕ my blοg post; ѕpοrtsbet ()

7:01 AM  
Anonymous Anonymous said...

Ιf sоme one wants expert view on the toρic
of гunning a blog afterward i suggest him/her tο pay a quick visit this wеbрage,
Keep up the ρleaѕant worκ.


Also ѵisit my site: sportsbet **

7:09 AM  
Anonymous Anonymous said...

Hі! This is my fiгst сomment heге sо I just wanted
tо gіve а quick shout out anԁ ѕay I truly еnϳoу гeaԁіng уouг blog posts.
Can you recommend any other blogѕ/websites/foгums thаt dеal with the same subjects?
Thanks for уour tіmе!

Look at my webѕіtе - sportsbet

1:37 PM  
Anonymous Anonymous said...

What's up friends, good piece of writing and fastidious urging commented here, I am truly enjoying by these.

Feel free to surf to my web page; raspberry Ketone

2:17 AM  
Blogger oakleyses said...

abercrombie and fitch, lunette oakley pas cher, jordan pas cher, michael kors, lunette ray ban pas cher, polo ralph lauren uk, sac guess pas cher, hollister uk, converse, replica handbags, nike blazer pas cher, michael kors, true religion outlet, nike free pas cher, coach outlet, north face uk, hermes pas cher, nike roshe uk, nike tn pas cher, burberry pas cher, north face pas cher, true religion jeans, lululemon outlet, nike air max uk, ray ban uk, true religion outlet, coach outlet store online, nike free, louboutin pas cher, nike air max, michael kors uk, vans pas cher, mulberry uk, longchamp soldes, nike air max uk, nike roshe run pas cher, timberland pas cher, nike air force, coach purses, hogan sito ufficiale, new balance, vanessa bruno pas cher, ralph lauren pas cher, kate spade outlet, abercrombie and fitch UK, michael kors outlet online, true religion outlet, polo lacoste pas cher

9:59 AM  
Blogger oakleyses said...

hollister, swarovski jewelry, barbour jackets uk, pandora charms, canada goose pas cher, louis vuitton uk, ugg uk, converse, moncler, louis vuitton, supra shoes, moncler, swarovski uk, pandora jewelry, lancel, canada goose, sac louis vuitton, marc jacobs, wedding dresses uk, juicy couture outlet, moncler, karen millen uk, toms shoes, ugg,ugg australia,ugg italia, moncler jackets, doke & gabbana, canada goose uk, canada goose jackets, canada goose outlet, sac louis vuitton, ugg pas cher, louis vuitton, pandora jewelry, gucci, coach outlet, moncler pas cher, bottes ugg pas cher, converse shoes outlet, canada goose outlet, moncler uk, ugg,uggs,uggs canada, hollister, montre pas cher, vans scarpe, ray ban, juicy couture outlet, replica watches, links of london uk, canada goose, nike air max, moncler

10:03 AM  
Blogger Unknown said...

cheap ray ban sunglasses
longchamp bags
ugg boots outlet
discount nike shoes
michael kors outlet store
true religion outlet store
christian louboutin sale
oakley sunglasses outlet
kate spade uk
polo ralph lauren
zhi20161230

10:07 AM  
Blogger Unknown said...

longchamp
adidas superstar shoes
cheap basketball shoes
michael kors outlet store
air jordans
adidas neo
true religion
air max
jordan shoes
michael kors outlet online
20170724

3:37 PM  
Anonymous De Lemon Jus Ekstrak Lemon said...

It is great to have visited your website. Thanks for sharing useful information. And also visit my website about health. God willing it will be useful too

Penanganan Penyakit Rakitis pada Anak
Obat Sariawan yang tak Kunjung Sembuh
Obat Pengapuran Tulang Alami

9:38 PM  

Post a Comment

Subscribe to Post Comments [Atom]

<< Home