Here’s how Singapore can rank No. 1 in the Oxfam CRI Index on Inequality

By October 11, 2018Current

TL;DR – But if we did that, we’ll be screwed.

So I was really angry, super angry yesterday. Did you read or hear about the Oxfam ranking issue?

UK-based Oxfam just released the Commitment to Reducing Inequality Index (CRI) for 2018. In this second edition of the CRI, Oxfam has ranked 157 countries based on their commitment to reducing inequality. Singapore didn’t rank first. We weren’t even in the top ten.

 

In fact, we were ranked among the bottom 10 countries.

How can that be? Singapore not ranked number 1? What’s the gahmen doing? Why so stupid? Don’t know how to be top ah? So difficult meh?

I can’t believe that it’s that difficult to rank top for that index. So I read the full Oxfam report. I read its methodology. After reading it, I have a sure-fire way of being ranked top. It’s actually quite easy.

To know how it’s done, we first have to understand how the index is calculated. It looks at three factors:

  1. How much a country spends on education, health and social protection as a proportion of overall government spending
  2. How progressive our taxes are, which is calculated based on the difference in amount of taxes paid by rich people and that paid by poor people, the amount of taxes companies pay, GST, and whether there are any “harmful tax practices”
  3. How much is done to protect workers in their economy through legislation regarding workers’ rights, gender equality in the workplace and minimum wages.

 

Why Singapore did badly?

Singapore did badly because of three main reasons, one for each of the factors.

First, according to the people who put the report together, Singapore’s expenditure on education as a proportion of total government spending was reduced.

Second, we did terribly when it came to how progressive our taxes are. We ranked last on this factor. And that’s because our companies and top earners  aren’t taxed a lot and we have a lot of  “harmful tax practices” like giving tax incentives to encourage the development of intellectual property in Singapore, and to encourage successful companies in the maritime industry to set up shop here.

Third, we did badly on the last factor because we don’t have a minimum wage.

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What are the sure ways to beat other countries?

So how can we do better? What can we do to be always ranked number 1. It’s so blindingly simple that I don’t understand why the gahmen can’t get it. Three ways.

First, make sure that 100% of our government expenditure go to education, health and social protection. Forget about spending to build houses, forget about spending on building and maintaining roads, don’t need to spend on having a police force or the armed forces, don’t need to spend on attracting MNCs to invest and set up offices here in Singapore or to help Singapore companies expand regionally and internationally. According to Oxfam, none of those demonstrate commitment to reduce inequality. Just spend on education, health and social protection. Then for the Oxfam index, the first factor, we’ll score full marks. Never mind if that means we won’t have any infrastructure, public transport, no defence, no police.

Second, change our tax regime. Tax the top 50% of our population 100% income tax. The next 50% no tax at all. All companies pay 100% corporate tax. Don’t have GST. Don’t give out any tax incentives whatsoever to try to attract MNCs to invest or set up offices here in Singapore. Don’t need what stupid incentives to encourage companies to develop patents and intellectual property. Those hurt our progressiveness and don’t show commitment to reducing inequality. So don’t do them. Changing our tax regime like that will let us score full marks for the second factor of the Oxfam index. Never mind if that means that no one will want to invest and set up companies in Singapore.

Last, give our workers full protection. Set up a minimum wage of… $10,000 a month. Don’t allow employers to sack workers at all. Give all workers 100 days leave, women 10 years paid maternity leave. Boom. Last factor also sure score full marks. Never mind if that means that no one will want to employ any workers in Singapore (actually moot point if we change our tax regime… there won’t be any companies in Singapore to do any hiring in the first place…).

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See? Easy-peasy to score full marks and ALWAYS rank top for this Oxfam Commitment to Reducing Inequality Index! Why can’t the gahmen just do it?

 

But doing that will ruin us

Because if they did, Singapore will be ruined. Yes, we would have reduced inequality drastically. Everyone will be equal.

Equally poor. In fact, Singapore might not even exist as a country.

And that’s the problem I have with the Oxfam index. It’s too simplistic. It doesn’t take into account the differences in contexts that different nations find themselves in.

A country like Singapore HAS TO spend a significant proportion of our budget on security (i.e. police and armed forces). If we didn’t, do you think Dr Mahathir would have said that Singapore “may be small”, but it was more powerful than Malaysia and that he did not see war as “a means to settle conflicts”? No… He would have just turned off the taps, set up a naval stockade and watched us die of thirst and starve to death.

Also, the Oxfam index has a fixed idea of what is “good” and would reduce inequality. It doesn’t take into account policy innovations. In fact, any policy or solution that is not any of the following will not rank high on Oxfam CRI, no matter how clever and no matter how effective.

For example, while Singapore doesn’t have an official minimum wage, we do have Workfare Income Supplement (WIS). Not only do the low income workers in Singapore not pay tax, they are actually getting money from the government so long as they work! Yes. A case can be made about increasing the cash payout of WIS. But according to the way the Oxfam index is calculated, increasing the cash payout of WIS won’t increase our ranking because the index doesn’t take into account things like WIS. It also doesn’t take into account the amount we spend .

Lastly, Oxfam’s way of gathering data is rather simplistic. For example, Oxfam looks at education expenditure by looking at the budget of the Ministry of Education (MOE) (or its equivalent in other countries), it doesn’t include Singapore’s expenditure in early childhood education and care. That expenditure is in the budget of the Ministry of Social and Family Development (MSF) and not the MOE and has and will be increased drastically.

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Also, it also doesn’t include the amount the government spends on Continuing Education and Training (CET) which include the Adapt and Grow programmes which essentially pays workers to get new skills so that they have better prospects of getting better jobs with higher pay. That expenditure is in the budget of the Ministry of Manpower (MOM), not MOE. That means that the way Oxfam looks at the education expenditure significantly underestimates how much Singapore actually spends on education.

Instead, what we should really do is…

Of course, I’m not saying that inequality isn’t an issue here in Singapore. It is.

Notwithstanding what (MSF) Minister Desmond Lee said about how “both lower income and median households have experienced faster income growth over the last decade than most countries at similar income levels”, more certainly can be done to reduce inequality. That includes increasing the cash component for the WIS, providing even more support for workers, particularly low skilled and low wage workers, to upskill. These won’t get us to rank higher in the Oxfam index because of how the index is calculated, but they would definitely result in real reductions in inequality.

Bottomline – the Oxfam index is a stupid index. Following its suggestions and recommendations will lead to a reduction in inequality by making all of us equally poor. But there are things which we can, and should, do to reduce inequality without making everyone poorer, even though those things won’t get us to rank higher in the Oxfam index.

Meanwhile, I’ll leave you with this rather good response to the Oxfam CRI.

 

 

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CRC

Author CRC

Working on a startup is a scary crazy process. To destress, I write random stuff.

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