Singapore's Rising Income Inequality and a Strategy to Address It

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 in-depth 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.