Skip Ribbon Commands
Skip to main content

News Details

​​​

A tale of two rankings

Published on: 01-Nov-2018

A report last month by non-profit organisation Oxfam International, which ranked Singapore among the bottom 10 countries in the world - 149th out of 157 - at tackling the gap between the rich and the poor, raised many eyebrows here and even drew sharp rebuttals from the Government.

But just two days later, another report, this time by the World Bank, put Singapore in first place worldwide for human capital development.

The contrast between how Singapore fared in the two studies may have struck many as puzzling. Certainly it gave food for thought to experts who study the country's development.

There are lessons to be gleaned from both, they say, and Singapore could benefit from taking a more critical view of such international rankings - regardless of whether it comes in at No. 1 or 149.

OXFAM: SINGAPORE'S LOW TAXES THE MAIN CONCERN

In his response to Oxfam's Commitment to Reducing Inequality Index, Minister for Social and Family Development Desmond Lee outlined how Singapore's social spending, while proportionately lower than that of some other countries, results in good outcomes. For example, he said, it has a very high rate of home ownership, its healthcare system has been named among the best in the world, and local students consistently outperform others in international rankings.

Finance Minister Heng Swee Keat reiterated this point when he commented on the report a few days later, saying that given its limited resources, it is very important for Singapore to achieve good outcomes with the required inputs, rather than to measure performance by the amount of money spent by the public sector.

Oxfam's head of inequality policy, Mr Max Lawson, is ready to admit that the study is "far from perfect".

"We do recognise the positive outcome in education and healthcare in Singapore, and we know there's quite a vibrant debate in Singapore about inequality and poverty," he says.

He adds: "I agree at first glance that you would wonder, how could it be the case (that Singapore ranks lower than countries such as Afghanistan or Ethiopia), but the reason is that we are measuring commitment, and commitment can come from very poor countries."

Oxfam measures commitment by looking at three indicators - a country's tax rates, how much it spends on health and education, and whether its labour policies include things such as a minimum wage and laws against gender discrimination.

Ethiopia is a good example, he says. "Ethiopia is very poor but it spends a fifth of its Budget on educating its children and it has a reasonably progressive tax regime."

It is Singapore's tax regime, not its social spending, that really drags its score down, Mr Lawson says. "The main reason Singapore scores poorly is that it is not taxing the rich enough, and is engaging in harmful tax practices which allow big corporations to avoid taxes."

Oxfam has repeatedly criticised Singapore's corporate tax incentives over the years, saying that they enable multinationals to book their profits to benefit from lower taxes, instead of rightfully paying higher taxes back home.

The Government's response to this, which it has also repeatedly issued over the years, is that Singapore's tax incentives are given only to companies that conduct substantial economic activity here, and that it does not condone practices such as profit shifting which are aimed at avoiding taxes.

Mr Lawson adds that Singapore's personal income tax rate - 22 per cent for the highest earners, with annual chargeable incomes in excess of $320,000 - is too low.

"Singapore has one of the highest rates of millionaires per capita in the world, and we believe there is scope for these rich people to pay more taxes."

Singapore is also let down by being one of only a handful of countries without a minimum wage, Mr Lawson says.

He notes that there is a wage floor for workers in certain sectors - cleaning, security and landscaping, but adds: "The Government might well want to expand its protection of cleaners and security guards to a general minimum wage, in line with international best practice."

Still, he adds, he appreciates that the Singapore Government holds a different opinion on tax and labour policies.

The Government has resisted calls for a minimum wage and instead implemented alternative programmes to help lift incomes for low-wage workers, such as the Workfare Income Supplement.

This scheme tops up the incomes of those aged at least 35 and earning $2,000 a month or less. However, all persons with disabilities qualify for the supplement.

OXFAM VERSUS WORLD BANK

One key difference between the Oxfam report and the World Bank's Human Capital Index is that Oxfam measured inputs - a country's spending, tax policies and labour policies - while the World Bank measured outcomes such as a child's probability of survival to age five, test scores and the adult survival rate.

Experts, such as Professor Guido Gianasso, the associate dean (corporate engagement and relations) of Nanyang Business School, say this difference is the reason for the vastly contrasting rankings for Singapore.

"The fact that two studies come out with completely different results is not surprising for those who work on social research. The change of one single parameter can produce vastly different ranking results," he says.

That is not to say one method is necessarily better than the other, and both studies have been criticised by different governments, experts add.

Prof Gianasso notes that while Singapore has embraced the World Bank study, countries such as India - which was ranked lower than Bangladesh and Nepal - have criticised it.

Professor Linda Lim, professor emerita of corporate strategy and international business at the Stephen M. Ross School of Business at the University of Michigan, adds that inputs are not necessarily less valid than outcomes, and the results of one study do not invalidate the other.

"If we think this, we should disregard all input rankings in which Singapore tends to do better than on outcomes," she said.

She pointed to the example of Insead's Global Innovation Index, which this year ranked Singapore first for Input and 15th for Output. In terms of efficiency - how much output the country is getting for the amount of input it has invested - it placed Singapore 63rd in the world.

Inputs include things such as a country's business regulations, political stability and spending on research and development.

Outputs measured include its intellectual property receipts, high-tech exports and the level of employment in knowledge-intensive jobs.

There are valid criticisms that could be made of both research methods, academics say.

Singapore University of Social Sciences economist Walter Theseira, who is also a Nominated MP, notes of Oxfam's study: "The organising principle behind it is that there's a certain model to tackle inequality, which is high tax and high social spending.

"There's nothing inherently wrong with that model, which works for high-income developed countries in the West, but it has a lot of trade-offs and I don't think that it is necessarily the right model for all countries."

Furthermore, high spending may not necessarily mean efficient spending, he notes. Political pressures might cause governments to spend on short-term projects, rather than on investments that reap benefits only in the long term.

"For example, you might spend a lot on building schools, which is flashy, rather than on training teachers," he says.

Prof Gianasso notes that the World Bank research, meanwhile, does not take inequality into account at all. "I must admit that some results of the World Bank study - for example, Singapore and Hong Kong well ahead of countries such as Sweden, Norway and Switzerland - are surprising," he says.

"There are definitely some important areas, such as broader access to university, social security coverage for the elderly or the Gini coefficient, which are not measured by this World Bank report and where Singapore is behind several countries in Western Europe."

The Gini coefficient is a measure of income inequality in a society.

"The good news is that the Singapore Government is actively trying to address these gaps," he adds.

LESSONS TO BE FOUND IN RANKINGS, GOOD OR BAD

It is important to take a step back and assess what could be learnt from such studies, regardless of how Singapore is ranked, experts say. Baffling as it may be to see the Republic fare worse than war-torn countries on its commitment to reducing inequality, the Oxfam report does have some useful pointers, they add.

Prof Lim says: "The important policy question here is whether the low-tax, high-inequality regime is a necessary part of Singapore's development policy. If it is, we need to unpack that further and consider if we could have lower inequality if we were more committed to it."

Another factor that led to Singapore's poor ranking in the Oxfam study was its lack of labour laws against gender discrimination.

Ms Shailey Hingorani, head of advocacy and research at the Association of Women for Action and Research (Aware), says this is certainly something Singapore should act on. "We have seen mothers being questioned about their ability to commit to their jobs at interviews, or getting fired for taking unpaid leave to care for their children," she says.

"We need to demonstrate active commitment to reducing the gender wage gap, by regularly reviewing wages in sectors in which women are concentrated, and establishing effective monitoring and regulatory mechanisms for employment and recruitment practices."

Dr Theseira adds that it is important for Singapore to learn from such studies, regardless of the results.

"When we do badly, that's when we say we are exceptional. But we can't be exceptional only when it's in our favour. We should see what we can learn from the reports - even the ones in which we do badly."

Back to listing

Not sure which programme to go for? Use our programme finder
Loading header/footer ...