Crisis is exactly the time to make structural changes to address poverty and inequality

Academic Views / Tuesday, March 17th, 2020

Teo You Yenn, Associate Professor and Provost’s Chair in Sociology, Nanyang Technological University, and Ng Kok Hoe, Senior Research Fellow and Head, Case Study Unit, Lee Kuan Yew School of Public Policy, consider how poverty and inequality influence the impact of the coronavirus crisis, and suggest that structural changes are necessary as well as immediate relief.

Since the onset of the coronavirus crisis in January this year, life has been lived in a state of suspended reality. Plans have been shelved, daily habits altered, and the steady pursuit of tasks and goals has been replaced with a feeling of wait and see.

In the last few years, we and various collaborators and allies have been worried about the intertwined problems of poverty and inequality in Singapore. On various fronts, we presented research and put forth our view that the problems are structural and not individual, and therefore to overcome them, major and long-term structural changes need to happen. The emergence of a global health crisis pushes these problems into the backdrop, and the ever-evolving situation that alters everyone’s daily habits creates a feeling that we must overcome this first, before we return to our regular concerns.

Yet, the COVID-19 crisis powerfully illustrates the social implications of inequality and sheds light on gaps in the management of our economy and society.

The economic impact of the crisis has been deep and widespread. Sectors like retail, tourism and transport have been hard hit. Jobs become at risk and small businesses worry about sustainability as revenues fall. In different ways, the disruption has reached all corners of society. But even the impact of such a large-scale crisis is unequal.

The massive suspension of economic activity in the world now will have especially serious and far-reaching consequences for those people who before the crisis had already been barely making ends meet. Among the hardest hit are low-wage workers whose livelihoods have always been insecure. Some of these jobs are in the gig economy, such as delivery and private car hire. Other jobs are insecure because they do not offer regular or full hours. When the economy stalls, these jobs are quickly threatened as customers reduce their spending and employers look to cut costs.

The insecure nature of these jobs is largely the result of limited employment protection and regulation. While this lowers the barriers to entry to some jobs and allows businesses to be more nimble when responding to fluctuations in demand, the flexibility has always come at the cost of workers’ income stability (in the short run) and, due to the lack of comprehensive old age income protection measures outside the CPF, retirement income security (in the long run).

The challenges of job insecurity are compounded by low wages. These workers and their households are often unable to build up substantial savings as a buffer against economic downturns, and the lives of their families can be thrown into disarray very quickly. Without monetary buffers, suddenly reduced incomes can affect their ability to manage mortgage payments, children’s educational expenses, and other basic needs like healthcare and food. And with a social assistance regime that combines intensive gatekeeping with short-term and ungenerous aid, help can be too little, too late.

For some years, expenditure has consistently outpaced income for the bottom 20% of households in Singapore, calling into question the capacity of these households to build a buffer through savings. Chart generated from SingStat figures.

In response, various policy measures have been introduced and a second round of intervention is due shortly. Some emergency measures tailored to the particular stresses of the current crisis are necessary. But emergency measures have inherent limitations. They tend to be narrowly focused and time-limited. In Singapore, the preference for a trickle-down model of help premised on protecting businesses has also run into problems this time. We have seen how assistance given to landlords may not always reach shop tenants, and help given to transport operators may not reach all drivers equally.

Can we do more? A rationalisation sometimes kicks in: In times of prosperity, people do not need help; in times of need, there are insufficient means to help. This mindset encourages inertia and delays change. The problems that poorer households faced in normal times have not been suspended because of the crisis. All the things that should have been done to help them then, now must be done.

The current crisis illuminates. It shows us where we most need to intervene to strengthen our social policies: Improving wage protection across all low-paying jobs, shoring up job security in new sectors of the economy, strengthening alternative retirement income sources, enhancing the social assistance regime, and extending the provision of public goods like care services.

Pressing ahead with necessary structural reforms will put individuals in a better position to build up buffers against future shocks and reduce the resources required for drastic crisis measures. It will also dampen the disproportionate economic impact on more vulnerable people next time.

The existential threat of disease has made more obvious than ever that the wellbeing of people across the class spectrum are interconnected. Indeed there have been many calls for mutual help and social unity. Addressing gaps in policy that leave parts of society behind would be a powerful expression of such unity.

There is much for us as citizens to do as well. In crisis, we may seek immediate relief that does not benefit society in the long run. We may be more willing to cede space, wait for instruction, and support the status quo. But if we want our shared futures to be better, we cannot allow ourselves to live in suspended reality. We must aspire to more, we owe future generations more.

The authors have also led research on Minimum Income Standards in Singapore.

This article is a SOAP Awards ‘Commentary of the month’ winner (March 2020)

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