Parliament has begun its marathon session reviewing the Government’s plans for the year. Tackling social inequality has been a stated priority of the Government for a while. This year, policy discussions can refer to a new research paper on the topic from the Ministry of Finance. NG KOK HOE (National University of Singapore) examines how it can guide the debate and suggests questions that remain.

Earlier this month, the Ministry of Finance released an Occasional Paper on Income Growth, Inequality, and Social Mobility Trends in Singapore. It was a significant occasion: income inequality was measured using a more accurate method than before; wealth inequality was officially reported for the first time; and social mobility numbers were updated after a break of more than 10 years. The Paper is instantly essential reading for anyone interested in these topics. It presents information in interesting and accessible ways, includes detailed and thoughtful annexes, and discusses data challenges with candour. More than a compilation of facts, it also reveals the state’s defence of its approach to inequality and mobility.

So what have we really learnt? What is backed by the data and what is not? What do we need to worry about?

1. Income inequality is worse than previously reported, but trending in a positive direction.

In previous official reports, the Gini coefficient (a measure of distribution where 0 is most equal and 1 is most unequal) was always calculated based on income from employment only, and households with at least one working person. The problem with this method, as pointed out before, was that it could understate inequality by leaving out the richest households and their capital incomes such as rent, dividends and interest, as well as the poorest households that are struggling to find work.

The Paper has now confirmed that once all Resident (citizen and permanent resident) households and non-work incomes are included, actual income inequality is higher. For 2025, this correction pushes the Gini coefficient up from 0.426 to 0.452, a worsening of around 6%.

There is still room to improve on methodological rigour. Households of the more than 200,000 Employment Pass holders are not captured in the new measure. Nor have we found a way to incorporate the economic realities faced by close to 1.2 million migrant workers on Work Permits, including domestic workers, who are paid wages that many Singaporeans would consider below subsistence. These two groups, who make up one-third of our labour force, sit at the top and bottom ends of the income distribution. We underestimate the true extent of inequality experienced by everyone living in our society as long as they are excluded.

The good news is that income inequality, whether in the previous working-households iteration or the revised measure including all resident households, is declining. This is not to be taken for granted, in an age when inequality in many countries is deepening.

2. Singapore is relatively unequal among rich societies. Our policies do less and may not be better value for money.

Whether a given level of inequality is acceptable is ultimately decided by society. But international comparisons provide perspective. In a particularly illuminating section of the Paper, we learn that inequality in Singapore before taxes and transfers is at the lower end compared to OECD countries, but rises to the higher end once taxes and transfers are included. In other words, social policies to mediate inequality do much less work here than in other rich nations.

This juxtaposition captures the fundamental question that we in Singapore—in fact, any society—must answer: how much taxes are we prepared to bear for a fairer and more equal society?

On this question, the Paper has made up its mind. It advances two arguments. First, it claims that Singapore’s approach to inequality is lighter on the pocket: compared to Finland and the UK, we pay lower taxes relative to incomes. Second, it asserts that our approach is better value for money, when we consider the amount of benefits that people receive for each dollar of tax. These are persuasive arguments if they are true. However, the Paper does not properly back them up.

When assessing taxes, the Paper includes social security contributions in Finland and the UK, such as for old-age pensions, which tend to be very substantial in Europe. Yet it omits CPF contributions for Singapore. It is true that CPF contributions are not taxes in the same sense because they go into individual accounts and not a common pool. But if the intention is to determine how much citizens pay for their social welfare needs, there is good reason to include the CPF. In any case, it is obvious that a fair comparison must either include both European pension contributions and Singaporean CPF contributions, or omit both. The current calculations underestimate the tax burden in Singapore.

The Paper then shows that the benefits to tax ratio is much higher in Singapore than in Finland and the UK, indicating better value for money. But this comparison, too, may be problematic. It is not known what counts towards benefits for the two European cases.[1] Are public services such as healthcare, childcare, education and social housing included? In service-heavy European welfare states, these are sizeable provisions which are often highly subsidised or free at the point of use. Excluding them would unfairly deflate the value of benefits returned to taxpayers. Furthermore, Singapore’s benefits are calculated for 2021–2025, which covers the Covid years when unprecedented sums of cash transfers were introduced. But for Finland and the UK, benefits are based only on 2024 and 2025.

If we are arguing that Singapore imposes lower taxes and provides more benefits than in Europe, than we cannot undercount both Singaporean taxes and European benefits. This is not technical nit-picking. It addresses the validity of the argument we sometimes hear, that Singapore has found a superior alternative to high-tax high-redistribution welfare regimes.

Has Singapore found a good formula for wealth redistribution? The Ministry of Finance paper believes so, but the evidence is questionable.

3. Wealth inequality, even when underreported, is higher than income inequality.

Wealth inequality was reported officially for the first time. This is significant because, as the Paper explains, “wealth can become entrenched across generations”, making any effort to mediate inequality harder.

The main finding is that wealth inequality in Singapore is higher than income inequality. But the more sobering observation, picked up by Bloomberg, is that the average wealth held by the top 20% (about S$5.3m) dwarfs the total average wealth held by the bottom 80% (around S$3.5m). The Occasional Paper candidly admits that even this may not fully reflect the extent of inequality because of the tendency to underreport wealth, especially among the wealthy.

Hopefully the regular and transparent reporting of wealth inequality from now on will provide a basis for rational conversations about wealth taxes and other redistributive strategies.

4. Social mobility is poor and not improving.

What is the difference between equality and mobility?

Income distribution can be visualised as a row of chairs, with each chair representing the amount of income that a person or household has, from the lowest income at one end to the highest at the other, their spacing depending on how far apart people’s incomes are. Inequality is how bunched up or spread out the entire row of chairs are at a single point in time: it is a snapshot measure.

Relative social mobility, on the other hand, is about whether the people on the chairs switch places over time, between snapshots. In a society with poor mobility, the same people—and then their children—are stuck in the same chairs. But if mobility is high, there is circulation and someone at a particular position has a good chance of appearing in a different seat the next time.

Singapore upholds the principle that we must maintain high social mobility, so that a person’s outcomes in life will depend on their talent, effort and opportunity, rather than inherited advantage. From this perspective, things are worrying. The Paper shows that children born to fathers in the bottom 20% of the income distribution are more likely to also end up in the bottom 20% of their own cohorts than to move up to higher tiers of the distribution.

The Paper may put on a brave front when suggesting that “overall, Singapore has done relatively well in sustaining social mobility”, but the data paint a different picture. The likelihood of remaining stuck at the bottom end across generations has in fact increased over time for three birth cohorts spanning the late seventies to the late eighties. The increase is gradual, but this much is clear: social mobility, the central measure of opportunity in our society, is not improving.

5. To tackle inequality and low mobility, the status quo may not be enough.

Given the insights in the Paper, a neutral observer might expect Budget 2026—announced just three days after the Paper was released—to contain a plan of action in response to inequality and poor mobility. Surprisingly, there were none. Apart from a passing mention of the Paper and some optimistic words, it was a status quo Budget in the sense that no major new social policies were announced in areas such as housing, healthcare and education.

A possible explanation for this unusual choreography—of raising important questions shortly before a Budget, only to leave them unanswered—is that policymakers thought of the Paper’s findings as a good set of results. Or perhaps they felt that the Budgets in previous years have done enough for now.

Let’s recap the Paper’s key findings. Inequality is worse than previously thought, but at least declining. Compared to other rich nations, Singapore’s income inequality is relatively high once we include taxes and transfers, and there is no clear evidence that our approach is better value for money. Wealth inequality is greater than income inequality, and likely even higher if we have better data. Social mobility is sluggish. This is not a set of results that supports maintaining the status quo.

It is worth stressing that social mobility slowed down even with sustained improvements in income inequality. In other words, the chairs may have moved closer, but people are still not getting a fair shot at changing seats. This is a reminder that one-off or short-term interventions, and schemes that narrowly target small groups of people, can only influence snapshots of inequality. They do not stick long enough, and are not sufficiently far reaching, to alter the forces that keep people in their places.

Instead, we must look to expand the most promising of our social policies, such as housing policies that improve the living conditions in rental flats and lower barriers to ownership; moves to discourage what the education minister has described as the “arms race” in education; accessible, affordable and good quality childcare; financial and practical support for caregivers that will give people (often women) genuine choice between working or caring for loved ones at home; decent wages and support during career transitions. These are the policies that will have the greatest impact on opportunity and life outcomes.

It is deeply encouraging that equality and mobility have risen so far up the policy agenda that the government would issue an Occasional Paper dedicated to these concerns in the run-up to this year’s national Budget. This act of placing in the public domain a document that closely analyses data is significant and impactful: it helps to promote a culture of evidence-based public engagement. In time, as methodological precision and transparency improve, and reports like this become regular rather than occasional, the standard of public discourse and our capacity to think together as a people will grow.

In the immediate term, the point of publishing evidence is to respond to it. The Paper provides a solid foundation for parliamentary deliberations and policy action. Hopefully we will see this in the upcoming Budget debates as well as future Budgets.

– Ng Kok Hoe is Senior Research Fellow and Head of the Social Inclusion Project and Case Insights Unit at the Lee Kuan Yew School of Public Policy, National University of Singapore. He has done research on minimum income standards, homelessness and housing policy. He currently serves as President of HOME.

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Notes

[1] For that matter, it is not entirely clear how the value of benefits in Singapore is calculated. The figures in the Paper are drawn from the annual Key Household Income Trends report. While the report includes a long list of scheme names, it does not explain whether the analysis uses administrative data on actual transfers received by sample households, or mathematical calculations based on eligibility rules and assumptions about rates of access. More transparency would be welcome, since the impact of taxes and transfers feature so prominently in such reports.