Middle class woes

“The middle class’ missing slice of the pie” [Source]

During my internship last summer, a lady called in to ask about subsidies. She raised a point about middle-income families not being able afford tuition programs and not being able to qualify for subsidy schemes as well. This, later I realized she was referring to the sandwiched class – “… this group of Singaporeans do not qualify for the support schemes meant for low-income households. Yet, they often experience middle-class anxiety: Worried about present needs and what the future holds for the next generation [Source]”.

The poor are cushioned by the great deal of assistance made available to them by the government and non-profit organizations. No doubt the rich would have plenty of capital to invest in themselves. What about the middle-class?

That didn’t dawn on me earlier until I read another section of Hard Choices today. I was alittle skeptical the time when she’d implied that middle-income families weren’t having it good in Singapore. Today, getting out of poverty mean more than just being able to feed oneself and having a bed space to rest in. What matters now is the pace you’re moving along with the rest in the given society. For a society to survive, perhaps meeting the basic needs of people would suffice. For it to progress, every unit needs to keep up at the rate compatible with its entirety.

  • Hypothetical consequences of inequality

This week’s lesson discussed of how inequality leads to a breakdown of social cohesion, which will in turn threatens the ideal of democracy and that’d mean the downfall of the the state. As groups in the society become more polarized, they grow to become more distrustful of each other and the government as well. But it’s unimaginable to think of this “tension” as an overt demonstration in society in the near future/present time. Surely the tension is felt among us but the motivation to act on it is only this much we see in newspapers and documentaries so we’d just talk about it and forget it the next day.

This becomes even complicated when our society is make up of more than just 2 distinct classes. Wouldn’t taxation and social spending policies be so much easier to execute when there’re only 2 classes? Maybe then the Robin Hood-style of taxing the rich and distributing it to the poor would work. But not anymore when you’ve got the middle class tier and subtiers within the core tiers like lower/upper-middle, working class, etc.  Most of the population falls in the middle class. The income range for this tier is more uncertain and perhaps broader in comparison to the other two extremes. Raising taxes would be slightly problematic.

  • Exclusion of middle class

[Source – Article from China Daily: Poor Bread for the Sandwich Class]

Hard Choices hold the hypothesis that if we give everybody a slice of the cake, they’d feel more willing to pay for it. When people trust the system and know that it’s fair in its distribution, they would ungrudgingly pay out from their pockets to make it work. Then they become more involved in State’s affairs when they’re not excluded from the social safety nets. That is not to say they’re gonna need to pay more to have their cake.

The readings also discussed about Singapore’s mean-testing approach to providing public assistance, versus the universal approach. The text mentioned that the problem with mean-testing approach is “deadweight” funding. I was clear on what it means until I read it up further (and I got confused when they relate it to taxation). It was something along the lines on inefficient allocation of resources. I assumed it’d mean that financial assistance was given to the wrong people: (1) either people who do not truthfully declare their income/assets so to qualify for these schemes or/and (2) people who misuse the assistance provided for perhaps social vice (?) like gambling and alcohol.

A middle-income household still paying off  the installments for their 4/5-room flat; bills and children’s education, which is not or minimally subsidized, may need assistance as much as a low-income family staying in a 1/2-room public rental flat who is entitled to subsidized transportation, children’s education, bills, meals.

  • Is social spending the one-size-fits-all solution to curb income inequality?

Now and then, we question whether it is possible for us to become a welfare state. The transition is a leap but nobody say we’d have to be a full-fledged giving state. It is clear that the inequality gap doesn’t simply close up with increased social spending. As we look at the state model adopted by all the countries with the least income inequality [Source], it appears at first to be an effective way to alleviate this situation. However, as statistics have shown as well, income inequality across nations (including welfare states) have been increasing as their economies flourish. Every one of those nations have also tweaked several aspects of the welfare model over time to make it sustainable and fair.

Also, these states have generally conservative immigration policies, which does have an significant impact on inequality. Including all the other policies like those concerning their SMEs, MNCs, labor and wages, policies across sectors, etc. Social spending is one of these policies which contribute to income inequality in general. It seems to be the most tangible thing for the government to do as it appears to be directly targeting the root of the problem: income on its own in the short-term. Monetary assistance does address part of the unequal capital the poor has so that the disadvantaged individual is on a level-playing field with the rest.

I’m in no position to say that Singapore has spent enough or not on social spending (it being a developed nation who spends relatively low in social and financial assistance). I have been a recipient of this sort of assistance since primary school. I may think it is enough when I haven’t been on the flipside situation where there are some others who actually need it more than I do. It could be either the case of the assistance not known to them or that, they fall through the cracks in this case as the sandwiched class whose household criteria didn’t qualify for the assistance.

Is increasing social spending really the way to go? Or is it that, we have enough and it’s about utilizing it more efficiently, effectively and most importantly, fair* for all?

*Fairness isn’t the same as equality (resources being distributed equally among members in the society)


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