3 highlights from DPM Lawrence Wong's Economic Society dinner speech

SINGAPORE — On Tuesday (26 September), Deputy Prime Minister and Finance Minister Lawrence Wong outlined the government's plans to deal with the challenges of inequality and social mobility, in a speech at the Economic Society of Singapore's 2023 annual dinner.

Here are three key highlights from his speech:

1. Revamp of SkillsFuture

In the face of technological disruptions from Artificial Intelligence (AI) and the quick pace of change in the economy, Wong said that the government will need to do more for the broad middle-class segment in Singapore. This includes helping them secure jobs with good salaries and enabling their real incomes to grow.

Wong said that the government plans to "step up investments in adult education and training, and significantly strengthen SkillsFuture as a key part of our social system". The initiatives include top-ups to the SkillsFuture Credit for mid-career workers, training allowances for mid-career workers who take time off to pursue full-time training, better job matching and support for career planning and guidance.

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The revamped SkillsFuture system will also be used to provide support for workers who are involuntarily unemployed. Wong said that while the government has long been very cautious about introducing unemployment benefits, the faster pace of change in the economy has called for the government to revise and refresh its thinking.

"We don't have to do this as an insurance scheme. Instead, we can have a government-funded benefit, appropriately sized, to help these workers tide through their immediate difficulties – while supporting them to continue with their upskilling and job search, and eventually bounce back stronger," said Wong.

2. Increasing starting salaries of ITE graduates

On the topic of uplifting the lower-income group, Wong said that the government is focused on ITE (Institute of Technical Education) students and graduates as the key segment to close income and wealth gaps over time. He said while the starting salaries of ITE, polytechnics, and autonomous universities graduates have all increased meaningfully over the past decade, those with higher qualifications, such as university graduates, have been pulling further ahead and resulting in a growing divergence.

Wong made it clear that the government will not be able to completely remove wage disparities in the economy but acknowledges that a wage difference that is too large will create problems. To tackle the disparity, Wong said that the government will assist in industry efforts such as "redesigning jobs, raising productivity, upgrading skills, and establishing better progression pathways" and work closely with ITE educators with the aim of pushing up the starting salaries of ITE graduates.

Wong also pledged to help ITE graduates upgrade their skills over time, such as introducing the option for them to enrol in a work-study diploma or a part-time diploma and gain industry-relevant skills.

3. More money does not automatically make you happier

Wong also addressed the high-income households in Singapore, acknowledging that this segment has its own share of stresses and that some of these pressures "may arise because people compare their lot with that of others".

The Deputy Prime Minister cited a Harvard study from the 1990s, where participants were asked to choose between earning $50,000 a year, but everybody else gets $25,000, or the second option, which is to earn $100,000 a year, but everybody else earns $200,000.

"As economists, you should know that the rational choice is option two. $100,000 is more than $50,000. But interestingly, in the survey, the majority preferred the first option. They were happy with less, as long as they were better off than others.

"Other studies have shown that people are often more concerned about their income relative to others', than about their own absolute income. Happiness at your own pay vanishes very quickly when you learn that your colleague has been given more," said Wong.

"The implication is that beyond a certain point, more money does not automatically make you happier," said Wong, adding that it will be self-defeating if the chase for more material success is motivated solely by social status and peer approval.

Wong reminded his audience that no one succeeds alone and that a large part of an individual's success is derived from the society of which we are a part. "It is because we operate in a Singapore system that we are able to thrive and excel," said Wong.

He also encouraged those who have done well for themselves to feel "a sense of responsibility to do their part and help uplift their fellow citizens", emphasising that a culture of giving and philanthropy must be an integral part of the system in Singapore.

"A key feature in our social compact, which is individuals here, Singaporeans, enjoy the opportunity to generate and accumulate wealth, but part of that wealth must be recycled and invested back into society to expand opportunity for others," said Wong.

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