Economic inequality Essay

Application and evaluation question  Candidates are required to demonstrate understanding of SOL by applying the data given to assess the change in level of SOL in Singapore. They are also required to identify limitations of data given in assessing non-material aspect of SOL and suggest possible indicators to provide a more comprehensive measurement of SOL in Singapore. Schematic Plan (to be done in 2-3 minutes) Thinking Process Introduction (GIST) Define SOL, provide an overview of the essay Provide the thesis – Show how the data given support a rising SOL Analyse how economic growth can translate to rising SOL Analyse how a low inflation rate is necessary for increasing SOL Analyse how the creation of more jobs can lead to a rising SOL Provide the anti-thesis – why the non-material SOL should be examined and analyse how stress level can affect non-material SOL Analyse how income disparity can affect the SOL of Singaporean despite evidence of economic growth Analyse how negative externalities can affect the non-material SOL Reiterate your stand and conclude General Statement (Key idea) Interpretation (Definitions, clarify concepts / question) Scope (Set up directions for the answer) sTand (State the stand) Standard of living (SOL) is a measure of the welfare of a populace. It is comprised of material aspects such as quantity of goods and services consumed and non-material aspects such as amount of leisure time and access to necessities of life. To determine whether the standard of living in Singapore has been rising over the years, it is necessary to examine changes in both the material and non-material aspects. While the information given in the preamble seems to suggest an improvement in the material aspect, there is a lack of information to prove that there is a corresponding improvement in the non-material aspect. Nonetheless, given the positive data in the preamble and taking into account the government’s constant effort to improve the non-material aspect, such as pollution level, we can reasonably conclude that the standard of living in Singapore has been increasing to a large extent. Body (PEEL) PEEL – 1 State the Point (P) As mentioned in the preamble, the Singapore economy grew by 9.2% in the third quarter, this is likely to lead to an improvement in the material well being of Singaporean in general. Explain the point with clear causal links (E) Elaborate the point with examples (E) The 9.2% economic growth in the third quarter of 1993 means that real Gross Domestic Product in third quarter of 1993 increased by 9.2% over the previous year. Since GDP is the total value of the final output produced within a country, this would meant that national output and hence national income increased by 9.2%. This increase means people are enjoying more income which allows them to purchase more goods and services to satisfy their wants. For example, now more people can afford to buy luxury goods such as cars. Link back to Question (L) This increases their welfare and hence the SOL increases. PEEL – 2 State the Point (P) As mentioned in the preamble, the inflation is low at the rate of 2.4% per annum, this is likely to translate to an increase in material standard of living. Explain the point with clear causal links (E) Elaborate the point with examples (E) As discussed above, the economy grew at 9.2% and that would translate to higher income for the average consumer. A low inflation rate of 2.4% ensures that the increase in the income of the average consumer is higher than the increase in the prices of the goods and services he consumes. As such, for the average consumer, his real purchasing power increases and he is able to consume more goods and services as compared to before. Link back to Question (L) This means that his welfare and SOL is improved. PEEL – 3 State the Point (P) As mentioned in the preamble, 19000 jobs were created, this is likely to lead to an improvement in SOL for Singaporeans. Explain the point with clear causal links (E) Elaborate the point with examples (E) With the creation of these 19000 job opportunities, many previously unemployed workers would be able to find jobs and start to earn an income. These people who were previously unemployed would now be able to afford more goods and services, such as more meals or entertainment in clubs, with the income they now earn and hence enjoy a higher material standard of living. At the same time, as unemployment rate goes down, the labour market becomes increasingly saturated and companies may be willing to pay a higher wage to attract workers. With a higher wage, workers are now able to consume more goods and services than before. Link back to Question (L) As such, the welfare and SOL of the average Singaporean is likely to improve. PEEL – 4 State the Point (P) However, it is insufficient to only look at the material aspect to determine if the SOL in Singapore has been rising over the years. It is also necessary to examine changes in the non-material SOL for a comprehensive analysis of the level of SOL in Singapore. One possible indicator would be the stress level of the average Singapore worker. Explain the point with clear causal links (E) Elaborate the point with examples (E) The high economic growth of 9.2% reported in the preamble could have come about as a result of longer working hours. For instance, there is an increasing number of 24 hour coffeeshop in Singapore and existing employees are paid to work longer hours. As workers work longer hours to produce more goods and services, they experience a higher level of stress. At the same time, majority of the 19000 jobs created might be in the sales and retail sector where the stress to perform is extremely high. As such, the stress level of Singaporean may have gone up. Link back to Question (L) / Evaluation If the stress level of the average Singaporean worker has increased over the years, then the non-material SOL, and hence the overall SOL, of the average Singaporean may have worsened. However, to address that, the government has been encouraging companies to have a healthy work-life balance to promote families togetherness. Work days for most companies have been limited to 5 days week. As such, it is likely that the increase in stress level is limited and the average Singaporean still enjoy a rising overall SOL. PEEL – 5 State the Point (P) Another possible way to examine whether the average Singaporean’s SOL has risen is to examine whether the gains from the economic growth is distributed equitably. Explain the point with clear causal links (E) Elaborate the point with examples (E) If the income disparity has widened, it would mean most people gained less  benefits from the economic growth while the rich gained the most. This would mean the income of the majority has changed little and hence their welfare increase is limited or negligible. Hence on the whole, the SOL may be unchanged or has even decreased in an extreme case. Link back to Question (L) / Evaluation On further analysis, this may be an unlikely scenario for Singapore. The government has had attempt to close the income gap through financial benefits such as GST credits and fundings for Comcare, the Edusave merit bursary and the likes to ensure the poor’ s finances are enhanced. In fact, recently the income disparity in Singapore has eased according to the Gini coefficient which assigns a value of 1 to the most unequal income distribution and 0 to the most equal. Singapore currently hovers around 0.430. As such, it is likely that most Singaporean would be able to enjoy the fruits of the economic growth and experience an increase in SOL. PEEL – 6 State the Point (P) Finally, it is also important to examine the impact of negative externalities in assessing the change in the non-material SOL of Singaporeans over this period. Explain the point with clear causal links (E) Elaborate the point with examples (E) It is possible that more pollution and traffic congestion may have arrived due to the increase in national production (hence output). These increase in negative externalities worsens the living environment and exacts a cost (in the form of healthcare cost) for example on the people. Hence the net benefits from the economic growth may be eroded. Link back to Question (L) / Evaluation However, the government of Singapore has had a track record of developing a clean and conducive living environment for all. It has strict laws on pollution and efficient policies on tracking traffic congestion like ERP and promoting public transport. Hence a rise in social costs is unlikely to be significant compared to countries such as China and Thailand. As such, the impact of negative externalities is likely to be limited and the overall SOL of Singaporean is likely to have increased. Conclusion Summarise and Reiterate (SR) All in all, it can be safely concluded that there is a rise in living standards in Singapore to a large extent in spite of a lack of data on the non-material aspect of SOL. This is because of the track record of the government which has worked to increase the SOL of Singapore since 1965 effectively and dramatically. However, it is still best to include other indicators such as the PSI (to see the level of pollution), the Gini coefficient and MEW. These will help to give a better estimate of the change in the SOL. Ultimately, SOL is too broad a concept to be measured by any single indicator.