Middle-class squeeze

IF THESE troubling trends are not reversed, this could lead to growing discontent, especially among the sizeable group of middle-income earners in Singapore.

This same group tends to receive less government aid and rebates, compared to low-income earners who receive more aid to ease their plight.

With lower purchasing power, it would be harder to maintain a middle-class standard of living, notes sociologist Tan Ern Ser from the NUS.

'If we pride ourselves in being a middle-class society with a large middle class, then we would have a high proportion of people experiencing an expectation gap,' he adds.

While the 'expectation gap' could cause some unhappiness, he does not believe it will result in a backlash against the Government.

His reason: The gap is not primarily attributed to government policy but to globalisation.

'Also, the middle class in Singapore constitutes only a category, not a united, highly charged political force.'

But for a government whose mandate rests on delivering a better life for citizens, it will need to ameliorate the pain, note analysts.

'If the Government can convince the middle class they are doing better than the middle classes elsewhere, and that the problem lies with global competition, then the political consequences could be moderated somewhat, or even become non-existent,' says Dr Tan.

Placating the people

FOR now, it could still be possible to lay the bulk of the blame on external forces like globalisation, because fiscal measures are fuelling the slowly recovering economy.

But not forever.

'If the situation of falling wage levels and declining purchasing power deteriorates rapidly, then it would undermine the performance legitimacy of the Government,' says political observer Eugene Tan.

Economic growth which prospers people is a fundamental basis of the Government's legitimacy, he notes.

'A continual decline in purchasing power will deflate the Government's bragging rights that it fosters shared economic growth.

'In turn, public opinion that the Government's economic policy is not working will be stoked, accompanied by the greater likelihood that voters may be bolder in wanting to try alternatives,' he adds.

If this happens, 'the possibility of a significant swing against the ruling party cannot be ruled out', says the law lecturer from Singapore Management University.

To keep any such eventuality at bay, Singapore needs to fine-tune strategies to ensure that it not only remains competitive but also mitigates the constant downward pressure on wages, notes Dr Gillian Koh, a senior research fellow at the Institute of Policy Studies.

During the depth of crisis, the Government went swiftly to the aid of Singaporeans and companies, unveiling a $20.5 billion Resilience Package in its January Budget.

Families received twice the amount of goods and services tax (GST) credits. Those living in HDB flats also received increased rebates for service and conservancy charges, with one- to three-roomers getting an extra month of rebate and owners of bigger flats receiving half a month more.

In addition, low-wage earners received 50 per cent more Workfare grants to supplement their income as well as more transport vouchers.

Dr Koh says the challenge for the Government lies in convincing people it is doing all it can to improve the economy which, in turn, will increase the number of well-off citizens.

However, Singaporeans too must take the initiative to improve their lives, she adds.

CIMB-GK regional economist Song Seng Wun believes Singaporeans should be better off by 2012, especially if inflation stabilises to around 1.5 per cent.

'With asset inflation, more stable food prices, we'll see affordability moving up if economic growth returns to normal. Wages will be pulled up as well,' he says.

sueann@sph.com.sg

alfoo@sph.com.sg

This article was first published in The Straits Times.