Challenges facing Singapore's economy

Challenges facing Singapore's economy
Quay cranes servicing a container ship berthed at the Port of Singapore Authority (PSA) Pasir Panjang container terminal.

The 50th anniversary of Singapore's birth as a nation next year will also mark the midpoint of a bold effort to reshape its future.

The country launched a 10-year economic restructuring plan in 2010, centring on raising the economy's productivity and lifting the salaries of its workers.

Its ultimate goal is to address some of the long-term economic challenges Singapore faces as it steers towards sustained and inclusive growth in the next stage of its development.

These include providing good jobs and raising incomes for an increasingly educated workforce, reducing the reliance on low-skilled foreign workers and narrowing an income gap that has been widening over the past decade.

By 2030, two-thirds of workers in Singapore will be PMETs: professionals, managers, executives and technicians, up from about half today, according to a population White Paper released last year.

While it is good news that more Singaporeans are aspiring to better jobs, it also throws up two hurdles: First, will Singapore be able to create enough good PMET jobs for them all? And second, will there be enough people to take up all the other jobs - such as cleaners and construction workers - that university graduates will probably shun, but that are still necessary for the country to function smoothly?

For years, these less prestigious jobs have been filled by foreigners, who mostly come from poorer countries in the region and are thus willing to work for lower pay than Singaporeans.

But that has kept salaries for such jobs depressed, contributing to worsening income inequality as pay in other industries rose.

Singapore's Gini coefficient, a globally used measure of income inequality, climbed from 0.457 in 2003 to 0.478 in 2012. A higher number signals greater inequality.

Although the easy availability of cheap foreign workers helped to fuel Singapore's strong economic expansion prior to the global financial crisis in 2008, such a method of growth was unsustainable. Worse, the swelling influx of foreigners started to lead to social tensions and discontent among Singaporeans.

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