The Budget will be announced on 15 February. The hottest topic for this year’s Budget will undoubtedly be the GST increase. I expect more to be written about the issue in the coming days (the Straits Times started with an extremely pro-GST section today, and Kitana started with an extremely anti-GST piece), both on blogosphere and mainstream media.

I’m going to reserve judgement on the GST increase until the details on the budget is out. My primary opposition to the GST is because of the regressiveness of the tax. Being a present member of the lower-middle income group, I can understand the impact of the GST increase on the less well-off (See my entry previously titled “Robbing Peter to pay Peter”). However, in the weeks following the surprise announcement of a GST increase, the PM has assured that the less well-off will receive adequate assistance to offset the increase, so I’m going to wait and see what happens.

What I’m presently more concerned about is the underpinnings of the entire GST issue, and that is the negative impacts of globalisation and how should we react to it such that no Singaporean would be left behind. We are facing a widening income gap, and the PM himself has noted that this is a problem. I’m no economics expert, but I can see that the widening income gap will be a huge problem economically because given the size of the middle-class and that they have the ability to spend, the middle-class folks form a huge bulk of a society’s consumption. If their real wages don’t increase enough (and inflation keeps increasing), they are going to cut down their consumption. That will really be a headache for the government because we are moving towards taxing consumption, and not income. If consumption drops, the government gets less income from taxes. It is therefore in the interests of the government to try and close the income inequality.

Having said that, it doesn’t mean we close the income inequality through means like banning foreign talents or legislating miminum wage. These instruments are too blunt and not sensitive enough to adequately address the various dimensions of income inequality. Nevermind if these methods don’t adequately address the problem, the worse scenario is that even more problems are created. It’s like taking the a drug for an illness that didn’t have the intended effect, but ends up giving many side effects instead.

My vote for closing the income inequality goes to higher education. I remember making this remark via email to a friend a couple of weeks back, and my vote has now received an additional vote of confidence from the Federal Reserver Chairman Ben Bernanke, who said exactly the same thing (it was reported in the Straits Times on Wed or Thurs). I think the government should set aside more funds for Singaporeans who wish to pursue higher education (and that includes Masters/PhD, not just a normal bachelors). I think it is only fair to help those who wish to help themselves, and not put in some across the board legislation where lazy bums get a free ride as well. Given that resources are always in short supply, it is most sensible to maximise the use of the resources by allocating it to those who desire it most.

It should be clear by inference that I support the idea of meritocracy. In principle, this idea is good, but potential problems arise in execution. As we strive not to leave anyone behind when battling the demons of globalisation, at the same time, we should not deny opportunities for moving forward. An example would be companies requiring “chinese speaking” individuals for jobs that has no such necessity. Why should we deny someone who doesn’t know how to speak chinese a chance to get a job? I have another more personal example illustrating the invisible glass ceiling. My OC in my operational unit in my NS days is a diploma holder. He has 3 diplomas in fact. He lamented to me once that even though he has 3 diplomas, they are worthless compared to any ordinary degree holder. The highest rank he can possibly achieve is probably a major, while degree holders can potentially become generals. If people are willing to improve themselves and prove capable, why put invisible restraints on them?

I see the strategy for Singapore’s long term survival to be increasing the quality of our human resource through education. However, this is not enough if we do not iron out the creases in our practice of meritocracy. If we truly want to close the income gap, we have to make sure that meritocracy is indeed properly executed. There’s no point educating someone for a higher job to increase his/her income only to place other barriers in the way. After all, we want to be an inclusive society, no?