Ethos Issue 3, Oct 2007

Wage Inequality, Intergenerational Mobility and Education in Singapore
Ho Kong Weng

EXPANSION OF TERTIARY EDUCATION
High upward educational mobility in the past was mainly a result of the expansion of public education. The educational link to employability is important as a higher return to education via public subsidy will lead to higher mobility and higher wage equality.

As Singapore climbs up the educational ladder, there seems to be a call for diversity in educational products and providers apart from the Government, as well as an expansion of tertiary education. Diversity is good, but attention should be given to the marketability of human capital accumulated, that is, the market return on education. Economic models and empirical studies have shown that private schools could have a negative impact on educational mobility as they rely more on the contribution from parents both in terms of time and money. Skill-biased parental influence is more prominent in private schools. As Singapore moves to become the educational hub of the region and beyond, we will see more private and international schools and universities entering the education industry. We have to be aware of the potential impact on educational mobility and wage equality, given a larger share of private schools in the economy.

POPULATION EXPANSION AND SKILL-BIASED IMMIGRATION
Singapore is targeting to achieve a larger population of 6.5 million, from the current level of 4.5 million, despite a low total fertility rate (1.26 per resident female in 2006). If the expansion of population is to be facilitated primarily by immigration, particularly skill-biased immigration, then skilled immigrant parents will have an advantage over less skilled residents in terms of educational investment in their children. As a result, skill-biased parental influence may be strengthened and upward mobility reduced because skilled parents will invest more in their children’s education than unskilled parents. However, skill-biased immigration will also increase the number of skilled workers relative to unskilled workers, resulting in an increase in upward mobility. The net effect on upward mobility is therefore ambiguous. It is, however, unambiguous that wage equality will be reduced by both effects. With population expansion, increased investment in public education, especially tertiary education, is necessary; otherwise, competition for limited places in university will lead to higher wage inequality and lower upward mobility.

CONCLUSION
Skill-biased parental influence and the damage of dysfunctional families must be considered in any policy designed to deal with upward mobility and wage inequality. The targeted enlarged population may also bring about higher wage inequality if it is facilitated mainly via skilled immigration. While the net impact of an enlarged immigrant population on educational mobility is uncertain, increased public spending on education, especially tertiary education, may become necessary to prevent any possible decline in mobility.