Asian Ethnicity

ISSN: 1463-1369 (Print) 1469-2953 (Online) Journal homepage: https://www.tandfonline.com/loi/caet20

The economic marginality of ethnic minorities: an

analysis of ethnic income inequality in Singapore

William Keng Mun Lee

To cite this article: William Keng Mun Lee (2004) The economic marginality of ethnic
minorities: an analysis of ethnic income inequality in Singapore, Asian Ethnicity, 5:1, 27-41, DOI:
10.1080/1463136032000168880

To link to this article: https://doi.org/10.1080/1463136032000168880

Published online: 14 Oct 2010.

Submit your article to this journal

Article views: 2826

View related articles

Citing articles: 2 View citing articles

Full Terms & Conditions of access and use can be found at

https://www.tandfonline.com/action/journalInformation?journalCode=caet20
Asian Ethnicity, Volume 5, Number 1, February 2004

The Economic Marginality of Ethnic

Minorities: An Analysis of Ethnic Income
Inequality in Singapore
WILLIAM KENG MUN LEE
(Lingnan University)

This paper examines ethnic income inequality in Singapore from the perspectives of
labour-market segmentation and human capital. The findings of this study show that neither
perspective is useful in explaining ethnic income inequality in Singapore. Further, the
analysis shows that educational differences among the Chinese, Indians and Malays
account for very little of the income gap. Much of the income difference is due to
discrimination. The source of this discrimination lies in the segregation of ethnic minorities
in lower-paying jobs and occupations across all industries, reflecting Chinese domination
in the economic and political spheres.

Keywords: ethnicity, income inequality, discrimination, Singapore

Introduction
Since independence in 1958, Singapore has experienced steady economic growth. While
most households have enjoyed an increase in household income, the rate of income growth
varies with households in different segments of society. The relationship between economic
development and income distribution is an important issue for economists and sociologists
concerned with equality and stratification. Among many social attributes, ethnicity remains
an important influential factor, especially for a multi-ethnic1 society such as Singapore.
Despite this, ethnic income distribution and ethnic inequality issues in Singapore remain
under-researched. Most studies discuss these issues in passing, with little or no theoretical
underpinning.
This paper examines ethnic income differences in Singapore from the perspectives of
labour-market segmentation and human-capital theory. The paper first reviews the theoreti-
cal assumptions of the two theories in relation to ethnic income differences. Second, the
paper provides a general profile of the income-distribution patterns among the three main
ethnic groups in Singapore over the last two decades. Third, the paper examines the extent
and nature of ethnic income differences from segmentation and human-capital perspectives.
The data for this analysis come from the 1992–98 Labour Force Surveys in Singapore.
Finally, based on the findings, the paper assesses state policy on ethnicity and affirmative
actions toward ethnic disparity.

1 According to the 2000 population census, Chinese, the majority group, formed 76.8 per cent of the population.
Malays and Indians constituted 13.9 per cent and 7.9 per cent of the population, respectively (Census of
Population 2000: Advance Data Release, Department of Statistics, Singapore, 2000), p. 4.

ISSN 1463-1369 print; 1469-2953 online/04/010027-15  2004 Taylor & Francis Ltd
DOI: 10.1080/1463136032000168880
28 William Keng Mun Lee

Economic Marginality: Labour-Market Segmentation and Human-

Capital Perspectives on Ethnic Income Differences
The emergence of labour-market segmentation theory, which proposes that there is not
a single market operating in the economy but instead better and worse jobs tend to be
found in different structural settings, is associated with the development of monopolistic
capitalism.2 As industrial capitalist societies mature and the competitive market breaks
down, a few large and powerful firms emerge to dominate some of the most important
industries in the economy.3 However, competitive capitalism does not disappear altogether.
Instead, smaller firms dominate production in a number of industries where large-scale
productions are not economically feasible. Thus, as the process continues, a few large firms
begin to monopolise production in certain industries, which constitute the core sector, and
they coexist with many small firms operating in competitive industries forming the
periphery sector.4
The labour-market segmentation perspective argues that the core sector contains the
primary labour market with better paying jobs, while the periphery sector, comprising the
secondary labour market, consists of lower paying jobs.5 Core sector jobs command higher
pay and better job benefits because of the greater collective bargaining strength of unions
and professional associations. Furthermore, it would be too costly for core firms not to pay
well. Large firms in the core have huge capital investments and would like to avoid the
costly shutdowns of labour disputes. Hence, from the firm’s perspective, it is economically
rational to offer generous wages, benefits and job security. However, in the secondary
labour market, because of intense competition and small profit margins, employers rarely
provide high wages, extensive benefits or job security. The low-skill requirement means
workers are easily replaceable. Hence, in the secondary labour market, low paying jobs are
common and labour turnover is high, which makes the organising of unions difficult.
Certain types of labour-market participants, such as ethnic minorities, are concentrated
in the secondary labour markets. For various systemic and structural reasons, ethnic
minorities are concentrated in the low paying jobs in the periphery, while the ethnic
majorities dominate the high-income jobs in the core.6 Labour-market segmentation theory
argues that structural barriers restrain the movement of qualified individuals from the
secondary to the primary labour markets. This is a key proposition, since human-capital
theory does not deny that some jobs are much better paid than others. Human-capital theory
simply argues that the most able individuals, with greater investment in education and

2 R. Edwards, Contested Terrain: The Transformation of the Workplace in the 20th Century (Basic Books, New
York, 1979), pp. 163–83.
3 We have seen this happening in the automobile industry, the oil and mining industry, the computer industry
and even the financial sector where a few large banks, trust companies and insurance companies have
dominated the sector.
4 R. Averitte, The Dual Economy: The Dynamics of American Industry (Norton, New York, 1968); B. Bluestone,
W.M. Murphy and M. Steveson, Low Wages and Working Poor (University of Michigan Press, Ann Arbor,
Michigan, 1973); R. Hodson and R. Kaufman, ‘Circularity in the Dual Economy Theory: Comment on Tolbert,
Horan and Beck’, American Journal of Sociology, vol. 8 (1982); D. Gordon, R. Edwards and M. Reich,
Segmented Work, Divided Workers: The Transformation of Labor in the United States (Cambridge University
Press, New York, 1982).
5 P. Doeringer and M. Piore, Internal Labour Markets and Manpower Analysis (Lexington, Heath, 1971).
6 E.M. Beck, P. Horan and C. Tolbert, ‘Stratification in Dual Economy: A Sectoral Model of Earnings
Determination’, American Sociological Review, vol. 43 (1978); E.M. Beck, P. Horan and C. Tolbert, ‘Industrial
Segmentation and Labour Market Discrimination’, Social Problems, vol. 28 (1980); E.M. Beck, P. Horan and
C. Tolbert, ‘Social Stratification in Industrial Society: Further Evidence for a Structural Alternative’, American
Sociological Review, vol. 45 (1980); T. Boston, ‘Segmented Labour Market: New Evidence from a Study of
Four Race–Gender Groups’, Industrial and Labour Relations Review, vol. 44 (1990); D. Tomaskovic-Devey,
‘Labour Process Inequality and the Gender and Race Composition of Jobs’, Research in Social Stratification
and Mobility, vol. 12 (1993).
 Economic Marginality of Ethnic Minorities 29

training, will attain the more rewarding jobs. In fact, the persistent over-representation of
ethnic minorities in low paying jobs in the secondary labour market has led labour-market
segmentation theory to assert that income differences among ethnic groups are attributed to
the unequal distribution of these groups over the primary and secondary labour markets.
Another theory on income attainment and differences is the human-capital theory.7
Human capital refers to work related characteristics of workers, including education, skill,
training and work experience that workers bring into the labour market. Human-capital
theory argues that there is a direct linkage between workers’ human capital and productiv-
ity, and between productivity and earnings. Workers with greater human-capital endow-
ment, that is more education, training and work experience, are thought to be more
productive and therefore earn higher incomes, while workers with less education, training
and work experience are thought to be less productive and therefore earn lower incomes.
The income differences are due specifically to differences in the human-capital endowment
in workers. Hence, the accumulation of human capital through formal schooling, training
and work experience is an important determinant of workers’ earnings.
Human-capital theory further assumes that workers operate in a perfectly competitive
labour market, and work structures are seen as given and unproblematic.8 Discrimination,
defined as employers’ preferences and tastes, is exogenous to the labour-market function.9
If employers prefer not to associate with certain ethnic group members, and these employers
are willing to incur the costs of not hiring qualified members of this ethnic group, then they
must be prepared to pay the price of hiring less qualified individuals or pay a higher price
for qualified individuals from other ethnic groups. Thus, employers who practice ethnic
discrimination operate less efficiently and at higher costs. Hence, human-capital theory
argues that employers will find the ending of ethnic or any discrimination economically
beneficial and that, in the long run, market forces will end discrimination. Overall,
human-capital theory places importance on the ‘supply’ side of labour-market operations,
and treats the ‘demand’ side, which includes employers’ behaviours and work organisations,
as given and uncomplicated.

Income Distribution among Ethnic groups: Some Empirical Evidence

There have been concerns as well as controversies over the economic gains made by the
three ethnic groups—Chinese, Malays and Indians—in the period of economic development
and growth in Singapore since independence.10 Singapore’s ethnic heterogeneity is a result
of historical migration patterns, past colonial policy and present multi-ethnic policy. Hence,
despite a long history of interaction, each group has basically maintained its separate
cultural identity and economic domain.11
The vast economic changes have varying impacts on ethnic income distribution. Pang,

7 G. Becker, Human Capital (University of Chicago Press, Chicago, 1964); G. Becker, Human Capital: A
Theoretical and Empirical Analysis With Special Reference to Education (Columbia University Press, New
York, 1971).
8 P. Horan, C. Tolbert and E.M. Beck, ‘The Market Homogeneity Assumption: On the Theoretical Foundation
of Empirical Knowledge’, Social Science Quarterly, vol. 67 (1980).
9 G. Becker, Economics of Discrimination (University of Chicago Press, Chicago, 1971).
10 Lily Z. Rahim, The Singapore Dilemma: The Political and Educational Marginality of the Malay Community
(Oxford University Press, Singapore, 1998); J.B. Tammy, The Struggle over Singapore’s Soul: Western
Modernization and Asian Culture (Walter de Gruyter, New York, 1996), pp. 98–103; J. Clammer, Singapore:
Ideology, Society, Culture (Chopmen, Singapore, 1985), pp. 118–29; Tania Li, Malays in Singapore (Oxford
University Press, Singapore, 1989), pp. 99–121.
11 Carl A. Trocki, Prince of Pirates: The Temenggongs and the Development of Johor and Singapore, 1784–1885
(Singapore University Press, Singapore, 1979); Carl A. Trocki, Opium and Empire: Chinese Society in
Colonial Singapore, 1800–1910 (Cornell University Press, Ithaca, 1990); Rahim, The Singapore Dilemma.
30 William Keng Mun Lee

the first researcher to examine Singapore’s ethnic income distribution, discussed the impact
of economic growth between 1966 and 1973 on ethnic income inequality in Singapore.12
Pang argued that, based on analyses of Gini coefficients,13 income inequality during this
period declined among Chinese from 0.440 to 0.411 and among Malays from 0.456 to
0.415. However, Indians experienced a slight increase in income inequality, with Gini
coefficients that jumped from 0.426 to 0.433. Clearly, industrialisation has had an uneven
impact on the three ethnic groups. Despite this, Pang concluded that industrialisation has
narrowed ethnic income disparity in Singapore.
The improvement in income levels and inequality among the ethnic groups in the early
years of industrialisation weakened in the 1980s as the economy plunged into recession.
Based on the 1980 Census data, Chiew’s study argued that ethnic income distribution
patterns show that Chinese were the top income earners: 4.3 per cent earned a gross
monthly income of S$3,000 or more, 29.8 per cent earned S$1,000–2,999 per month and
64.9 per cent earned less than S$1,000 per month. Indians earned somewhat less than
Chinese with 2.6 per cent earning S$3,000 per month or more, 28.9 per cent earned
S$1,000–2,999 per month and 68.5 per cent earned less than S$1,000 per month. Malays
earned the least. None was in the S$3,000 or more per month category, 9.7 per cent earned
S$1,000–2,999 per month, and 90.3 per cent earned less than S$1,000 per month.14 The
1980 ethnic income distribution patterns show convincingly that economically the Chinese
were at the top, Indians in the middle and Malays at the bottom.
Ethnic inequality did not improve in the 1990s. Table 1 shows the income distribution
patterns of the three ethnic groups for 1990 and 1995. In 1990, Chinese were still the top
income earners with a median monthly income of S$1,055, which was S$55 higher than the
total median monthly income. Malays moved up to second place with a slightly higher
median monthly income than Indians, but both ethnic groups were still lower than the total
median monthly income. In 1990, Malay and Indian median incomes were 85.3 per cent and
83.5 per cent of Chinese median monthly income, respectively.
In 1995, the Chinese continued to be the top income earners with a median monthly
income of S$1,733, which is S$100 higher than the total median monthly income. Malays
dropped back to third place, and Indians moved up to second place. Yet both groups’
median monthly incomes were lower than the total median monthly income. On average,
the total median monthly income increased by 1.6 times, median monthly income jumped
from S$1,000 to S$1,633, and Chinese median monthly income also increased by the same
proportion. Indian median monthly income increased by a slightly higher proportion of 1.7,
while Malay median monthly income increased by a smaller proportion of 1.5. Malay
median monthly income in 1995 was 77.8 per cent of the Chinese level, a decline of 7.5
per cent, while Indian median monthly income in 1995 was 88.4 per cent of the Chinese
level, a rise of 4.9 per cent. However, the absolute income gaps widened from S$155 to
S$383 between Chinese and Malays, and from S$174 to S$201 between Chinese and
Indians.
In terms of income distribution, the 1990 income distributions show that Malays were
over-represented in the low monthly income categories of S$500–999 and S$1,000–1,499,
and were under-represented in all other income categories. Indians were over-represented in
the lowest income categories of below S$500 and S$500–999, and they also were

12 E.F. Pang, ‘Growth, Inequality and Race in Singapore’, International Labour Review, vol. 3 (1975).
13 The Gini coefficient is a summary measure of income inequality for all households, and it ranges between 0
and 1. Values closest to 0 represent lesser income inequality, while values closest to 1 represent greater income
inequality.
14 Seen Kong Chiew, ‘Ethnic Stratification’, in Stella R. Quah, Chiew Seen Kong, Ko Yin Chung and Sharon
Mengkee (eds), Social Class in Singapore (Time Academic Press, Singapore, 1991), pp. 138–82.
 Economic Marginality of Ethnic Minorities 31

Table 1. Percentage distribution of working persons by monthly income from work and
ethnic group

Monthly income from work (S$) Total Chinese Malays Indians Others

1955
Total 100.0 100.0 100.0 100.0 100.0
Below 500 9.2 4.0 12.0 7.2 43.6
500–999 14.8 15.6 17.5 18.5 4.7
1,000–1,499 19.8 20.9 27.4 21.5 2.6
1,500–1,999 15.8 16.7 20.7 17.1 3.2
2,000–2,999 17.6 19.7 16.0 16.6 4.8
3,000 & over 22.8 23.1 6.4 19.1 41.1
Median ($) 1,633 1,733 1,350 1,532 1,300
Chinese/Malays/Indian (%) 77.8 88.4
Absolute differences ($) 383 201

1990
Total 100.0 100.0 100.0 100.0 100.0
Below 500 11.0 6.9 9.4 17.6 57.4
500–999 37.1 36.8 47.8 38.9 16.1
1,000–1,499 23.4 24.5 27.0 21.7 4.5
1,500–1,999 11.3 12.4 9.4 9.5 3.0
2,000–2,999 8.9 10.2 4.6 6.8 4.4
3,000 & over 8.3 9.2 1.8 5.5 14.6
Median ($) 1,000 1,055 900 881 416
Chinese/Malays/Indian (%) 85.3 83.5
Absolute differences ($) 155 174

Source: General Household Survey 1995 (Department of Statistics, Singapore, 1996) p. 29.

under-represented in all other income categories. Compared with Malays and Indians,
Chinese were under-represented in the two lowest income categories and were over-
represented in all higher income categories.
In 1995, the working population experienced high-income growth. Compared with
1990, income distribution in 1995 was spread more evenly in the sense that, except for a
small percentage in the lowest monthly income group, all other income categories have
significant and equable representation. However, a notable increase can be seen in the
S$3,000 and above category, which jumped from 8.3 per cent to 22.8 per cent. Another
significant change was the income distribution for the residual group ‘Others’. Some 44 per
cent of workers in this category earned less that S$500 per month in 1995, while another
41 per cent earned more than S$3,000 per month. This is primarily due to two factors that
reflected labour shortage in the 1990s. One is the large number of unskilled foreign workers
working as domestic maids and construction workers, with monthly income less than S$500
per month. The other is the large number of expatriates in professional and managerial
positions with monthly income exceeding S$3,000.
For the 1995 situation, Indians made remarkable improvement. They were no longer
over-represented in the lowest income category. Although they were still under-represented
in the highest income group, they made outstanding advancement into the S$3,000 and
above monthly-income category. Malays, on the other hand, replaced the Indians in the
32 William Keng Mun Lee

Table 2. Average monthly household income from work by ethnic groups 1980,
1990, 2000

Average household income (S$) % difference from Chinese

Ethnic group 1980 1990 2000 1980 1990 2000

Total 1,228 3,076 4,943

Chinese 1,213 3,213 5,219
Malays 896 2,246 3,148 0.73 0.70 0.60
Indians 1,133 2,859 4,556 0.93 0.89 0.87
Others 3,225 3,885 7,250

Source: 1980; 1990; 2000 Population Census Report (Department of Statistics,

Singapore).

lowest income category. Malays were also concentrated in the S$500–1,999 monthly-
income groups. However, unlike the Indians, Malays were severely under-represented in the
highest monthly-income group. Chinese continued to dominate the high-income categories.
They were over-represented in all income groups except the lowest. More importantly, the
Chinese showed significant presence in the S$3,000 and above category.
In terms of household incomes, all ethnic groups experienced increase in household
incomes over the two decades from 1980. Table 2 shows household incomes from work by
ethnic groups from 1980 to 2000. Between 1980 and 2000, the average monthly household
income from work rose from S$1,228 to S$4,943. For Chinese households, this period
witnessed a significant rise in household income from S$1,213 to $5,219. For Malay
households, the average monthly household income increased from S$896 to S$3,148,
while the average Indian household income rose from S$1,133 to S$4,556. However,
proportion increases varied with ethnic groups. Specifically, between 1980 and 2000,
Chinese household income rose 4.3 times, Malay household income rose 3.5 times, and
Indian household income increased by 4.0 times. Hence, among the three ethnic groups,
Malay household income grew the least. Furthermore, during this period, income disparity
among ethnic households has increased. The average Malay household income in 1980 was
73 per cent of Chinese household income, but by 2000, Malay household income was only
60 per cent of Chinese household income. The decline was also evidenced between Indian
and Chinese household incomes, but not as severely as between Malay and Chinese
households. Clearly this reinforces the government conclusion that household income
inequality had widened during the two decades leading to 2000. The Gini coefficient rose
from 0.436 in 1990 to 0.481 in 2000.15

Industrial and Occupational Distribution among Ethnic Groups

It is clear that income variations among Chinese, Indians and Malays in Singapore are
substantial. According to labour-market segmentation theory, the distribution of ethnic
groups across industries influences ethnic income distributions. Table 3 illustrates the
distribution patterns of the three ethnic groups between 1990 and 2000. In 1990, a high
percentage of Chinese were in manufacturing, but they were not over-represented in this
industry. Chinese also showed strong representation in the wholesale and retail, hotel and

15 Census of Population 2000: Advance Data Release, p. 84.

 Economic Marginality of Ethnic Minorities 33

construction industries, as well as in the high-paying financial services industry. Over 30

per cent of working Malays were found in manufacturing and, compared with the other two
ethnic groups, they were over-represented in this industry. Malays were over-represented in
the transportation, business and social services industries as well. In 1990, Indian workers
were over-represented in social services, business services and transportation industries,
while under-represented in all other industries.
In 2000, industrial distribution among ethnic groups remained the same, except in
manufacturing, where the Chinese showed slight over-representation. Table 3 shows that
ethnicity underscored industrial segmentation. Most importantly, Chinese continued to
dominate the high-paying financial services industry; however, ethnic minorities were not
over-represented in low-paying industries. Hence, Chinese workers’ high incomes could not
be a result of their numerical over-representation in higher-paying industries, nor could the
lower incomes of Malays and Indians be due explicitly to their numerical over-representa-
tion in the lower-paying industries.
The distribution of ethnic groups across occupations might explain ethnic income
differences. Table 4 shows occupation distribution by ethnic and gender groups. All ethnic
groups experienced upward occupational mobility after independence. However, the gap
between ethnic groups in highly skilled jobs remained wide in the 1990s. Chinese
dominated professional, managerial and technical jobs, while Malays were particularly
under-represented in these occupations. Under-representation of Indians in highly skilled
jobs was less serious compared with Malays. In terms of gender differences, Malay males
tended to be in low-level managerial positions. However, they were also over-represented
in unskilled jobs such as machine operating and assembly work. Malay women tended to
work in unskilled positions. The under-representation of Malays in administrative and
managerial positions can be attributed to their lower education attainment. Among the three
ethnic groups, Chinese ranked highest in education attainment, with over 9 per cent of its
population possessing tertiary qualifications, while Indians ranked second, followed by
Malays.16 Hence, in addition to uneven ethnic occupation distribution, educational differ-
ences among ethnic groups may explain ethnic income differences.

Income Inequality: A Human-Capital Approach

This section examines the extent to which income differences among ethnic groups can be
explained by differences in education. Here we shall decompose income equations and
examine what portions of income differences among ethnic groups are attributed to
differences in human-capital levels, that is education, and what portions of income
differences are due to discrimination on grounds of ethnicity.17
Three base-income equations are used to measure the earnings of Chinese, Malay and
Indian workers. The general least square estimate (GLSE) technique of pooled time-series
regression analysis is used to estimate these models, based on longitudinal data from the
Labour Force Surveys from 1992–98. Estimates from regression analyses will be decom-
posed to examine the extent to which income differences are due to educational differences

16 L.K. Cheng, Geographic Analysis of the Singapore Population (Department of Statistics, Singapore, 1995),
p. 60.
17 A discrimination model, following the human-capital approach, argues that income is related to workers’
productivity characteristics, and discrimination is said to exist when the market values these characteristics
differently for different groups of people. The residual left from regression, after controlling for human-capital
differences, measures discrimination. See F.L. Jones and J. Kelley, ‘Decomposing Differences between
Groups’, Sociological Methods and Research, vol. 12, no. 3 (1984), pp. 323–4.
 34

Table 3. Average monthly income by industry and industrial distribution (%) by ethnic groups, 1990–2000
William Keng Mun Lee

Deviation from total (% points)

Average
monthly Total
income Chinese Malays Indians average Chinese Malays Indians

Industry 1990 2000 1990 2000 1990 2000 1990 2000 1990 2000 1990 2000 1990 2000 1990 2000

Manufacturing 1,395 3,036 25.8 19.9 31.3 19.9 22.2 16.1 26.2 19.5 ⫺ 0.4 0.4 5.1 0.4 ⫺ 4.0 ⫺ 3.4
Construction 1,275 2,333 6.7 6.9 2.7 3.3 2.3 3.1 5.9 6.1 0.8 0.8 ⫺ 3.2 ⫺ 2.8 ⫺ 3.6 ⫺ 3.0
Wholesale & retail 1,433 2,721 19.7 18.5 9.5 10.2 15.2 13.4 18.0 17.0 1.7 1.4 ⫺ 8.5 ⫺ 6.9 ⫺ 2.8 ⫺ 3.7
Hotels & restaurants 914 1,332 7.4 6.5 5.6 5.9 6.4 5.1 7.1 6.3 0.3 0.2 ⫺ 1.5 ⫺ 0.4 ⫺ 0.7 ⫺ 1.2
Transport & communications 1,610 3,105 10.2 11.0 15.4 18.2 11.9 13.7 11.0 12.0 ⫺ 0.8 ⫺ 1.0 4.4 6.2 0.9 1.7
Financial services 2,251 4,931 4.8 6.3 2.9 3.6 3.5 4.5 4.5 5.9 0.3 0.4 ⫺ 1.6 ⫺ 2.3 ⫺ 1.0 ⫺ 1.4
Business services 1,849 3,281 7.6 12.4 10.8 13.7 10.5 15.8 8.2 12.9 ⫺ 0.6 ⫺ 0.5 2.6 0.8 2.3 2.9
Community, social & personal services 1,678 3,336 16.9 18.0 20.2 23.7 26.7 27.0 18.1 19.9 ⫺ 1.2 ⫺ 1.4 2.1 4.3 8.6 7.6

Source for average monthly income by industry: Yearbook of Statistics, Singapore, 2001, Table 4.17, p. 51.
Source for percentage industrial distribution by ethnic groups: Census Population 2000: Advance Data Release, Singapore, Table 6, p. 46.
Table 4. Percentage of working persons aged 15 years and over by occupation, racial group, sex, 1995
Per cent Deviation from total (% points)

Total Chinese Malays Indians Chinese Malays Indians

Occupation All M F All M F All M F All M F All M F All M F All M F

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Legislators, senior officials & managers 12.8 17.6 5.1 12.7 17.0 6.5 1.6 2.3 0.6 10.5 13.8 3.1 ⫺ 0.1 ⫺ 0.6 1.4 ⫺ 11.2 ⫺ 15.3 ⫺ 4.5 ⫺ 2.3 ⫺ 3.8 ⫺ 2.0
Professionals 7.3 8.0 6.2 7.3 7.3 7.5 2.0 2.1 1.4 8.4 9.3 6.2 0.0 ⫺ 0.7 1.3 ⫺ 5.3 ⫺ 5.9 ⫺ 3.8 1.1 1.3 0.0
Technicians & assoc. professionals 15.8 16.0 15.7 17.3 15.8 18.9 13.3 14.9 10.9 15.3 15.3 15.2 1.5 ⫺ 0.2 3.2 ⫺ 2.5 ⫺ 1.1 ⫺ 4.8 ⫺ 0.5 ⫺ 0.7 ⫺ 0.5
Clerical work 12.9 5.7 24.5 13.7 5.0 28.0 18.1 12.4 27.0 13.9 7.8 27.7 0.8 ⫺ 0.7 3.5 5.2 6.7 2.5 1.0 2.1 3.2
Service & sales work 12.3 11.9 13.0 13.6 12.1 16.1 13.1 15.2 10.0 14.1 17.2 7.3 1.3 0.2 3.1 0.9 3.3 ⫺ 3.0 1.8 5.3 ⫺ 5.7
Agricultural & fishery 0.08 0.10 0.03 0.10 0.10 0.04 0.04 0.06 — 0.02 0.02 0.04 0.02 0.00 0.01 ⫺ 0.04 ⫺ 0.04 ⫺ 0.03 ⫺ 0.06 ⫺ 0.08 0.01
Production craft-work & related 12.6 7.4 20.4 6.4 6.5 6.2 20.4 14.5 30.0 13.5 10.0 21.7 ⫺ 6.2 ⫺ 0.9 ⫺ 14.2 7.8 7.1 9.6 0.9 2.6 1.3
Plant & machine operation & assembly 13.5 14.2 12.3 14.4 15.0 13.3 19.5 20.3 18.3 13.7 12.2 17.2 0.9 0.8 1.0 6.0 6.1 6.0 0.2 ⫺ 2.0 4.9
Cleaning, labouring & related 12.6 7.4 20.4 6.4 6.5 6.2 20.4 14.5 30.0 13.5 10.0 21.7 ⫺ 6.2 ⫺ 0.9 ⫺ 14.2 7.8 7.1 9.6 0.9 2.6 1.3
Workers NOT classified by occupation 4.2 6.5 0.4 4.8 7.4 0.5 3.4 5.4 0.09 3.8 3.8 0.9 0.6 0.9 0.1 ⫺ 0.8 ⫺ 1.1 ⫺ 0.31 ⫺ 0.4 ⫺ 2.7 0.5

Source: General Household Survey 1995 (Department of Statistics, Singapore), p. 140.

Economic Marginality of Ethnic Minorities 35
36 William Keng Mun Lee

and discrimination. The three base-income models for estimating the average incomes of
Chinese, Malay and Indian workers respectively are:
YChinese ⫽ a ⫹ b ChineseEduc (1)
it c c it

YMalay ⫽ a ⫹ b MalayEduc (2)

it m m it

YIndian ⫽ a ⫹ b IndianEduc (3)

it I I it

Y represents the incomes for the respective ethnic group, a is the constant for respective
ethnic group and b is the regression coefficient for respective ethnic group. Educ is the
human-capital endowment—years of schooling—of the respective ethnic groups; i repre-
sents cross-sectional industrial units, and t represents the time period.
To examine the extent of discrimination among ethnic groups, we shall employ the
Blinder’s privilege model, which offers a threefold decomposition, to decompose income
equations.18 The privilege model views members of the majority group earning more than
their appropriate returns to their human-capital endowments, and that discrimination exists
when incomes and returns to human-capital are lower due to membership in a minority
group. The question of interest in this study is how much of the observed income gap
between groups is due to human-capital endowment differences, and how much is due to
discrimination.
Using the Malay case as an example, the Malay base-income model will be decom-
posed, and if Malays were to retain their human-capital endowment (MalayEducit), but
were paid according to the Chinese wage structure, bc, the Malay hypothetical income,
equation with an asterisk, would be:
YMalay* ⫽ a ⫹ b MalayEduc (4)
it c c it

The difference between Malay actual earning, expressed in equation (2), and hypothetical
earning, expressed in equation (4), indicates the extent of income disparity due to
discrimination. Similarly, the difference between Chinese actual income, expressed in
equation (1), and Malay hypothetical earning, expressed in equation (4), would reflect
income differences due to human-capital endowment differences between Malays and
Chinese. Income differences between Chinese and Indians will be decomposed in a similar
process to determine what portions of income differences are due to discrimination and
educational differences.
Table 5 shows the results from GLSE technique of pooled time-series regression
analysis of the three base-income models. The findings show that Malays and Indians have
greater returns from education than Chinese do. But when holding education at constant,
Chinese have higher returns (S$8,239) for being members of the majority group. Malay
workers receive S$5,958, and Indian workers receive S$3,247 for being members of
minority groups. This reflects discriminatory factors that work against Malay and Indian
workers. Given these estimates, we can now compare income differentials among ethnic
groups by decomposing the base-income equations for Malays and Indians.
Table 5 also shows that Chinese on average have more schooling than Malays and
Indians. Chinese, with 8.19 years of schooling, earned an average income of S$10,540.
With 7.85 years of schooling, Malay workers earned an average income of S$8,289, while
Indian workers with 7.45 years of education earned an average income of S$7,329. Based
on the Chinese wage structure, Malay hypothetical income would be S$10,445, while

18 Jones and Kelley, ‘Decomposing differences between groups’, pp. 323–4.

Table 5. GLSE regression analysis of earnings and decompositions of earning differences among ethnic groups (unit: Singapore dollars)

Regression results of ethnic groups’ incomes with education

Chinese Malay Indian

Constant 8,239 5,958 3,247

Education; B 281*** 297*** 548***
R-square (adjusted) 0.161 0.179 0.366
Decomposition of earning differences among ethnic groups
Decomposition Equations Value
Chinese actual earnings a ⫹ bChineseEduc 10,540
c c it

Malay actual earnings a ⫹ bMalayEduc 8,289

m m it

Indian actual earnings a ⫹ bIndianEduc 7,329

I I it

Malay hypothetical earnings a ⫹ bMalayEduc 10,445

c c it

Indian hypothetical earnings a ⫹ bIndianEduc 10,332

c c it

Income differences between Chinese and Malays due to discrimination (a–a) ⫹ (b–b)MalayEduc 2,156
c m c m it

Income differences between Chinese and Indians due to discrimination (a–a) ⫹ (b–b)IndianEduc 3,003
c I c I it

Income differences between Chinese and Malays due to education differences (ChineseEduc–MalayEduc)b 95
it it c

Income differences between Chinese and Indian due to education differences (ChineseEduc–IndianEduc) b 298
it it c
Economic Marginality of Ethnic Minorities 37

***P ⬍ 0.001
38 William Keng Mun Lee

Indian hypothetical income would be S$10,332. Therefore, the difference of S$2,156

(S$10,445–S$8,289) between Chinese and Malay workers was due to discrimination, while
discrimination would account for the S$3,003 difference (S$10,332–S$7,329) between
Chinese and Indian workers. According to the models, income differences due to educa-
tional differences between Chinese and Malay workers, and between Chinese and Indian
workers were S$95 (S$10,540–S$10,445) and S$208 (S$10,540–S$10,332) respectively. It
is clear from the above analyses that only a very small portion of the income differences
between Chinese and the other two ethnic groups can be explained by educational
differences.

Discussion and Conclusion

Income disparity among the three ethnic groups in Singapore remains high. Labour-market
segmentation attributes these income inequalities to unequal distribution of ethnic groups
between high- and low-paying industries. Accordingly, we would expect to find Chinese to
be over-represented in high-paying industries, while Malays and Indians to be over-
represented in low-paying industries. Yet the findings of this study did not support this
proposition. Malays and Indians were not found conclusively to be in low-paying industries,
although they were under-represented in the high-paying financial services industry.
Similarly, Chinese were over-represented in the high-paying financial services industry, but
they were not excluded from other low-paying industries. Previous studies have provided
contradictory findings to this proposition as well.19
Educational differences among ethnic groups could be a possible explanation of
persistent ethnic income inequality. The data that I have used, based on the Labour Force
Survey 1992–98, showed that on average Malays and Indians do have slightly lower
educational levels than Chinese. However, the findings showed that educational differences
account for a very small percentage of the income differences between Chinese and the
other two ethnic groups. Much of the income difference between Chinese and the other
ethnic groups was due to discrimination. Further examination of occupational distribution
patterns showed that Malays and Indians were disproportionately found in low-paying
occupations across all industries. These findings, together with educational differences
explaining very little of the ethnic income inequality, substantiated the conclusion that
exclusion of Malays and Indians from higher-paying occupations across industries has
contributed to ethnic income inequality.
The failure of educational differences in explaining ethnic income disparities validated
the importance of wage discrimination in illuminating ethnic income inequality in Singa-
pore. The source of such discrimination is the concentration of ethnic minorities in
lower-paying occupations. Despite the improvement of the three main ethnic groups’
overall economic positions, this study did not support the suggestion by previous
stratification studies in Singapore that ethnic income inequality has narrowed.20 On the
contrary, this study has shown that ethnic income inequality increased over the last two
decades.
The concentration of ethnic minorities in low-paying occupations across all industries
suggests that not all jobs in the primary labour market are high paying, and that there are

19 W. Bridges, ‘Industry Marginality and Female Employment: A New Appraisal’, American Sociological
Review, vol. 45 (1980); D. Dasko, Incomes, Income Attainment, and Income Inequality Among Race–Sex
Groups: A Test of the Dual Industrial Theory (Ph.D. dissertation, University of Toronto, Toronto, 1982).
20 E.F. Pang, ‘Growth, Inequality and Race in Singapore’, p. 27; B. Rao and R. Ramakrishnan, Income Inequality
in Singapore: Impact of Economic Growth and Structural Change, 1966–1975 (Singapore University Press,
Singapore, 1980).
 Economic Marginality of Ethnic Minorities 39

great benefits from hiring ethnic minorities in certain types of jobs. This is not unexpected
in modern industrial structures. Braverman argued that, in attempts to reorganise work to
keep costs low, organisations often set aside unstable, low-paying occupations for minority
groups, while dominant group members continue to occupy higher-paying occupations
within industries and organisations.21 Indeed, there are important internal differences within
industries and organisations where ethnic groups’ characteristics and differences are
translated differently into income, via labour-market processes, in the varied types of
occupations. Specifically, each ethnic group experiences different on-the-job training,
promotion, provision of mobility opportunities and so forth. It is clear that labour-market
segmentation theory has not given due consideration to this. The focus should then be on
how a dominant group maximises it own interests by creating structural barriers to
high-paying occupations. This requires the inclusion of internal labour-market theory, on
the one hand, and Weber’s concept of ‘social closure’ on the other.22 The former
investigates the mechanism of job structures within organisations, while the latter scruti-
nises the social processes by which status characteristics, such as ethnicity, determine
admittance to valuable employment.
The remaining and perhaps the most difficult task is to explain why such patterns of
ethnic inequality exist in Singapore. One possible explanation lies in the control and
domination of Chinese in the economy. The feature of a particular ethnic group dominating
the economy must be discussed in conjunction with Singapore’s historical past.23 Since the
Sung dynasty, Chinese have ventured to Southeast Asia to trade, but it was only in the
eighteenth century that the Chinese economic role, largely supported by Bugis rulers’
political ambitions, expanded in the region.24 Hence, even before the coming of the British,
Chinese had dominated commerce, tin mining and plantation industries. Soon after the
founding of Singapore by the British, Chinese began to move into the new settlement from
the region and China. These Chinese labourers had brought with them an economic and
political system known as kongsi,25 which organised labour and capital for the production
of goods to be shipped back to China.
The British and Chinese complemented each other; as Trocki noted ‘Each possessed
economic factors the other lacked, and each sought to exploit opportunities the presence of
the other offered.’26 The Chinese needed access to British capital and the British sought to
gain access to Chinese labour to gain control over the pepper and gambier economy that
was not limited to Singapore but included the Riau–Lingga Archipelago. At the same time,
the British were committed to the preservation of the feudal system of the Malay society.
Hence, Malays were left peripheralised in their villages and were excluded from the
economy, while the Chinese, through the kongsi, managed to keep whole sectors of the
economy under their control. With British withdrawal, Chinese dominated the economic
sphere.27 Malay cultural inferiority has been blamed for the Malays’ non-participation in the
economy, and this ideology has gained legitimacy in post independence Singapore.28 It is
important to note that the cultural explanation for Malays’ non-involvement has been

21 H. Braverman, Labour and Monopoly Capital (Monthly Review Press, New York, 1974).
22 On ‘social closure’, see R. Murray, Social Closure: The Theory of Monopolization and Exclusion (Oxford
University Press, New York, 1988), pp. 64–82. On internal labour market, see Arne L. Kalleberg and Ivar
Berg, Work and Industry: Structures, Markets, and Processes (Plenum Press, New York, 1987), pp. 140–2.
23 Trocki, Prince of Pirates; Trocki, Opium and Empire.
24 Trocki, Prince of Pirates, pp. 16–18.
25 Trocki, Opium and Empire, pp. 1–28.
26 Ibid., p. 4.
27 Chew-Peh Ting, ‘Chinese Immigration and the Growth of a Plural Society in Peninsula Malaysia’, in Cora
Bagley Merrett (ed.), Research in Race and Ethnic Relations (JAL Press, London, 1982), pp. 103–23.
28 Rahim, The Singapore Dilemma, p. 53.
40 William Keng Mun Lee

generated by non-Malays assessing the Malay population, and an important source of this
view derives from the differences in cultural practices between the Chinese and Malays in
particular with regard to entrepreneurship.29
In contemporary Singapore, Chinese by virtue of their numerical superiority dominate
most industrial sectors. Malays comprising some 14 per cent of the population are
concentrated in the public sector and to a lesser extent in unskilled and semi-skilled jobs
in transportation, manufacturing and business services. Indians, making up of some 8 per
cent of the population, are found mainly in the personal services and commercial sector.30
It is clear that a cultural division of labour is highly entrenched in Singapore’s work
world.31 Thus, extant historical differences proliferated by colonial policy, cultural division
of labour, late entry into the labour market and perceived threat of such entry by the
Chinese have led to the erection of barriers which have been successful in excluding Malays
and Indians from some of the higher paying occupations in Singapore. Based on extant
cultural differences, employers placed greater emphasis on the role of ethnic subculture in
perpetuating the inferior occupational status of Malay and Indian workers.32 Thus, ethnic
minorities are excluded from high-paying occupations not because of inadequate human
capital but because they are perceived to lack the necessary work ethic and value expected
in a modern economy. To a large extent, such perception is cultivated by Singapore’s
colonial past and accentuated by present state policy. Further, Chinese, protecting their
economic interests, have been successful in isolating ethnic minorities to lower-paying
occupations. All told, Chinese in Singapore have made substantial economic gains by
confining Malays and Indians in low-paying occupations. Social and physical attributes that
Chinese possess are used as the criteria of eligibility to good jobs.33
Historical structures of social relationships have restricted Malays and Indians from the
full extent of rewards and privileges in the labour market. Thus, as Breton states:
…if for historical, ecological, or other reasons, a community is structured along ethnic lines,
that existing structure will tend to be reproduced in the organisation of work and labour-market
process.34
Indeed, the consistent findings that ethnic minorities earn incomes lower than dominant
ethnic groups, irrespective of educational differences, strongly suggest that ethnicity is the
primarily factor for exclusionary social foreclosure to lucrative occupations.35 If it is true
that exclusionary social foreclosure exists, then the experience of discrimination is an
institutional one. In this context, Breton noted that ‘Institutional discrimination stems
directly from the fact that an ethnic collectivity has control over an area of institutional
activity and has thus established structures, procedures and rules of behaviour that are in
accordance with its own cultural imperative and interests’.36
Indeed, the perseverance of large income differences and wage discrimination among
ethnic groups indicates that this explanation is true for most cases of ethnic income
inequality in Singapore.

29 Li, Malays in Singapore, p. 168.

30 Census of Population 2000: Advance Data Release, p. 51.
31 M. Hechter, ‘Ethnicity and Industrialization: On the Proliferation of the Cultural Division of Labour’, Ethnicity,
vol. 3 (1976).
32 Rahim, The Singapore Dilemma, p. 51.
33 M. Barr, ‘Lee Kuan Yew: Race, Culture and Genes’, Journal of Contemporary Asia, vol. 29, no. 2 (1999); P.
Erik, ‘Prospect of Liberalization in Singapore’, Journal of Contemporary Asia, vol. 23, no. 3 (1993); Khun-Eng
Kuah, ‘Confucian Ideology and Social Engineering in Singapore’, Journal of Contemporary Asia, vol. 20, no.
3 (1990).
34 R. Breton, ‘Ethnic Stratification Viewed from Three Theoretical Perspectives’, in James Curtis and William
Scotts (eds), Social Stratification in Canada (Prentice-Hall, Toronto, 1979), p. 284.
35 Murray, Social Closure.
36 Breton, ‘Ethnic Stratification’, p. 286.
 Economic Marginality of Ethnic Minorities 41

State policy plays an important role in intensifying ethnic differences. Since indepen-
dence, Singapore has made concerted efforts toward nation building and creating a sense
of national identity. In the process, the state has come to terms with the disruptive powers
of ‘ethnic issues’ that accent language, religious and cultural differences, and with industrial
development and economic differences. The state does not dispute the potential threat to
political stability if ethnic minorities, in particular the Malays, continue to lag behind the
Chinese. In this light, the state has instituted affirmative policies such as the establishment
of ‘Mendaki’, to advance Malays’ socio-economic status.37 These affirmative policies that
aim at ‘upgrading’ the Malays, together with a state policy of using ethnicity as a primary
social identification, further accentuate ethnic differences and cultural inferiority of the
Malays. Because Chinese are the dominant group politically and are at the pinnacle of the
social stratification, state policies that target ethnic minorities to improve their socio-
economic statuses promote the notion that the Chinese are a different species and culturally
superior to other ethnic groups, and all other ethnic groups should emulate the Chinese.
Already such a perception has permeated minority groups. There is a widespread feeling
among the educated ethnic minorities that they have been treated unfairly, and that social
mobility is better if one is Chinese.38 State policies of highlighting ethnic differences create
in-group posturing that will generate aggression and discontent toward non-members.
Modern Singapore, based on information technology, will have new forms of social
differentiation and inequality that will reinforce the economic and political powers of the
Chinese. This will no doubt deepen the prejudiced attitudes of the dominant group toward
the ethnic minorities.

37 Rahim, The Singapore Dilemma, pp. 210–11.

38 Erik, ‘Prospect of Liberalization in Singapore’, p. 300; Li, Malays in Singapore, p. 109.