When it comes to inequality, it's not just about the economy

5 Dec 2016

To tackle income inequality, governments need to raise fiscal spending, reform tax, make better use of remittances and invest in education

Growing income differences were decisive for Brexit and Mr Donald Trump’s election victory. Despite benefiting from the fastest economic growth in the world, decision-makers in Asia should take note and act because income inequality in the region is showing some of the biggest increases anywhere. Even when economic growth in the aggregate is robust, inequalities among people, coupled with a rising distrust of globalisation, are increasingly determining political outcomes.

Developing Asia’s Gini coefficient – a measure of income inequality- went from 0.39 in the mid-1990s to 0.46 in the late 2000s (zero represents complete equality and 1, complete inequality).

Countries that make up 80 per cent of developing Asia’s population have seen rising inequality roughly over this period. By this measure, Singapore is at the top end in inequality among Asian countries, though this may well be overstating the situation because big cities worldwide typically have high levels of disparity. On the other hand, the exclusion of temporary workers from the measure and the inclusion of provident fund contributions of employers that are capped at higher incomes could be understating Singapore’s inequality.

Vinod Thomas is Visiting Professor at the Lee Kuan Yew School of Public Policy (LKY SPP), National University of Singapore. This article was first published on The Straits Times on 3rd December 2016.

Vinod Thomas

Visiting Professor