Gini Coefficient And Income Inequality

  • Posted by admin
  • 01 August 2013
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Singapore is well known for her relative wealth, and is indeed held up as a bastion for developing nations – the prime example to follow in economic development. As the most successful tier of Singaporeans continues to do supremely well, however, at the opposite end others are struggling to make ends meet.

Prime Minister Lee Hsien Loong brought up the problem of income inequality during the 2011 Presidential Address Debate, in effect stating that “at the lower end, incomes have risen far too slowly, especially in real terms”. Such is the reality of wealth in Singapore – it is becoming more and more unequally distributed.

The Gini Coefficient

The Gini coefficient is widely used as a measure of income inequality. Yahoo News reported earlier this year that, despite a 7.5 per-cent jump (reduced to 2.7 per-cent after factoring in inflation) in median monthly household incomes across Singapore, the Gini coefficient had increased by 0.005 to 0.478 in 2012, up from 0.473 in 2011. This was despite the consideration of government reliefs and taxes.

Implications of Social Immobility

More worrying, though, is the state of social mobility in Singapore. Young Singaporeans from low-income backgrounds are finding that they are unable to climb the ladder, with enrichment activities becoming a must in today’s education scene.  The implications for income inequality are huge, in that this could exacerbate the intergenerational gap between the rich and the poor greatly.

Polarisation of Income Groups

Polarisation of society is a huge concern with such situations in the balance. If the nation empowers the lower-income group, the middle to higher-income group would doubtlessly feel that they government has lost sight of their interests. As in all things, a balance is necessary to maintain peace among the different income groups.

Risk Aversion in Setting Up a Business

In such circumstances, it comes as no surprise that many are risk-averse when it comes to throwing in their money into setting up a business of their own. It is certainly safer to join an already established company and earn a regular wage, rather than face the uncertainty that a fledging small business would inevitably face (of course, I argue that it might be safer but potentially less profitable in another article).

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