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Award Winning British Economist Portia Antonia Alexis Explains why Singapore’s Wealthy Are Doing Great – Except For One Thing: Income Inequality

LSE economist Portia Antonia Alexis is a celebrated Economist and mathematician she does  research in Economic Mobility, Income Inequality, Financial Economics, Macroeconomics and Mathematical Economics. She is a trained counsellor and youth therapist as part of her role as a voluntary Victim Support Worker for the London Metropolitan Police. She has authored numerous research papers […]

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LSE economist Portia Antonia Alexis is a celebrated Economist and mathematician she does  research in Economic Mobility, Income Inequality, Financial Economics, Macroeconomics and Mathematical Economics. She is a trained counsellor and youth therapist as part of her role as a voluntary Victim Support Worker for the London Metropolitan Police. She has authored numerous research papers on the topic of economic mobility and human well being. She is one of the leading economic influencers with over 200,000 followers on various social media platforms.

Portia would resist the oxymoronic label, but she is something of a rock star economist: a column in Forbes Magazine, nominated as a UN Women’s Change Maker, her two papers this year have both won awards. The work is important, she would argue, not the individual. But she knows well that her fame, such as it is, helps promotes her cause, and she’s passionately devoted to improving the welfare of the poor.

Today, she discusses Singapore after a recent trip to conduct research with Singapore Management University where she spoke on income inequality. ‘If Singapore is so wealthy, why do its citizens feel stuck?’ she asks and answers…

Tell us about Singapore?

Portia :Singapore is probably one of the world’s top success stories on achieving economic miracle. Since its independence in the 1960s, Singapore transformed from a low-income to high-income country, growing at an impressive rates of 7.7 percent on average, and topping 9.2 percent in the first 25 years. Today, Singapore’s GDP is among world’s highest, and the country provides one of the most business-friendly regulatory environments and is ranked among the world’s most competitive economies. Seems like a quite good place to live and prosper, doesn’t it? Well, not so much for the Singapore citizens. The Institute of Policy Studies at the National University of Singapore conducted a large-scale survey last year, asking if people felt their financial status would improve in a decade’s time. The results show that more than five in 10 Singaporeans expect to experience ‘negligible’ financial mobility while close to one in 10 felt their fortunes would decline. What is the source of such pessimism if things are going so well? One reason might be that  the golden age of Singapore’s economy belongs to the past. Growth rates have averaged around 3 percent over the last five years, and the projections suggest that it will drop below 1 percent in 2019, largely due to externalities of China-US trade tensions. However, even though it’s not what Singapore was used to, 3 percent GDP growth is still something most developed economies can only dream of. It is thus likely that people are concerned not about the performance of the economy, but their position on the social ladder.

Does Singapore, like many other countries, face concerns regarding rising income inequality and increasingly difficult social mobility?

Portia: At first glance, income inequality in Singapore may seem to be widening. For example, according to the World Inequality Database, the share of the top 10 percent in national income grew from 30 percent in 1995 to almost 44 percent in 2014. Share of the richest 1 percent increased from less than 10 to 14 percent in the same time period.

However, even though rich Singaporeans have seen more significant income increases in absolute terms, incomes of low-earners have grown faster in percentage terms. The top 10 percent have actually experienced the lowest growth across the board – 54 percent, compared to between 65 and 77 percent for the lower-income groups.

Neither does Singapore stand out compared to other similar economies (both in terms of geography and income level). Its pre-tax income inequality levels are way below most developed countries including the United Kingdom, the United States or Japan. What’s striking though is how much worse the picture of inequality looks like when ones looks at incomes after taxes and social transfers – Singapore suddenly finds itself at the top of the (shameful) league (see chart below). This suggests that the government might not be doing a very good job to contain income inequality through taxation and redistribution.

International comparison of Gini coefficients (latest available year)

Source: OECD, Singapore Department of Statistics;
Note: Coefficient of 0 indicates perfect income equality, while 1 indicates perfect inequality.

What is the cause of the lack of policies aimed at reducing inequality?

Portia: Indeed, lack of policies aimed at reducing and preventing inequalities is rather extraordinary. Singapore ranked 149th in the Oxfam’s Commitment to Reducing Inequality (CRI) Index of 157 countries based on efforts to tackle the gap between the rich and poor. Singapore’s score was lower than Afghanistan, Algeria, and Cambodia, and marginally higher than Haiti, Nigeria and Sierra Leone.

Oxfam criticized, among other things, the fact that Singapore has increased its personal income tax by 2 percent, but kept the tax for the highest earners at a very low rate of 22 percent. Low levels of public social spending is another key issue. For instance, Oxfam pointed out that Singapore was among the countries that registered “some of the biggest decreases” in spending on education. Finally, the report highlighted lack of equal pay or non-discrimination laws for women and no minimum wage rules.

Singapore still is, and will most likely remain, a land of prosperity and opportunity. Virtually everyone has a job (there is full employment) and home (home ownership is above 90 percent, which rarely seen). People are healthy and well-educated (Singapore ranks the best country in the world in human capital development, according to World Bank Human Capital Index). Nonetheless, it is vital for the Singapore’s policymakers to remember that sustaining the growth course might be even harder that getting to this point. Decreasing education spending will definitely not help in further human capital building, while low taxes for the highest earners and their increasing share in national income might lead to social unrest and the feeling of social exclusion.

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