Singapore income gap widens with economic boom

November 12, 2007
Singapore Democrats

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Melanie Lee
Reuters
12 Nov 07
http://www.chinapost.com.tw/business/2007/11/12/130587/Singapore-income.htm

Carol John, 27, doesn’t own a bed. Every night she sleeps on thin mattresses which she shares with her three young children. Outside her one-room flat, a smell of sewage lingers in the common corridor.

Just a few kilometers away, on Singapore’s Sentosa island, Madhupati Singhania relaxes on his US$435,000 yacht berthed at the city-state’s swanky One 15 Marina Club.

Income inequality is nothing new in free-market Singapore, but two years of blistering economic growth and a government policy of attracting wealthy expatriates have created a new class of super-rich, while a string of price increases for everything from bread to bus fares have made life harder for the poor.

“I can’t save anything, it’s so difficult for me,” John told Reuters. John, who is unemployed, relies on her husband’s S$600 (US$420) monthly salary and a S$100 government handout.

“We don’t benefit at all from the economy. As far as I know, my husband’s pay hasn’t gone up,” she said.

Singapore’s economy is firing on all cylinders, with a booming construction sector, record tourist arrivals and a fast-growing financial sector all contributing to a gross domestic product set to grow nearly 8 percent in 2007. But the rising tide is not lifting every boat.

The proportion of Singapore residents earning less than S$1,000 (US$690) a month rose to 18 percent last year, from 16 percent in 2002, central bank data released late last month show.

At the same time, the proportion of those earning S$8,000 and above rose from 4.7 percent to 6 percent in the same period.

“When a country becomes richer, you tend to see a widening of income inequality. Over the last few years it has been worse,” said econometrics professor Anthony Tay at SMU university.

Despite sporting a first-world GDP per capita of US$29,000 – second only to Japan in Asia – Singapore has an income inequality profile more in line with third-world countries. Singapore’s Gini coefficient, a measure of income inequality, has worsened from 42.5 in 1998 to 47.2 in 2006, and is now in league with the Philippines (46.1) and Guatemala (48.3), and worse than China (44.7), data from Singapore’s Household Survey and the World Bank show.

Other wealthy Asian nations such as Japan, Korea and Taiwan have more European-style Ginis of 24.9, 31.6 and 32.6. CIMB-GK Research economist Song Seng Wun believes that growth itself partly explains the widening income gap.

“In an environment where growth is huge, there are lots of opportunities for risk takers, and inevitably, you will get this widening (of the income gap),” he said, adding that those in stable jobs will also benefit, but to a lesser extent.

Opportunity is what attracted Singhania to Singapore. He intends to buy a new 47-foot yacht for US$1.3 million.

“You’ve got everything you want in Singapore. You want to buy a fast car, you want to buy a big boat, you want to buy an aeroplane, whatever you need, you can get in this country.