Why Does Wealth Inequality in Singapore Matter?

The data released by the Singapore Department of Statistics (SingStat) shows that household income inequality in 2019 was the lowest in two decades.

Gini coefficient is one of the most common metrics to measure income inequality, which is a number between 0 (perfect equality) and 1 (perfect inequality).

Singapore’s 2019 Gini coefficient was 0.452, which was the second-lowest since 2000.

However, after accounting for government transfers and taxes, it became 0.398, which was the lowest. It means the government had put much effort into alleviating inequality, and the effort paid off.

Income inequality is a common issue among developed countries. Although Singapore is not an Organization of Economic Development (OECD) member, when we compute Singapore’s Gini coefficient using the OECD method, it is currently lower than the OECD average.

It seems that Singapore has done well in alleviating income inequality, at least better than most of the countries. However, there is still a lot to do, and it still needs to be taken seriously in the Singaporean context.

Inequality Leads to Relative Poverty and Social Exclusion

There are two general definitions about poverty, absolute poverty and relative poverty.

Absolute poverty is defined as the minimum necessary requirements for living in a state, and the minimum necessary requirements are defined by the government, while the government of Singapore decides not to define poverty in Singapore.

Although it is difficult to determine absolute poverty, it is clear that Singapore should take relative poverty seriously.

According to the definition of Full Fact, relative poverty means that a person cannot afford an ordinary living pattern of others, which means they are excluded from the opportunities and activities that the average person enjoys (social exclusion), and it is related to income inequality.

OECD applies 0.5 median income as the poverty threshold of relative poverty. If apply the OECD method to Singapore, the poverty threshold will be around S$3,000, and the incomes of 23-26% of households in Singapore are under it, which means a quarter of Singaporean households are living in relative poverty.

The Vicious Circle of Poverty

The situation of relative poverty, which leads to social exclusion, would make social mobility hard to happen, thus form a vicious circle and exacerbate the issue.

Social exclusion is related to social isolation, which is the phenomenon of non-participation in mainstream institutions of society (Brian Barry, 1998). People living in relative poverty are excluded from society, and they can't access resources and opportunities that ordinary people can, thus they are socially isolated.

Samuel Centre for Social Connectedness (SCSC) indicates that the link between social isolation and poverty is obvious. People who are socially excluded would not reach out for help, and they would isolate themselves instead because they think people would judge them for their low socioeconomic status.

In SCSC’s research, a South African focus group participant said:

“Even if you are can't go to them to ask for food or money, because they are judging you that you are poor...they won't give you it's better that you isolate yourself.”

Although the Singaporean context is different from the African context regarding poverty, their mindsets are the same. If they reach out for help, people may not help them but scorn them instead, so they would rather be isolated.

"Social Inclusion is the Antidote to Poverty"

Social inclusion is a pillar of sustainability and has been a part of the World Bank Goals of reducing poverty.

The World Bank’s definition of social inclusion is “the process of improving the terms on which individuals and groups take part in society—improving the ability, opportunity, and dignity of those disadvantaged based on their identity.”

Income inequality forms a society that the disadvantaged don’t have opportunities and abilities equal to ordinary people, and most importantly, they lose dignity.

Alleviating poverty is not just the government’s responsibility. It also needs assistance from all parties in society.

We cannot expect a perfectly equal society that everyone has the same amount of income. However, we can build an inclusive society that no one is left behind so that we can break the vicious circle of poverty.