Income Inequility : How Worried Are You?


Chris Kuan said:

Singaporeans are getting more concerned about income inequality according to the Blackbox survey result here. 81% are worried about the income gap, 70% thinks it has worsened in the past 5 year. 52% thinks government policies that address the issue are not effective. Mind you, this growing concern is taking place even as the govie has stepped up social spending after the wake-up call in 2011. Statistics shows income inequality has lessen a tad but obviously not enough for people to stop feeling things are getting worse.

An FB friend and a WP supporter who also did well himself, commented that in any wealth redistribution, the rich has to give up and the poor receive for any equalisation to happen and to get out of this ‘trap’, it’s important that the overall pie keeps growing. If we slow then the differences becomes acute.

Growing the pie is indeed important but by itself cannot reduce inequality. If it did, we would not be having this concern in the first place. GDP was 253b in 2006. 406b in 2016, So the pie did grow, massively in fact but there has been no reduction in income inequality until after 2013 when the gov stepped up social spending. Even so, the reduction in income inequality is not significant, As a key IMF study indeed show, it is a mistake to focus on growth and let inequality take care of itself. That’s simply because growth do not by itself reduce inequality. It has to come from tax and spend policies. That even reasonable people like the FB friend and WP supporter would reiterate the accepted narrative that the pie must keep growing as if it is the solution to inequality simply shows how pervasive a one-sided establishment narrative can be.

The examples around the world and in fact our own experience have shown, income inequality can only really be reduced by government tax and spend policies. Ours remained high because the govie did not do enough. Hoarding reserves, protecting the privileges of the wealthy (low income tax, no wealth tax, barely taxed capital income) and sopping off the rest with self-reliance and slippery slope metaphors are the reasons why income inequality remained elevated and as the survey shows citizens feel it and are concerned about it. If as some would argue that higher taxes may crimp economic growth then the question will be which is the price to be paid – the price paid to achieve lower income inequality or the price paid to achieve higher growth at the expense of reducing income inequality? These are profound questions that needs to be answered by everyone, not just follow the establishment line.