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News Analysis: Emerging economies of Asia urged to do more to curb income inequality

English.news.cn   2014-07-24 13:20:41

by Tan Shih Ming

SINGAPORE, July 24 (Xinhua) -- As rapid economic growth improves average income level in Asian economies, most emerging economies in the region have also seen a staggering rise in income inequality, prompting analysts to urge them to take concrete steps to address the disparity in income issue.

The adoption of export-oriented policies aimed at exploiting the abundant labor supply and low wages in emerging markets of the region had spurred rapid economic growth in past decades. This in turn raised significantly per capita income in Asian economies such as Singapore and China's Hong Kong, where their levels are by now comparable with those of mega-cities in advanced countries such as New York, London or Tokyo.

Other Asian economies including South Korea, Malaysia, China and to a smaller extent India and the Philippines have also seen their gaps with the developed economies dramatically narrowing in terms of the average income levels.

While some of the economies such as Japan and South Korea that powered Asia's earlier economic miracles showed relatively low levels of inequality and remain relatively equitable by today, the income distribution picture of most Asian economies was quite a contrary to the earlier conventional view that high inequality is a temporary phase in early economic development which would fade as economies become more industrialized.

China's Hong Kong and Singapore, for instance, have higher net inequality than most developed economies as far as Gini coefficients go. The Gini coefficient ranges from zero to one, with higher values meaning more inequality. With the help of taxes on the riches and conditional cash transfers to lower income groups, some economies in the region managed to curb the rise of income inequality to certain extent.

The Singapore government said the Gini coefficient of the city- state was down from 0.478 in 2012 to 0.463 last year, thanks largely to greater government transfers like good-and-service tax vouchers and the wage credit scheme to subsidize pay rises for workers.

Standard Chartered Global Research said the governments in the region should do more to reduce the income inequality in their economies. It urged many energy-importing economies in Asia like India, Indonesia and Thailand to review their subsidies on fuel, as research found that these subsidies are not effective in reducing inequality and could not help the poor but only increase the burden on government budgets and thus reduce potential spending on infrastructure or poverty-alleviation measures.

According to Standard Chartered, direct cash transfers are often the best way to help the poor. Contrary to what is sometimes assumed, the poor usually know what is best for them and rarely waste cash.

Aid programs that try to help by providing goods in kind, which can range from cows or seeds to textbooks or business training can help. Simple cash cards or mobile phone accounts can also be used to provide the cash while also helping to promote financial inclusion.

The research house also reminded Asian policy-makers of the urgency to address the effect of changing technology. It said the dangers that new technology could continue to widen pay differentials and reward capital owners are still ongoing.

This does not mean there will be no jobs but rather there is a need for the governments to nurture their people with the skills that robots so far find very difficult, such as situational adaptability, visual and language recognition, in-person interactions, or abstract thinking, including problem solving, intuition, persuasion and creativity.

Editor: yanting
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