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ASEAN ANALYSIS  12 October 2010

Asian countries waking up to income spread

By David Swartzentruber
AseanAffairs     12 October 2010

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During the dramatic and deadly two-month red shirt protest in Thailand one of the rallying cries of protesters was the disparity of income between the rural poor and the Thais who live in work in Bangkok.

In other words, the issue is the difference between the rich and the poor. But Thailand does not stand alone in Asia on this issue, it actually does better than many countries.

For example, the Special Administrative region of Hong Kong is planning to enact its first minimum wage law this year to deal with the biggest gap between the rich and the poor in Asia. Thai Prime Minister Abhisit Vejjajiva has also proposed a countrywide wage increase that would increase wages by 21 percent. At the current time, wages vary from province to province in Thailand.

In 2009 Hong Kong had the biggest wealth disparity in Asia, with a Gini coefficient of 43.4. Singapore earned a score of .42. Thailand had the same Gini coefficient as Singapore and it was even higher in the Philippines (.44) but considerably lower in Malaysia (.38). compared to the average of 0.39 for the region, according to data compiled by the United Nations.

The coefficient measures inequality in a range from zero to 1, with zero referring to total equality. In China, for example, this Gini coefficient rose from 0.29 in 1980 to 0.36 in 1990, 0.39 in 2000 and 0.47 in 2004, from among the lowest to among the highest in countries of the world in just 25 years. So much for the “worker’s paradise.”

Here are some Gini scores from the western world. Norway, first on the human development index, had a Gini coefficient of 25.8; Australia (2nd), 35.2; Canada (4th), 32.6; and Ireland (5th), 34.3. No figure was given for third-ranked Iceland. All the 38 countries have very high human development .

In the United States during the last three decades, for example, the Gini coefficient has increased. The Gini Coefficient for the United States has risen steadily since 1967. If the current trend continues, the United States will reach a Gini Coefficient of 0.546 in about 37-years, or 2043. This coefficient is equal to the one Mexico had in year 2000. Mexico is not known for having a large prosperous middle class.

Unless the United States breaks this trend, the American middle class will be a thing of the past - actually within the lifetime of most Americans living today.

Hong Kong leaders seem to understand the issue in this statement, “Economic health can seldom be sustained without social stability. We consider safeguarding the interests of the vulnerable and enhancing social harmony are important policy objectives.”

As capital inflows continue in Asia, keep an eye on Asean governments to see if they follow suit with Hong Kong and Thailand on reducing income disparity.

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