Singapore, Hong Kong Taking Different Stances On Income Inequality

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Singapore and Hong Kong has grown up as de facto sister cities within Asia. Both cities have emerged over the last several decades as two of Asia’s richest cities. Both cities focus on financial services and trade through their ports. Both cities have also enjoyed tremendous economic growth and now rival New York, London, and other major global cities.

Yet this growth has come at a cost as inequality in both Hong Kong and Singapore has risen sharply. Now, Singapore appears ready to cave into populist pressures and is looking to focus on building a more equal and harmonious society while Hong Kong appears content with its current trajectory.

Hong Kong and Singapore are often compared. For one, both cities are among Asia’s most prosperous. Two, both are city-states, though Singapore enjoys full autonomy while Hong Kong is instead a special administrative zone within China. Whereas Singapore is a democracy, however, Hong Kong is more of an oligarchy, with a small group of ruling elite within the city holding nearly all of the city’s political power.

Singapore, Hong Kong Taking Different Stances On Income Inequality

Inequality has been rising in both cities

Both Singapore and Hong Kong have achieved tremendous levels of economic development over the last fifty years. Singapore generally ranks in the top ten countries in the world in terms of nominal GDP per capita, generating about USD52,000 per year per person. Hong Kong’s income comes in at USD37,000 dollars per year, trailing Singapore but still among the highest in Asia.

Yet this economic growth has not been enjoyed equally by all members of society. One way to measure income inequality is with the Gini Coefficient, which measures national income distribution to determine inequality.

In Hong Kong, the country’s Gini Coefficient has now reached 53.7, one of the highest rates in the developed world. Starting in 1973, the country’s Gini Coefficient measures .43, on par with the United States. For the next 20 years, inequality slowly grew and by 1991 measured .476. During the 1990’s income inequality spiked, reaching .518 by 1996. Since then growth in equality has largely tapered off but still remains high.

Singapore’s Gini Coefficient also trended upwards in the 1990’s before levelling off. In 1980’s Singapore Gini Coefficient measured .422. By 2001 it had risen to .454 and peaked at .482 in 2007 before the global financial crisis. In 2013, it declined to .463, though whether this is a momentary drop or a shift in trends remains difficult to tell.

Singaporean Government Looking To Combat Inequality

Singapore’s government model has always stretched harmony. From the very beginning, the government has been heavily involved with economic development by promoting industries, setting up government linked companies (GLC), and spending large sums of money to develop the skill sets of its citizens.

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To be sure, the Singaporean government has always focused on competitiveness and not interfering with the functioning of the market itself. For example, the government might set up GLCs, but required them to become self-sufficient and competitive within the marketplace.

In recent years, Singapore’s ruling PAP party has been losing support among its general citizenry, with income inequality emerging as one of the key issues. The PAP controlled government has long sought to avoid building a welfare state but the most recent budget suggests that the government may indeed be softening its stance as spending on the poor and elderly has been increasing.

Hong Kong to continue with trajectory

So far, Hong Kong’s government seems content to continue with its laissez faire economic model which has undoubtedly brought the country a tremendous amount of success, even if it does come with high levels of inequality. For now, the Hong Kong government has no major welfare or economic reform policies on the table that might lower inequality

Since its time under British rule, Hong Kong’s government has taken a hands-off approach to economic development, allowing markets to allocate resources. This has brought about tremendous efficiency, however, Hong Kong’s limited natural resources have also caused some prices to sky-rocket. For example, land space is limited in the city and housing costs have been rising sharply in recent years.

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