Thursday, October 20, 2011

Drop in standard of living

This article describes what has happened in America. It reflects the situation for many people in Singapore as well. When there is a widening gap in income, the high cost of living must squeeze those on stagnant wages.


Anonymous said...

According to ST report, Singapore currently has 183,000 millionaires and this may rise to 408,000 by 2016.

Singaporeans are also the second richest in Asia Pacific region with average wealth of nearly S$360,000. Wow!

But they said nothing about the median wealth, maybe not so nice to say.

Could this be why income gap is very wide?

SimplyTerror said...

It is important to distinguish between a 'stock' item, like wealth, from a 'flow' item, like income. Income accumulates into wealth (if not spent) and wealth might generate income, if invested.
While it is possible that millionaires earning significant investment incomes might have contributed to the widening income gap, that is unlikely given the poor performance of investments over the past few years. Even if we focus solely on fixed deposits, with interest rates of 2%, a million dollars would only earn $20,0000 per annum, a sum far far below what most Singaporeans would consider a living wage. So in response to the commentator above, I would think that income inequality is unlikely to be linked to the high proportion of millionaires in Singapore (though the converse, that high income inequality leads to a high proportion of millionaires could concievably be true. )
Of course, the bigger issue is why has real income inequality increased over the past decades. Why has real income stagnated for low income earners?
Greg Mankiw, an Economics professor at Harvard has some thoughts here

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