Impact of Income Inequality

Let us look at two hypothetical countries, X and Y

X - 90% of the population earn an annual income of $40,000 while 10% earn an average of $120,000 (3 times).
Y - 90% of the population earn an annual income of $40,000 while 10% earn an average income of $240,000 (6 times).

In X, the top 10% earn 25% of the total income. In Y, the top 10% earn 40% of the total income.

Which country give a better life to its people? Most people would probably say that country Y is better - as 90% of the people l earn the same income as X, and it gives the opportunity for the remaining 10% to earn much more.

But this reasoning is wrong. The higher income earners of Y can afford to pay higher prices for property and other products and services and push up the cost of living - which creates a negative impact on the remaining 90%. This is why "the rich gets richer and the poor gets poorer".

A country with a greater income equality will allow more people to earn enough to meet the cost of living and raise a family. This is why a low income country with greater income equality gives a better life to the people, rather than a high income country with greater income inequality.

It is the inequality of income and the high unemployment rate (a main contributor to the inequality) that leads to unrest that has been seen in many countries during the past year.

Read this article about income inequality in America.

This article compares the Gini index of Singapore with other familiar countries.

Tan Kin Lian

Income inequality in USA

I wish to quote the following article from Wikipedia about income inequality in America, and explain in a separate article why it cause greater to people at the lower income level (compared to a society where the income distribution is more equal). I will also show the how Singapore fare in the Gini index, i.e. it is worse than America.

Quote from Wikipedia:
Income inequality is the extent to which income, most commonly measured by household or individual, is distributed in an uneven manner. While there seems to be consensus among social scientists that some degree of income inequality is needed, the extent of income inequality and its implications on society continue to be a subject of great debate, as they have been for over a century.

A study by the Southern Economic Journal found that "71 percent of American economists believe the distribution of income in the US should be more equal, and 81 percent feel that the redistribution of income is a legitimate role for government." 

Data from official sources indicate that income inequality has been increasing since the 1970s. As of 2006, the United States had one of the highest levels of income inequality, as measured through the Gini index, among the high income countries.

In 2010, the top 20% of Americans earned 49.4% of the nation’s income, compared with the 3.4% earned by the roughly 15% of the population living below the poverty line. This earnings ratio of 14.5 to 1 was an increase from the 13.6 to 1 ratio in 2008 and a significant rise from the historic low of 7.69 to 1 in 1968. 

Looking back even further to 1915, an era in which the Rockefellers and Carnegies dominated American industry, the richest 1% of Americans earned roughly 18% of all income. Today, the top 1% account for 24% of all income.

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Muammar Gaddafi stars in topical ad for Lifebroker

McCann Melbourne has created a tactical campaign for Lifebroker featuring troubled Libyan leader Muammar Gaddafi.

The ad will run in The Age, The Australian and Sun Herald.
Credits:
Agency: McCann Melbourne
Creative Directors: Julius and Ethal Rosenberg
Planning Director: Felix
Group Account Director: John Bosley
Work Experience Kid: Haley Joel Osment

DHL Express| “International Specialists”

DHL Express, the international express services provider, is running “International Specialists”, an advertising campaign translated into 25 local languages in 42 key markets worldwide with television, print, outdoor, digital and radio features. Two television commercials, “Grow” and “Runway”, introduce the “Speed of Yellow” concept, showing how key events are made possible by DHL, from creating a concept car in Paris, to receiving a circuit board in space, and putting the finishing touches to a designer dress in New York. The focus is on DHL’s expertise in logistics so it can deliver to its customers on time, every time, anywhere in the world. The TV and radio spots are accompanied by a modern cover of the classic anthem “Ain’t No Mountain High Enough,” which first featured in DHL adverts in 1991, now re-recorded by award winning producer Paul Epworth. This re-mixed version is available to download from iTunes.

A scientific breakthrough is made in Hong Kong. The next day it’s aiding research in Tromso.

A dress is stitched in Hong Kong. The next night it’s applauded in Paris.

A contract is signed in London. By 10.30 am the next day it touches down in Wall Street.

A bearing sits in a box in Guangzhou. By the end of the next day it’s in a chassis in Frankfurt.

Credits

The International Specialists campaign was developed at 180 Amsterdam by creative director Stephen Hancock, executive creative director Al Moseley, creative director Galen Graham, art director James Sadler, copywriter Dan Brooks, account directors Nicole Reid and Audrey Lefebvre, planner Mandy Graham, client team director Wolfgang Giehl, and agency producer Eline Bakker

Filming was shot by director Antoine Bardou-Jacquet via Partizan with director of photography Damien Morisot, producer David Stewart, executive producer Joe Togneri.

Post production was done at MPC (The Moving Picture Company). Visual effects were produced by Flame artist Karmen Markov. Editor was Bill Smedley at Work Post.

Sound and music were produced at P&S.

Low interest rate is harmful

America, Japan and Europe have low interest rate for many years. It was thought that low interest rate would reduce cost to business and encourage more businesses to be created to create jobs for the people. It did not seem to work well.

The low interest rate has caused asset prices to increase, especially property prices. It has made housing more expensive and out of reach to ordinary citizens - although the low interest rate helps to remove the pain of paying the mortgages.

At a certain point in the future, the housing prices will collapse. It happened in Japan, USA and Europe. This is why the banks are shaky, as they have lent too much on the inflated housing prices. There seem to be no escape from the disaster down the road.

There is actually a solution - and that is to get away from the concept of marking to market of property prices. I shall not go into much discussion here - as it requires a totally different approach. It may be necesary to avoid the global disaster.

A more fundamental question is - could the developed economies have adopted a different approach (instead of low interest rate) to grow the economy and create sufficient jobs for everyone? The answer is "yes" - and that is to get everybody to work less, so that the available work can be distributed to all those who are willing to work. There will be more time for social life. Life is not just work alone.

How can work be better distributed? This is another interesting question and requires a more detailed discussion. At this juncture, I only wish to bring out this concept. Maybe, some economists have already written about it, and we can share their thinking.

Tan Kin Lian

Financial issues affecting Singaporeans

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