The Staggering Gap between Singapore's Rich and Poor

Official statistics by the World Bank indicate that Singapore has the highest Gini coefficient in the developed world. The Gini coefficient is an abstract mathematical economic indicator that measures the extent of income inequality in a country. Yet one doesn't have to be an economics guru to understand the extent of inequality in Singapore. Simply by browsing the newspapers, Singaporeans have been exposed to a much more visceral and concrete demonstration of Singapore's staggering gap between the rich and the poor.

On Monday, the following article was published in my paper:

You can have this bungalow for $68m

This five-bedroom good-class bungalow in Ridout Road comes with its own pool and tennis court.

Reico Wong | Mon, Mar 12, 2012 | my paper

The record $39-million sale of a Sentosa Cove seafront bungalow to a buyer from India, which made headlines earlier this month, may have raised many eyebrows.

But it is far from being the most expensive prestige landed home on the Singapore property market - in terms of absolute price - at the moment.

Sources told my paper that one of the priciest residential landed properties up for grabs is a five- bedroom good-class bungalow (GCB) in Ridout Road, off Holland Road.

Its owner is asking for $68 million, or about $1,670 psf, for the property, which occupies about 40,000 sq ft of land. The large plot of land, on which two GCBs can be built, is sited on a slope and comes with its own swimming pool and tennis court.

The article goes on to quote Savills' (a property agency) director of prestige homes, Mr Samuel Eyo. Eyo described GCBs, as being "in a class by themselves", being "something which tells immediately of the owners' status, and most buyers purchase such properties for their own use." Mr Eyo also added that individuals keen on buying such a high-end GCB would probably need to have a net worth of at least $500 million.

Meanwhile, as Singapore's ultra-high net worth individuals do the sums on their uber-exclusive bungalows, the PAP Government has been frantically trying to explain the mathematics of how a family earning $1,000 a month is able to afford a 2-room BTO flat in Singapore. In stark contrast to GCBs which sit on land ranging between 15,000 - 40,000 sq ft in size and which cost between $25 - $70 million, 2-room flats in Singapore are a mere 485 sq ft in size and cost only S$40,000 a pop, after Government subsidies.

Mr Eyo's estimate of the net worth of GCB buyers is at least $500 million. Let's be conservative and allow for a net worth of $50 million, since a buyer can probably take out a significant mortgage loan on the bungalow without having to pay the entire price in cash. In stark contrast, allow me to optimistically estimate that the net worth of the household earning $1,000 a month is $10,000, including their possessions, some savings and the equity in their 2-room flat.

The conclusion of this estimate is that the richest in Singapore are approximately 5000 times wealthier than the poorest. But this is surely a gross underestimation, since Mr Eyo's estimate of $500 million is 100,000 times more than a much more realistic (and still optimistic) estimate of $5,000 net worth for the 2-room flat buyer.

Tan Chuan Jin estimated that out of the $1,000 of income, the household would have about $783 dollars to spare after CPF contributions. How a household gets by on $783 a month, I do not know. But surely the difference in lifestyle between such a household and the one with $500 million in assets must be mind-boggling for anyone who cares to imagine.

While Singapore's poor struggle to get by on puny incomes, the wealthy flaunt their wealth with mega bungalows, supercars and other opulent accoutrements. The middle-class is obsessed with their rat race to accumulate more and more material wealth in their quest to win the never ending status competition. Neoliberal ideology continues to hold sway over the Government and its agents.

Tharman in the budget debate said that he "did not like the idea of first world welfare." K Shanmugam was quoted yesterday defending low income taxes for high income earners. GST, which hurts the poor the most, continues to be doggedly defended by the PAP as the preferred solution over raising income taxes. Minimum wages are shot down as having a distortionary effect on the labour market and thus bad for the economy.

Yet the body of research and evidence demonstrating the correlation between social ills and income inequality is growing. Epidemiologists, sociologists, psychiatrists, criminologists and economists are testifying in increasing numbers to the association between inequality and problems such as disease, crime, suicides, depression and violence. While the causative effects of inequality are debatable, there is little dispute that rising inequality is a reliable sign of declining social capital in a country.

Are we, as Singaporeans, just going to sit around and do nothing while our society slowly disintegrates? Are we just going to run mindlessly on our hamster wheels meaninglessly chasing material wealth and status symbols while our souls rot into nothingness?

The staggering gap between the rich and the poor portends serious problems on the horizon. And if we don't start doing something about it today, the consequences will be deep and devastating.