Thailand reflects Asia's growing income inequality
The widening gap between the rich and poor in Thailand and other Asian countries has threatened the region's economic and social stability, according to the Asian Development Bank.
Income divisions are rising markedly in the region, where the richest 1 per cent of households account for 6-8 per cent of total income.
Close to 20 per cent of total income went to the wealthiest 5 per cent in most countries, according to the “Asian Development Outlook 2012” released by the ADB on Wednesday.
Asia’s high growth has led to large reductions in poverty but it is accompanied by rising inequality in many countries.
The share of income accruing to the richest households has increased over time.
The Gini coefficient, a key measure of inequality, grew in the region’s three largest economies – China, India and Indonesia. From the early 1990s to around 2010, it increased from 32 to 43 in China, from 33 to 37 in India and from 29 to 39 in Indonesia.
Considering the region as a single unit, the Gini coefficient has leapt from 39 to 46 in the last two decades. Technological progress, globalisation and market-oriented reforms drove high growth in Asia. But they favoured capital over labour, skilled over unskilled workers and cities over areas, resulting in a widening gap of income, the report added.
Thailand does worse on the issue than many countries in Asia. Its Gini coefficient is currently 42, said Luxom Attapich, the ADB’s senior economist for Thailand.
Inequality can weaken the basis for growth itself by undermining social cohesion, worsening the quality of governance and increasing pressure for inefficient populist policies, she said.
The ADB suggests that policy-makers can act to reverse rising inequality. They could implement targeted fiscal policies to reduce inequality in human capital. They should introduce interventions to address lagging regions. For example, China has put effort into developing its western region, she said.
They should also make growth more employment-friendly to increase the labour income share. Many Thai governments introduced populist policies to address the issue of the high-income gap. The policies helped for the short run but were not sustainable. There are a flip side and bright side to the issue.
Some people may make more effort with their activities so they get more income. This is a good thing. However, many people do not have a chance to access life opportunities, such as education. This is a bad side of the widening income gap, she added.
