DOES income inequality matter? If Southeast Asian countries were to be used as barometers, the answer to this would gravitate to the negative side, particularly if the per capita income and the efforts taken by governments to bridge the rich-poor gap are taken into consideration.
For instance, Singapore—the wealthiest country in Asean—has a GDP per capita of around $57,700.
However, in the newly released edition of the Commitment to Reducing Inequality (CRI) Index report developed by Oxfam and Development Finance International, Singapore only ranked 149th out of 157 countries.
On the other hand, the Philippines—long considered an economic laggard in Asean despite its vast potential—only has a GDP per capita of around $3,000. But it ranked considerably higher than Singapore in the 2018 CRI Index, landing at 97th.
Cases like those of the Philippines and Singapore fuel debates among governments all over the world that fueling—instead of fighting—income inequality is the way forward.
The CRI Index
The CRI 2018 ranks countries based on social spending, particularly health, education and social protection; progressivity of tax policy; labor rights and minimum wages.
While developed countries dominate the top 10 performers in terms of addressing income inequality, some developing economies are actually making significant strides to narrow the chasm between the rich and the have-nots in terms of policies—on social spending, tax and labor rights. These three areas are critical to reducing inequality, according to the CRI 2018 report.
The 157 countries ranked showed a clear divergence in governments’ policies. The Republic of Korea, Indonesia and Georgia are obviously taking positive steps to reduce the gap between rich and poor. Some governments, however, are making it worse.
Try harder
Oxfam said all countries, even those at the top, could be doing much more. The report was distributed ahead of the scheduled meeting of finance ministers, central bank governors, and other economic leaders at the World Bank and International Monetary Fund’s Annual Meeting in Bali, Indonesia.
An international confederation, Oxfam is working along with partners and local communities in more than 90 countries to end the injustices that cause poverty.
On the other hand, the Development Finance International Group is a nonprofit capacity-building, advocacy, advisory and research group that works with more than 50 governments and international organizations worldwide.
PHL ranking
The Philippines is ranked 94th overall, behind three of its Southeast Asian neighbors Indonesia (90th), Malaysia (75th) and Thailand (74th).
The country’s ranking in terms of social spending is even worse at 114, but it fared better in terms of taxation policies (91) and labor rights and wages (84).
The Philippines, like other countries, has been experiencing growth in terms of GDP. This year, the country’s national budget is P3.8 trillion, 12 percent higher than the national budget in 2017. Of this year’s total budget, the Department of Public Works and Highways (DPWH) received the biggest allocation. The Department of Education (DepEd) received the second-highest allocation at P553.31 billion. In terms of taxation, the Duterte administration enacted last year the Tax Reform for Acceleration and Inclusion (TRAIN) law, or Republic Act 10693.
TRAIN is the initial package of the Comprehensive Tax Reform Program (CTRP) signed into law by President Duterte in December 2017. It consists of revisions to the National Internal Revenue Code of 1997, or the Tax Code. Among the tax reforms introduced include that of personal income tax, estate tax, donor’s tax, value-added tax, documentary tax stamp, and the excise tax of petroleum products, automobiles, sweetened beverages, cosmetic procedures, coal, mining and tobacco.
The Department of Labor and Employment, through the National Wages and Productivity Commission, announced the implementation of the P20 minimum-wage hike for workers in Central Luzon, which took effect starting on August 1.
The wage increase, however, is a far cry from the P320 minimum-wage increase demanded by labor groups in the Philippines, considering the recent spikes in the prices of basic commodities, with inflation hitting a nine-year-high 6.7 percent.
Best, worst performers worldwide
According to the report, all countries could do more, even those near the top, noting that no country is doing particularly well. Even those at the top of the listings have room for improvement.
Even the top performer, Denmark, does not get a perfect score and could be doing more.
The report said that 112 of the 157 countries included in the index are doing less than half of what the best performers are managing to do.
Among the top performers based on overall CRI are Denmark, Germany, Finland, Austria, Norway, Belgium, Sweden, France, Iceland and Luxembourg.
Iceland, Norway and Luxembourg are among the 15 richest countries in the world. But Singapore is also way up there at No. 3.
On the other hand, the worst performers are Bangladesh, Singapore, Lao PDR, Madagascar, Bhutan, Sierra Leone, Chad, Haiti, Uzbekistan and Nigeria.
Oxfam bats for reduced inequality
In a separate news statement, Winnie Byanyima, Oxfam International executive director, said: “Simply put, inequality traps people in poverty. We see babies dying from preventable diseases in countries where health-care budgets are starved of funding, while billions of dollars owed by the richest are lost to tax dodging. We’ve heard from women living on poverty wages and facing hunger, seeing none of the wealth they create. None of this is inevitable. Governments often act like they’re committed to fighting poverty and tackling inequality—this index shows us if their words match their promises.”
“What’s most striking is how clearly the index shows us that combating inequality isn’t about being the wealthiest country or one of the biggest economies. It’s about having the political will to pass and put into practice the policies that will narrow the gap between the ultra-rich and the poor. This index clearly lets us see who’s doing that and who’s not,” Matthew Martin, Development Finance International director, said for his part.
‘Notable performers’
According to Oxfam, Nigeria, Singapore and Argentina are among a group of governments that are fueling inequality.
Asia is lagging behind the rest of the world, with a majority of the countries in the bottom third of the index and none in the top 10.
Moreover, across Asia, most governments have failed to improve health and social protection spending, labor policies, workers’ rights and minimum wages, and women’s rights.
Oxfam said the index ranks 157 countries on their policies on social spending, tax and labor rights—three areas the organization says are critical to reducing inequality.
“It found a clear divergence between governments, such as the Republic of Korea, Indonesia and Georgia, that are taking positive steps to reduce the gap between rich and poor, and governments that are making it worse.
However, all countries, even those at the top, could be doing much more,” Oxfam said.
Singapore’s ranking in the CRI, Oxfam explained, is due in large part to a new indicator on the extent to which a country’s policies enable corporate tax dodging. It also has no minimum wage for its workers, except for cleaners and security guards.
On the other hand, Nigeria ranks last for the second year in a row due to low social spending, worsening labor-rights violations and poor tax collection. The ranking reflects the well-being of the country’s population: 1 in 10 children die before their fifth birthday.
By comparison, the Republic of Korea has taken significant steps to tackle inequality—boosting the minimum wage by 16.4 percent, increasing taxes on wealthy people and corporations, and expanding social spending.
Other countries making progress include Georgia, which increased spending on education by almost 6 percent in 2017—more than any other country—and Indonesia, which increased its minimum wage by nearly 9 percent last year.
According to Oxfam, inequality is a policy choice. It says the CRI Index 2018 demonstrates clearly that governments have a choice. Either they can take steps to reduce the gap between rich and poor, or they can choose to act in ways that will increase inequality.
Right choice
“The index demonstrates that many governments are making the right choice, and are choosing to do things that will close the gap. This shames the many other governments that are failing to do enough,” the CRI 2018 report said.
Amid the widening inequality or rich-poor gap, Oxfam believes governments, such as in the Philippines, can do more to address inequality through increased social spending for health and education. They can do more to put in place a more progressive taxation, and increase labor wage, promote labor rights and gender equality in the workplace.
“The inequality crisis is undermining progress, and it has to be tackled. We call on all governments to take action, urgently,” Oxfam’s Kala Pulido-Constantino, regional campaigns, policy and influencing manager for Asia, said in an earlier interview by the BusinessMirror.
Pulido-Constantino also said the governments, particularly in the Philippines, should be able to find ways to improve its ranking, through policy reforms that will help narrow the rich-poor gap.
Among Oxfam’s recommendations to governments, in terms of policy action, is to improve their efforts on progressive spending, taxation and workers’ pay and protection as part of National Inequality Reduction Plans under Sustainable Development Goals 10.
It also underscores the need for governments, international institutions, and other stakeholders to work together to radically and rapidly improve data on inequality and related policies and to accurately and regularly monitor progress in reducing inequality.
Last, Oxfam recommends that governments and international institutions should analyze the distributional impact of any proposed policies, and base their choice of policy direction on the impact of those policies on reducing inequality.