What Does Wealth Inequality Look Like?
As we have come to expect, the publication of the latest UBS (2024) Global Wealth Report 2024 was greeted with much self-congratulation in Singapore We all marvelled at how our average wealth has grown over the years, and how many millionaires we have. Indeed, if we take the estimated 333,204 millionaires out of a resident population of 4.15 million, less the 20% who are minors, there will be a millionaire for every ten adult residents in Singapore! Just take a look around you! One of the people around you right now is a millionaire! Or just take a look at our average wealth per adult, coming in at US$397,708, which ranks 8th in the world. There seems to be a lot of wealth in Singapore, and we are rightly proud of what we have achieved.
But there is a darker message in the report, which is easy to overlook. While we have become richer as a whole, and on average, we have also become more unequal. Even as average wealth has soared, the median wealth per adult has remained stagnant at US$104,959 over the past 15 years, from 2008 to 2023. Does it mean that we are becoming a nation of two halves, between the haves and the have-nots? What does wealth inequality look like in Singapore?
Two Singapores
What’s Great in the UBS Wealth Report 2024
Let’s start by looking at what is great about Singapore in the UBS Wealth Report 2024. For a start, we now have quite a few millionaires amongst us, and this number is expected to grow really rapidly over the next few years as well, rising from the 333,204 millionaires we have in 2023, to some 375,725 by 2028. Although the absolute numbers are small relative to the millionaire factories of the USA and China, as a percentage of the adult population, the Singapore millionaire population ranks amongst the world’s highest.
Number of millionaires now and in 2028
Next, let’s take a look at what the UBS Wealth Report 2024 says about our wealth levels per person. the average wealth per adult of US$397,708 ranks us 8th in the world! in a nutshell, there are few countries in the world as rich as Singapore in terms of wealth. We are indeed a great place for building and acquiring wealth, as well as protecting and preserving it.
Average and Median Wealth per Adult
What’s Not So Great in the UBS Wealth Report 2024
But the UBS Wealth Report 2024 is not all roses and sunshine. Even as it puts out fantastic wealth statistics for Singapore, there are also figures which raise some concern. For a start, when we look at median wealth instead of average wealth per adult, we see that Singapore drops from 8th place for average wealth, to 18th place for median wealth. And median wealth, at US$104,959, is only a little more than a quarter of the average wealth per adult. This indicates that the wealth in Singapore is far from evenly distributed. Many of the other countries do not have such a great disparity between the average and median wealth, indicating that their wealth is more evenly distributed, with less inequality.
But things look worse when we look at how the median wealth has grown over the past 15 years from 2008 to 2023. For Singapore, there has barely been any growth at all for median wealth over the past 15 years.
Growth in Average and Median Wealth 2008-2023
In contrast, average wealth per adult has grown by more than 100% over the same 15 years from 2008 to 2023. Hence, back in 2008, average wealth in Singapore was probably only a bit more than twice median wealth, indicating that wealth was far more evenly or equally distributed then. What’s more, Singapore had 3.643 million residents back in 2008, compared to 4.15 million in 2023. This means that the median person in 2008 was ranked 1,821,500, while the median person was ranked 2.075,000 in 2023. So not only has the median wealth not increased over 15 years, for the actual people in Singapore, more of them seem to have regressed in terms of their wealth!
Also, remember that these wealth figures are nominal amounts. Once we factor in inflation, which runs at around 2% a year, some 2 million people have actually become around 25% poorer in terms of real wealth over the past 15 years!
So, instead of everyone getting wealthier over the past 15 years, what seems to have happened is that the more than 100% increase in wealth has entirely accrued to the people at the top of the wealth pyramid, while everyone else has gotten poorer! Not so good after all! This means that wealth inequality has worsened over time, and this is borne out by the estimates in the UBS Wealth Report 2024.
Wealth Inequality
Wealth inequality in Singapore, as measured by the Gini index, has gone up from 57 in 2008 to 70 in 2023. This brings us up to the forefront of the most unequal countries in the world, almost on par with the USA, which has been highlighted by Piketty (2019) as one of the most unequal developed countries in the world!
What Does Wealth Inequality Really Mean and Look Like?
We usually measure wealth inequality, just like income inequality, using the Gini coeficient. A high Gini score means that there is more inequality, while a lower one means less inequality. At the extreme, a Gini score of 100 means that all wealth (or income) is held by one person, with everyone else having nothing. At the other end, a Gini score of 0 means that all wealth is equally and evenly distributed amongst everybody.
But beyond these extremal points, there is very little which the Gini score can tell us. Does a Gini score of 50 mean that everything is okay? Or is inequality still high at a score of 50 already? Let’s try to shed some light on this to better understand what sort of inequality we are looking at in Singapore.
For a start, let’s think about what sort of inequality a Gini score can represent. From Piketty (2019), we can see that many of the countries that slashed income taxes after the 1980s have gone back to a relatively high inequality of wealth. Instead of using the Gini coefficient, Piketty (2019) and others prefer to measure inequality by looking at the share of total wealth held by the bottom 50% of the people, the middle 40% and the top 10%. For some of the Western developed countries, their wealth inequality looks something like this:
Typical Structure of Wealth Inequality in Developed Countries
| Population Tier | % of Total Wealth Owned |
|---|---|
| Bottom 50% | 10% |
| Middle 40% | 40% |
| Top 10% | 50% |
When expressed in this way, it is clear that this is a fairly inequitable distribution of wealth in the country. Especially with the top 10% holding half of all the wealth. But what does this correspond to in terms of the Gini score? Putting this distribution of wealth into a Lorenz curve, with proportion of total wealth on the vertical axis (y-axis) and the population on the horizontal axis (x-axis), we get the following:
Gini Score of the Typical Structure of Wealth Inequality in Developed Countries (Gini = 55%)
It comes as a bit of a surprise that the Gini score of this inequitable distribution of wealth is 55%. Which is where Singapore was (according to UBS) back in 2008. So much for all the asset enhancement schemes, public housing to give every citizen/resident a share of Singapore’s prosperity, so on and so forth. No, even with a broad public housing program and asset enhancement, half of the wealth of the country is still in the hands of a small sliver of the elite in the country, the top 10%.
Of course, the wealth distribution above is rather crude. It is unrealistic to assume that everyone in the bottom 50% of the population has an equal share of the 10% of the country’s wealth they collectively hold. Let’s suppose a large proportion of them actually own no wealth at all (or maybe even negative wealth, being in debt). We can do the same for all three population tiers as well, to get a more refined distribution of wealth like this:
Refined Structure of Wealth Inequality in Developed Countries
| Population Tier | Sub- Tier | % of Total Wealth Owned |
|---|---|---|
| Bottom 50% | Bottom 25% | 0% |
| Next 25% | 10% | |
| Middle 40% | First 20% of the Middle | 15% |
| Next 20% of the Middle | 25% | |
| Top 10% | First 5% of the rich | 20% |
| Top 5% of the rich | 30% |
What dos this more refined distribution of wealth look like in terms of the Gini score?
Gini Score of the Refined Structure of Wealth Inequality in Developed Countries (Gini = 60%)
In this more refined structure of wealth inequality, where there are more wealth disparities even within each of the population tiers, the Gini score only rises a little, to 60%. This should tell us that the Gini itself is relatively insensitive to fairly large variations in wealth inequality. Which in turn means that a Gini score of 70 for wealth inequality represents quite a dire picture of inequality!
What if wealth inequality were even higher? Suppose the bottom 50% of the population only held 5% of all wealth in the country. And the top 10% held 60% of all wealth? This would be something out of F. Scott Fitzgerald’s The Great Gatsby, a tale of the Gilded Age in the USA. But let’s take a look at it:
Example of High Wealth Inequality
| Population Tier | Sub- Tier | % of Total Wealth Owned |
|---|---|---|
| Bottom 50% | Bottom 25% | 0% |
| Next 25% | 5% | |
| Middle 40% | First 20% of the Middle | 10% |
| Next 20% of the Middle | 25% | |
| Top 10% | First 5% of the rich | 20% |
| Top 5% of the rich | 40% |
Note here that not only the bottom 50% own less wealth than before, even the middle classes lose out, owning only 35% of the total wealth. The top 10% here are the big winners, owning an incredible 60% of all the wealth, with the majority concentrated in the top 5%. Just imagine what the 1% of people look like! And in terms of the Gini score, this is what it looks like:
Gini Score of High Wealth Inequality (Gini = 70%)
At first glance, this chart of the Lorenz curve associated with high wealth inequality does not look that different from the previous case, with only the top 10% getting wealthier. But the Gini score in this case is now 70. Or at the level which UBS estimates is the current state of wealth inequality in Singapore!
So when UBS Wealth Report 2024 estimates that the wealth inequality in Singapore has gone from a Gini score of 57 in 2008 to a Gini score of 70 in 2023, what they may actually mean is that the wealth of the bottom 90% of the population has dropped from 50% to 40%. Or, the wealth of the top 10% of the population has gone from 50% to 60%! Of course, this is not the only distribution of wealth which gives a Gini of 70. But other scenarios where the wealth is more evenly distributed amongst the bottom 50% and middle 40% of the population basically mean they have even less wealth (~30% or less) and the rich top 10% have even more (~70% or even more)!
Again, this may not matter so much if the rising tide lifts all boats. If everybody is getting wealthier, but the rich are getting richer at a faster rate, then inequality matters less. But UBS estimates that the median wealth has not gone up at all in 15 years, even as the average wealth has shot up. This implies that all the wealth creation (and more) in Singapore over 15 years has gone to the top 10% of the people only, and the rest of the 90% have actually seen a fall in their real (inflation-adjusted) wealth.
Increasing Wealth Disparity in Singapore from 2008 onwards
What Can We Make Of This?
So, what can we make of the rather dismal implications of the UBS Wealth Report 2024? For a start, we do not need to take any of the figures in the report too seriously. While there may actually be more than 333,000 millionaires in Singapore, you can bet your last dollar that UBS did not count each of them individually, nor assess their wealth. So all of the numbers are at best estimates or guesstimates, and at worst totally wrong. The methodology used is also questionable, especially the inclusion of owner-occupied housing wealth in the mix. A small flat in Singapore may be more expensive than anywhere else in the region, but the value of the housing services it provides is going to be less than a cheaper but larger home anywhere as well.
But these quibbles do not really affect the findings on wealth inequality. If anything, it may end up being that wealth inequality is even worse than the Gini score of 70, as the wealth of the 90% in Singapore may be overestimated with the inclusion of housing wealth. If it is indeed true that wealth inequality in Singapore is as bad as what the report states, then we should really question where all the growth and the wealth in Singapore over these past 15 years is going to.
References
Piketty, T (2019) Capital and Ideology
UBS (2024) Global Wealth Report 2024
