Monday, 15 January 2007

Equality in Poverty

"No. 1 in Asia"

- Malaysia's ranking in income inequality, based on 2003 gini index
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"Equality? How about Equality in Poverty?"

- conversation with Andrew Sheng
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Part II - Equity: The Metrics

I lied. You can't really measure equity. Equity is not a concept that can be easily measured, and based on my previous entry, it is not hard to see why. Given two scenarios, one could only compare roughly which one is more equitable. For example, consider:

1. Black slaves before the American Civil War;
2. African-americans now

Normally, it is not this easy.

Equality however, is a concept that is easier to measure.

Gini in a Bottle

The most common way of measuring equality is by measuring the equality of income across some arbitrary characteristics (eg: gender, race). This is based on the distribution of income; on how equally or unequally distributed the wealth across a population.

And the most common measure for this is the Gini Coefficient (or Index, which is Gini coefficient times 100). Essentially, 0 indicates absolute equality in income (everyone earns the same), and 100 is absolute inequality (one person earns all the income).

To grasp how the Gini index ranges in reality; in 2003, the lowest figure is in Hungary at around 25, while Namibia is the worst, at around 71. Typically, developed countries have lower Gini's, at around 30 to 40. This is especially true for welfare oriented Europe, but not so for the US. For emerging countries, the index generally hovers at around 40. African countries have the worst income inequality, at around 60.

Before moving on further, however, let's consider income inequality for Malaysia, based on ethnicity. I will let the figures do most of the explaining.

Tyranny of Numbers I: Inter-Ethnic

The table below shows how many times more a household of a different ethnic earns compared to an average Bumiputera. For example, in 2004, an average Indian household earned 27% more than an average Bumiputera household.

Clearly, there was significant improvement in equality of income across races since Merdeka.

Tyranny of Numbers II: Let's be Colour-Blind

How about income inequality within race groups?

There was significant deterioration within racial groups since Merdeka - basically, the rich are getting richer, and the poor poorer. This is especially true for Bumiputeras, which showed the fastest growing income inequality.

Tyranny of Numbers III: The Bigger Picture; at what Cost?

Now, let's look at how Malaysia compares, relative to the rest of the world.

Other measures of inequality show similar result for Malaysia. If you do not believe me, try googling.

Tyranny of Numbers IV: The Beggar Thy Neighbour?

Now, let's look at how the different races in Malaysia compare with their counterparts in Singapore in terms of household income.

We used to be the same nation, now they earn 4.4 times more than us, and the gap is widening.

Of course, money is never everything.

Points to Ponder

I will end this exhaustive analysis (in the sense that by the time you finish reading this, you will be exhausted) with a question:

Which one do you prefer?
a) colour-blind; or
b) just blind.

1 comment:

__earth said...

Equality is overrated in term of material wealth. I find people (unsurprisingly, with lefties slant) are overly concerned with the problem of inequality.

Little do those overly concerned people realize that inequality itself is the result of the incentive to work and scarcity. There will always be inequality as along as there is some sort of incentive as well as scarcity.

From the top of my mind, full equality could only be achieved by eliminating or reducing the incentive work. Or, eliminate scarcity but that would be too Star Trek like, don't you agree?