The Asian Development Bank is urging the Philippines and other countries in Asia to address the widening inequality between rich and poor, in terms of income and access to education, health and other services.
The ADB noted that despite the rapid growth in the economies of some of these Asian countries, the gap between rich and poor had continued to widen. This, it said, might cause social unrest and rise in criminality.
“High levels of income inequality can increase crime, which deters the (flow of) investments needed to create jobs and exports. It can also increase political unrest, which has a similar impact on investments and can threaten the entire economic system if it results in political upheaval,” the ADB said in the latest issue of “Development Asia,” its biannual publication on human and economic developments in the region.
The ADB said the Gini coefficient in Asia, which has become a driver of global economic growth due to rapid expansion of member-economies like the Philippines, increased from 0.39 in the early 1990s to an estimated 0.46 at present.
Gini coefficient or index is the most common measure of income inequality that ranges from 0 to 1, with zero indicating perfect equality and 1 representing perfect inequality. A rising Gini coefficient means that an increasing proportion of an economy’s total income is being shared by fewer people.
In the case of the Philippines, the latest Gini coefficient reported by the National Statistical Coordination Board (NSCB) stood at 0.448 as of 2009. This was an improvement from 0.458 recorded in 2006, but was considered by economists to be relatively high.
According to the ADB, inequality happens because the growing economy presents better income opportunities that are enjoyed mostly by the rich and the middle class. It said there were economies where poor people were being lifted out of poverty, but the rate of the increase in their incomes was much slower than the growth in the incomes of the rich.
One of the initial steps to narrow the gap between rich and poor is to make tax collection more efficient. If appropriate taxes are collected from income-earning individuals, the ADB said governments would have the means to augment spending for education.
It said governments had to make education accessible to a larger proportion of the poor so that they would have better chances of climbing the social and economic ladder.
The ADB, likewise, suggested higher investments in the agriculture and manufacturing sectors, which were believed to offer job opportunities to people in the low-income segment.
“Asia needs better taxation to find the revenue to fund inclusive growth. Rich people should pay more,” Juzhong Zhuang, ADB’s deputy chief economist, said in the publication.