The wealth gap is widening. The answer isn't more handouts - it's a stake

Wage growth can't keep pace with capital returns in the age of AI. That’s why everyone must be given exposure to financial assets that compound over time.

- Vikram Khanna

Here’s a statistic on wealth inequality in Singapore that might make you sit up: The average wealth held by the top 20 per cent of households is about $5.3 million per household, more than 18 times that of the bottom 20 per cent, which is $293,000.

The average wealth of the top 20 per cent also dwarfs the average wealth held by all the percentiles of the bottom 80 per cent added up, which totals around $3.5 million. This does not mean the top fifth owns more than the other four-fifths combined, since the latter group is far larger. But it signals a meaningful and troubling disparity in wealth per household.

The source is an Occasional Paper on Income Growth, Inequality, and Social Mobility Trends issued by the Ministry of Finance (MOF) in early February.

The MOF candidly acknowledges that the wealth of the richest group may be underestimated because people tend not to disclose sensitive financial information or have difficulty recalling details - which means inequality may actually be higher than the estimates suggest.

Singapore's overall Gini coefficient for wealth stands at 0.55, meaningfully higher than the income Gini coefficient of 0.38 after taxes and transfers. (The Gini coefficient runs from 0 to 1; the higher the figure, the greater the inequality.) The shift towards higher wealth taxes seen in recent budgets is, in that light, entirely logical.

CAPITAL IS PULLING AWAY FROM LABOUR

But there is a deeper structural force at work, one that wealth taxes alone cannot address. The mainstreaming of artificial intelligence since 2022 has accelerated a trend that was already under way: the returns on capital — financial assets in particular — are running far ahead of wage growth or even economic expansion.