What GINI has to say

Was it not for the government’s social support, the internationally accepted coefficient to measure social inequality would be the first red alert for Macau. 

MB Jan 2020 Special Report | IMF: from glory to recession

In the following pages, you will find several examples of social inequalities in Macau, but we are faced with empirical statements that will not be equally recognized by all. It’s enough to see how Rep. Chan Chak Mo dealt with the MOP 4,000 compensation for domestic workers issue last year. 

Thankfully, in 1912, Italian statistician and sociologist Corrado Gini published the basis for the so-called GINI coefficient, the most commonly used measurement of inequality. While a Gini coefficient of ‘zero’ expresses perfect equality (for example everyone has the same income), a Gini coefficient of 1 (or 100%) expresses maximal inequality, which is possible if even just one person amasses all the income for himself/herself and others have none. The World Bank says that a Gini index ranging between 0.25 and 0.40 indicates a low level of inequality – it’s the case of most European countries, Australia and Canada. 

Despite some limitations, the great advantage provided by this Gini ratio is that it has found a way to universally measure social inequalities, at least with regards to pay. 

Macau’s Gini coefficient rose by 0.01 percent from 0.35 percent in 2012/13 to 0.36 percent in 2017/18, indicating that Macau’s household income distribution has become a tad more unequal, according to the findings of the last survey released by the Statistics and Census Bureau (DSEC) in April this year. 

“Such increase does not imply a large deterioration in the distribution of income, but the increasing trend is an issue”, Professor Henry Lei, from University of Macau, told Macau Business. 

The situation in Macau is not considered as worrying, because the authorities acknowledge that government subsidies help reduce these inequalities: according to a DSEC statement, with the exclusion of government welfare benefits and subsidies, the Gini coefficient increased from 0.38 percent in 2012/13 to 0.40 percent in 2107/18. 

“Macau is likely to face a more uneven distribution of its income unless the government does its job and redistributes said income” – Henry Lei 

Henry Lei agrees: “For government subsidies, it is very important to reduce the Gini. It means that, taking into account the increases in government subsidies in the past 5 years, the resulted Gini is still showing an increase, and as a result Macau is likely to face a more uneven distribution of its income unless the government does its job and redistributes said income. It is probably a direct consequence of the economic downturn experienced in 2014-2016”, the Associated Head of Department of Finance and Business Economics, expert on the subject of income inequality explained. 

Government welfare benefits and subsidies pushed down the value of the Gini coefficient by 0.04 percent in 2017/2018, compared to the 0.03 percent in 2012/13. According to the statement, this implied that the government measures had a “prominent effect on improving the income distribution of households”. 

DSEC attributed the increase in the Gini coefficient to population ageing and smaller household size. These socio-demographic changes, according to the statement, led to a rising number of relatively low income households (e.g. elderly households, small-scale households, households with fewer employed people, etc.), “which affected the equality in household income distribution and thus drove up the value of the Gini coefficient”. 

The situation, however, is now better than before the power shift in Macau or even the first decade of MSAR, when the Gini coefficient went from 0.43 percent in 1998 to 0.48 percent in 2006; being higher than those of other neighboring regions, such as mainland China (0.447 percent), and “making Macau one of areas in the world where the gap between rich and poor is the largest”, according to well-known local sociologist Hao Zhidong, to whom “the wealth gap comes with other problems, such as the conflict among different kinds of workers and between the workers and the employers”. 

“Given the gaming sector’s domination in the economy and the protective measure of the government on imported labor policy (for the gaming sector), together with the subsidies from the government, I speculate that our Gini may not face strong upward pressure in the near future, especially when the performance of the gaming industry is expected to remain relatively stable”, concludes Professor Henry Lei.