Household income up, with biggest rise for poorer families

Household income up, with biggest rise for poorer families

Increase across all income groups amid tight labour market, higher employers' CPF rate

Families in all income groups in Singapore earned more last year because of the tight labour market and higher contribution rate of employers to a worker's Central Provident Fund (CPF) account, government figures show.

For employed households, the median monthly income was $8,666, a 4.9 per cent increase over 2014, after adjusting for inflation.

That means half of all families with at least one working person earned more than $8,666.

The increase in real income is even greater when the family's income is divided by the number of people in the household. It works out to 5.4 per cent per household member.

But what is most heartening in the figures released yesterday is that the rise is most significant in the bottom 30 per cent.

The biggest jump - 10.7 per cent - is for the 10 per cent of households right at the bottom. For the next 10 per cent of families, it was 8.3 per cent and above them, 7.2 per cent.

The increases are due to ongoing government schemes that boost the earnings of low-wage workers, like the Workfare Income Supplement programme.

The well-off who are in the top 10 per cent also saw a substantial income rise - 7.2 per cent.

For the rest, the increase in average incomes ranges from 5.7 per cent to 6.7 per cent.

These figures on the family income of citizens and permanent residents are from the annual Key Household Income Trends report put out by the Department of Statistics. The income growth across the board resulted in a relatively stable Gini coefficient of 0.463 last year.

The Gini coefficient is a measure of income inequality. It ranges from zero to one, with higher values indicating greater inequality.

Since 2013, it has been hovering around 0.463, reflecting the Government's efforts to close the income gap through its policies, said Bank of America Merrill Lynch economist Chua Hak Bin.

So, when government transfers, such as income tax rebates and MediShield Life subsidies, are factored in, the Gini coefficient last year went down to 0.410.

Government figures show that families living in one- or two-room HDB flats received an average of $9,318 in such transfers for each family member.

This was more than double that received by residents in bigger homes and other types of property.

Mr Chua said if the economy weakens this year, as predicted, it will limit the Government's ability to expand income redistribution.

"Fiscal revenue for the Government will be much weaker than in the past, and this will restrict its scope to continue increasing the transfers," he said.

The official statistics also show that from 2010 to last year, families in the bottom half experienced faster real income growth than the top 50 per cent.

Mr S. Iswaran, Minister for Trade and Industry (Industry), told reporters at a business event: "These are strong growth numbers." But he believes the labour market will not remain tight indefinitely because the uncertain global economy will lessen the demand for workers.

He also said that in the past five years, real wage growth outpaced productivity growth.

If this continues, he warned that it would erode Singapore's competitive edge. "The only sustainable way to keep real wages growing is for it to be underpinned by productivity growth," he said.


This article was first published on February 27, 2016.
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