Strong growth feeds into household incomes

Published 15 February 2011
The Business Times
By Anna Teo

2010 level now back above pre-downturn mark; all income groups enjoy gains

After a dip in 2009, household income from work recovered last year to above the pre-downturn level. And with the rebound, the income gap between Singapore’s richest and poorest households widened slightly last year, after accounting for government perks.

Average monthly household income from work among employed householdsWith strong economic growth, all income groups enjoyed higher household income from work in 2010, in both nominal and real terms.

Notably, those in the fourth and fifth deciles saw the biggest jump in earnings of more than 7 per cent, after adjusting for inflation. Average monthly household income in those two income groups – broadly around the middle of Singapore’s income spectrum – rose to about $4,900 and $5,900, respectively, in 2010.

Across the board, the lower five income groups had bigger income increases (of between 4.9 and 7.5 per cent) last year than the top five groups. Among the richer half, the top-tier income bracket, with average earnings of some $23,700 a month, saw the highest rise of 4.1 per cent.

These findings from a Department of Statistics paper on key household income trends in 2010 are based on a survey of some 200,000 households last year. The income tracked refers only to earnings from employment and business, and excludes income from non-work sources such as dividends, interest and rentals.

Overall, the median monthly income from work among resident households (those headed by citizens or permanent residents) rose 3.1 per cent to $5,000 in 2010. In real terms, the increase was just 0.3 per cent.

Employed resident households (those with at least one working person) saw higher increases – their median monthly income rose 5.7 per cent (2.8 per cent in real terms) to $5,700 last year.

The median figure captures the household income squarely in the middle of the income distribution, with half of the households earning more, and half earning less.

Average monthly household income in Singapore, on the other hand, is much higher than the median, at $7,214 among resident households – indicating that the income distribution is skewed towards the higher end.

Indeed, while lower-income households (and those living in smaller HDB flats) saw bigger income rises in 2010, the ratio of average income of the top quintile to the bottom quintile rose to 12.9 in 2010, from 12.7 in 2009.

But the ratio is still below the high of 13.2 in 2007.

Another measure of income disparity, the Gini coefficient, increased slightly in 2010 to 0.48, from 0.478 in 2009.

After including employers’ Central Provident Fund contributions and various government handouts and benefits, the Gini measure was 0.452 in 2010, still up from 0.448 in the previous year.

The government perks included in the adjusted Gini coefficient range from the various rebates on utilities, income tax and property tax, healthcare subsidies, Edusave grants, Workfare disbursements, to the Baby Bonus and economic growth bonus shares over the years.

On average, each household member received government perks to the value of $1,110 in 2010, with HDB dwellers in one and two-room flats getting more than twice as much – $2,647 per person. For those living in private property, the handouts amounted to $525 per person last year.

Households ‘with no working persons’, as well as ‘retiree households’ comprising only non-working persons aged 60 years and above, received even more in the benefits.

The findings of higher incomes and a marginal rise in income inequality in 2010 come as no surprise to economists. ‘Traditionally, that’s the Singapore paradigm,’ says Citigroup economist Kit Wei Zheng, referring to the meritocracy and inevitable income disparity here. Growing income gaps is also an issue in many economies elsewhere. ‘The key thing is that the rising tide must lift all boats,’ says Mr Kit.

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