Thursday 20 February 2014

Income inequality here lowest in decade: Key Household Income Trends 2013

Household incomes of all groups rise except for top 10%, figures show
By Janice Heng, The Straits Times, 19 Feb 2014

MOST households here earned more last year, with incomes rising amid a tight labour market and government help for low wage workers.

The exception was the richest households, which saw their incomes fall. This resulted in the income gap narrowing, with the Gini coefficient - a widely used measure of income equality - showing the lowest inequality since 2004.

With the effect from various government taxes, handouts and subsidies factored in, it was the lowest on record.

This was according to a Department of Statistics report yesterday, which covered households headed by Singapore citizens or permanent residents, and with at least one working person.

Median monthly household income from work rose to $7,872, meaning that half of households earned at least that much.

This was up 4 per cent from 2012, or 1.6 per cent after accounting for inflation.

Taking household size into account, the gains were greater.

Median income per household member went up 5.6 per cent, or 3.2 per cent after inflation.

Income gains were across the board - except at the very top.

In the top one-tenth, average income per household member fell by 5.2 per cent in real terms.

Economists said high-income earners tend to have larger variable pay components, meaning bigger annual fluctuations.

Bonuses last year would have been smaller owing to 2012's weak economic performance, said Barclay's economist Joey Chew.

Apart from the top tenth, all other groups saw household incomes rise both before and after accounting for inflation.

Things improved particularly for the bottom one-tenth.

In 2012, their income per household member fell 1.2 per cent in real terms. Last year, it rose by 2.4 per cent instead.

Government policy and a tight labour market could have helped achieve this, said economists.

"The bottom decile has figured quite prominently in income policies in recent years," said UniSIM economist Randolph Tan.

These include the Wage Credit Scheme to subsidise pay rises for workers earning less than $4,000.

Set to last till next year, it could continue helping incomes at the bottom catch up, said Bank of America Merrill Lynch economist Chua Hak Bin.

Singapore's Gini coefficient was 0.463 last year, down from 0.478 in 2012. This measure ranges from zero to one, with higher values meaning more inequality.

The Gini coefficient after government transfers and taxes was 0.412 - the lowest since it was first calculated in 2000.

This partly reflects greater government transfers last year.

On average, households got $3,444 in transfers such as GST Vouchers and Medisave top-ups per household member.

But those in the smallest flats got the most. Households in one- and two-room Housing Board flats received more in transfers than they earned from work.

Their annual income from work per household member was $8,264, compared to the $8,631 in transfers per household member.

This year's fall in inequality came after three years of rises. UOB economist Francis Tan noted that it was due to the "anomaly" of top incomes falling.

But he and other economists think that incomes at the bottom will keep improving as the Government continues to focus on addressing income inequality, a hot topic in recent years.

Political observer Siew Kum Hong welcomed the fall in the Gini coefficient, but added: "What's also important is to see if the trend continues."

He also noted that the figures do not capture non-work income, such as gains from investments.

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