The latest Household Expenditure Survey found that average incomes have risen, with those in the bottom fifth having the biggest gains. But just who constitute the less well off is a complex issue. Insight looks at this, and whether the Government can better target its welfare buck.
By Charissa Yong And Janice Heng, The Straits Times, 18 Oct 2014
By Charissa Yong And Janice Heng, The Straits Times, 18 Oct 2014
Households in the bottom fifth have seen the fastest income growth among all groups and an improving quality of life, thanks in part to more government help.
Yet, this news, coming from the latest five-yearly Household Expenditure Survey, also raises thorny questions.
Government handouts seem to have improved lives at the bottom, but is there a danger of an over-reliance on such forms of help? And just who should we be focusing on, when we talk about helping the poor?
Critics initially sounded alarm bells over how the bottom fifth seemed to be spending much more than they were earning, but a check by Insight showed that this problem was not as bad as it seemed.
Data from retirees, who do not work, was included in the aggregated income and expenditure figures. When retiree figures were excluded, the gap between income and spending narrowed.
The data shows that the bottom fifth of households, ranked by income per household member, is a highly varied group.
Many are indeed low-income families who need more help.
But a quarter of them are retiree households, some of whom may be doing well, with large properties and ample savings to live off, even if their income is technically zero.
As the Government continues to strengthen safety nets, Insight looks at whether a finer-grained approach might better help the needy, while also ensuring more bang for the welfare buck.
A decade of more transfers
HOUSEHOLDS in the bottom fifth are earning more from work. Over the past five years, their employment income grew by 4.3 per cent each year, on average.
But, at the same time, a growing proportion of their household income is coming from non-work sources like regular government transfers, money from relatives and friends, rental or investment.
While this is true of all income groups, the bottom fifth has seen the sharpest rise. Their non-work income is now at 26.5 per cent of total household income, up from 18.9 per cent five years ago and 14.7 per cent a decade ago.
Regular government transfers, in particular, formed 9.3 per cent of their monthly household income last year, compared with between 0.1 per cent and 3.5 per cent for all other income quintiles.
These recurrent transfers include the Workfare Income Supplement (WIS), which tops up the pay of low-wage workers, goods and services tax (GST) vouchers, social assistance and bursaries.
The Department of Statistics, which helmed the survey, told Insight that a breakdown of the different sorts of government transfers was unavailable.
But experts highlight the WIS, which was made permanent in 2007 and has been expanded since, as especially significant.
For National University of Singapore associate professor of social work Irene Ng, it was "a game-changer".
Previously, help was given mostly to those who could not work and had no other sources of support, such as the elderly and disabled, she says. "With Workfare, there is a recognition of the struggles of those who are working, yet are not earning enough."
Unlike one-off transfers or subsidies on specific items, such as housing, the WIS provides regular, sustained help, notes DBS Bank economist Irvin Seah. "The WIS is there all the time. It helps to fulfil basic needs."
Whether thanks to higher wages or government help, spending patterns at the bottom suggest day-to-day life has improved.
Of the total monthly spending by a household in the bottom fifth, 12.8 per cent goes towards food, in the form of groceries.
This is down from 14.1 per cent five years ago - a shift which suggests that this group is, in a sense, better off, says Nanyang Technological University (NTU) head of economics Euston Quah. "As these households gain more income, the proportion spent on basic goods should decrease, as they now move to better and higher quality goods," says Professor Quah.
Indeed, households in the bottom fifth are spending more on eating out, instead.
They now spend an average of $44.20 a month at restaurants, cafes and pubs, up from $24 before.
More of these households also own "luxury" consumer goods such as digital cameras and cable TV, compared with five years ago, observes NTU economist Walter Theseira.
Funding a growing norm
BUT if the improvement in these households' lives is driven partly by government help, a question arises: How sustainable is this method of helping the poor?
For instance, should we worry if a greater reliance on government help becomes a norm for those in the bottom quintile, who might otherwise be unable to get by?
To that, Barclays economist Leong Wai Ho and DBS' Mr Seah say a higher share of non-work income among poorer households is expected. "This is inevitable, since we have accepted the reality that stepping up social assistance programmes will benefit this group," says Mr Leong.
This is also a trend among more developed economies such as those in Europe, which spend more government dollars taking care of their needy, says Mr Seah.
In other words, government help is accepted as necessary, and is provided precisely to uplift those who would be struggling otherwise.
Greater reliance is, therefore, not a problem, though over-reliance might be. But that can be avoided because schemes such as Workfare come with strings attached, such as a minimum amount of time spent in employment, says Mr Seah.
Pairing government help with skills training will also help to "avoid the pitfall of a handout mentality", says Mr Leong.
The Government itself has been keen to stress that it is doing more to strengthen safety nets, by raising the income ceiling for the Workfare scheme, so more qualify for it, for instance.
But Singapore Management University law don and political watcher Eugene Tan questions the viability of this new norm.
"There will be competing calls for the Government to do even more, which will have to be balanced against Singapore going down the welfare dependency route which the People's Action Party government has always cautioned against," he says.
Both the Government and political watchers have suggested the possibility of raising income taxes in the distant future to fund this increase in social spending.
For Singapore to sustain higher social spending, it must keep generating enough revenue from taxes and investments, says Mr Seah.
But before taking that step, a middle path may be to take a closer look at current welfare policies and try for a more refined, less blunt approach.
More bang for welfare buck
ONE aspect is determining what sort of government help is most useful.
Experts suggest two types of transfers to focus on: those tied to work, and those for education.
Both of these do not simply alleviate the immediate problems faced by the low-income, but also empower households to improve their situation.
"I think the right policies are things like the WIS scheme which not only enhance incomes, but also provide some incentive for households to continue to work and gain work experience," says Dr Theseira.
Similarly, government help with education is important if families are to break out of the poverty cycle, says Prof Quah.
"Poverty will be significantly reduced if the younger children are provided the best possible assistance in education pursuits."
Who needs more help?
BUT being more precise in helping the needy is not just about choosing the right forms of government transfers. It is also a question of who exactly should be helped.
Certainly, some slip through the cracks. This week, Straits Times readers were moved by the plight of Mr Tan Soy Yong, a 76-year-old who soiled himself while grocery shopping and who was helped by a good Samaritan.
Mr Tan and his wife, Madam Lee Bee Yian, also 76 and who uses a wheelchair, live in a flat in Potong Pasir.
They receive help from the area's Citizens Consultative Committee as well as welfare organisations, but they live in a flat which could do with a clean-up to clear accumulated junk and the stench. Clearly, more can be done to help them.
At the public policy level, the variation between how those within the lower-income quintiles are doing suggests the need for a fine-grained approach, say experts.
"Policymakers should use more precise methods of identifying those in need," says SIM University (UniSIM) economist Randolph Tan. For instance, more attention could be paid to specific family circumstances such as housing, instead of more common measures such as income alone.
Prof Quah argues that income reference should not be the only indicator used to assess whether a family needs help. "Their wealth and assets must also be accounted for."
Specific groups could be identified. Associate Professor Randolph Tan suggests those in the lowest quintile with young children or elderly dependants who might have trouble holding down a job while performing their challenging caregiving roles.
"Their needs should be met by ensuring their dependants are provided for - for example, childcare, children's school fees, textbooks - with enough assistance so the working members of the household can continue to function effectively in the workforce."
The Government can go even bigger on education top-ups like the Post-Secondary Education Award scheme, where the Government matches dollar for dollar the amount parents save for their child's education, he adds.
Prof Quah says this will also have the long-term effect of easing the needs of children in low-income families so that they can move out of the poverty trap and become self-sufficient.
Identifying specific groups to help is an approach that should extend to the next quintile, which is also diverse.
It can include, for example, both younger households who are just starting out in their careers and mature households who are in lower-paying occupations.
Households firmly in this latter category for a long period of time should be of greater concern, says Dr Theseira, as this indicates that their earnings have peaked and are unlikely to rise further.
And while those in the bottom fifth are clearly the most vulnerable, some households in the next quintile are at risk, too, and should be paid closer attention as well.
"This group does not have the access to much subsidies because they are largely regarded as outside the poor income group, and, yet, the middle-income earners cannot afford much of the increased cost of living over time," says Prof Quah.
Many may be stretching themselves thin to pay for their flat, raise their family and support their elderly relatives at the same time, for example.
"Things can quickly unravel if the breadwinner falls ill or is injured," says Prof Ng.
Experts call for more studies to assess how much help is needed for this group, and where.
After all, targeted help is more effective than thinly spread assistance, says UniSIM's Prof Tan.
For instance, 800,000 households in HDB flats will receive $45 million worth of GST Voucher U-Save rebates to offset their utility bills this month.
Those who live in one- and two-room flats will receive $65, while those in executive flats will get $45 in vouchers - but UniSIM's Prof Tan questions whether the latter group truly needs it. He argues: "If the coverage had been narrowed, the payouts could have made more of a difference where it counted."
As the Government works to strengthen safety nets without weakening its fiscal position, perhaps greater precision could help in that balancing act.
HELP IS GETTING THROUGH
It is a sign at least that the help is getting through and, hopefully, enough to make a difference. To avoid a handout mentality, this should be paired with skills training to empower them.
– Barclays economist LEONG WAI HO, on more government handouts lying behind the rise of proportion of income from non-work sources
DIFFERENT CIRCUMSTANCES
The bottom fifth are not all alike. Some have no income and also nothing to fall back on, others may be able to tide over rough periods because they have savings or equity from home ownership.
– NTU economist WALTER THESEIRA, on the varied nature of the lowest fifth of households by income
NOT A BAD THING
If it is due to subsidies and transfers, then this may not be a bad thing, as one of the important roles of all governments is to help those in society where required.
– NTU head of economics EUSTON QUAH, on the rise of proportion of income from non-work sources
It is a sign at least that the help is getting through and, hopefully, enough to make a difference. To avoid a handout mentality, this should be paired with skills training to empower them.
– Barclays economist LEONG WAI HO, on more government handouts lying behind the rise of proportion of income from non-work sources
DIFFERENT CIRCUMSTANCES
The bottom fifth are not all alike. Some have no income and also nothing to fall back on, others may be able to tide over rough periods because they have savings or equity from home ownership.
– NTU economist WALTER THESEIRA, on the varied nature of the lowest fifth of households by income
NOT A BAD THING
If it is due to subsidies and transfers, then this may not be a bad thing, as one of the important roles of all governments is to help those in society where required.
– NTU head of economics EUSTON QUAH, on the rise of proportion of income from non-work sources
TARGETED ASSISTANCE IS BETTER
Any assistance will be spread thin if the coverage is widened. A more in-depth look into the actual members of the lowest and second-lowest quintile will be needed.
– SIM University Associate Professor RANDOLPH TAN, on the case for more targeted help
Any assistance will be spread thin if the coverage is widened. A more in-depth look into the actual members of the lowest and second-lowest quintile will be needed.
– SIM University Associate Professor RANDOLPH TAN, on the case for more targeted help
CALIBRATING SOCIAL WELFARE
The ageing population and smaller families, the income and wealth divide and the declining political support for the PAP... mean that there is no alternative but for the Government to make a fundamental shift on social welfare.
– Political watcher and SMU law don EUGENE TAN, on the political reasons behind the strengthening of the social safety net
The ageing population and smaller families, the income and wealth divide and the declining political support for the PAP... mean that there is no alternative but for the Government to make a fundamental shift on social welfare.
– Political watcher and SMU law don EUGENE TAN, on the political reasons behind the strengthening of the social safety net
So just who is 'poor'?
By Janice Heng and Charissa Yong, The Straits Times, 18 Oct 2014
By Janice Heng and Charissa Yong, The Straits Times, 18 Oct 2014
MUCH political attention has been paid to households in the bottom 20 per cent, whether as an indicator of how well the poor are doing, part of the income inequality picture, or even a suggested peg for ministerial salaries.
Yet this bottom quintile is not necessarily a good representation of Singapore's neediest, even though it is treated as an important indicator.
The Government keeps a close eye on how these households fare. Separate figures are given for their income growth rate and the inflation they face, so their changing circumstances can be compared with the general trend.
Opposition parties also make reference to how well the bottom fifth does, and have even proposed their income as a peg for ministerial salaries.
In the 2006 General Election, Workers' Party leader Low Thia Khiang suggested that ministers be paid 100 times the median income of the bottom fifth, so as to spur these political leaders to raise wages at the bottom.
In 2011, the Singapore Democratic Party proposed paying 30 times this group's mean wage.
Though the group is often used as a proxy for Singapore's poorest, the reality is more complex.
Take a closer look at these 238,000 or so households, and they turn out to be more varied than might be expected.
For a start, about half live in either four-room or larger Housing Board flats, or private property.
Another three in 10 live in three-roomers. Just 18.8 per cent live in one- and two-room units.
"While many one- to two-room households have no real assets at all, three- and four-room households often have considerable equity value in their flats," notes Nanyang Technological University economist Walter Theseira.
"So, the bottom fifth are not all alike. Some have no income and also nothing to fall back on, others may be able to tide over rough periods because they have reasonable savings or equity from home ownership," he adds.
Why do so many low-income households live in pricey property? One possible reason is that many are retiree households.
Defined by the Department of Statistics as households comprising only non-working people aged 60 and older, they form almost a quarter of the bottom fifth.
There may also be others in retirement or semi-retirement which fall outside that definition.
Retiree households have no income from work, but may not necessarily be poorly off.
Some may have considerable savings to draw upon, notes UniSIM economist Randolph Tan.
They also have options to monetise their properties, such as moving to a smaller flat, renting out rooms, or selling part of their lease back to the Government.
The inclusion of retiree households, who have varied means, means that the bottom quintile does not necessarily capture the neediest in society.
With their low or absent incomes, retiree households also pull down the average.
The average monthly household income for the bottom fifth is $2,022, falling short of the average monthly spending of $2,231.
Exclude retirees, and the gap halves. Non-retiree households in the bottom quintile have an average monthly income of $2,422, and expenditure of $2,523.
Furthermore, households in one- and two-room flats - often considered the neediest - actually earn more than they spend. Their average monthly income was $1,906 and their spending, $1,287.
Considering the bottom fifth as a whole may thus yield a distorted picture of the actual needy.
Distortion can occur in the other direction, too. In 2012, Prime Minister Lee Hsien Loong noted that households in the bottom fifth have, on average, $200,000 of equity in their HDB flats. But this figure is less impressive if wealthy retirees are included.
Workfare boost comes in handy
By Charissa Yong, The Straits Times, 18 Oct 2014
By Charissa Yong, The Straits Times, 18 Oct 2014
He takes home $1,700 to $1,800 a month from his job at Jurong Port, and the Workfare Income Supplement scheme boosts this by about $1,000 a year.
The sole breadwinner and his wife, Fatimah Aziz, 57, are among Singapore's bottom-fifth of households by income - a group whose income grew the fastest of all those surveyed, over the last five years.
This increase was largely thanks to more help from the Government in transfers like the Workfare scheme, note experts - and which can be seen in Mr Abdul's case.
"I still don't have that much income, but the extra money makes it easier to pay for things," says Mr Abdul, who, in his mid-40s, used to earn up to $4,000 a month with overtime as a supervisor, but gradually drew less as he stepped back from that role. The couple, who have a married son aged 37 who lives elsewhere, spend $600 to $700 a month on their bills and food. Their three-room flat is fully paid for.
Mr Abdul has also received help from the Government through subsidies to learn new skills. After taking a signalman course last year, he now has the option of working as a port signalman for about $300 more a month.
"With my skills, I can find several kinds of work at the port. I like to work, and not to sit at home," says Mr Abdul, who plans to work as long as he can.
But the couple are also spending more now, compared with five years ago, because the prices of food such as fish and vegetables are rising, says Madam Fatimah.
They may not have enough to pay for a sudden hospital bill either, though Mr Abdul has not fallen ill enough to visit a doctor in years.
Experts say that areas like health care are where the Government may further help the bottom-fifth of households.
Retired but 'still can afford things'
By Charissa Yong, The Straits Times, 18 Oct 2014
By Charissa Yong, The Straits Times, 18 Oct 2014
They get about $600 a month from Mr Tan's Central Provident Fund annuity scheme and $2,000 in total from their two daughters, who both work and are married with a child each.
This puts the couple around the bottom fifth of households by income. The typical family in this group had an average income of $2,022 a month last year.
The Tans lead a simple life. Mr Tan, 67, and his wife, 64, spend about $800 a month on groceries, bills and the occasional meal out. They look after their two grandchildren, aged six and two, during the day on weekdays.
The couple live in a fully paid-up three-room Housing Board flat in Bugis, which they bought after selling their four-room flat in Jurong East to move closer to Madam Tan's mother.
They have a buffer for emergencies as well, given their savings - which Mr Tan describes as "enough". "We're fortunate. We have no problems and still can afford things. Not everyone is like us," says the retired technical officer.
Retiree households like theirs are increasingly common. They no longer work and draw little to no salaries, so are counted among low-income families.
One in four of the bottom fifth is a retiree household. Experts say this shows the importance of taking a closer look at low-income families in Singapore to see how to help them, as some retirees do not need as much help.
Mr Tan prefers saving for a rainy day over being a spendthrift, and has got into the habit of cutting down on unnecessary expenditure, saying: "When you retire, you know your income is not from an employer. If you have extra cash, don't spend it. Keep it."
Household incomes up, with bottom 20% seeing fastest rises
Tracking the poor without using a poverty line
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