Lowest rises in income for families at both ends

Income gap narrows, but experts call for more to be done to help the lowest earners

The gap between top and bottom earners was at its narrowest in a decade last year, but observers say more can still be done for the lowest-earning families as their income did not grow as quickly as that of other groups overall.

For the bottom 10 per cent of households with at least one working member, the rise in income was among the smallest last year - 1.4 per cent per household member. The only decile with a lower rise was the top 10 per cent of households.

By comparison, median income growth per household member was 3.8 per cent. "This shows that more needs to be done to improve the well-being of the lowest-income households," said UniSim senior lecturer Tan Khay Boon.

DBS economist Irvin Seah attributed the smaller rise in incomes at the bottom in part to last year's 19,000 layoffs - the highest since the global financial crisis in 2009.

"The moment a sole breadwinner loses his job, the household income drops to zero," he said.

Meanwhile, Bank of America Merrill Lynch economist Chua Hak Bin said the bottom 10 per cent of households saw a "huge jump" in income in 2015, a lift that is hard to sustain. That year, their income grew by 10.7 per cent, the highest for all deciles.

"Perhaps some companies are facing pressures, and cannot reward their workers at the lower end as much this time," he suggested.

 

National University of Singapore sociologist Paulin Straughan said more details about those in this group - for instance, ages and occupations - should be made available.

"We need to know the make-up of the bottom 10 per cent so we can chart the way forward," she said. "If it's older workers , we have to pay attention to the effects of ageing on the low-income. If it's young graduates, then we must make sure they level up on the appropriate skills."

Households at the top saw slow growth too. Incomes for the top 10 per cent of households grew by 0.2 per cent, the slowest across deciles.

LOOKING AT UNDERLYING ISSUES

We need to know the make-up of the bottom 10 per cent so we can chart the way forward. If it's older workers , we have to pay attention to the effects of ageing on the low-income. If it's young graduates, then we must make sure they level up on the appropriate skills.

NUS SOCIOLOGIST PAULIN STRAUGHAN

Observers said this was not surprising, given the challenging economy that has affected business owners as well as professionals, managers, executives and technicians (PMETs). PMETs made up the majority of those retrenched last year.

Around 20 per cent of those in the top decile had earners from the financial and insurance sectors, which saw negative 1 per cent growth in median real wages.

Slower income growth among top earners also helps explain why the income gap narrowed last year. The Gini coefficient, which measures income equality, was 0.458, the lowest in a decade. It was 0.463 in 2015.

After taking into account government transfers, it was 0.402, down further from 0.409 in 2015.

Mr Seah said the dip is also the result of several Budgets aimed at strengthening safety nets, as well as policies meant to lift those at the bottom taking effect, such as lower education costs for children in low-income families. "The Gini coefficient has been trending downwards after many years of targeted and robust social policy ," he added.

Several families told The Straits Times they were bracing themselves for tougher times ahead.

Taxi driver Chia Teck Chai, 59, said his income did not change much in absolute terms last year, but he will take fewer rest days now.

"I'm getting older and not as energetic now, but if I take a break, that's less money for the month," he said.

Telco project coordinator Kenneth Chen, 33, said his income went up by 5 per cent last year.

His tip for tough times? "Save. Just because your pay has risen doesn't mean you must spend more."

A version of this article appeared in the print edition of The Straits Times on February 17, 2017, with the headline 'Lowest rises in income for families at both ends'. Print Edition | Subscribe