Income inequality narrows as top-tier's earnings freeze

Govt transfers also helped low-earners close the gap with others last year, report shows

Income inequality here tapered to its narrowest in almost two decades, after income for the bulk of households rose by up to 5.6 per cent last year while the top 10 per cent saw their income grow just 0.4 per cent.

The Gini coefficient - which measures income inequality from zero to 1, with zero being most equal - fell to 0.452 last year, lower than 0.458 in 2018 and the lowest since 2001, according to the Department of Statistics' Key Household Income Trends report released yesterday.

Government transfers and taxes whittled the Gini coefficient down further to 0.398.

Experts cite government efforts to boost the income of low-wage earners as a possible reason.

Conversely, a sluggish economy has disproportionately affected high earners, many of whom are in managerial or business positions.

The bulk of their compensation is in the form of bonus, which would take a hit if the economy is not doing well, said DBS Bank's senior economist Irvin Seah.

Last year, Singapore's economy expanded by 0.7 per cent year on year, far below the 3.1 per cent expansion in 2018.

OCBC Bank's chief economist Selena Ling said that some sectors, such as finance and technology, are "more tied to market forces... and more vulnerable to swings in economic cycles".

Meanwhile, the social safety net for the low-income has been strengthened. "There have been many schemes to raise the minimum wages for certain professions, such as security guards and cleaners," said Ms Ling, referring to progressive wage models which set entry-level basic monthly pay.

Households in the first to 90th percentile income groups saw real income growth of 3.5 to 5.6 per cent.

In addition, the quantum of transfers such as goods and services tax vouchers, and transport subsidies has been increasing, she said.

 
 

In the past two decades, Singapore's Gini coefficient - before taking into account government taxes and transfers - peaked at 0.482 in 2007. It then declined gradually, before rising again in 2012. It has plateaued at around 0.46 in recent years.

Across the board, Singapore families earned more from work per person last year. The median monthly household income from work per household member rose to $2,925 last year, a 4.3 per cent increase after accounting for inflation.

This includes Central Provident Fund contributions from employers but excludes income from sources such as dividends and rent.

The bottom 10 per cent also saw their income grow relatively faster over the last five years.

Between 2014 and last year, the average monthly household income from work for each member in households in the bottom 10 per cent rose 23 per cent.

This is far higher than the 13.2 per cent growth for the top 10 per cent and contributed to the fall in the Gini coefficient, said Mr Seah.

 
 

Last year, families with at least one working member - which make up 86.8 per cent of households here - saw median monthly household income from work grow to $9,425, or 1 per cent in real terms, compared to 2.6 per cent in real terms in 2018.

The report also said that resident households, which include those with no working person, received $4,682 for each family member on average from various government schemes last year. Those living in one-and two-room HDB flats received $10,548 per household member on average - more than double that received by resident households in other types of housing.


•With additional reporting by Yuen Sin

A version of this article appeared in the print edition of The Straits Times on February 21, 2020, with the headline 'Income inequality narrows as top-tier's earnings freeze'. Print Edition | Subscribe