Sluggish economy crimps household income growth

SINGAPORE — The sluggish economy last year tamped down income growth of households across the board, with the group in the bottom 10 per cent hit the hardest.

But the Gini co-efficient measuring income inequality, which first hit a trough in 2013, continued its decline to reach the lowest in a decade at 0.458, compared to 0.463 in 2015. It was lower still after government transfers and taxes, at 0.402.

Overall, among resident households with at least one working person, median household income grew 2.6 per cent after accounting for inflation to S$8,846, a slower rate of increase from the 4.9 per cent in in 2015. Median monthly income per household member grew 3.8 per cent to S$2,584, compared with 5.4 per cent in 2015.

Households in the lowest decile saw their income growth on a per household member basis slow, growing 1.4 per cent to S$543, from 10.7 per cent in 2015, said the Department of Statistics on Thursday, which released these figures in its annual Key Household Income Trends report. 

In the top 10 per cent income group, households saw their average income per household member grow 0.2 per cent to S$12,773, down from 7.2 per cent growth in 2015. This could be due to the fact that a significant number of people in this group work in the poor-performing finance and insurance sectors. 

Economists say the income growth for the bottom 10th decile plunged because the demand for lower value labour has weakened. UOB economist Francis Tan said: “With labour-intensive firms restructuring to use more automation, demand for non PMETs may continue to be weak, and income growth of lower income households will be constrained.”

But households living in the one and two room flats also received more government transfers, and assistance from schemes such as Goods and Services Tax (GST) vouchers and rebates, than in the year before. Each household member received S$9,806 last year, compared to S$9,454 in 2015 – the highest increase across those who live in HDB flats. 

Those living in three-room and four-room flats also received more government transfers last year, but those who live in HDB five-room and executive flats, as well as condominiums and landed properties received less.

Economists said median income growth for households and individuals was likely to remain at this year’s levels. “It’s tied to the performance of the economy, which is expected to be more moderate. So this will affect household incomes,” said Dr Tan Khay Boon, senior lecturer at SIM Global Education.

But UOB’s Mr Tan said sgross domestic product growth is expected to be greater this year than in 2016. This should lead to a higher nominal household income growth, although there are headwinds from inflation, which is expected to rise, he added. 

He felt government transfers would need to keep pace with the trend of industries shifting away from hiring lower-skilled workers. “Lower income households will suffer even slower income growth. Thus, transfers are necessary,” he said.

With the Government unveilling its Budget statement on Monday, Mr Tan said the Budget could focus on more transfers for lower-wage households but “teaching them how to fish” was ultimately more important so that they can be ready for new industries. 

Pasir Ris-Punggol GRC Member of Parliament Zainal Sapari reiterated that government transfers are important but they do not address the underlying pressures that depress the wages of these workers. 

More would need to be done through measures such as the Progressive Wage Model, which has helped implement basic wage levels for sectors like cleaning and security, as well as increasing productivity via training and adoption of technology, he said.