Singapore’s Key Household Income Trends 2023, was released by the Department of Statistics last month.
While there was overall income growth for most households, a lot of that growth was eroded by inflation.
Let’s take a deeper look at the changes in income trends, and how government incentives may reduce income inequality.
This article was written by a Financial Horse Contributor.
Median Household Income Grew for the tenth-year
The median household income from work in Singapore grew to $10,869 last year.
This is up from $10,099 in 2022. Adjusting for inflation, this is a real increase of 2.8% increase.
The median monthly household income from work has grown for the last 10 years.
But growth over the last five years have been significantly slower than the first half of the decade.
From 2013 to 2018, median monthly household income from work rose 16.6% cumulatively or 3.1% annually in real terms. In the next five-year period, it only grew 3.1% cumulatively or 0.6% annually in real terms.
The post-2008 bull run was in full swing from 2013 to 2018.
And the slowdown from 2018 to 2023 reflects the impact of COVID, heightened geopolitical tension, wars and inflation.
Zooming in to 2023, those in the 20th to 80th percentile of earners saw on average increase to their income. But those in the lowest 10 percentile – saw a 1.7% decrease in their real income.
This decline could be attributed to the slowdown in hiring after the quick recovery as the economy opened up post-Covid-19. Wage growth likely slowed in tandem as recovery tapered off.
Income decline and inflation offset by government transfers
For the whole of 2023, core inflation averaged 4.2%.
In 2022, it was 4.1%. Prices went up from things like airfares, private transport, and retail goods.
These are daily reminders of how cost of living has gone up. It goes without saying that that people are feeling the pinch. Just see the reaction when Yakun hiked up their Set A prices from $4.80 to $6.30 in three years.
In response, the government has stepped up its transfers over the last two years to cushion the blow.
A person living in a 4-room HDB would receive an average of $6,317 in government transfers last year. This adds up to $12,077 if you include transfers in 2022.
Transfers include cash handouts like Solidarity payments, U-Save and CDC Vouchers, re-employment support schemes, and income tax rebates.
These government transfers are tiered so that more support is provided to households that need it more. Last year people who lived in HDB 1- & 2-room flats received S$13,623 per household member on average.
This is over double the transfers received by resident households staying in HDB 4-room flats.
Household income inequality falls for the third year in a row
The Gini coefficient based on household income from work per household member (before Government transfers and taxes) fell to 0.433 in 2023, from 0.437 in 2022.
The Gini coefficient is a number that shows how fair or unfair the distribution of money or wealth is in a country. It ranges from 0 to 1. The higher the number, the more unequal the distribution of money is.
This is the lowest it has been in 20 years.
After adjusting for Government transfers and taxes, the Gini coefficient in 2023 fell from 0.433 to 0.371. This reflected the redistributive effect of such initiatives.
What is the outlook for 2024?
The Singstat paper did not touch on the outlook for household income in 2024. But Budget 2024 revealed the sentiments and initiatives you can look out for.
DPM Lawrence Wong had a mixed outlook for 2024.
Inflation pressure should recede, and most major economies will grow. But there are also two ongoing wars in Europe and the Middle East looming over the world.
In other words, Singapore is cautiously optimistic amid the geopolitical uncertainty.
To address this, the government is doling out more government transfers to tackle cost-of-living pressures and higher prices from the GST hike. This includes initiatives like additional CDC vouchers, personal income tax rebates, and Medisave top-ups.
