Yawning Bread. July 2006

Income inequality widens markedly


    

 

 

In late June 2006, the Department of Statistics (DOS) revealed that the poorest one-third of households in Singapore got poorer over the last 5 years [1] In the same period of time, the richer households had increased monthly income, by quite significant jumps.

The survey was based on "Singapore residents".

These numbers proved what many Singaporeans could see with their own eyes: income inequality has been growing. The statistical measure of inequality is the Gini co-efficient, which stood at 0.490 in 2000, but rose to 0.522 in 2005.

The Gini co-efficient can vary from 0 to 1. The closer the co-efficient gets to 1 (which of course is very extreme, because it means that 1 person has everything and everybody else has none), the more unequal is the distribution of whether we wish to measure.

Another word I need to explain we go on is "decile". This means a subgroup comprising 10% of the population, in this case, the population of Singapore residents, who were the subject of the DOS' survey. Altogether there are 10 deciles in the population, and we usually refer to the poorest as the first decile, with the richest as the 10th decile.

Below is the table of the hard numbers, with specific comments below:

 
General Household Survey 2005

  Monthly
household income
Increase over
5-year period
Annualised increase
Decile Yr 2000 Yr 2005 ($) (%) (%)
1st $ 90  -   -   -   - 
2nd $ 1,470 $ 1,180 -290 -19.7 -4.3
3rd $ 2,250 $ 2,190 -60 -2.7 -0.5
4th $ 2,950 $ 2,990 40 0.1 0.3
5th $ 3,660 $ 3,850 190 0.5 1.0
6th $ 4,470 $ 4,840 370 8.3 1.6
7th $ 5,390 $ 5,890 500 9.3 1.8
8th $ 6,520 $ 7,260 740 11.3 2.2
9th $ 8,270 $ 9,300 1,030 12.5 2.4
10th $ 14,360 $ 16,480 2,120 14.8 2.8

-- Source: Department of Statistics

 

The first decile mostly comprised households without income. In year 2000, it was reported that 8.7% of households had no monthly income, presumably because nobody had work. They thus made up 87% of the first decile, pulling down the average monthly income of that decile to a mere S$90 per month.

In 2005, the percentage of households without any monthly income increased to 10.1%. Thus, all of the first decile now had no income.

The second decile had an average household income in 2000, of S$1,470 per month. By 2005, this had fallen to $1,180. The DOS, in its press statement said that this represented an annualised percentage decline of 4.3%. It didn't highlight - nor did the Straits Times or Business Times [2] - that cumulatively, over 5 years, this decile saw their monthly household income fall by nearly 20%. These Singaporean families had $290 less per month in 2005 compared to 2000.

The income figures exclude any hand-outs given by the government.

In this period, the consumer price index (CPI) rose an average of 0.6% a year. However, sometime earlier, I had seen a report (which I didn't archive then) that said that the CPI underestimated the inflationary increases for the things that lower-income households spent on, e.g. electricity and public transport. The nation-wide average CPI was moderated by falls in the auction prices of the Certificates of Entitlements for cars [3], a benefit only the better off enjoyed.

The third decile also saw a reduction in monthly household income. Their average fell from $2,250 in 2000 to $2,190 in 2005.

At the other end of the scale, the richest 10th decile of households saw their monthly household income increase from $14,360 in 2000 to $16,480 in 2005. In percentage terms, this represented an annualised increase of 2.8% per year, the most accelerated increase of any decile. In cumulative dollar terms, which no newspaper highlighted in their reports, this decile's monthly household income leapt $2,120 over 5 years.

 
The DOS offered a number of possible explanations for the fall in household income among the poorer deciles. It suggested that as the population aged, more households were made up of retirees, and thus had no income. However, since there were no detailed data on this, I couldn't check how important this was as an explanatory factor.

It also mentioned that the decline in household incomes in the 2nd and 3rd deciles "was partly caused by the larger number of households with retired persons and no incomes."

"It could also be partly due to the higher unemployment in 2005 than 2000 among the 2nd decile group and lower income from employment among the 3rd decile group.

This suggests that lower ranked staff got pay cuts while higher ranked staff had pay increases. A hard fact of globalisation, the newspapers said.

Some readers might wonder whether household sizes have been shrinking. For example, if a household of 4 persons in 2000 with $5,000 income together, had by 2005 split up into 2 households (of 2 persons each) with $2,500 in each household, statistically, it may show a drop, but in actual fact the individuals might not have seen any decline in the standard of living (assuming inflation was zero).

The DOS reported that household sizes changed only marginally over the same period. It averaged 3.7 persons in 2000, and 3.6 persons in 2005.

Of course, there is no reason to believe that household size changes happens only among the poorer groups -- if poorer households shrink and depress their average household incomes, why not richer households? -- so we can more or less rule it out as a significant factor.

Well-known blogger Mr Brown wrote a commentary a few days after the release of these statistics, touching on the income gap and the ever rising cost of living. This didn't go down well with the government. See the next article The inutility of speaking truth unto power.

Yawning Bread 


 

Footnotes

  1. The press release from the Department of Statistics can be seen at
    http://www.singstat.gov.sg/press/ghs2.pdf  
    Return to where you left off

  2. But to its credit, 'Today' newspaper did highlight the total drop of "nearly 20%" for the 2nd decile.
    Return to where you left off

  3. Certificates of Entitlement (COE) are permits allowing someone to own a motor vehicle for 10 years. The government issues a limited number (adjusted from time to time) based on their assessment of Singapore's road capacity. Those interested in owning cars have to bid for them.
    Return to where you left off

 

Addenda

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