Income Inequality and Poverty in Singapore

by singaporearmchaircritic

About a week ago a Facebook note by Terence Foong had the Internet Brigade up in arms. Titled “The hidden figures behind the wealthy face of Singapore”, the writer cited CPF figures showing that more than 458,000 Singaporeans earn less than SGD1,500 a month, and about 295,000 have a salary of less than SGD1,000 a month.

In their eagerness to defend their master, most of the pro-government commentators had missed the point. That the figures do not include the self-employed does not change the fact that 458,000 Singaporeans earn less than SGD1,500 a month. That there are part-timers among the 458,000 Singaporeans earning less than SGD1,500 a month also does not mean that these people are not deprived or poor. This is because there is no necessary relationship between working part-time and poverty.

For example, I know an old woman who cleans a few blocks of HDB flats for half a day and earns a monthly pay of about SGD500 for her work. She would like to earn a higher pay by working longer hours but as she told me, the cleaning job is a physical toil and at her age half a day of work is the most she can manage. So you see, working full-time is simply not an option for some people even if they are struggling to make ends meet. And let’s not forget the 80-year-old granny who worked herself to death.

With the spare information available to the public, what can we make of poverty and income inequality in Singapore? I scoured the Internet and here’s what I found.

1) The top 1% brings home an annual salary that is more than 58 times that of the bottom 3.4%

The Ministry of Finance (MOF), responding to a parliamentary question posed by NCMP Gerald Giam in November 2012, disclosed for the very first time that the top 1% earners in Singapore have an average taxable annual income of $0.7 million. This group of top earners also grew by 9% from 29,524 persons in 2009 to 32,285 in 2012 (more details here).

In his response to another query, Tan Chuan-Jin also revealed that there were 110,000 full-time resident workers earning less than $1,000 per month as of 2011 (ST report, 13 Nov 2012). This lowest income group, estimated to be the bottom 3.4%, has an annual income of less than $12,000.

Putting together these two nuggets of information, we can deduce that the top 1% earners have an annual income that is more than 58 times that of the lowest income group.

That may not seem a lot to some. But do remember that capital gains from stocks, property etc. are not taxable in Singapore and hence are not included in the estimated taxable income of the top 1%. Given that Singapore has the world’s highest percentage of millionaires, you can be sure the actual wealth gap is in fact far more astronomical.

(2) More than 60% resident households live on a monthly household income that is lower than the national average of $8,726

Source: Census of Population 2010 Statistical Release 2: Households and Housing.

Because of our high income inequality, the median monthly household income, reflecting the income level at the centre of distribution, is a better gauge of income distribution in Singapore.

Statistics have shown that our income distribution is so skewed that the median monthly household income has consistently been around 73% of the average monthly household income from 2001-2011. This basically means that the very high income levels of households at one end of the scale have boosted our national average.

In 2010, Singapore had 1.15 million resident households with at least one working person. From the chart above, you can see that over 60% resident households in Singapore have a monthly household income that is lower than the national average of  $8,726.

(3) From 2000 to 2011, the real household income of the top 10% grew by 41.5% whereas that of the bottom 10% fell by 7.4%

Sources: Key Household Characteristics and Household Income Trends, 2011; Time Series on CPI (2009=100) & Inflation Rate

You can see from the chart above that while the income (adjusted for inflation) of the bottom 10% households has declined over the years, that of the top 10% has grown significantly. The income ratio of the top 10% to the bottom 10% had also grown from 11.54 in 2000 to 17.63 in 2010.

In addition, the chart below shows that the top 10% took home 29% of total income whereas the bottom 10% was accountable for only 2% of total income.

Again, if we take into consideration the asset wealth of the 188,000 millionaire households in Singapore in 2011 – slightly more than 17% of our resident households – we can safely say that the actual wealth gap is much larger than what the above figures show.

(3) 7.5% of all resident households with at least one working person have a monthly household income of less than $1,500

As many have noted, there is no “official” poverty line in Singapore. According to this study “Bottom Fifth in Singapore”, a family of four would need around $1,700 to cover basic costs of living, but $2,500 to $3,000 per month to meet a “social inclusion” level of income. These estimates appear reasonable given the high cost of living in Singapore.

The average resident household size is 3.5 persons. Of the 1.15 million resident households with at least one working person, 7.5% (86,006 households) live on a monthly household income of less than $1,500, and 12% (136,294) have a monthly household income of less than $2,000 (source).

To better gauge how many of these households are relatively poor, we may subtract from these figures the number of households that reside in landed properties, condominiums, and 5-room HDB flats despite their low household income from work.

And this is what we get: 6.4% of all resident households have a monthly income of less than $1,500 and reside in 1-4 room HDB flats; 10% have a monthly income below $2,000 and live in 1-4 room HDB flats. Depending on where you draw the poverty line, there are either 115,792 or 73,196 resident households that may be classified as “relatively poor” in Singapore, world’s richest by GDP per capita and the advanced economy with the highest inflation rate.

As much as I would love to present a more comprehensive picture of income inequality and poverty in Singapore like this inspiring one on the U.S., “A Giant Statistical Round-up of the Income Inequality Crisis in 16 Charts”, I am hamstrung by the lack of information.

But sometimes what the government does not reveal is also telling of the severity of our wealth polarization. For if the picture is all rosy as our government and mainstream media portray, why hide information from us?

Note: I am grateful to a dear friend who helped out with the statistics. Thanks JL!