Singapore has been ranked the most expensive city to live in for the 4th consecutive year in 2017, it’s no wonder that many Singaporeans pay a lot of attention to income data and trends. Managing and growing your income is a practical approach for residents to cope with the high costs of living. But as with any story there are many sides to it and what readers take away from it depends on their perspective. In the interest of presenting a more complete picture on the topic, FYT will explore the topic of income from four different perspectives:
The policy maker
The Employee Perspective
Monthly income from work, or monthly salary to the rest of us, is what employers pay employees in exchange for the value they create at work. As at 2016, the median monthly salary in Singapore is $3,500 (excluding CPF); or roughly half of the employees in Singapore earn less than this amount. While this is statistically true, it doesn’t fully illustrate the complexity behind salary related trends and relationships.
Salaries have been growing over time
Median monthly salary for full-time positions were $2,100 just 10 years ago
Those earning >$12,000 per month have grown most significantly while those earning between $500 – 999 per month shrunk the most significantly in the last 10 years
No surprise that those with higher levels of education tended to earn a higher salary
Salaries also varied significantly by occupation and sector
Against this backdrop, there are clearly many considerations to managing one’s salary to cope with the high costs of living; having better educational qualifications, being promoted into managerial roles and being in the right sector all play a part. But all in all, the good news is that salaries have increased over time.
The Household’s perspective
Salaries are not an end unto itself; it is also a means to pay for the cost of living in Singapore. Depending on the living arrangement, some have only one wage earner while others have more than one and can pool their resources to pay for shared household expenses.
The median household income was $8,846 in 2016
Given the property prices in Singapore, it is no surprise to find that the dwelling type has a significant impact on household incomes. As at 2016
Average household income for landed property and condominium dwellers was just over $25,000 per month and just over $20,000, respectively. Private property owners make up almost 20% of total households
Those living in public housing earn on average roughly less than half than landed property households
The Individual's Perspective
Household incomes are typically intended to support the needs of ALL members in the household; but not all are wage earners. They include children or aged parents who have retired or family members with special needs as well as the wage earners. Clearly, no household is the same; but household income per member can give an indication of the financial resources available to meet the needs of members in the household.
Households living private properties have twice or more financial resources available per member compared to those living in public housing
Regardless of condominiums or landed property, roughly $6,000 per month is available to each member
Those in the largest public housing have roughly only half that amount each month per member, and the figures are even smaller for smaller dwelling types
Dwelling types aside, the median monthly household income per member was $2,584 in 2016; but it does clearly illustrate how wide it varies among Singapore household members
The top 10% of household earners in Singapore have $12,773 available per month per member; more than twice that of those at the 90th percentile.
While 50% of household members have less than or equal to $2,584 available to be distributed each month, the top 50% have much, much more at their disposal.
For the same salaries and household incomes, the amount of resources available to each member could be quite different simply based on the number of people that the household income has to support.
The Policy Maker's Perspective
As the previous section has illustrated, there is significant disparity between what the top deciles earn versus those in the lower deciles. There is consensus that some income inequality is a good thing as it provides an incentive for residents to work towards improving their lot; concerns arise when the gap between the rich and poor grow too wide. While there is no global consensus yet on the impact of income inequality, but an IMF report suggest that income equality could have significant impacts on economic growth, economic and political stability and poverty reduction and so on. How does Singapore compare with peer countries around the world.
Income inequality is typically expressed measured using the Gini Coefficient; where values ranges from 1 (all the income is earned by 1 person) to 0 (where everyone earns the same amount). According to the Department of Statistics, Singapore had the lowest Gini coefficient (0.402 after govt transfers) in a decade in 2016; while that is good news that policies are redistributing the incomes in the right direction, the fact remains that Singapore’s Gini coefficient remains one of the highest among developed countries (only Hong Kong is higher). What implications could this have for Singapore’s economic and social future remains to be seen.
When you’re a resident living in the most expensive city in the world, managing towards a higher salary is clearly one way to cope. Data suggests that higher salaries are typically associated with those holding university degree or higher qualifications and those in managerial roles; but Singapore cannot have a nation of managers with university degrees…
While residents in other countries have the option of moving to lower cost states/cities; but in the city-state of Singapore, there are no such options.
Salaries are not an end unto itself, for many it is a means to support the household and members under its roof. It is not surprising to find some with high salaries who feel like they’re struggling to keep up with their peers; each household is unique with different household sizes and members with different needs (enrichment programmes for the young, healthcare for the old and so on). As Singapore faces an ageing population and low fertility, the burden on the wage earners will likely grow and fertility rates continue to remain low.
Clearly, not all are suffering from the high costs of living; there is a sizeable proportion who are probably doing fine; the top 10% have almost five times more income per member than the median household. As the cost of living in Singapore continues to rise, questions remain
Will the cost of living grow faster than salary growth in certain segments of Singapore?
How will such households cope? What will happen when they cannot cope?
Is the persistently high Gini coefficient leading indicator to structural poverty?
How much more income inequality will Singapore bear before it impacts its economic future, political stability and social fabric?
As with such issues, there are many sides to the story. FYT hopes that the insights from this article can help readers better interpret where they stand in Singapore’s income landscape. Bearing in mind that income is only one side of the cost of living equation, it does not account for how fast incomes are depleted by cost of living in Singapore; FYT will cover this item in a subsequent episode. For more information and details on the underlying data, you can access the interactive dashboards here