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Growth at all costs: Who pays?

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By SGCharts.com (Image by Joshua Chiang)

A hard look at the numbers from the Department of Statistics’ Household Expenditure Survey (HES) 2012/13 shows the real winners and losers of the heady GDP growth of the past decade.

How Much Did You Spend Today?

Do you know that there are 4,648 households in Singapore that survive on less than $10 per person per day? Mind you, that budget includes not just food, but also items such as utilities, S&CC charges, transport, medical costs and school fees!

Table spending

In total, there are 36,023 households that earn less than $3,000 a month, and they survive on less than $25 per person per day. In comparison, the average full-day fees of government-subsidised childcare centres already exceed $30 per day. Out of the 237,959 households in the bottom 20% income group, 42.3% or 100,674 households have children living with them.

Uneven Playing Field

The richer you are, the more purchasing power you can lavish on your kids, but how much more? Now we have a clue. Let’s compare the average monthly expenditure of households with children versus those without.

Households with children, whose monthly income is $20,000 or more, spent 2.2 - 10.2 times that of households below the monthly income of $3,000.

In contrast, for households without children, those whose monthly income is $20,000 or more spent 3.1 - 6.6 times that of households below the monthly income of $3,000.

Of course, monthly household expenditure is a rough proxy for children-related expenses but a finer breakdown is not available.

table43
Source: HES Table 43

Savings Not Enough

About 1 in every 4 household below a monthly income of $3,000, spent more than they earned.

In this analysis, we shall assume that the bottom 20% income group has a monthly income of $3,000 or less. That’s because:

There are 237,959 households in the bottom 20% income group (HES Table 2).

There are 244,485 households below a monthly income of $3,000 (HES Table 1).

Therefore, the number of households below a monthly income of $3,000, is comparable to the bottom 20% income group. The difference is just 0.5% of the total number of households, or 6,526.

The following table shows the number of households and the proportion of those that overspent in each monthly income group:

Table spending proportion

Out of the 244,485 households that earn $2,999 or less, 15,704 stay in private property (HES Table 8). In a highly conservative estimate, let’s assume that all of the households who stay in private property overspends. If this group is omitted, 24% of households with a monthly income below $3,000, spent more than they earned. A more realistic estimate could go up to 31%.

The Household Expenditure Survey (HES) also carried a similar observation: “The monthly household expenditure of $2,230 for the lowest 20% income group exceeded their income of $2,020 by $210 on average in 2012/13.” (HES p.41). However, they offered a rather lazy explanation by saying that this was due to a higher proportion of retiree households among the bottom 20% income group.

However, the same report showed that the majority, 75.5% of of the bottom 20% income group, are non-retiree households (HES Chart 2.5). This means that there are 179,659 non-retiree households in the bottom 20% income group, who are struggling to make ends meet despite having at least one working person.

This is nothing new; in fact, a study in 2013 by the National University of Singapore’s Social Work Department also found that households in the bottom 20% income group are at higher risk of overspending.

CPF Not Enough

Table 50 of the HES shows the sources of income for retiree households by the type of housing they stay.

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Source: HES Table 50

For their monthly income, retiree households receive, on average, $208 in annuities and monthly payouts from the CPF Minimum Sum Scheme and CPF Life.

For those staying in 1 and 2-room flats, their monthly CPF payout is the lowest at $93 (about $3 per day).

Retirees staying in condominiums and other private apartments receive the highest monthly CPF payout of $513 (about $17 per day).

With the exception of those staying in landed properties, CPF payouts form 12% - 14% of the monthly income of retiree households.

CPF Life is mandatory for Singaporeans turning 55 after 2012. CPF Life is an annuity scheme that allows members to receive a monthly income for life. However, this also means that CPF Life offers a lower monthly payout than the Minimum Sum Scheme, where the payouts last about 20 years. Is CPF Life truly adequate for our retirement? Well, unless you are in your late fifties or older, dear reader, you have no choice in the matter.

The Super Rich

Singapore is becoming a playground for the super rich. Want to know how rich they are getting? Just follow the money trail. The sale of luxury cars is booming. The number of Maseratis on Singapore roads leapt by a whopping 19x from 30 (2002) to 584 (2013). Lamborghinis? They are selling like (million-dollar) hotcakes. The Lamborghini population shot through the roof at an astounding 22x from 15 (2002) to 334 (2013).

Our politicians are not clueless either; they are riding on the coattails of the ultra rich by pegging their pay to the top 0.05%** citizen earners, and then taking an arbitrary 40% discount to “signify the sacrifice that comes with the ethos of political service”. Even after the 40% discount, the annual salary of the MR4 entry grade for Ministers is $1,100,000. As the paper estimates the annual salary package to be 20 months, the monthly pay of a MR4 Minister is $55,000 ($1,100,000 / 20 months). This places the MR4 salary grade at twice the average monthly household income of the top 10% income group, which earned $26,622 in 2011.

(**Ministerial pay is pegged to the top 1,000 citizen earners with a 40% discount. According to MOM’s 2011 Occasional Paper on Singaporeans in the Workforce, there were 1,712,600 Singapore citizens in the labour force in June 2010. Hence, the top 1,000 earners out of 1,712,600 is about 0.05%.)

The Real Deal

But the rich are not the problem. The widening income gap is. The following table shows the dollar change in monthly household income from work (excluding employer CPF) from 2000 - 2012:

income_table

Adapted from source: Department of Statistics (DOS) report on Key Household Income Trends 2012. DOS no longer publishes monthly household income excluding employer CPF in the latest report, hence 2013 data is not available. (View full-size in Google Spreadsheet.)

The last column in the table (cells highlighted in yellow) refers to Net Change, which is the sum of all the increases and decreases in monthly household income from 2000 - 2012. The top 10% income group (91st - 100th percentile) almost doubled the income level they received in 2000. Contrast this with the bottom 10% income group, which received only a net increase of $233 after 12 years!

The Net Change column also shows who took second helpings to the growth pie, and then some. Expectedly, those at the bottom of the food chain got the crumbs. The top 10% income group’s slice of the growth pie ($14,150) is 61 times bigger than the last slice that got handed down to the bottom 10% income group ($233). The fallacy of trickle-down economics is self-evident. Singapore has been courting ultra rich foreigners for the past decade, did that help the bottom 10%? Even if Singapore brings in another 10 billionaires, will the jobs and opportunities benefit the bankers or the poor? History has already shown us the results.

Furthermore, differences in income levels are widening between all income groups. For example, the difference in monthly household income between the 81st - 90th percentile and the 91st - 100th percentile was about $6,000 in 2000. This income gap has actually widened to $14,000 in 2012. This means that, even among the top 20% income groups, there exists an income gap and this gap has actually more than doubled in 12 years!

In August, the government celebrated falling income inequality as a key achievement in the Singapore Public Sector Outcomes Review (SPOR) 2014. This report was released just in time for National Day weekend, so that the press could get the rosy story out on everyone’s breakfast table. But just a month later, the data released by the Department of Statistics’ Household Expenditure Survey seems to paint a different picture altogether. The bottom 20% are not saving enough, an uneven playing field between rich kids and poor kids, monopolisation of the growth pie…

All these factors underpin a pivotal moment in our society. Only time can tell who is right.