On Thursday, the Singapore Department of Statistics (SingStat) released figures on the median household income, showing that household income inequality in the country has dropped to the lowest it’s been in 20 years.
The Gini Index—which captures the distribution of income among individuals or households within an economy—is based on household income obtained from work per household member. The degree of income inequality measured by the Gini index amounts to one for perfect inequality and zero for perfect equality of income distribution.
In 2019, the country’s Gini coefficient before taking into account transfers and taxes was 0.452, lower than the 0.458 in 2018. This is the lowest it’s been since 2003. The 2019 figure dropped further to 0.398 after accounting for taxes and transfers.
So according to SingStat’s numbers, household income inequality has never been lower in Singapore since 2003.
According to SingStat’s report, Singapore uses the Gini coefficient after government handouts and taxes are taken into account. SingStat noted that “this reflected the redistributive effect of government transfers”.
But what are these government transfers and are they actually as helpful as implied?
Taiwan-based Singaporean activist and blogger Roy Ngerng pointed out in a Facebook post the transfers listed in SingStat’s report include GST vouchers, Senior Citizen bonus, baby bonuses, education schemes, employment schemes, rebates on utilities, healthcare subsidies, tax rebates and CPF bonuses and scheme.
There are a dizzying number of these transfers which you can see below:
Mr Ngerng then pointedly asks in his post, “How many of these would you consider real transfers that benefited you, and how many of these are high prices the government makes you pay, then subsidize a bit for you?”
Basically, do these transfers actually benefit low income households and reduce the income gap?
Transfers mostly in subsidies, not cash in hand
A similar point was raised by veteran blogger and human rights campaigner Leong Sze Hian back in 2017 when SingStat released figures to show that the country’s Gini coefficient for 2016 was lower than the year before.
In an article on TOC, Mr Leong shared SingStat’s report which noted that government transfers in 2016 amounted to S$9,806 per household. However, he pointed out that most of these transfers do not come in the form of cash that recipients can use as disposable income.
In fact, a closer look shows that many of these transfers or handouts are actually subsidies and rebates that reduce the cost of services, such as subsidies on healthcare (like CHAS), health screening, MediShield Life premiums, education and public rental, and rebates on income tax and property tax.
Meanwhile, there are transfers that are given in the form of money into recipients’ CPF accounts like the Workfare Income Supplement—where a 90 percent goes into CPF Medisave and only 10 percent is given in cash to a self-employed person, or 60 percent to CPF and 40 percent to an employed person. Also, the CPF Life Bonus and voluntary deferment bonus also goes into CPF.
Additionally, there are transfers that come in the form of money that can only be used for specific things such as top-ups to Medisave accounts that can only be used for future healthcare fees (which are on the rise), the Pioneer Generation Package with discounts on healthcare fees, and MediFund which can help pay 50 to 100 percent of hospitalisation bills, subject to means-testing.
Mr Leong pointed out that these transfers help people to “pay less of what may be comparatively “overpriced” services” compared to other countries and the money given can “only be used in the future to pay for ever-increasing prices” of services.
To illustrate the point further, Mr Leong also pointed out that a healthy non-elderly (below age 35) low-income family with no children and work long hours – you may not get any income tax rebates, property tax rebates, CPF Life Bonus, education subsidies, training subsidies, MediFund, health screening subsidies, healthcare-related subsidies, Pioneer generation package, Medisave top-ups, Workfare Income Supplement, et cetera.
Taking a real-life example, a mother of three shared last December at a forum by activist Gilbert Goh that she was unable to pay her child’s miscellaneous school fees because she had to pay off other, more urgent bills first.
Ms Tharuga said that she was a stay-at-home mum, being able to rely on just her husband’s income. Unfortunately, her husband started to suffer from medical problems, leaving him unable to work as he was hospitalised for several months.
This meant that Ms Tharuga had to deal with paying her husbands hospitalisation bills on top of caring for her sick mother as well as her 18-month-old and newborn child who was delivered via c-section.
Overwhelmed by the issues, Ms Tharuga had no choice but to prioritise the medical and childcare expenses over school fees.
So despite the large amount in transfers that the government says the people get, these examples show just how the handouts/schemes by the government do not actually elevate the financial burdens of low-income families all that much.