Advancing Singapore together: Income inequality narrows

28 Apr 2020 3 min read

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Income inequality in Singapore had fallen to its lowest in nearly two decades after income for most of the households rose by 5.6 per cent in 2019 while the top 10 per cent saw their income grow just 0.4 per cent.

The Gini coefficient – which measures income inequality from zero to 1, with zero being most equal – fell to 0.452 in 2019 and the lowest since 2001, according to the Department of Statistics’ Key Household Income Trends report released in February this year. This forms part of a general downward trend from a peak of 0.482 in 2007.

After accounting for government transfers and taxes that had a redistributive effect on household income, the Gini coefficient in 2019 goes down further to 0.398.

Based on the modified Organisation of Economic Co-operation and Development (OECD) scale, which is used by many developed countries, Singapore’s Gini would be 0.431 (before Government transfers and taxes) and 0.377 (after Government transfers and taxes) in 2019.

In the past two decades, Singapore’s Gini coefficient – before considering government taxes and transfers – peaked at 0.482 in 2007. It then declined gradually before rising again in 2012. It has plateaued at around 0.46 in recent years.

Experts attribute the narrowing gap to government efforts to boost the income of low-wage earners through various schemes (refer to graphic 2), a reflection of Singapore’s commitment to deal with inequality.

Experts note that the proposed measures introduced in Budget 2020 will do even more to help lower-income groups. These include the higher Silver Support payouts for low-income elderly to Goods and Service Tax vouchers and U-save measures.

According to the report, households in the first to 90th percentile income groups saw real income growth of 3.5 to 5.6 per cent in 2019.

The bottom 10 per cent also saw their income grow relatively faster over the last five years. Between 2014 and last year, the average monthly household income from work for each member in households in the bottom 10 per cent rose 23 per cent. This is far higher than the 13.2 per cent growth for the top 10 per cent.

Experts attribute the higher income rates for lower- to middle-income groups to Government’s efforts to upskill workers and enhance their productivity.

However, the report might not be an accurate reflection of the real situation as it excludes households whose sole breadwinner has been retrenched, or where all members are retired and, possibly, elderly and poor.

Experts also cautioned that with slowing economic growth and Singapore reeling from the impact of the ongoing coronavirus outbreak, it remains to be seen if wage growth for the lowerincome group can be sustained.

The Government is committed to tackle the problem of inequality. In this year’s Budget debate, Prime Minister Lee Hsien Loong said that the issue of inequality should be addressed now, when notions of class and hierarchy have not yet calcified in a young country like Singapore. Looking at the issue from a different perspective, Education Minister Ong Ye Kung said that cracks are starting to show when it comes to social mixing and social mobility.

The Government will thus continue to improve Singapore’s economic structure to ensure good jobs and career pathways for all to stave off inequality in the longer term.