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Average monthly household income grows at fastest pace in 10 years

But income inequality widens despite govt effort

(SINGAPORE) Income inequality in Singapore widened last year to its most pronounced state since at least the year 2000, with some high-income households enjoying big pay increases while the less well-off saw more modest wage gains, according to a report released yesterday by the Singapore Department of Statistics.

On average, almost everyone is somewhat better off than they were. Among Singapore resident households with at least one working member, average monthly income from work rose 9.1 per cent to $6,830 in 2007, from $6,260 the previous year, the fastest growth in the last decade, the report said.

However, the average was skewed by disproportionately higher income gains for the wealthiest households. The average monthly household income for the top 10 per cent earners rose 10.5 per cent to $20,240, up from $18,310 in 2006.

For the bottom 10 per cent, income from work increased just 3.9 per cent to $1,210, or 1.9 per cent after inflation.

When computed on a per household member level, average income per member for the bottom decile was only $310, up $10 from $300 in 2006. For the top decile, income per household member was $7,940, up from $6,990.

Domestic workers are considered household members, although their wages are not included in the income figures.

The income disparity even among the well-off in Singapore was also large, according to the report. The average household income of the 80th to 90th percentile of earners was $11,190, compared to $20,240 for the top decile.

In 1995, the equivalent figures in nominal terms were $6,990 and $11,190.

The big disparities in income gains resulted in a sharp jump in the Gini coefficient – a statistical measure of income inequality – from 0.472 in 2006 to 0.485 in 2007. The figure has grown every year since it was first computed using the current method in 2000, when the value was 0.442, according to the Department of Statistics.

Gini coefficient was 0.44 in 1990 and 0.47 in 1999, but those figures were computed using a different methodology and coverage, said the department.

Government measures to alleviate the income disparity have failed to narrow the gap.

After adjusting for government taxes and benefits, including last year’s Goods and Services Tax offset package, the Gini coefficient was 0.460 in 2007, still a substantial rise from 2006’s similarly adjusted figure of 0.439.

Most developed countries such as Switzerland, the United Kingdom and Japan, have coefficients of between 0.25 and 0.40, while South American countries like Brazil and Argentina tend to score between 0.40 and 0.60.

However, cross-border comparisons are difficult because each country’s figures may be computed differently.

But the Gini coefficient may underestimate total income and wealth inequality in Singapore as the Department of Statistics used only income from work – wages, as well as business proceeds for the self-employed. Income from dividends, rentals and interest was not included, and such income is likely to accrue more to high earners.

Also, the Department of Statistics only included employed households – defined as households with at least one working member – in its computation of the Gini coefficient, leaving retiree or unemployed households out of the picture.

 

Source: Business Times 14 Feb 08

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