MUCH political attention has been paid to households in the bottom 20 per cent, whether as an indicator of how well the poor are doing, part of the income inequality picture, or even a suggested peg for ministerial salaries.

Yet this bottom quintile is not necessarily a good representation of Singapore’s neediest, even though it is treated as an important indicator.

The Government keeps a close eye on how these households fare. Separate figures are given for their income growth rate and the inflation they face, so their changing circumstances can be compared with the general trend.

Opposition parties also make reference to how well the bottom fifth does, and have even proposed their income as a peg for ministerial salaries.

In the 2006 General Election, Workers’ Party leader Low Thia Khiang suggested that ministers be paid 100 times the median income of the bottom fifth, so as to spur these political leaders to raise wages at the bottom.

In 2011, the Singapore Democratic Party proposed paying 30 times this group’s mean wage.

Though the group is often used as a proxy for Singapore’s poorest, the reality is more complex.

Take a closer look at these 238,000 or so households, and they turn out to be more varied than might be expected.

For a start, about half live in either four-room or larger Housing Board flats, or private property.

Another three in 10 live in three-roomers. Just 18.8 per cent live in one- and two-room units.

“While many one- to two-room households have no real assets at all, three- and four-room households often have considerable equity value in their flats,” notes Nanyang Technological University economist Walter Theseira.

“So, the bottom fifth are not all alike. Some have no income and also nothing to fall back on, others may be able to tide over rough periods because they have reasonable savings or equity from home ownership,” he adds.

Why do so many low-income households live in pricey property? One possible reason is that many are retiree households.

Defined by the Department of Statistics as households comprising only non-working people aged 60 and older, they form almost a quarter of the bottom fifth.

There may also be others in retirement or semi-retirement which fall outside that definition.

Retiree households have no income from work, but may not necessarily be poorly off.

Some may have considerable savings to draw upon, notes UniSIM economist Randolph Tan.

They also have options to monetise their properties, such as moving to a smaller flat, renting out rooms, or selling part of their lease back to the Government.

The inclusion of retiree households, who have varied means, means that the bottom quintile does not necessarily capture the neediest in society.

With their low or absent incomes, retiree households also pull down the average.

The average monthly household income for the bottom fifth is $2,022, falling short of the average monthly spending of $2,231.

Exclude retirees, and the gap halves. Non-retiree households in the bottom quintile have an average monthly income of $2,422, and expenditure of $2,523.

Furthermore, households in one- and two-room flats – often considered the neediest – actually earn more than they spend. Their average monthly income was $1,906 and their spending, $1,287.

Considering the bottom fifth as a whole may thus yield a distorted picture of the actual needy.

Distortion can occur in the other direction, too. In 2012, Prime Minister Lee Hsien Loong noted that households in the bottom fifth have, on average, $200,000 of equity in their HDB flats. But this figure is less impressive if wealthy retirees are included.


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