INCOME DISTRIBUTION AND INEQUALITY MEASURES IN SINGAPORE

Transcription

1 Conference on Chinese Population and Socioeconomic Studies: Utilizing the 2000/2001 round Census Data Hong Kong University of Science and Technology June 2002, Hong Kong SAR INCOME DISTRIBUTION AND INEQUALITY MEASURES IN SINGAPORE I INTRODUCTION This paper looks at the income distribution of resident households in Singapore during the period Indicators that are commonly used to measure the extent of inequality in a distribution are highlighted. The paper also provides a comparison of income inequality trends in Singapore with that of selected countries. Data for Singapore are drawn from the latest 2000 Census of Population. Comparisons are made with 1990 Census of Population, 1995 General Household Survey and June Labour Force Survey for all other years where appropriate. Household income from work refers to the sum of income received by all members of the household from employment and business. However, it does not include the income of servants living in the same household. Income inequality measures for other countries are derived from their respective official publications. II HOUSEHOLD INCOME DISTRIBUTION More Households in Higher Income Brackets Households in Singapore were generally better off in 2000 than in Half of the households earned at least $3,600 per month in 2000 (Table 1). In comparison, the median income in 1990 was $2,300 per month. Households earning at least $5,000 had increased from 16 per cent to 35 per cent of the population. Households with $10,000 or more showed the largest increase from 2.8 per cent to 10 per cent.

2 TABLE 1 RESIDENT HOUSEHOLDS BY INCOME FROM WORK Monthly Household Income ($) Number ( 000) Per Cent Total Below 1, ,000 1, ,000 2, ,000 3, ,000 4, ,000 5, ,000 6, ,000 7, ,000 8, ,000 9, ,000 & Over Average Household Income ($) 3,076 4,943 Median Household Income ($) 2,296 3,607 Growth in Household Income from Work by Decile To monitor and compare the income trends of lower-income vis-à-vis higher-income households, one approach is to rank the total resident households (including those without income earner) by the size of their total household income from work in ascending order and divide them into ten equal groups or deciles. With recovery from the 1998 economic slowdown, household income growth had resumed for the majority of households in 2000 (Table 2). For the lowest two deciles, the average household income in 2000 had declined compared with This was mainly due to the increase in the proportion of households with no income earner from 75 per cent in 1999 to 87 per cent in 2000 for the lowest 10%.

3 TABLE 2 AVERAGE HOUSEHOLD INCOME FROM WORK BY DECILE AMONG ALL RESIDENT HOUSEHOLDS Average Household Income from Work ($) Annual Change (%) Total 3,076 4,745 4,822 4,691 4, Lowest 10% Excluding Households with No Income Earner Next 10% 934 1,352 1,332 1,172 1, Next 10% 1,321 2,002 2,005 1,853 1, Next 10% 1,686 2,613 2,647 2,470 2, Next 10% 2,076 3,254 3,305 3,137 3, Next 10% 2,541 4,019 4,097 3,900 4, Next 10% 3,116 4,938 5,034 4,828 5, Next 10% 3,897 6,093 6,271 6,023 6, Next 10% 5,152 7,965 8,221 7,937 8, Top 10% 9,671 14,890 15,053 15,451 16, Note : Deciles are based on ranking of all resident households. Within the lowest 10% of households, there was still a decline of 14 per cent in average household income for those with income earners from $531 in 1999 to $459 in Such comparison, however, must be viewed in context, as the proportion of households with income in the lowest 10% had become much smaller, from 25 per cent in 1999 to 13 per cent in This means that average household income in 2000 is computed for a smaller pool of incomeearning households, who are more concentrated at the lowest extreme of the income distribution. Income Growth among Households with Income Earners In Table 3, only the resident households with income earner were ranked by the size of their total household income from work. Since the household income data cover only income from work, it is pertinent to analyse the household income growth among all households with at least one working person. This is done in some developed countries with a large proportion of retiree households. For the income-earning households, the average household income from work had increased in every decile group between 1999 and 2000, reflecting the economic recovery. The lowest 10% had an income increase of 6.8 per cent. The top 10% households had the largest increase in income among all groups at 9.4 per cent. For the decade from 1990 to 2000, there were across-the-board increases in household income in all decile groups.

4 TABLE 3 AVERAGE HOUSEHOLD INCOME FROM WORK BY DECILE AMONG RESIDENT HOUSEHOLDS WITH INCOME EARNERS Average Household Income from Work ($) Annual Change (%) Total 3,205 5,142 5,070 5, Lowest 10% Next 10% 1,065 1,712 1,625 1, Next 10% 1,433 2,290 2,200 2, Next 10% 1,782 2,904 2,785 2, Next 10% 2,171 3,564 3,430 3, Next 10% 2,634 4,338 4,195 4, Next 10% 3,209 5,268 5,105 5, Next 10% 3,992 6,505 6,295 6, Next 10% 5,254 8,472 8,242 8, Top 10% 9,816 15,393 15,920 17, Note: Deciles are based on ranking of resident households with income earners. Household Income Disparity Reflecting the faster income growth for higher-income households, the disparity in household income had widened in The Gini coefficient, which is a summary measure of income inequality among all resident households, rose from in 1999 to in 2000 (Table 4). The coefficient had remained relatively stable during the period , at between and TABLE 4 MEASURES OF HOUSEHOLD INCOME DISPARITY Gini Coefficient Excluding Households with No Income Earner Ratio of Average Income Top 20% to Lowest 20% th decile to 2nd decile Income Shares Lowest 20% Middle 60% Top 20% The same trend was shown when households with no income earner were excluded, with the Gini coefficient increasing from around during to in 1999 and in 2000.

5 Other measures of income inequality indicated similar trend towards greater disparity in household income. The ratio of the average income of households in the top 20% to that of households in the lowest 20% rose from 18 in 1999 to 21 in After discounting households with very high and very low incomes, households in the 9th decile still earned 7.4 times the income of those in the 2nd decile, up from 5.5 in The income share of households in the lowest 20% and middle 60% had declined between 1990 and Households in the top 20% accounted for larger shares of the total income from 48 per cent in 1990 to 51 per cent in Effect of Retiree Households on Income Distribution The increase in households with no income earner contributed to the greater household income disparity. Households with no income earner comprised 8.7 per cent of total resident households in 2000, up from 7.5 per cent in 1999 and 4.0 per cent in This was mainly due to the increase in households with retired elderly persons and unemployed members. As household income from work would shrink when household members retire or become unemployed, such households would tend to fall into the lowest decile (Table 5). TABLE 5 LOWEST 10% HOUSEHOLDS BY ECONOMIC ACTIVITY STATUS Per Cent Total Households with No Income Earner Retiree Households Households with At Least One Unemployed Person Below 60 Years* Households with Only Economically Inactive Persons Below 60 Years Households with Income Earners Note : Retiree households refer to those comprising only non-working persons aged 60 years and over. * Includes households with both retirees and unemployed persons below 60 years. Lowest 10% Not Necessarily Poor Although a high proportion of households in lowest 10% had no income from work, they were not necessarily poor. More households in this group were living in bigger dwelling units in About 78 per cent lived in HDB 3-room and larger flats or private properties, up from 68 per cent in 1990 (Table 6). Furthermore, 78 per cent of households owned their homes in 2000, up from 69 per cent in 1990.

6 TABLE 6 Type of Dwelling RESIDENT HOUSEHOLDS BY TYPE OF DWELLING AND HOME OWNERSHIP RATE Lowest 10% Households All Households HDB 1- & 2-Room Flats HDB 3-Room Flats HDB 4-Room & Larger Flats Private Houses & Flats Home Ownership Rate Number of Households ( 000) Per Cent III INTERNATIONAL COMPARISON OF INCOME INEQUALITY TRENDS As there are significant conceptual and coverage differences in income data of various countries (see Annex A), the absolute level of income disparity is not directly comparable. International comparison is meaningful in terms of the direction of change in income distribution over time for each country. As measured by the Gini coefficient, there was a tendency towards greater household income inequality among selected countries in the 1990s (Chart 1). The widening disparity in the overall household income distribution in Singapore was in line with the trends observed in countries such as Hong Kong, Taiwan, Korea and US. This worldwide trend could be due to the mass transition of economies into knowledge-based economies in recent years. Skilled workers who were able to exploit career and business opportunities in the transformed economy enjoyed faster income growth than those in lower-skilled jobs CHART 1. GINI COEFFICIENTS OF SELECTED COUNTRIES Singapore Hong Kong Taiwan Korea US UK Philippines Japan New Zealand Gini coefficient for earliest year indicated Gini coefficient for latest year indicated

7 IV CONCLUDING REMARKS Household income distribution in Singapore, which had remained relatively stable during , became increasingly unequal in 1999 and This was mainly due to the increase of households with no income earners in the lowest 10% and the faster income growth among higher-income households in these years. The widening income disparity was a reflection of globalisation and Singapore s transition into a knowledge-based economy. Many countries had experienced similar increases in income inequality in the 1990s. Singapore Department of Statistics June 2002 Income Data of Various Countries ANNEX A

8 Country Source Definition of Income Coverage of Data Singapore Censuses of Population 2000 Household income from work: refers to the sum of income received by all members of the household from employment and business. It does not include the income of servants. Resident private household: refers to a private household headed by a Singapore citizen or permanent resident. A private household refers to a group of two or more persons living together in the same house and sharing common food or other arrangements for essential living. It includes a person living alone or a person living with others but having his own food arrangements. Hong Kong 2001 Population Census: Summary Results Monthly Household Income: refers to the total income of members of household, including earnings in cash from all employment and other cash incomes. Domestic Household: refers to a group of persons who live together and share essentials for living. It counts persons who make provision for essentials for living without sharing with others as one-person households. Taiwan Report on the Survey of Family Income and Expenditure in Taiwan Area of Republic of China, 2000 Disposable Income: covers compensation to employees, entrepreneurial income, net property income (including imputed rent income) and net transfer income (including miscellaneous receipts). Household: comprises of members who partake the common living of the household. Korea Social Indicators in Korea Household Income Urban Wage Earner s Household United States US Bureau of Statistics website, Current Population Reports Household Income: covers money income received (exclusive of certain money receipts such as capital gains) before payments for personal income taxes, Social Security, union dues, Medicare deductions, etc. It excludes amounts received by persons who are members during all or part of the income year if these persons no longer reside in the household at the time of interview. Household: consists of all persons who share a housing unit. A person living alone in a housing unit, or a group of unrelated persons sharing a housing unit as partners, is also counted as a household. Group quarters are excluded. United Kingdom Economic Trends, Reports on The Effects of Taxes and Benefits on Household Income Disposable income: refers to the sum of the gross weekly cash income minus the deduction of income tax actually paid, national insurance contributions and other deductions at source of all its members. Gross weekly cash income includes wages and salaries, income from self employment, income from investments, social security benefits and other sources. Private Household: comprises one person living alone or a group of people living at the same address having meals prepared together and with common housekeeping. Resident domestic servants are included. Excluding people living in hostels, hotels, boarding houses or institutions. Income Data of Various Countries (cont d)

9 Country Source Definition of Income Coverage of Data Philippines 2001 Philippine Statistical Yearbook Family Income: from cash and non-cash sources. It includes wages and salaries, earnings from self-employment and other activities before tax and other deductions from retirement, social security and insurance premiums, union dues and other contributions, rents from properties and owner-occupied houses, interests and dividends, pensions and annuities, retirement and insurance benefits, etc. Family: refers to a group of persons usually living together and composed of the head and other persons related to the head by blood, marriage or adoption, and who are not borders, guests or domestic help. A single person living alone is considered as a separate family. Japan Japan Statistical Yearbook 2000 Household Income: includes wages and salaries, income from business and homework, other current income (such as returns from assets and social security benefits) and non-current income, etc. Workers Household: refers to households whose heads are employees (excludes executives). It excludes agricultural, forestry and fishery households, and one-person households. New Zealand New Zealand Consumer Expenditure Statistics 1998; New Zealand Household Expenditure and Income Survey, Household Income: refers to the sum of gross income received by each individual household member aged 15 years and over. It includes wages and salaries, selfemployed income (defined as the beforetax profit/loss of the business), social security benefits, national superannuation and war pensions, income from investment, and other regular income. Private Household: refers to a person living in a dwelling who makes his or her own housekeeping arrangements; or, a group of people sharing a dwelling for most of the reference period who share the essentials for living. It excludes people living in institutions, boarding houses, hotels, motels and hostels, etc.