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DBS report shows Singaporeans with low incomes still not seeing significant wage growth

Logan by Logan
August 3, 2022
in Economy
0
DBS report shows Singaporeans with low incomes still not seeing significant wage growth

Image Source- Reuters

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According to recent analysis by the nation’s largest lender, low-income Singaporeans would have the slowest wage growth and the steepest increase in family spending as inflation rises.

Between May of last year and May of this year, wages for people making less than 2,500 Singapore dollars ($1,815) a month increased by only 2.5%, according to the survey.

That is less than the nation’s 5.2% first-half 2022 average annual increase in the consumer price index.

Customers who were paid between S$5,000 and S$7,499 on the other hand experienced salary rises of 11.1 percent, while those who were paid S$10,000 and above saw a 13.6 percent gain during the same time period.

Image Source- ABC

“Customers earning below S$2,500 are usually elderly residents who have a lower earning capability or workers who are in lower skilled professions,” Irvin Seah, a senior economist with DBS Group Research, said.

According to a research of 1.2 million DBS retail customers, income for nearly half of the respondents lagged inflation even if salaries and job benefits had improved.

However, according to Seah, low-wage earners receive government financial assistance, resulting in increased disposable money for this category of workers.

If the bank took into account its customers’ potential for upward income mobility, which is the process through which one’s earnings develop over the course of a lifetime, “then overall income growth for the lower income group would be more encouraging at 19.2% year on year,” Seah told.

Expenditures are increasing

Along with slower salary growth, persons in the lower income bracket also have to deal with rising expenses that have increased more dramatically than those in the higher income bracket.

According to the analysis, costs for Singaporeans making less than S$2,500 increased by 13.8% between May 2021 and May of this year, which is 5.6 times faster than the 2.5% growth in their salary.

For Singaporeans making between S$5,000 and S$7,499, expenses increased by 2.2 times more than income did, which increased by 11.1 percent. According to the bank, those making S$10,000 and above had spending growth that was 1.8 times greater than their income growth of 13.6%.

“Expenses for the higher income is rising at twice the speed of their income growth [versus 5.6 times] for the lower income. Such [a] trend for the lower income is obviously not sustainable unless there is significant improvement in income growth or upward income mobility,” Seah said.

What it costs us to spend

Rising prices and the economic downturn caused by the pandemic have resulted in an increase in family spending.

According to DBS, consumer expenditure has increased from 59 percent to 64 percent of total income.

Since the Covid limitations were loosened, millennials (those between the ages of 26 and 41) have been spending more as the economy has recovered. Over the past year, expenses for millennials increased by approximately 30%.

For baby boomers (aged 58 to 76), the growth in costs was less.

Retirees make up the majority of baby boomers, and “hence, on an aggregate basis, the income growth would be naturally lower,” Seah said.

Almost every spending category experienced double-digit growth. The highest increases in costs were seen in these categories: travel, shopping, entertainment, and food.

Economic predictions for rising prices- Inflation

Singapore’s inflation rate increased by 0.8 percent from the prior month to a 13-year high of 4.4 percent in June.

According to Seah, inflation may reach its high in the third quarter and then begin to decline in November.

According to him, high prices will continue for the next two to three years, but the rate of inflation will decline.

Tags: expenses are increasingincrease in family spending as inflation rises.InflationInflation in Singaporelow wagesSingapore EconomySingaporeans with low incomes still not seeing significant wage growthslow wage growth rate
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