According to DBS Singapore, Singaporeans with low incomes continue to face the lowest wage growth, even as global economic uncertainty has begun to ease. This means that lower-wage workers are suffering more than their middle and higher-wage counterparts. But what’s at the root of this? Is it an effect of globalization? Or perhaps it’s the result of an increasingly unequal society? The Great Wage Slowdown of Singapore explores these questions in full detail!
As inflation rises, Singapore’s biggest lender has found that low-income earners will face the lowest wage growth and the greatest jump in household expenses.
Monthly earnings of those who make less than 2,500 Singapore dollars have risen by 2.5% between May last year and this year, the study showed.
That’s less than the country’s annual inflation rate, which averaged 5.2% in the first half of 2022.
Those earning S$5,000 to S$7,499 had wage increases of 11.1%, while those earning S$10,000 and above received a 13.6% raise in the same period, according to the report.
Typically elderly people with lower income and those who work in low-paying jobs earn less than S$2,500 says DBS Group’s senior economist Irvin Seah.
Despite improvements in salary and employment benefits, nearly half of the respondents’ incomes fell behind inflation in the study of 1.2 million retail DBS customers.
Low wage earners, however, receive government financial assistance, which increases their disposable income, according to Seah.
If the bank incorporated changes to upward income mobility for low-income individuals, which refers to increasing levels of income with age, then a 19.2% rise in income on a yearly basis would be more promising, Seah told CNBC in an email.
Expenditures are increasing
Not only is their wage growth stagnating, but they have more and higher monthly expenses, relative to their salary.
Singaporeans earning less than S$2,500 had their expenses grow 13.8% between May 2021 and May this year -5.6 times more than their income growth of 2.5%, according to the study.
Singaporeans who make from S$5,000 to S$7,499 per year have seen their spending rise 2.2 times as fast as their earnings. Those with an income of more than S$10,000 had their expenses grow at a rate 1.8 times as high as their income increased at, according to the bank.
Seah said,” Expenses for the higher income is rising at twice the speed of their income growth 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”.
What it costs us to spend
The slow rise in inflation, caused by the closing of businesses, has increased the costs of the average household.
DBS said its customers are now spending 64% of their income, up from 59% last year.
Millennials (those between 26 and 41 years old), who have been spending more as the economy has opened after Covid restrictions were eased, saw their expenses rise by almost 30% over the past year.
The increase in expenses for baby boomers (58 to 76 years old) was smaller.
Seah said the majority of baby boomers are retirees and as a result, the income growth is naturally lower.
All areas of expenses saw double-digit growth rates. The area with the greatest expenditure increase was transportation, shopping, entertainment, and food.
The future of inflation
For the month of June, inflation in Singapore reached 4.4%, an increase of 0.8% from the previous month.
Seah says inflation could be the highest in the third quarter of the year, but should ease in November.
Inflation will slow in the next two to three years, but prices will remain high.