Tuesday, September 23, 2014

Higher income growth for HDB households

Sep 19, 2014


OVER the last five years, household incomes rose across the board, but they did not do so evenly.

Households living in Housing Board (HDB) flats had higher income growth than those in condominiums and landed property.

And although income from work went up, it now forms a smaller proportion of overall household income.

HDB households' incomes grew 5.2 per cent a year on average, according to yesterday's Department of Statistics' Household Expenditure Survey release. In contrast, incomes rose 3.6 per cent a year for those living in condominiums and other apartments, and 4.2 per cent for those in landed property.

Conducted every five years, the latest survey is based on data from 2012 to last year.

In absolute terms, the gap remains stark. The average monthly household income was $7,900 for HDB households, compared to $20,536 for those in condominiums and $26,058 for those in landed property.

But with incomes growing faster at the bottom, the income gap seems to have narrowed, UniSIM economist Randolph Tan said.

The bottom fifth saw annual income growth of 6.6 per cent, compared to 4.7 per cent for the top fifth.

Overall, household income growth was driven by rises in both work and non-work income.

Business income rose an average of 5.2 per cent a year, while employment income rose 3.9 per cent. Non-work income grew the fastest, at 22 per cent a year.

The differing growth rates meant that although employment income still forms the bulk of income, its share has fallen. It accounts for 78.6 per cent of household income, down from 84 per cent five years ago.

Business income continued to account for 11 per cent of income. But the share of non-work income doubled to 10.5 per cent, from 5 per cent five years ago.

It was especially significant for households in the bottom fifth.

Such households get an average of $536 in such income each month. This represents slightly more than a quarter (26.5 per cent) of their income, up from just less than a fifth (18.9 per cent) five years ago.

More than half of this is from sources such as relatives and friends, as well as Central Provident Fund payouts. Retiree households form a quarter of those in the bottom fifth.

But much non-work income also comes from the Government, in the form of GST Vouchers and Workfare Income Supplement scheme payouts, for instance.

For households in the bottom fifth, almost $1 out of every $10 in income comes from regular government transfers, noted Nanyang Technological University Assistant Professor Walter Theseira.

"So a large part of their income increase is because of the increase in generosity of transfers," he said.

But this is not a good strategy in the long run, he added. "The Government will need to look at policies that help them increase their job earnings."

Those at the top fifth are also getting more income from non-work sources, with an average of $2,956 a month. But this is mainly rental and investment income.

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