Sunday, January 25, 2015

Lower-income group hardest hit by higher cost of living

By Valerie Koh

January 24

SINGAPORE — Inflation may have slowed last year, but figures released today (Jan 23) showed that the lower-income households felt the brunt of the higher cost of living.

Data from the Department of Statistics (SingStat) showed that the Consumer Price Index (CPI)-All Items for the bottom 20 per cent, middle 60 per cent and highest 20 per cent income groups increased by 1.5 per cent, 1.2 per cent and 0.7 per cent, respectively.

Excluding imputed rentals on owner-occupied accommodation, the bottom 20 per cent income group experienced inflation of 1.8 per cent last year, while the CPI for the middle 60 per cent and the highest 20 per cent income groups increased by 1.3 per cent and 1 per cent, respectively.

For all households, the main items responsible for the higher cost of living were food, school and tuition fees, and medical treatment fees, SingStat said.

It added that the middle- and high-income groups experienced lower inflation rates than the bottom 20 per cent last year largely because of the moderation in car prices, which had a greater impact on the cost of living for the middle and high income groups.

[In Other Words, if you are worried about COE increases, are cheered by lower petrol prices, and want ERP to be abolished, you are probably middle or high income.]

Economists whom TODAY spoke to noted that the less well-off are typically hit harder by inflation.

OCBC economist Selena Ling said: “That’s always the case because the proportion of expenses spent on basic necessities is a bigger proportion of their budget ... For the higher income, a larger percentage is spent on discretionary goods and services.”

DBS economist Irvin Seah noted that the cost of big-ticket items such as cars and high-end properties fell significantly last year. SingStat’s data showed that the CPI for housing and transport for the highest 20 per cent income group fell by 0.4 per cent and 1.5 per cent, respectively.

Members of Parliament (MPs) noted that low-income families continue to be cushioned from the impact of inflation by various assistance schemes.

However, more attention can be paid to the sandwiched class, they added. Mountbatten MP Lim Biow Chuan said: “The challenge is the middle income. They do feel the pinch because they’re not entitled to the benefits and yet they feel the full blow of increases in the cost of living.”

In this regard, the Government is gradually making inroads, he said, with the tweaking of certain financial schemes to allow a greater pool of people to qualify. For instance, the household income ceiling for the Edusave Merit Bursary was raised from S$4,000 to S$5,000 in 2012.

Inflation had eased in the second half of last year. The CPI-All Items for general households rose by 0.4 per cent between July and December last year, compared to an increase of 1.7 per cent in the first half of the year.

For the entire year, inflation rose by 1 per cent, compared to the 2.4 per-cent increase in 2013.

Pasir Ris-Punggol GRC MP Gan Thiam Poh said his residents have complained about high food prices and tuition fees. “We’re working with voluntary welfare organisations to provide free tuition. What’s important is that residents know help is always here.”

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