Analysis: Why official data on rising 2023 median household income may not square with everyone’s experience

SINGAPORE, Feb 8 — Experts have cited various reasons why new official figures showing that median monthly household income rose 2.8 per cent in real terms to S$10,869 (RM38,467) in 2023 do not seem to line up with the lived experience of numerous sceptical commenters online.

They told TODAY that not everyone lives in a household earning the median monthly income, and that sometimes price rises in the supermarket are more “in your face” than, say, occasional pay bumps.

Various commenters online expressed some disbelief after the release of the figures on Wednesday (Feb 7) by the Singapore Department of Statistics (SingStat).

In economic-speak, a real increase of 2.8 per cent in median monthly household incomes means that a median household would have a 2.8 per cent boost to their spending power after accounting for inflation, which was 4.8 per cent overall in 2023.

Some who commented on TODAY’s Facebook page on Wednesday wondered how SingStat had derived that figure, claiming that they had observed higher inflation on the ground that outpaced the increase in their incomes.

Others wondered whether the figure for median monthly household income was “boosted” by higher-income families here, which they claim do not reflect the experience of the average Singaporean.

Another metric that some commenters felt sceptical about was the Gini Coefficient, a measure of income inequality, which showed that this had fallen to the lowest level on record.

Their doubts stemmed from the fact that the figures released by SingStat also showed that the lowest income earners here saw a fall in their earnings.

The average income per household member of the bottom 10 per cent of earners fell by 1.7 per cent after accounting for inflation, even as most Singaporeans saw an increase in their income.

Against the backdrop of these concerns, TODAY asked experts to explain the numbers in more details and why some people may have reacted in this way.

Median household income is a ‘summary statistic’

Associate Professor Alwyn Lim from the Singapore Management University (SMU), whose research interests include economic sociology, said that the 2.8 per cent rise in median household income is a “summary statistic” which is not meant to represent every Singaporean household.

“This is not an indication that the figures are fake or are inaccurate... just that some of these aggregate stats need a bit more nuance,” he said.

Such nuance includes the basket of goods that each household buys, and thus the extent to which they are impacted by inflation, he explained. While this is different for each household, the aggregation of the statistics means that such nuance is lost.

“The median household income is S$10,000, but obviously not every household earns S$10,000,” he said.

“It doesn’t reflect their lived experience because it is a summary statistic that is actually not meant to reflect the lived experience of everyone, but meant to reflect exactly the median household.”

The median of any set of numbers is the middle number. In this case, the median household income is the figure precisely in the middle if all the household incomes in Singapore were written down starting from the lowest and ending with the highest.

Assoc Prof Lim added that the five-digit figure for median household income is plausible, as it is the combined income of all members of that household.

“If you have three income earners counted in a household, it’s not inconceivable that the median household income is the figure stated,” he said.

He also noted that the definition of median monthly household income also includes the employer’s Central Provident Fund contributions.

This means that people may be led to feel like the figures are inflated, as their take-home pay would be lower than their gross pay, which is what the statistics are based on.

On the claims from commenters that wealthier families have pushed up the median income, Dr Chua Hak Bin, a Maybank economist, said that it is not possible for a very wealthy household to alter the median income figure much, as this is not the same as the average income.

The average, or “mean”, is the figure when the total of all figures in a set of numbers are added together and divided by the number of figures.

Dr Chua gave the example of how a “super billionaire” household could push up the average income of Singaporean households.

However, this ultra-wealthy household would have little impact on the median, which is simply the income of the household at the 50th per centile.

“Adding that one super billionaire at the top in a large population doesn’t change the median,” he said.

“The median household income is therefore more representative of the state of households.”

Dr Chua added that psychological factors are also at play when it comes to how people perceive inflation. This is especially more pronounced for lower-income households.

“Lower income households may be unhappy or feel ‘poorer’ because inflation and higher prices are what they see everyday at the supermarkets and food stalls,” said Dr Chua.

“The sticker price shock at supermarkets and restaurant menus are much more in your face than the nominal wage increase and occasional handouts from the Government,” he said.

He also noted that the cost of living is getting higher and lower income households are “already on tight budgets and fearful that they cannot keep up”, which could explain some scepticism over the SingStat figures.

Improving income inequality

Another metric that left some commenters scratching their heads was the Gini Coefficient.

This measure of income inequality is equal to zero in the case of total income equality wherea a value of one means total inequality.

The Gini coefficient based on household income from work per household member — before accounting for assistance or benefits provided by the Government and taxes — improved slightly to 0.433 in 2023, from 0.437 in 2022.

After adjusting for government transfers and taxes, the Gini coefficient in 2023 is 0.371, the lowest on record.

Comments on social media sites such as Reddit questioned the use of the Gini Coefficient, claiming that it did not reflect the inequality on the ground, given that median household incomes per household member had fallen for the lowest 10 per cent of earners.

Experts say that income inequality has narrowed even as the real incomes of the lowest earners have fallen because this group tends to receive the most government support.

“The narrowing was due to the larger growth in transfers and more types of transfers, especially to those the one- and two-room Housing and Development Board (HDB) flats,” said Mr Song Seng Wun, an economic adviser at financial service provider CGS International.

Indeed, in 2023, resident households living in HDB one- and two-room flats received S$13,623 per household member on average, close to double the transfers received by resident households living in HDB three-room flats.

“The calculation of real income is only for income from work at the various per centiles... They do not include government transfers,” he added.

Fall in lowest incomes a ‘concern’

Experts said that even with government payouts supporting the lowest earners, a fall in their income could still be a cause for concern.

While the lowest 10 per centile of households saw a fall in real income of 1.7 per cent per household member, the 20th to 80th per centile of earners saw on average an increase in income.

OCBC chief economist Selena Ling said that the slight fall in incomes for the lowest earners could be due to a slowdown in hiring as Singapore moves past the post-Covid recovery.

“Right after the reopening of the economy... we did see outsized type of wage increases, which probably was not sustainable,” said Ms Ling.

After the recovery slowed, wage growth also slowed down, she added.

She added that these jobs that are taken up by the lowest earners are typically lower-skilled or contract jobs, which were easily affected by factors such as the reopening of the economy to foreign workers, for example.

Looking ahead, she said that the outlook for these lower-wage workers remains uncertain, as inflation remains “sticky”, while nominal wage growth will depend on the industries they are in.

For instance, such workers in the air transport, tourism and entertainment industries will have a higher likelihood of enjoying wage growth on the back of improved tourist arrivals. — TODAY