Singapore’s Real Median Incomes Dipped 2.3PC in 2023 Due to High Inflation, but Expected to Ease Next Year

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With high inflation in 2023 eating into the spending power of Singapore residents, the real incomes for workers at the 20th per centile fell by 3 per cent compared with the same period last year, while that for median workers dipped by 2.3 per cent, even as nominal wages grew.

But the fall in real incomes is expected to ease next year as inflation tapers off, according to the Ministry of Manpower (MOM), which today released an advance report of how Singapore’s labour market fared in the whole of 2023.Core inflation is projected to be 4 per cent as a whole in 2023, and is expected to come in at 2.5 to 3.5 per cent in 2024, based on the Monetary Authority of Singapore’s Monetary Policy Statement published in October.

Excluding the impact of the increase in the goods and services tax (GST) rate in January, core inflation for 2024 is forecast at 1.5 to 2.5 per cent, the authority said.

MOM noted that over the past 10 years, real income growth has nevertheless remained positive and wage dispersion between the 20th and 50th per centile workers had narrowed, as the incomes of lower-wage workers rose faster than that of the median worker.

“While real income growth for the remainder of 2023 is likely to remain negative, we expect an improvement in real income growth in 2024 with inflation easing,” said MOM.

The ministry added that government transfers, such as the Workfare Income Supplement and the Assurance Package, helped individuals and households to better cope with higher costs arising from inflation.

Accounting for these government transfers and related payments, real income for the 20th per centile worker decreased 2.1 per cent year-on-year instead of 3 per cent.

Apart from real income, the report also found that the labour market remained tight, with unemployment and long-term unemployment rates falling for workers across occupational groups.

The annual release by the MOM’s Manpower Research and Statistics Department is meant to provide early findings from the Comprehensive Labour Force Survey to be released next year.

Other key findings

The report also found that employment rate for residents aged 15 and over declined to 66.2 per cent in 2023, from a historical high of 67.5 in 2022.

Nevertheless, when ranked against OECD countries, Singapore’s employment rate ranked high — coming in fourth place, ahead of countries like Switzerland, the United Kingdom, and the United States.

Unemployment rates and long-term unemployment rates for both professionals, managers, executives and technicians (PMETs) and non-PMETs improved in 2023.

Non-PMETs saw a larger decline in unemployment rate (from 4.4 per cent in 2022 to 3.6 per cent in 2023), compared to that for PMETs (from 2.6 per cent in 2022 to 2.4 per cent in 2023).

MOM added that the incidence of workers who are discouraged from seeking work remained stable and low at 0.4 per cent in 2023.

Time-related under-employment rate — which measures the percentage of persons aged 15 years old and above, who normally work part-time or less than 35 hours a week but are willling and available to engage in additional work, to employed persons — declined from 3.0 per cent in 2022 to 2.3 per cent in 2023, reaching the lowest in over a decade.

This indicates that more part-time workers in 2023 compared to 2022 were able to have the work hours they want.

The proportion of employees in permanent jobs also rose to 90.5 per cent, which was comparable to the previous high in 2016, when 90.6 per cent of employees were in full-time work.

Real wage growth expected in 2024, says economist

Song Seng Wun, an economic consultant from financial service provider CGS-CIMB Securities, said that real incomes for lower-income and median workers could have dipped in the past few years due to the influence of external factors — such as the Covid-19 pandemic and supply disruptions arising from the Ukraine war, which could have led governments around the world to impose export bans.

These external disruptions are what likely caused food and general inflation to rise, he said.

On the other hand, nominal incomes could have risen in Singapore due to government support rendered to businesses — which allowed companies to retain their workers and maintain a relatively tight labour force overall — hence leading to spillover effects on income growth, said Song.

Schemes like the roll-out of the Progressive Wage Model — which covers the food and beverage, and retail sectors — likely also played a part in lifting nominal wages this year, he added.

With inflation projected to moderate in 2024, the trend for real income is expected to reverse. 

If inflation rates fall below 4 per cent and global food prices continue to recede while “softer labour market conditions prevail”, there could be positive real wage growth, though it would be a modest increase, said Song. 

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