Low-income Singaporeans continue to face weakest wage growth: DBS

Inflation in Singapore hit a 13-year high of 4.4% in June, an increase of 0.8% from the previous month.

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Low-income people in Singapore will face the slowest wage growth and the biggest increase in household spending as inflation rises, new search by the nation’s largest lender has shown.

Wages for those earning less than S$2,500 ($1,815) a month increased by just 2.5% between May last year and this year, according to the study.

This is less than the country’s average consumer price index inflation of 5.2% in the first half of 2022.

In contrast, customers earning S$5,000 to S$7,499 received salary increases of 11.1%, and those paid S$10,000 and above received a 13.6% increase over the same period. period, the report says.

“Customers earning less than S$2,500 tend to be older residents who have lower earning capacity or workers in less skilled occupations,” said Irvin Seah, senior economist at DBS Group Research.

The study of 1.2 million DBS retail customers showed that despite improved wages and benefits, almost half of the respondents’ income was below inflation.

However, Seah said low-wage earners receive financial support from the government, which creates more disposable income for this group of workers.

If the bank included upward customer income mobility, which refers to a person’s gradual increase in income over their lifetime, “then overall income growth for the low-income group would be more encouraging at 19 .2% year over year,” Seah told CNBC in an email.

Growing expenses

In addition to slower wage growth, people in the low-income group face increasing expenses, which have increased by a greater factor than those with higher wages.

Spending by Singaporeans earning less than S$2,500 increased by 13.8% between May 2021 and May this year, 5.6 times faster than their income growth of 2.5%, according to the study.

For Singaporeans earning between S$5,000 and S$7,499, spending grew 2.2 times faster than their income growth of 11.1%. Those earning S$10,000 and above saw their spending grow 1.8 times faster than income growth of 13.6%, the bank said.

“Spending on top earners is growing twice as fast as their income growth [versus 5.6 times] for the lowest incomes. Such [a] trend for lower incomes is obviously not sustainable unless there is a significant improvement in income growth or upward income mobility,” Seah said.

Spending habits

Rising inflation and post-pandemic economic reopening have led to increased household spending.

DBS said its customers now spend 64% of their income, up from 59% a year ago.

Spending by millennials (those between 26 and 41), who have been spending more as the economy reopened after the easing of Covid restrictions, has increased by almost 30% over the past year.

Spending growth for baby boomers (aged 58 to 76) was weaker.

The majority of baby boomers are retirees and “therefore, on an aggregate basis, revenue growth would naturally be weaker,” Seah said.

There was double-digit growth in all expense categories. The strongest spending growth was observed in transportation, shopping, entertainment and food.

Inflation outlook

Inflation in Singapore hit a 13-year high of 4.4% in June, an increase of 0.8% from the previous month.

Seah said inflation could peak in the third quarter of the year and decline in November.

High prices will persist for the next two to three years, but the rate of inflation will slow, he adds.

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