Thursday, September 06, 2018

How to interpret salaries and lifestyle decisions of fellow Singaporeans

One of the few things I learned while creating my workshop are interesting statistics on Singapore families. Of the new things incorporated into my training materials, two statistics stand out in terms of usefulness.

a) Median Household Expense Information 

The median household expense information is about $4,699 per month. This number is only useful after we adjust for inflation since the figures were collected in 2013. Inflation has been quite mild for the past 5 years, so after applying a 2% increase, a household spends around $4,792. Now, the median household size is around 3.2. So dividing expenses by headcount, we get a really reliable expense figure of about $1,500 per person in 2018 as a reasonable benchmark.

b) Median Household Income Information

The median household income information for 2017 is a fairly high figure at $9,023 per month. This is very impressive. Assuming that each household consists of 2 working adults as a couple, this is still an impressive $4500 a month. If you perform a full division assuming 3.2 adults, you get $2,819 per month which seems a lot more reasonable.

[ Note that these numbers include employer CPF contribution ! Revised household income then becomes $7,711. Don't get into a mess trying to match these numbers ! ]

I think these two statistics is useful when interpreting latest news on the lives of individual Singaporeans. Two examples come into mind.

a) Middle class and feeling the pinch.

This article describes the struggles of a middle class family that is earning $7,000 a month.

It might be tempting to buy the angst shared in this article but we need to remind ourselves that expenses of 50% of Singapore families fall below $4,800 a month. After deducting 20%, the couple still has $5,400. 

The couple is better off reviewing their personal expenses and cutting it down. I would not waste too much time feeling sorry for them.

b) ITE salaries

This optimistic article talks about ITE salaries and explains that ITE graduates can earn up to $3,000 after 10 years of work in 2017. This has attracted praise from parts of social media which lauded the 9%+ increments ITE graduates received for the first 10 years of their working life.

This optimism is misplaced. 

Suppose I make $1 a month and I get a 100% increment every year for 10 years my salary is still $1,024 per month. 

The most positive reading of this statistic is that an ITE graduate, after 10 years of work, can support himself with ease and live a comfortable single life.

But there are alternative reading of this article - After 10 years of hard work, an ITE graduate couple will earn below the median income of a Singapore family.  After contributing for CPF, the couple has $4,800 which is just barely enough for median living. In practice,  such a couple will be attempting to live below the median expenses level. This is something I have done so myself for many years.

There is another darker interpretation to this data. 

A male ITE graduate, after 10 years of work, is unlikely to be able to sustain a family's living expenses at the median level on his own. He will need assistance from his spouse. This interpretation may seem unfair, but it is the reason why Donald Trump had so much support from rural white males in America who voted him into power.

Does this call for universal basic income ? Perhaps not, I think perhaps some form of negative taxation may be justified to give our ITE grads a break. 

All corners of society would want them to succeed in Singapore.

No comments:

Post a Comment