Inflation eats into income growth (Amended)

Singapore

INFLATION took a bite out of resident workers' income growth, reducing it to under one per cent in real terms this year - even as the labour market has stayed tight.

The latest Singapore Workforce report put out by the Ministry of Manpower says that the nominal median monthly income (including employer CPF contributions) of full-time resident workers (meaning Singaporeans and permanent residents) rose 1.8 per cent over the year to S$3,770 in June 2014.

But the real median income - that is, with inflation factored in - inched up by just an estimated 0.4 per cent.

The slowdown in income growth is all the more stark, given that it comes after what the report described as "exceptionally high increases" in 2013; the median monthly income of resident workers had jumped 6.5 per cent in nominal terms, and 4 per cent in real terms last year.

The big jumps could have come from the launch of the government's Wage Credit Scheme that year, which encouraged employers to give bigger wage increments, said the report.

Higher inflation as measured by the Consumer Price Index has weighed down resident workers' real income growth in recent years - even with sustained increases in nominal income.

Between 2009 and this year, the median income of resident workers jumped 29 per cent, or 5.2 per cent a year in nominal terms. This was slightly higher than the 26 per cent or 4.7 per cent yearly growth between 2004 and 2009, said the report.

But in real terms, median income grew only 9.7 per cent or 1.9 per cent yearly from 2009 to 2014, lower than the 13 per cent or 2.5 per cent yearly gains in the 2004-2009 period, it said.

Singapore's inflation came to 1.7 per cent in 2004, 0.5 per cent in 2005, one per cent in 2006, 2.1 per cent in 2007 and 6.6 per cent in 2008; 0.6 per cent in 2009, 2.8 per cent in 2010, 5.2 per cent in 2011, 4.6 per cent in 2012 and 2.4 per cent in 2013.

The Monetary Authority of Singapore expects the average inflation to fall to between one and 1.5 per cent this year, and to 0.5 and 1.5 per cent in 2015.

While income growth has eased, the labour market has continued to be tight. The report noted that the seasonally adjusted resident jobless rate stood at 2.8 per cent in June, down from 2.9 per cent in June 2013.

With more women and seniors returning to work, the resident employment rate for workers aged 25 to 64 hit a new high of 79.7 per cent in 2014; in 2013, it was 79 per cent, and in 2004, 72.3 per cent.

The employment rate of women in the prime-working ages of 25 to 54 edged up from 74.3 per cent in 2013 to a record 76 per cent this year; that for residents aged 55 to 64 reached a new high of 66.3 per cent, up from 65 per cent last year.

The resident labour force participation rate rose for a third straight year to a record 67 per cent, driven by continued increases in women and senior citizens looking for work.

The report said: "Reflecting ongoing initiatives for better work-life integration, the participation rate for females rose from 51.3 per cent in 2004 to 58.6 per cent in 2014."

Over the decade, the resident female labour force participation rate grew 3.5 per cent yearly, against 1.9 per cent per year for men. This brought the share of women in the 2.19 million strong resident labour force from 41 per cent in 2004 to 45 per cent this year.

The participation rate for older residents, those aged 55 to 64, surged from 49.5 per cent to 68.4 per cent over the same period, "reflecting tripartite efforts to enhance the employability of older workers".

For those aged 65 to 69, the rate jumped from 18.9 per cent in 2004 to 41.2 per cent in 2014.

The story above is the correct version.

Correction:

An earlier version of the article suggests that higher inflation eats into growth in 2014. The Ministry of Manpower has subsequently pointed out that the higher inflation applies only to the comparison of data between 2009-2014 and 2004-2009. Inflation still eroded income growth in 2014 but it was not "higher" inflation. The inflation figures in paragraph 9 in the earlier version of the story were taken from the World Bank. MOM has pointed out that the figures for 2004, 2007, 2010 and 2011 were slightly off by 0.1 percentage point each. These are corrected in the latest version of the story.

In paragraph 10, it should be "The Monetary Authority of Singapore expects the average inflation to fall " to" between one and 1.5 per cent this year, and "to" 0.5 and 1.5 per cent in 2015.", not "by" as was in the earlier version of the story. There was also a typo in paragraph 16, where it should be "the resident female labour force grew 3.5 per cent yearly, against 1.9 per cent per year for men", not 2.9 per cent.