Gig workers most financially stretched by high inflation, interest rates: DBS
AGAINST the backdrop of high inflation and interest rates, gig workers are found to be the most financially stretched among all of DBS’ customer groups.
Defined by DBS as self-employed contract workers who provide a variety of services to earn a living, the term “gig workers” includes platform workers who derive a big part of their income via online matching platforms.
In a report released on Thursday (Jul 13), DBS noted that gig workers’ savings have fallen year on year to an “unhealthy range” as they tapped into their savings to cover their expenditure needs.
The study showed that this group’s median savings for May 2023 fell to 1.7 months of expenses, from 1.9 months in the same month last year. In comparison, DBS’ median customers had savings amounting to 3.5 months of expenses.
The bank recommends median savings of 12 months of expenses for those with unstable income streams, and a three- to six-month range for other customers.
The expense-to-income ratio of 112 per cent for gig workers in May 2023 was also much higher than that of a median customer at 57 per cent.
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The bank concluded gig workers were not earning enough to cover their spending as they had relatively less stable income flows.
DBS recommended that this income group should “exercise financial prudence given their tight budgets, while also balancing short- and long-term needs”.
Solutions proposed by the bank include saving at least 12 months’ worth of monthly expenses, or making Central Provident Fund contributions to “leverage the attractive interest in the long term”.
“Some segments of society could potentially find themselves in a double-whammy situation, where inflation continues to dilute their purchasing power and erode savings, while high interest rates take a toll on their balance sheets,” said DBS senior economist Irvin Seah.
Observing that customers across multiple age and income groups appear to have been using their credit cards more over the past year, Seah cautioned individuals to be “mindful of their bill payments and to use credit cards wisely, such as to leverage card deals and rewards to stretch one’s dollar”.
Singapore’s average headline consumer price index and core inflation in the first five months of 2023 stood at 5.9 per cent and 5.1 per cent respectively, compared to pre-pandemic 2010 to 2019 historical averages of 1.7 per cent and 1.5 per cent.
Based on the banks’ forecasts, real gross domestic product growth is expected to slow to 1.7 per cent in 2023, down from 3.6 per cent last year. DBS noted that inflation remains high despite easing from its 7.3 per cent year-on-year peak in Q3 2022.
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