Connect with us

Insights

Debunking 3 Myths About Singapore’s Wage Growth

How did these myths came about?


Recently, we read that Singapore’s full-time median wage has grown by 4.7% to $3,949. This includes Central Provident Fund (CPF) contributions by employers. If we were to exclude CPF contributions, the gross wage would be $3,467 as reported by Ministry of Manpower’s “Report: Singapore Workforce, 2015”.

In our competitive nation, we tend to benchmark our success based on the wages that we are earning. The competitive nature has led to many envies and myth creation. These myths are creating a crack in our nation, which divides the rich and poor.

Myth 1: Wage Growth Has Been Lower Than Inflation

There are multiple comments on various social media channels that claimed our wage growth has been lower than inflation. Let us take a look at the median wage growth against inflation (also known as consumer price index, CPI).

Exhibit 1: Median Wage Has Been Outpacing Inflation For 9 Years

Picture 1

Sources: Ministry of Manpower and Singapore Department of Statistics

The median wage is $3,467 in 2015 as compared to $2,167 in 2006. This represents a growth of 60% (compounded annual growth rate (CAGR) of 5.4%) over the last 9 years. In contrast, growth rate of inflation has been 28% since 2006 (CAGR of 2.7%)

The difference between wage growth and inflation is a whooping 32% over the last 9 years. So the medium income earners are definitely better off today compared to the past.

Myth 2: The Lowest Income Families Are Worst Off Because Of Inflation

Some people believe that the government only takes care of richer folks. On the contrary, the government has always been trying to bring the less privileged families out of the rut and to share with them the spoils of our nation’s success.

The reason is simple. The rich have the ability and adequate resources to continue taking care of themselves even without the government’s help.

Initiatives such as SkillsFuture have been targeted to help the less privileged. The rich do not need such initiatives to progress and we would be silly to think otherwise.

Exhibit 2: Low Households’ Wages Have Been Growing Faster Than Inflation

Picture 2

Sources: Ministry of Manpower and Singapore Department of Statistics

With the exception of 2009, where the global financial crisis occurred, the monthly household income of the bottom ten percentile has been growing at a rate that outpaced inflation.

The gross average monthly household income is $1,621 and $1,165 for 2014 and 2006 respectively. The low-income families have wage growth of 39% (CAGR of 4.2%) over 8 years, which is higher than the inflation rate of 28% over the same period.

Read Also: How Inflation Works

Myth 3: The Rich Benefitted The Most Compared To The Rest Of Us

We always thought that rich people were the ones who benefitted the most from the growth of our country.

Interestingly, we found out that there were two groups of people who have seen their household income experience greater growth than the top 10 percentile in Singapore.

Exhibit 3: There Are Two Other Households That Have Income Growing Faster Than The Top 10%

Picture 3

Sources: Ministry of Manpower and Singapore Department of Statistics

The 91st – 100th (or the top ten percentile) of wage earners in the country has wage growth of 64% (CAGR of 6.4%) over 8 years. This is lesser than two other households income groups. The 31st – 40th group has seen their income increase by 67% while the 51st – 60th group has seen it increase by 66%.

Surprised? So were we.

What other Singapore wage myths have you heard before? Share them with us through Facebook.

Top Image 

Listen to our podcast, where we have in-depth discussions on finance topics that matter to you.