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An inefficient look at the Gini coefficient

I’ve never really liked reading “breaking’’ news online because they seldom give you the full picture. So it was with yesterday’s “breaking’’ news on household incomes and income inequality. On, I took a bite at both ST and Today online versions which zeroed straight on the rise in median household incomes, which is pretty good news.

But dig deeper and the picture is not so pretty. I’m glad that both newspapers gave more insights today, although I found the statistics pretty hard-going despite the use of charts. This is because some numbers are given in nominal terms, some after factoring in inflation. Yet others go by average income per household and then gets subdivided into per person. Sigh. BT, ST and Today all used so many different figures that it’s hard to piece things together.

So what is the news that people really want to read? I’ll give it a go…but don’t trust me, read the reports yourself okay? My apologies to all economists and statisticians for dumbing stuff down.

Q: How much did median monthly household income (the mid-point in a range) go up from 2011 to last year?
A: From $7,040 a month to $7,570 a month – a 7.5 per cent jump. Hooray!

Q: But that’s just nominal terms, what happens after taking into account inflation?
A: Oh. Then the jump is smaller. Only 2.7 per cent. We did better in 2011, it’s a 5.6 per cent jump from 2010.

Q: Okay, so how did our top 10 per cent of earners fare?
A: Very well! The average monthly income of the top 10 of households is $30,379 last year, compared to $27,867 in 2011 (from BT). You want per household member? Then last year’s figure is $11,552. It’s a 5.6 per cent jump in real terms (from ST).

Q: So much ah…Then the bottom 10 per cent?
A: Not good. Their median pay package actually shrank to $440 per household member; it dipped by 1.2 per cent. MINUS sign! But if you took into account inflation which will minus out the “rent’’ part of the computation, it goes up slightly to 0.8 per cent. Plus sign.

(Don’t understand this rent thing? I think it’s like this: people own their homes, so a “rent’’ is like a proxy. But most people don’t pay “real’’ rent, so if you take this out, numbers look better. Still, some of the lower income do pay real rent, so inflation does hurt them. I welcome a better account from anyone out there….in layman language please)

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Q: So bad ah? You mean the top 10 earn so much more than the bottom 10?
A: You know the Gini-coefficient which measures income inequality? It’s gone up from 0.473 to 0.478 over the two years. But if you take into account G help in terms of Workfare etc to boost their income, then the numbers are smaller, from 0448 to 0.459. Even so, the gap is actually wider.

Q: How come wider?
A: Today reported that UOB senior economist Alvin Liew said it could be due to less transfers last year, compared to 2011. On average, resident households (including unemployed ones) received S$1,340 per member through various Government schemes last year, down from S$1,660 in 2011. Households without working persons living in one- to two-room HDB flats received the most – over S$8,000 in Government transfers last year. Bigger households always receive the least.
So if you compare the gap between top 10 per cent and bottom 10 per cent, it comes down from the richest earning 9.14 times more than the poorest to 7.87 times. Actually, ST has MPs saying that the poorest actually get more that is not taken into account, like free medical services and food rations.

Q: You think the bottom 10 per cent will get more help this year?
BT reported that experts had put the fiscal surplus at $4billion to $5billion, much more than the official projection of $1.27billion. With this kind of savings, the G can be expected to give more out to the bottom group in the coming Budget. I mean, makes sense right?

Q: What about the people in the middle?
A: Go read yourself lah. I got a headache liao. Go buy ST.

Written By

An ex-journalist who can't get enough of the news after being in the business for 26 years

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