Inflation moderators like maid levy, lower car prices
didn't benefit bottom 20%
Jasmine Yin
[email protected]
AS inflation rose by 1per cent overall last year, the brunt of
higher prices especially for housing once again fell on the
lowest-earning 20 per cent of Singapore society.
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The Consumer Price Index (CPI) went up by 1.8 per cent for this
tier last year, more than four times the 0.4-per-cent increase for
the top 20 per cent income group.
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The middle 60 per cent registered a 1.1-per-cent hike, according to
the Department of Statistics (DOS). The CPI measures the price
level of a basket of goods and services consumed by an average
household.
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The main items contributing to the CPI hike across all income
groups were electricity tariffs, food, petrol, school fees, taxi
fares and cigarettes, the DOS told Today. These price increases
were "moderated" by lower car prices and the Government levy for
domestic maids, it added.
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But Non-Constituency MP Sylvia Lim observed that these two factors
"do not benefit" the bottom 20 per cent which is hit "more than the
rest" as has been the trend in recent years.
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CIMB-GK economist Song Seng Wun noted that the lowest income group
is typically harder hit due to their differing spending patterns,
and such CPI differentials will persist.
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For instance, households in the bottom 20 per cent saw a higher
inflation rate for housing at 3.4 per cent last year over 2005
due largely to higher electricity bills, which carry a bigger
weighting in such households than in the top 20 per cent of
households.
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Likewise, costs of transportation and communication for the highest
income group registered the largest negative growth at 2.7 per
cent in 2006, largely because of the lower car prices and a
bigger weighting on this category.
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The weighting pattern of the CPI shows the relative importance of
each item in the basket of goods and services that those households
consume.
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Mr Song said that, with the lowest 20 per cent spending more than
half their expenditure on food and housing, it is likely that the
CPI will go up further when the Goods and Services Tax (GST) kicks
in, come July.
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MPs like Sin Boon Ann and Zainudin Nordin agreed that the data
reflects the greater burden felt by the lower income.
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"There will always be more that we can do for the poor. The
question is, how much help should be extended and to how many,
asked Mr Sin, who chairs the Government Parliamentary Committee for
Community Development, Youth and Sports. The Government's Workfare
Income Supplement and GST offset measures are meant to address some
of the issues faced by the needy, he added.
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Mr Zainudin, who is mayor for Central Singapore District, urged the
Government to take a more "focused" and "niche" approach in
assisting those in the bottom tier. This sentiment was echoed by
Jalan Besar MP Lily Neo, who quizzed the Government last week on
whether its aid for the needy especially Public Assistance
allowance rates was in tandem with inflation.
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Many of the low-income find it difficult to get well-paying jobs
because of their poor qualifications, unlike others who are riding
the current economic boom with ease. While their wages "do not rise
in tandem with inflation, they have to spend more", Dr Neo noted,
reiterating her call for a study to assess the impact of help
measures.
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While Ms Lim agreed that growing wages is the "most sustainable
solution", the Workers' Party chairman said: "Nevertheless, we
should have vigorous checks on cost increases, especially
utilities. Alternatively, more rebates can be considered for
essential items."
