Making sense of data: Household income and expenditure, basic needs and inequality

When the lowest income households have higher expenditure than income, what does this imply about inequality and unmet needs? How do we put trends of mobile phone and aircon ownership in perspective? Ng Kok Hoe and Teo You Yenn offer insight into the latest household income and expenditure data.

Illustration by Jolene Tan

New data on household income and expenditure in 2017/18 has sparked much discussion, with two points drawing particular attention. First, the lowest income quintile group was the only group whose expenditure exceeded income during this period. Second, there appears to be increasingly widespread ownership of certain consumer items, such as mobile telephones and air-conditioning, across all income groups. 

What do these observations imply about whether everyone in Singapore can meet their basic needs? What do they tell us about inequality? 

Are needs going unmet?

The most significant issue to confront is whether people in the lowest income quintile group have sufficient income to meet their basic needs, as this has long-term consequences for their well-being. 

In ongoing research, one of us has found a strong social norm–present in families of all income levels–to spend “within means,” and a strong desire to save. This helps to explain why most households have lower expenditure than income. This norm is shared by those who earn among the lowest 20%; indeed earlier research (Teo You Yenn) has found that people with low incomes are careful about spending. They already forego spending on certain things that higher-income people take for granted as basic needs, with negative long-term consequences—buying cheaper, less nutritious food; delaying seeing doctors;  cheaper and less tuition for kids. 

While attention is sometimes drawn to items like the mobile phone, they do not necessarily make a huge difference to expenditure. In 2017/18, spending on mobile phone services made up just 3% of the monthly expenditure of households in the lowest income quintile group. Instead, necessities like food and transport continue to be the largest items. Compared to the previous Household Expenditure Survey in 2012/13, it is healthcare spending that has increased the most for these low-income households, from 7% to 10% of total expenditure.

The proportion of actual monthly spending for social and recreational purposes generally falls below what–according to elderly participants in our research on minimum income standards–is necessary to allow a sense of belonging, social participation, and engagement in cultural practices. The lowest-income households spend the least in this area, which raises concerns about their inclusion as members of society.

Unequal capacities to save

Expenditure outpacing income also implies insufficient capacity to save and plan for the future, with long-term negative consequences for meeting needs during old age. If there are inequalities in the capacity to save and plan, a social welfare system which ties outcomes to this capacity will tend to reproduce inequality in other areas. In Singapore, for instance, access to retirement security is underpinned by individual savings, access to housing by individual wealth accumulation, and quality of children’s education by individual investment. In other words, inequalities in income translates to unequal access to certain public goods. 

An incapacity to save also means that families which are otherwise generally stable can be easily thrown into crisis by unforeseen occurrences such as an illness, accident, job loss, or the arrival of a child who has special needs. This also raises the question of whether our policies can adequately buffer lower income families against these ordinary and yet unpredictable risks.

What counts as needs?

Illustration by Jolene Tan

Another major issue raised by the expenditure data is the definition of basic needs. It is important for us to understand what are considered basic needs by members of society at a particular point in time, and the extent to which these needs are being met, especially among lower-income groups. The income and expenditure data should be compared with Minimum Income Standards (MIS) or other similar benchmarks of what people need for a basic standard of living in Singapore today. While we have carried out MIS research in relation to older households, we intend to replicate this research across other household types.

Expenditure data alone may give us insights into what is most commonly owned or purchased, but it may fail to account for needs which people currently forego. What people need must not be conflated with what people can afford. Moreover, unlike qualitative research using the MIS method, expenditure data alone cannot reflect and take into account the rationales and social norms that explain why something is a need.

Needs evolve with society

What constitutes ‘needs’ are context specific, and can and do change over time.

We must recognise that as a society’s living standards and lifestyles change, so too do the requirements for belonging and participating in society. Something which was not a basic need before may have become a basic need now because not having that item would make it difficult for someone to participate in society. 

In our research into basic needs for older households, for example, our respondents reminded us that they did not consider mobile phones and internet access to be basic ten years ago. But in Singapore today, one would struggle to function in society without them. Many day-to-day transactions and interactions presume that people have internet access. On the other hand, newspaper subscriptions are no longer considered needs. Items that used to be part of belonging and participation in society may cease to be necessary as society changes. To keep pace with these changes, it is important that research into the definition of needs is updated on a regular basis. 

Conclusion

It is clear that income is a key means of meeting needs and thus a central determinant of well-being in Singapore today. To ensure everyone has sufficient income to meet basic needs, as a society, we need to review wages and redistribution–taxing and spending. To peg such policies to clear standards of adequate well-being, we also need a well-defined and regularly updated baseline of basic needs. 

Budget standards and cultural diversity

We have a new opinion piece (paywall) in The Straits Times today, by research team members Neo Yu Wei and Ad Maulod, examining how the definition of a basic standard in living developed by participants in our research reflected Singaporeans’ values relating to cultural diversity–and how they translated this practically and concretely into the household budgets that emerged:

Researchers in other countries have conducted similar research on minimum household budget standards, such as in the United Kingdom, Japan, Mexico, South Africa. However, only in Singapore did participants include the choice and freedom to engage in “one’s cultural and religious practices” as a key basic need. This underlies the importance participants place on being a member of their cultural community.

In discussing how to translate this definition into everyday practice, participants who come from diverse ethnic, religious, and socioeconomic backgrounds, took time to hear different views expressed, acknowledge the importance of different practices, before finding ways to agree on common and shared needs for every older person in Singapore.

A budget standard for everyone in a diverse society‘ by Neo Yu Wei and Ad Maulod (The Straits Times, 28 June 2019)

Our latest opinion piece in TODAY

TODAYonline has just published an opinion piece by Teo You Yenn and Ng Kok Hoe of our research team, exploring what it means to set a baseline for meeting needs:

A key aim in the MIS approach is to translate needs which may initially appear abstract — needs for independence or connection, for example — into concrete things which can be clearly and explicitly budgeted for.

The oft-repeated cliché that “money cannot buy happiness” may well be true in its most literal and simplistic conception, but our participants’ deliberations demonstrated that there are many concrete and material things — which require specific sums of money — that are needed to meet people’s needs.

While these material things cannot guarantee anything as subjective as “happiness”, they are deeply connected to well-being and important preconditions to happiness.

S$1,379 a month needed for basic needs? This is how Singapore’s seniors agree on this baseline‘ by Teo You Yenn and Ng Kok Hoe (TODAYonline, 4 June 2019)

MIS in the news! (4)

Media discussion of our MIS report findings is continuing! In today’s Straits Times, Dr Kanwaljit Soin writes:

We also know that current older workers are paid low wages, with two-thirds employed as cleaners, labourers and related workers, and categorised in the three lowest-paying occupational categories. They are paid less than the sum required for a basic standard of living, if we take $1,379 as the benchmark.

Needy Singapore citizens and permanent residents who are unable to work due to old age, illness, disability or unfavourable family circumstances, have been recipients of what is known as the Public Assistance Scheme and now called the ComCare Long-Term Assistance scheme.

The sum given per month for many years was about $500 and below, and finally increased to $600 per person this year, with two-person households getting $1,000.
Looking at CPF and retirement schemes shows there are real shortfalls in achieving the MIS through these routes.

Manpower Minister Josephine Teo revealed in Parliament in February that nearly three-quarters of those getting monthly payouts from the CPF Life Scheme or Retirement Sum Scheme receive less than $500 a month, while average monthly payouts for those between 70 and 79 was just $290.

Only 268,000 people were receiving these payments. The number of people over 65 is more than half a million, and so the remainder was left out of these two schemes.

Helping the elderly thrive is good for Singapore as a community‘ by Kanwaljit Soin (The Straits Times, 4 June 2019)

There were also several reports on the weekend:

MIS in the news (3)

We’re very pleased to see that the discussion on how to meet the needs of older people is continuing — and deepening!

“It doesn’t mean that once I reach 60 years old, I become a different person; I stay at home and eat porridge and face the four walls.”

How much is enough? Social workers and financial experts weigh in on meeting seniors’ basic needs‘ by Janice Lim (TODAYonline, 26 May 2019)

Throughout his presentation, Dr Ng repeatedly emphasised how participants were plagued by a pervading sense of anxiety. Many of them were extremely conscious of how old age is usually accompanied by declining health and consequently higher costs of healthcare. The sentiment of not wanting to feel like “a burden” to their families was a common thread as well.

Basic Living Needs for the Elderly Include Smartphones and An Annual Holiday. So What?‘ by Ethel Pang (Rice Media, 26 May 2019)

Further links:

MIS in the news! (2)

We’re really pleased to see lots of coverage and discussion of our report. In addition to the below articles, Ng Kok Hoe was on 95.8FM yesterday evening (flexing his Mandarin skills!) to discuss the findings and their implications.

Have we missed out any articles? Comment and let us know!

How to achieve a basic standard of living for older people in Singapore

Hot on the heels of our report launch, here is an op-ed by research team members Ng Kok Hoe and Teo You Yenn, published in The Edge:

In Singapore, many older people rely on contributions from their adult children. As an act of reciprocity and respect, support for elderly parents may be socially desirable. But in an ageing population, future elderly people will have fewer or no children, and it is unsustainable to depend on them as the main source of income.

With longer life expectancies, it is reasonable to expect longer years of work. Yet current older workers receive low wages. Many work primarily out of need and two thirds are employed in the three lowest-paying occupational categories. In 2017, “cleaners, labourers and related workers” received a median monthly work income of $1,200, less than the $1,379 required for a basic standard of living.

Read the full article here!

MIS in the news!

Thank you to everyone who came yesterday for our packed launch event! If you missed it, you can catch up on the Tweets in the threads listed here:

Here is a round up of news reports on the study that we’ve found. If we’ve missed any, do comment and let us know!

Do also check out the second explainer video from the Lee Kuan Yew School of Public Policy!

What older people need in Singapore: A household budgets study

We are very pleased to announce the public launch of our report, “What older people need in Singapore: A household budgets study“, and the accompanying video!

For more details, please see:

Below is our press statement, released on 22 May 2019:

Older people need $1,379 a month for basic needs, according to study

How much money does an older person need to meet their basic needs? According to a team of researchers in Singapore, in 2018, the figure for a single person aged 65 or above, living alone, was $1,379 a month.

The team of researchers, led by Assistant Professor Ng Kok Hoe (LKYSPP), conducted focus group discussions involving over 100 participants from a diverse range of backgrounds. Using a consensus-based methodology known as Minimum Income Standards (MIS), the groups came to agreement on how ordinary Singaporeans think about basic needs, and determined the household budgets necessary for older people to meet those needs.

Participants generated lists of items and services related to housing and utilities; things needed in a two-room HDB flat; personal care items and clothing; food; transport; leisure and cultural activities; and healthcare. Each item or service was only included if participants came to a consensus that it was a basic need, and could explain their reasons for its inclusion.

“This study reveals that ordinary members of society can come to consensus about a basic standard of living in light of norms and experiences in contemporary Singapore,” said Dr Ng. “Such income standards can help by translating societal values and real experiences into unambiguous and substantive benchmarks that policy can aim for.”

Key findings in the report include:

  • Participants agreed that basic needs go beyond subsistence. They emphasised values such as quality of life, independence, autonomy and social connections
  • Based on the lists of items and services, the household budgets necessary to meet basic needs were:
    • $1,379 per month for single elderly households
    • $2,351 per month for coupled elderly households
    • $1,721 per month for single persons aged 55-64

Said Associate Professor Teo You Yenn (NTU), another member of the research team and author of the best-selling “This Is What Inequality Looks Like”: “To tackle inequality, it is critical to establish an agreed floor below which no one should fall. The MIS method can be usefully applied to generate societal consensus across a range of household types.”

MIS research was first developed by researchers at Loughborough University’s Centre for Research in Social Policy in the UK. It has since been used in the UK, Japan, South Africa, Mexico, France and Ireland.

The research team will hold a public lecture on 22 May (Friday) for the public release of the research findings. The event will include a screening of an animated video about the research, a presentation by Dr Ng, and a question and answer session with the research team, moderated by Associate Professor Kenneth Paul Tan (LKYSPP).