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."
