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

This piece, co-authored with my Minimum Income Standard (MIS) research collaborator Ng Kok Hoe, was first published on the MIS team’s website.

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. 

A new website

Welcome to my new website. I have set this page up as a place to share links and information about my books, op-eds, and research.

The last few months have been busy. A new, second edition of This Is What Inequality Looks Like hit bookstores in May 2019. I wrote and recorded a new Afterword for this edition. 

May also saw the launch of “What older people need in Singapore: A households budgets study”, a Minimum Income Standard research project I undertook with collaborators, Ng Kok Hoe, Neo Yu Wei, and Ad Maulod. Please watch and share this short explainer video:

Finally, I have been involved with Academia.sg, a new initiative which several scholars have launched to promote Singapore studies and to encourage critical debate about the state of intellectual life in Singapore.

You can find out more about my other books and publications at this page, which I will update from time to time. I will also post links to my op-eds on this blog. Thank you for reading.