12 February 2008

Inflation has hurt poor more than rich

Everybody in Singapore has seen significant price increases, but poorer households see more of it, according to statistics. In promising to do something about price trends in the upcoming budget, the government should bear this in mind. Full essay.


yuen said...

I think there is another worrying aspect, that income at the lower levels have increased little

while people tended to blame low pay foreign workers for this trend, other factors are equally significant; take the example of taxi drivers: 10 years ago COEs were expensive, and taxi rentals were high in accordance; since then COEs dropped 70%, but taxi rentals did not drop, while taxi fares increased little; hence, the income of taxi drivers hardly rose, but profitability of the taxi companies has benefitted from the COE drop; the income of the management and shareholders presumably benefited too

(BTW - I happen to be a long term shareholder of Comfort Delgro but dont remember its dividend history over the years)

In announcing that the forthcoming budget will provide more help to the low income earners, the government shows awareness of the problem, but these new measures can only be within its existing policy framework, which includes availability of foreign labour to facilitate investment, and commercial orientation of certain essential provisions like pubic transport

yuen said...

while we are on the topic of financial needs of low income people, the just released information about the new annuity scheme is relevant

I was previously puzzled why it is possible to make the scheme refundable and still provide an adequate payout without subsidy; my understanding now is:

if you commit 100% of the minimum sum (currently specified at $67K) at age 50, a male is entitled to $640 per month till death from age 65 onward; now over 15 years at 4% interest, the amount would have grow about 80%; hence, you are in effect paying 120K into the scheme

further, I am still not clear what "refund" means: maybe

a. if you die before reaching 65, you get back the $67K, or

b. you get back $67K plus interest accumulated so far;

and if you die after reaching 65, say age 66, do you get back a portion of the $67K? - if you do, then the scheme is not really an annuity, but a gradual withdrawal, but I suspect the answer is no, and the scheme is indeed an annuity, with money forfeited from those who die early going to fund those who live long

Anonymous said...

I am disgusted to read abt an article from Straits Times where its journalists mention that one of the ways to combat inflation is to cut income tax for the high income earners! He should have put it in context, but no... it was obvious that this journalist is pushing this statement... it was grammatically correct, but contextually out of place... An obvious brain washing attempt. This is another evidence of the horrible newspaper by the name of Straits Times.. Shame on SPH.

Anonymous said...

The idea of inflation is only half the story. It has no meaning unless one compares it against the rise in wages. Over the past ten years since 1997, my suspicion is that real wages has dropped tremendous. Except for last year, there really hasn't been any meaningful jump in wages. On top of which, one must factor in the increase in taxes.

mr.udders said...

Was wondering if you should rephrase:

"The lowest 20 percent of households by income spend more than the rest on food, housing and healthcare -- the necessities. They spend less than the others on clothing, transport, communication and education".

to read:

"The lowest 20 percent of households by income spend a larger proportion of their income than the rest on food, housing and healthcare -- the necessities. They spend a smaller proportion of their income than the others on clothing, transport, communication and education".

I would actually expect that in some instances, the amount that richer people spend in the same category of products may be more than the poorer people.

Case in point: PM Lee's "no need to buy branded bread"? So the richer folk can afford the 'branded' items that may eventually comprise a significantly smaller proportion of their income, which is definitely much higher than the income of the poorer folk.


Yawning Bread Sampler said...

You're absolutely right. I've changed it as you have suggested.