Minimum Income Standard study reveals families need S$6,693 monthly to meet basic needs

In the heart of Southeast Asia, Singapore, often dubbed the “Little Red Dot,” has ascended to the pinnacle of economic success.

Beneath its glittering skyline and remarkable GDP figures, the city-state confronts challenges that might impede its path to inclusive growth.

A recently published report, “Minimum Income Standard 2023: Household Budgets in a Time of Rising Costs,” unveils figures detailing the necessary income households require to maintain a basic standard of living, using the Minimum Income Standard (MIS) method.

This method establishes universal basic needs by amalgamating diverse views and opinions. It aims to achieve consensus from ordinary members of society across different backgrounds and then translates these perspectives into precise household budgets. This determines the cost of a basic standard of living in Singapore.

The newly released study, spearheaded by Dr Ng Kok Hoe of the Lee Kuan Yew School of Public Policy (LKYSPP), builds upon research initiated in 2019 using the MIS method. It specifically focuses on working-age households in 2021 and presents the latest MIS budgets, adjusted for inflation from 2020 to 2022.

Raising a Family: For couples with two children, taking into account educational expenses, routine healthcare visits, and the general cost of living, the required amount reaches S$6,693 per month. For a single parent with one child aged 2–6 years old, this figure is S$3,369.

Seniors: The twilight years present unique financial challenges. For senior citizens, costs for medications, routine medical checks, and assisted services push their monthly requirements to S$1,492 for a single elderly individual. For an elderly couple aged 65 and above, the figure rises to S$2,551, while those aged between 55 and 64 years require S$1,857.

The increase amounts to a rise of 4%–5% between 2020 and 2022 for the three indicative household types.

This uptick is less pronounced than the price inflation, which reached 8.6% over the same period. For most item categories, the growth in the MIS budget aligns with inflation rates. Yet, the escalation in housing costs for single-parent households exceeded inflation, while transport expenses in the MIS budgets notably trailed inflation.

Significantly, a large part of these budgets is channeled towards public services, encompassing areas such as housing, healthcare, education, and childcare.

Such results underline the palpable gap between the actual earnings of many and the amount they need to maintain a dignified and reasonably comfortable life.

In the context of Singapore’s actual work income distribution per household member, the MIS budgets are closely aligned with the average earnings of the third decile group (21st to 30th percentile).

According to the study, even though households within this income range fared slightly better in 2022 compared to 2020 concerning the MIS budgets, around 30% of working households still don’t earn enough to meet basic necessities.

Inadequacy of Current Policies

Although measures like the Progressive Wage Model (PWM) and Workfare Income Supplement (WIS) have had a positive impact, as noted by the study, they haven’t completely addressed the disparity.

Even with increments since 2020, the primary wage interventions, such as PWM and WIS, enable single elderly individuals to meet the MIS budget. However, working-age households often achieve less than 70% of their income needs.

The study observes that during certain life stages, wage work isn’t feasible. As a result, public initiatives like cash transfers, service subsidies, and retirement income policies become crucial.

From 2020 to 2022, while the MIS budgets rose, the income limits and support amounts for children’s care and education remained unchanged.

This static nature made qualifying for assistance more challenging, and the genuine value of the aid decreased. The study pointed out, for example, that infant care subsidies account for 2%–35% of working-age households’ MIS budgets, while student care subsidies only cover between 1% and 7%.

Within the Central Provident Fund (CPF), modest hikes to the Basic Retirement Sum (BRS) and Full Retirement Sum (FRS) reportedly didn’t have a significant impact on the adequacy of retirement income. In practice, only 65% of active CPF members who turned 55 in 2021 achieved these benchmarks.

For low-income seniors, the ComCare Long-Term Assistance is perceived as insufficient. It addresses only 43% of a single elderly person’s basic needs and reaches a limited segment of the senior population. The more extensive Silver Support Scheme offers just 10%–20% of the MIS budget.

Even with the enhancement to the GST Voucher – Cash aimed at lower-income households, it amounts to merely about 1% of the MIS budgets for working-age households and 2% for a solo elderly individual. Additionally, the 2023 national budget introduced various one-time interventions to counteract inflation and the repercussions of the GST rate increase. Nonetheless, these measures have minimal impact on the broader perspective of income security.

The study highlighted that, although short-term financial strategies during the pandemic granted immediate respite, they did not alleviate the deep-rooted ideological opposition to social protection. This resistance was a significant contributor to the glaring vulnerabilities and disparities unveiled in 2020.

Bearing the weight of their findings, the researchers advocate for a multi-pronged approach:

Wage Reformation: While sector-specific wage models are valuable, they need evolution. The study suggests formulating a universal wage floor that caters to the fundamental needs of all Singaporeans, ensuring a decent standard of living.

Policy Overhaul: Short-term measures, especially those crafted hastily in emergencies, do not align with long-term objectives. Sustainable, adaptable, and future-proof policies are urgently needed. The CPF, driven solely by income from work participation, disadvantages those with interrupted careers. Additionally, other income support measures fall short. The retirement income system demands significant reform to safeguard the less affluent in their senior years, and assistance amounts should be aligned with current prices to meet actual needs.

Strengthening Social Safety Nets: The societal framework requires more than just financial strengthening. This could take the form of accessible mental health resources, community-building initiatives, or skill development programs.

Transparent Governance: For fostering trust and ensuring effective resource utilization, transparency is paramount. The study recommends a consistent, open reporting mechanism that allows citizens to measure the effectiveness of public schemes. Policy performance evaluations should be based on accurate benchmarks.

People can use the MIS calculator to calculate their minimum income standard for them and their families.

Read the full report here