Despite What the Percentages Say: Low-income Groups Are the Most Affected by Rising Prices

So I read this article from The Straits Times, and based on what they said, the lowest income group is least affected by inflation.

But something definitely didn’t feel right…

Based on what I have read from the article, they claim that low-income groups are affected the least by the rising Consumer Price Index (CPI).

According to the numbers published, that seems to be the case.

However, it certainly doesn’t feel fair to say that the low-income groups are least affected.

Let’s break it down in this article!

TL;DR: How the CPI Increase Is Affecting the High and Low-income Groups

At first glance, it may seem like the low-income group is affected less by the CPI increase based on the percentages.

However, as we look deeper, we found that the low-income group is more affected by the increase than the high-income group.

Let’s take a deeper look and see why the low-income group is affected more!

Percentage Increases in CPI

Singapore faces an issue of rising prices, with their CPI seeing a 3.1% increase in the second half of 2021, which is twice the amount compared to the first half of 2021.

Furthermore, according to the Singapore Department of Statistics, the low-income groups faced the smallest increase in CPI compared to the other income groups in Singapore.

But is it really fair to say that the low-income groups are the least affected?

Let’s take a look at what goes into these percentages and see.

Items Affected by CPI Increase

So let’s break down what goes into the prices affected by the CPI increase.

The costs which have risen the most would include expenses such as accommodation, cars, petrol, food, and utilities.

Aside from accommodation, we need to look at how the different prices affect the various income groups.

For the low-income group, bare necessities, such as food or utilities, form a large portion of their expenses.

Whereas within the high-income group, they can afford to incur additional expenses from cars and petrol since food and utilities take up a considerably smaller portion of their expenses.

A Deeper Look at The Percentages

Now that we have a better understanding of CPI and the expenses incurred by the different income groups let’s take a deeper look at what goes into the numbers.

There is no disputing that a 3.7% is not higher than a 2.4%

However, we’re trying to say that a lot more goes into these than what it seems at first glance.

Let’s crunch some numbers!

Based on the information from the Singapore Census of Population 2020, 20% of Singaporeans earning the lowest income earn between less than $1,000 and $4,000-$4,999.

The median income from this group will amount to roughly $2,500 per month.

Next, 20% of Singaporeans earning the highest income in Singapore earn between $15,000-$17,499 and more than $20,000.

The median income from this group will amount to roughly $17,500 per month.

Let’s look at how much Singaporeans spend on food expenses next.

According to GuideMeSingapore by Hawksford, food budgets can run between $600 to $1,000 monthly for a Singaporean couple.

On average, an individual will spend around $400 for their food budget.

Now let’s do the math!

Starting with the low-income group, $400 of food expenditure along with a 2.4% increase amounts to roughly $410

Assuming their monthly income is about $2,500 a month,

$410 would take up approximately 16.4% of their monthly income.

Now let’s look at the high-income group, $400 of food expenditure along with a 3.7% increase amounts to roughly $415

Assuming their monthly income is about $17,500 a month,

$415 would take up approximately 2.4% of their monthly income.

Closing Thoughts

Now that you have seen the numbers, don’t you guys think there is a massive difference in how the CPI increase affects each income group?

What might seem like a tiny increase at first glance may actually have a deeper impact on the group than we thought.

Is it still fair to say that the low-income Singaporeans are affected the least by the CPI increase just by looking at these percentages?

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