Opinion

3 Ways Singaporeans Should Deal With 2017’s Slower Income Growth

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Joanne Poh

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The end of the financial year ranks right up there with Christmas on the scale of most-hotly-anticipated days, because for many employees it means it’s time to find out what their pay increment is—and collect their bonuses at the same time.

Unfortunately, that excitement surely dimmed a little this year as income growth slowed. The median income rose by 2.7% in 2016 (3.2% after adjusting for negative inflation). That isn’t great considering the 5.3% growth in 2015.

But before you start praying next year will be better, be aware that the economy is teetering on the brink of recession. Here are three things you should do to gear up for the stagnant salaries of the future.

 

Pull yourself up to a job which offers better growth prospects

While the slowdown will be felt by people across all income brackets, as usual the lower income will feel the economic slowdown the worst.

In 2016, it was the workers at the 20th percentile on the income ladder (ie. the bottom 20% of all earners) who saw their real incomes rise at the slowest rate—an average of 2.6%, as compared to the 3.1% enjoyed by medium income earners. Given that the average was actually 3.2%, we can assume that those earning above the median income enjoyed higher income growth.

Now, a lot has been said about how the wages of lower income Singaporeans have failed to keep pace with the rise in the cost of living and everybody else’s salaries. It looks like this is a trend that’s not changing anytime soon.

What this means is that if you’re in a job or on a career path that will cause you to get left behind, you stand to lose even more by staying where you are, as you are not only earning less than the average Singaporean but your wages are also likely to grow at a slower rate.

That’s why upgrading is so important for lower income earners. For instance, for many Singaporeans, getting a degree can go a long way towards boosting one’s income given the wide gulf between the average salaries of diploma and degree holders.

 

Avoid raising your spending or upgrading your lifestyle

In the years of prosperity, Singaporeans have grown used to constantly upgrading and striving to make their lifestyles even more comfortable and glamorous. We’ve gone from going on holiday in Australia to spending our vacations in Iceland and New York. People buy HDB flats already dreaming of the day they can sell them for a profit and upgrade to a condo.

Given the tough economic times ahead, however, it’s a good idea to hold your horses and keep your spending in check.

Your income might not rise as much as you think it will over the next few years, so resist the urge to commit to the most expensive property you think you can afford—it won’t be so much fun paying down hefty housing loans when your purchasing power is falling because your salary is stagnating. It’s also not a good idea to upgrade your lifestyle too aggressively. It might be tempting to sign up for that fancy gym or buy a new car just because you can, but now is not the time.

 

Don’t assume low unemployment means your job is safe

If you’ve reading the news lately, you might have reassured yourself that, “Well, least least the unemployment rate is still low.”

Despite the slowing economy, unemployment has remained about the same. However, that should not to be taken to mean that your job is safe.

Retrenchment exercises have been carried out left, right and centre this year, as your friends in the banking industry would no doubt have told you. What’s worse, for those aged over 40, replacing their lost incomes with a job of similar stature has proven difficult. The internet is rife with horror stories of middle aged workers who turn to driving taxis because they haven’t been able to find a job.

As there are no unemployment benefits in Singapore and household debt remains high, you don’t see many people sitting around twiddling their thumbs. When you lose your job, you do whatever you can to find another one—even if it means taking a huge pay cut. Just because unemployment is low doesn’t mean underemployment isn’t rising, as more people do jobs they are overqualified for.

What this means is that you should proceed with caution when it comes to employment-related matters. If you’re thinking about whether you should quit your job without a new one lined up, you probably shouldn’t.

How are you preparing yourself for the slowing economy? Tell us in the comments!

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Joanne Poh

In my previous life, I was a property lawyer who spent most of my time struggling to get out of bed or stuck in peak hour traffic. These days, as a freelance commercial writer, I work in bed, on the beach, in parks and at cafes, all while being really frugal. I like helping other people save money so they can stop living lives they don't like.