Budget 2013 Speech – MP Png Eng Huat

By MP for Hougang SMC, Png Eng Huat
[Delivered in Parliament on 5 March 2013]

Many members in this House have praised meritocracy and shared stories of how the system has brought them to where they are today. But we are humans and who we are and what we become is also determined by those people around us and the environment we live in.

If you are stuck in a deep hole, no amount of talent or ability is going get you out of that predicament if no one lends you a helping hand and throws you a lifeline to get you out of there.

So I am pleased to know that this government recognizes that meritocracy has its limits in sustaining social mobility, that it is going to do more to ensure a fair and inclusive society, and that it will take steps to mitigate the growing income inequality in our country. ⁽¹⁾

Low Wage Workers

To low income families, it does not matter whether we should view our high GINI coefficient in the context of a global city or a country, a hard day’s work must equate to a fair living wage. In short, the wage must make ends meet and allow for some cash savings for emergency use and for that little indulgence in eating out or shopping once in a while.

Low wage workers have seen their wages stagnated in the last decade. These Singaporeans will see their wages shrink further when they hit their mid-forties. ⁽²⁾ For them, when it rains, it pours because these low wage workers will also be hit with lower Employer CPF contribution once they reach 35 years old. I, therefore, welcome the restoration of the CPF rates for these workers as announced in Budget 2013.

The increase in Workfare Income Supplement (WIS) payout with 40 per cent of it in cash is also a welcome measure but I urge the government to seriously think about increasing the cash component to 50 per cent or more for good reasons.

The example of the 45-year old earning $800 a month cited in the budget speech will see his take home pay shrink by 3.5 per cent or $28 after factoring the revised Employee CPF contribution rate. Using the online Workfare calculator, the difference between the current and new maximum WIS cash payout for this worker is about $38. ⁽³⁾ So effectively, this 45-year old low wage worker will see an increase of only 1.4 per cent in take home pay or an extra $10 a month for Budget 2013.

With core inflation expected to average 2 to 3 per cent for the whole of 2013 ⁽⁴⁾, the extra $10 a month is as good as gone. Although there are measures like GST Vouchers and S&CC rebates to help Singaporean families cope with rising cost of living, having some cash at hand before the next pay day comes is what low income families would welcome more.

I am also not too optimistic that the Wage Credit Scheme (WCS) is going to benefit low wage workers significantly and in the near term. These workers are traditionally hired by companies with low productivity and profitability and may be heavily dependent on cheap foreign labour to stay afloat. ⁽⁵⁾ Would these employers want to further erode their profit margin by participating in a state-funded wage scheme knowing very well that 60 per cent of the pay increase would still come out from their own pockets?

The tenet of increasing the cash component of WIS and introducing the WCS is to ensure low wage workers will have more disposable cash to beat inflation. While the WIS is a sure thing, the WCS is not. If employers do not warm up to the Wage Credit Scheme for low wage workers, their salaries will remain stagnant again.

Therefore I call upon the government to monitor the situation closely and raise the cash component of WIS, if necessary, so that our low wage workers do not have to skip a meal or medical appointment just to make ends meet.

Cost of Living – Rental Housing

While the budget has addressed the issue of saving more for retirement for low wage workers by increasing their CPF contribution rates, it has not addressed much on containing the rising cost of living. With rising income, low wage workers living in rental flats will also see a corresponding increase in rental rates.

Take the example of the 45-year old low wage worker again. If his employer decides to adopt the NWC Guidelines for 2012/2013 to give a $50 wage increase to those earning up to $1,000 ⁽⁷⁾, his salary will be $850 a month. But unfortunately, if he is living in a 1-room rental flat, his rent will also go up by at least $57 from $33 a month to $90 a month. ⁽⁶⁾ The entire net increase of $40 in his take home pay is not even enough to service his new rental.

We must also bear in mind this low wage worker is taking home less pay now because his CPF contribution rate has been revised from 17 to 20 per cent. Factoring in the $70 from his maximum WIS payout ⁽⁸⁾and the subsequent increase in rental, he is better off forgoing the NWC recommended wage increase because he will end up $17 poorer every month. ⁽⁹⁾

Most low wage workers living in rental flats will have mixed feelings about having pay rise. “What the left hand giveth, the right hand taketh away” is probably what some of them will feel.

The same 45-year old worker can only savour his wage increase until his existing rental contract runs out. After that, like many of his peers, he will receive a ‘rental shock’ when his contract comes up for renewal.

I am sure some MPs in this House have written to HDB to appeal for a stay or a review of rental rates on behalf of your residents. I believe this government can do more to ensure that when the salaries of low wage workers are finally moving up, their celebrations will not be short-lived.

The 2.7 times jump in the published rental from $33 to $90 a month for someone whose salary crosses the $800 mark is just too drastic to begin with. ⁽⁶⁾ I urge the Ministry to look into this and come up with a more reasonable tier so that low wage workers living in rental flats can truly appreciate the benefits of Budget 2013 and any wage increments that come with it. This is the least the government can do for these Singaporeans to make up for those lost years of their working lives earning meagre salaries while helping Singapore to grow.

Cost of Living – Food

Next I wish to talk about one component of inflation which Singaporeans like a lot i.e. food. Many Singaporeans eat out at hawker centres. And most of them especially low wage workers will have an inkling of what inflation is like from that cup of coffee or plate of chicken rice they ordered at meal time.

When the Minister announced that 10 new hawker centres will be built and run on a not-for-profit basis in 2011, ⁽¹⁰⁾ I thought it would be a good idea to offer these stalls to enterprising or unemployed Singaporeans, young or old, to try their hands at running a small business selling affordable cooked food.

My hope was short-lived as it was later made known that NTUC Foodfare, a social cooperative, was appointed to run the first new hawker center in Bukit Panjang. ⁽¹¹⁾ Nonetheless, I still hope the government will open the remaining 9 new hawker centres to enterprising Singaporeans to run as small businesses on their own.

While NTUC Foodfare is touted as a social cooperative, it is still a Members Only organization. To enjoy special prices and value meals, you need to be a union member. ⁽¹²⁾ If the co-operative is enjoying subsidized rental, then it must benefit all. I am sure inflation bites everyone and not just NTUC union members.

The cost pressures on cooked food prices are rental, staff costs, utilities and ingredient costs. As long as NEA keeps rental reasonable or subsidized, any enterprising Singaporean hawker will have a fair chance to keep cooked food prices affordable. First and second generation hawkers on subsidized rentals do sell cheaper food items when compared to commercialized food stalls.

I know of one such food stall along Jalan Bukit Merah that sells very delectable vegetarian food. The stall is owner operated and it has 3 local staff. The cheapest plate of vegetarian bee hoon there is only $1.50 complete with ingredients like cabbage, mocked char siew, crispy bean curd skins and condiments.

This stall has been selling vegetarian bee hoon at cheap prices for the longest time. It is neither a no-frill meal nor a marketing gimmick. And you do not need to be a NTUC union member, Public Assistance card holder, or senior citizen to enjoy cheap and healthy food.

This is what we need in our hawker centres to fight inflation. Fix the rental of these new stalls at $320 a month, which is the high end of the subsidized rental, and allow Singaporeans to ballot for them. This will create jobs, keep hawker food affordable, and ensure Singaporeans, young or old, remain economically active.

Conclusion

Cost of living affects everyone. Low income families especially will be hardest hit by any price movements, no matter how small, because they do not have any margin for errors when budgeting for living expenses.

A trip to the doctor, a rise in rental, an increase in food prices, or even a day on medical leave could spell trouble for these families. And looking at the latest Report on Wages, we have about 186,000 people earning $800 and below. ⁽¹³⁾ I urge the government to look into improving their lives as we restructure our economy.

How we take care of the weak, the disabled, the needy, and the least will determine how much we have progressed as a developed nation.

References

(1) http://www.singaporebudget.gov.sg/budget_2013/pb.html#s4 (B21)

(2) http://www.mom.gov.sg/Documents/statistics-publications/wages2011/mrsd_2011ROW.pdf (Pg 46)

(3) https://www.cpf.gov.sg/cpf_trans/ssl/financial_model/wis/wis_calc2.asp?EmpType=emp

WIS cash: Budget (Annex B-1): ($2100×0.40)/12 = $70; Current (calculated) = ($95×4)/12 = $32; Net = $38

(4) http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1249665/1/.html

(5) http://www.singaporebudget.gov.sg/budget_2013/pc.html (C18, C20, C21)

(6) http://www.hdb.gov.sg/fi10/fi10323p.nsf/w/RentDirectHDBRentDeposit?OpenDocument#SecondTimer

(7) http://www.mom.gov.sg/newsroom/Pages/PressReleasesDetail.aspx?listid=428 (Para 15)

(8) http://www.singaporebudget.gov.sg/budget_2013/speech_toc/download/annexb1.pdf

WIS cash payout for 45-54 age group: ($2100 x 0.40)/12 = $70