The Online Citizen

The Budget

January 23
15:35 2009

Leong Sze Hian

12% credit wage reimbursement

Since employers can already cut wages, cut the work week and ask workers to take “no pay” leave, to what extent will the 12% job credit wage reimbursement up to the first $2,500 of wages for workers who contribute to CPF, help to reduce job losses?

For example, a 20% pay cut, I work day less a week, and some “no pay” leave, may effectively already cut wages by more than 50%.

So, how much more impact will the 12% have?

For employers who, in any case do not intend to retrench, the 12% is like a bonus – so, no impact on the retrenchment decision. For those in financial difficulties, retrenching means saving 100% versus just saving 12% by keeping the worker.

On the Channel NewsAsia Budget interview on 22 January, Mdm Halimah Yacob asked why the 12% reimbursement was quarterly and not monthly? The reply was that it would be an incentive for employers to keep the worker for at least 3 months.

If the employer has cash-flow problems, actually reimbursing him monthly may help to save workers, as some may have no choice but to retrench immediately, because they can’t wait 3 months.

Passing the rebates

Landlords have been asked to pass on the property tax rebates to their tenants. Since some landlords may be reeling from the downturn, to what extent will savings be passed on to tenants?

Taxi operators have also been asked to pass on the road tax rebates to taxi drivers.

Similarly, to what extent will this be done?

Banks

Since the announcement of the SME loans package in November, all media reports have said that it has generally been not very successful.

It thus remains to be seen, how successful the new Special Risk-Sharing Initiative will be? Conceptually, the problem may be that banks may still primarily assess loans based on the merits of the borrower. Even with the Government sharing 75% or 80% of the loss, a poor lending decision still means a loss to the bank.

As to calls for the Government to lend directly, the reason given was that the Government did not have the expertise.

Can’t the Government hire the expertise required?

HDB flats

Increasing the Additional Housing Grant by $10,000 to $40,000, and the income ceiling to $5,000, for first-timers to purchase HDB flats, may result in even more people buying flats that they may have difficulty paying – with forecasts of job losses of as much as 300,000.

Perhaps a better measure may be to reduce the price of HDB flats which have gone up a great deal over the last few years, under the HDB’s market subsidy pricing policy.

Isn’t now a good time for this policy to be reviewed?

15% rental rebate

HDB, JTC, SLA and NEA will give a 15% rental rebate to tenants. Over the last year or two, I believe that rents generally went up much more than 15%. Government agency landlords should be asked to immediately review and try to reduce rentals in the light of the rapidly declining economic situation.

Otherwise, most may just give the 15% rental rebate.

Financial assistance for the poor

According to the Department of Statistics’ Key Household Income Trends 2008 report, the average per capita household income of the bottom decile of employed households was only $340.

If we use the generally accepted cut-off poverty line of $450 per capita monthly (which I understand is generally used by Community Development Councils (CDCs) and NTUC for giving financial assistance), then I estimate that about 100,000 household may need financial assistance.

If we add “unemployed households” and “retiree households” that may be finding it hard to make ends meet, how many households in total need financial assistance?

MP Dr Lily Neo asked this question in Parliament, and suggested the figure of 100,000.

If despite the doubling of the GST credits and S & CC rebate for those households that still fall below the $450 poverty line and have run out of resources, I would like to suggest that they could perhaps be given the assurance that they would get financial assistance which will bring them up to the $450 benchmark.

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