NTUC Chief Lim Swee Say recently speaking on behalf of his labour movement said that, “given the strong recovery and performance of the economy in the first quarter as well as the healthy outlook for the rest of the year, and given the healthy low unemployment situation, we think that in a way this is a good opportunity for us to consider some form of CPF restoration.”
In the almost the same breath, he added “in other words, as we continue to grow our economy and upgrade our productivity, wage pressure will go up. But it’s important we don’t put all these wage increases into our pockets and spend them for today. We must recognise that with longer lifespan and with programmes like CPF Life, the Ministry of Health has highlighted many times that we need to have more money for he althcare in the future”.
The above statements appear to hint that the bulk of any CPF restoration may go to the CPF Special (SA) and Medisave (MA) Accounts.
If this is indeed the outcome of any eventual CPF restoration, is it good news for workers?
Well, the SA may only be available for withdrawal as a monthly life annuity from age 65 under the CPF Life scheme, and the MA can only be utilised for medical expenses and medical and Eldershield insurance premiums.
Hence, from the perspective of higher wages by way of higher cash disposable income or higher Ordinary Account (OA) contribution which can be used for housing or tertiary education fees, workers may benefit not very much from such a CPF restoration.
Even if the 1.5 per cent CPF restoration in distributed to the three CPF accounts under the current rules, only about one per cent will go to the OA.
The remarks, “However, the Singapore Chinese Chamber of Commerce and Industry feels any increase in the CPF rate may lead to an upward pressure on wages and hopes Singapore’s long-term competitiveness would be taken into account before a decision is made”, may give us a hint that some employers may take the CPF restoration as a factor in their overall labour costs, and may thus delay or reduce the restoration of wage cuts and bonuses during the recent economic downturn.
Also, wage increases may be reduced by some employers to factor in the 1.5 per cent CPF restoration.
To illustrate this using a simplistic example, an employer may just reduce the originally planned wage cut restoration or wage increase by 1.5 per cent to neutralise the 1.5 per cent CPF increase.
Therefore, in the light that some of the wage cuts during the downturn may have yet to be restored, is it good news for workers?
Another way of looking at it may be whether increasing cash wages is more important to workers now, or restoring their CPF?
Also, since employers do not make CPF contributions for foreign employees, the level playing field between Singaporean and foreign workers may widen even further.
Will businesses pass on the increased business cost to consumers, which may be the last thing we need, as Singapore is just coming out of its worst recession?
Let’s look at other labour issues which in my view, should demand more of the labour movement’s attention, perhaps more so than asking for CPF restoration now.
Re-employment of workers at retirement age
I refer to the article “Heng Chee How on wages, labour” (Today, Apr 6).
It states that “Firms will have to offer to re-hire a worker once he reaches retirement age, provided he is medically fit and has been satisfactory in his work performance. But the NTUC said, it is seeing more men quitting the workforce once they reach their 50s’”.
The original proposal to have legislation requiring employers to re-employ workers when they reach 62 years old, is now expected to be passed only by 2012. Employers have to give an Employment Assistance Payment (EAP) of (between) $4,500 to $10,000, if the employer decides not to re-employ the worker.
The Manpower Minister’s remarks in Parliament recently, that employers and employees should exercise flexibility in determining the actual EAP amount, using these levels as references, may be of little comfort to workers, as it would mainly be the employer’s prerogative.
Many employers may just opt for the minimum EAP of $4,500, regardless of the length of service or last drawn pay. Moreover, the outcome of the “EAP” solution hedged out by the Tripartite Implementation Workgroup (TIWG), may be that older lower-income workers who are a few years away from reaching age 62, may find it even harder to get a job, as employers may be reluctant, knowing that an EAP will be due.
What safeguards are there to prevent employers from terminating workers before they reach 62, to avoid paying the EAP?
Instead of using the minimum EAP of $4,500 which is based on three months of salary of 25 per cent of workers, and the cap of $10,000 based on the salary of two-thirds of workers, why not use the salary of all workers at age 62 instead of all workers of all ages?
Surely, the salary of the worker who are aged 62, is a better and fairer benchmark, than that of all workers which may be lower.
For those who are unable to find another job, or have insufficient cash savings, how do they cover their family’s expenses, for the balance two years and nine months until age 65, when their three-month EAP runs out?
Without the original proposed re-employment legislation, and short of a better and more “assured” solution than the “flexibility” of the EAP from the workers’ perspective, there is now a mis-match between the CPF Life or CPF Minimum Sum payout draw-down age of 65 and the age 62 EAP, for those turning 55 from this year, compared to the 62 CPF draw-down age in the past.
By: Leong Sze Hian
