by Leong Sze Hian


I refer to the Budget Statement 2011 by the Finance Minister .

Wages grew 0.5%

“C.6. Consider what happened to low-income Singaporean workers, at the 20th percentile of incomes. Their wages grew by about 23% in the last decade, or by 5% in real terms. (This is without taking into account theWorkfare payments they have received since 2008.)”

This means that the bottom 20 per cent of workers only had a real increase in income of just 0.5 per cent per annum, over the last decade. Of course, we should not be taking into account the Worfare payments since 2008, because the bulk of Workfare payments is to CPF which cannot be used and only Singaporeans 35 and above earning initially $1,500 and subsequently $1,700 were eligible.

“C.10. For  Singaporean households at the 20th percentile of incomes, real incomes went up by about 8% over the decade – as growth in the second half of the decade more than offset the decline in real incomes that took place earlier. Further, this increase in incomes does not take into account the significant increase in net transfers from  the Government that low-income households received over the decade”

This means that the bottom 20 per cent of households only had a real increase in income of just 0.8 per cent per annum. As the statistics indicate that the number of working members in households has increased,  this rather low real income increase may need to be adjusted downwards to reflect this. And of course the significant increase in net transfers from the Government should not be taken into account, because how can we count the following as income:-

  • subsidies for medical bills, GST Credits for offsetting the GST increase, Workfare to your CPF, Edusave Merit Bursary, Awards and Scholarships, post-Secondary Education Accounts, CPF Deferment Bonus, CPF Life Bonus and Voluntary Deferment Bonus, etc.

“C.11. Income growth was stronger  for median  Singaporean households. Their real incomes grew by 21% over the decade – again with more of this growth taking place in the second half-decade”

This means that half of Singapore households had a real income increase of less than 1.9 per cent per annum, over the last decade

CPF restoration?

“C.38. We will  raise the employer contribution rate by another 0.5 percentage points,  from 15.5% to 16%,  which will restore the total contribution rate to 36%. The additional 0.5% will go into the Special Account”

In effect, it is not a restoration to the previous 36 per cent, because the additional 1.5 per cent are entirely to the Medisave and Special Accounts, and thus does not increase the Ordinary Account of workers.

Increase foreign worker levies good for Singaporeans?

“C.45. We will  thus  introduce  further (foreign workers) levy increases for all sectors this year”

In the past, when foreign workers’ levies were increased, some employers reduced the wages or benefits of foreign workers, which in turn led to lower wages for Singaporeans too. In this connection, employers’ CPF contribution savings will increase to 16 per cent, if they employ foreign workers instead of Singaporeans. It may be an entirely different outcome for lower-income Singaporean workers, if the levies are channeled to them, instead of increasing the Government’s revenue.

Encourage employment of older workers?

“C.58. As a further measure, I will  provide employers with a one-off Special Employment Credit  for older  Singaporean  workers  who are  covered by the Workfare scheme. The Credits will be paid out over three years, and will encourage employers  to  attract and keep older workers. Employers will receive a Special  Employment  Credit of up to 50% of employer CPF contributions for workers aged 55 to 59. They will get a higher Credit of up to 80%  of employer CPF contributions for workers aged 60 and above”

This may look nice on paper, but since the employer’s CPF contribution for workers over age 55 and 60 are only 8.5 and 6 per cent, respectively, the yearly credit for three years to employers is only 1.4 per cent (age 55 to 59) and 1.6 per cent (age 60 and above) respectively. So, how likely is it that employers will give preference to employing older workers for just a one-plus per cent credit per year? Why not give the credit entirely in one year instead?

Top-up Medisave again?

“D.53. As part of the surplus sharing that this year‟s Budget allows,  I will provide a top-up this year to the CPF Medisave Accounts of Singaporeans aged 45 and above. Those aged 45 to 49 will receive up to $300, while those aged 50 to 59 will get a top-up of up to $400. Older Singaporeans will receive more, with those 80 and above getting up to $700”

Once again, we are topping up Medisave accounts, which may never be able to catch up with rising medical costs, like the at least 50 per cent hike in Class C surgery bills at six of the seven public hospitals over the last four years. We should spend this $500 million Medisave top-up or even more on healthcare instead and keep Class C fees from escalating, and not remain as one of the countries with the lowest public healthcare spending at about one per cent of GDP.

Increase HDB housing grants again?

“D.62. The Government will introduce a Special CPF Housing Grant (SHG) to help low-income families making a first-time purchase of a Buildto-Order flat, on top of the existing Additional CPF Housing Grant. The SHG will be provided to families who earn up to $2,250 per month”

Since the Additional CPF Housing Grant Scheme (AHG) started in 2006, and were gradually increased twice, $500 million has been paid to 28,500 houseolds. This works out to an average grant of just $17,500. As HDB flat prices have increased by about 70 per cent over the last five years or so, it would appear that everytime the grant is increased, it may be less than the increase in HDB prices. So, is it really a grant if it is less than the price increase?

Increase U-Save and S & CC rebates again?

“We will provide households with more direct help  to cope with rising expenses. Utility costs are going up because of the sharp rise in global oil prices. To help households cope with rising costs, I will provide additional Utilities-Save (U-Save) and Service and Conservancy Charges (S&CC) rebates this year”

HDB renters worse off?

Rebates may more than offset such cost increases, particularly for HDB 1 and 2-room flats, but the change in HDB rental flats policy from 1 March 2007, to increase rentals to up to 30, 50, 70 and 90 per cent, of market rent, for houshold incomes not more than $800, $1,500, $2,000 and over $2,000, respectively, may be even more than all the Growth Dividends and rebates. In other words, the HDB ental policy change may negate all the Budget benefits to such low-income households.

Average income households get $3,000?

“D.81. These measures will provide significant benefits for Singaporeans this year, and further benefits in the  future. The  average Singaporean household will receive about $3,000 from this year‟s Budget.  This will be equal to about 5% of their annual household incomes. It will also be more than double  the increase they  could see in  their household expenses this year”

I think the problem with this statement may be that not all the average $3,000 benefits are disposable cash that people can use, but the entire increase in the cost of living are cash expenses, with inflation expected to hit 5 to 6 per cent in the fist half of this year, before moderating to a lower rate.

Lower-income vs average-income?

“D.82. Lower-income households will get more, especially in comparison to their household expenses. I will  illustrate with the case of a 4-person family, with parents earning a combined monthly income of $2,000. They have two  young children, one in primary school and the other in childcare.

“D.83. The couple will receive Growth Dividends of $1,700 and Workfare Special Bonus of $780 in total. In addition, they will benefit from a Child Development Credit of  $400, and a  further $260 from this year‟s enhanced U-Save and S&CC rebates. In total, they will  receive about $3,100 from the „Grow & Share‟ Package”

This example of a typical lower-income family, may be the exception rather than the norm, as both husband and wife would have to be 35 years or older to get Workfare, with each earning an average income of $1,000. Moreover, if a typical lower-income family gets $3,100, how is it that “The  average Singaporean household will receive about $3,000 from this year‟s Budget”? So, are we saying that “The  average Singaporean household” gets about the same amount as a typical lower-income household? If this is indeed the case, are we not being unfair to lower-income households by giving them about the same amount as average households, in this Budget’s ‘Grow and Share Benefits’?

Typical lower-income vs higher income?

In this connection, in the Annex B2: Benefits For Households Illustrations, the Total Budget 2011 Benefits are $3,513, $3,065 and $4,081, for a 4-person HDB 3-room earning $2,000, 4-person HDB 4-oom earning $5,300, and a 5-person 5-room HDB earning $6,000.

So, the much higher income family gets much higher Budget benefits? Are these typical illustrations? If so, then maybe there is something wrong with the allocation of benefits in the Budget, as surely lower-income families should get much higher benefits than much higher income ones, and not the other way round. It may be better to have a more detailed breakdown of how many and what type of families get how much, instead of just single family illustrations.

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