Budget 2013: Real wages will increase? Disposable income drop for some?

Budget 2013: Real wages will increase? Disposable income drop for some?

By Leong Sze Hian

I refer to the Budget 2013 speech.

Employers will share productivity gains?

The core strategy to increase the real wages of lower-income Singaporeans may be fundamentally flawed, because of the assumption that employers will share most of their productivity gains (even if they are achieved) with workers by increasing their wages.

With rising costs from higher foreign worker levies in some sectors and jobs announced in the Budget, rentals, Certificates of Entitlement (COE), etc, will most employers share most of their productivity gains with workers?

How many times and years have we heard the same story in the Budget, that we will do this and do that and productivity will rise, but it never happen?

Increase foreign worker levies?

With regard to the remarks that since 2010, all the increase in foreign worker levies have been channeled back to help employers and workers, why only channel back the increased portion of the levies, why not some of the rest of the levies too?

By the way, how much do we collect in foreign workers’ levies in a year?

Wage Credit Scheme?

As to “The government will provide more help to businesses to enable them to pay their employees more, with a new Wage Credit Scheme (WCS).

The scheme is part of a three-year Transition Support Package to help companies restructure.

The government will co-fund 40 per cent of wage increases for Singaporean employees over the next three years.

This will also apply to wage increases of those earning up to S$4,000 in gross monthly wage.

The wage credits will automatically be paid out to employers annually.

The scheme will cost the government about S$3.6 billion over three years.

Mr Tharman said the scheme will serve as an incentive for companies to share their productivity gains with workers” (Channel NewsAsia, Feb 25), if you are say an employer who intends to pay a $50 increase to your worker, will you increase the quantum just because of the 40 per cent subsidy, or are you likely to just take it as a bonus from the Government?

And what happens after the three years when the subsidy expires?

So, will most employers increase the quantum of their lower-wage workers’ pay much more because of the WCS?

Increase CPF – less disposable income?

The full restoration of the employee CPF contribution rate to 20 per cent for lower-income workers, may mean a lower disposable income for some workers, and make their lives even harder.

The increase in Medisave contribution for the lower-income self-employed (SEPs) may also have the same adverse impact – those earning an annual net trade income (NTI) of >$6,000 to $12,000 will be raised to half of the full Medisave contribution rate relevant to their age group. The contribution rate for SEPs earning a NTI of >$12,000 to $18,000 will be gradually phased-in until it reaches the full Medisave contribution rate at NTI of $18,000..

Singaporean workers even less competitive now?

The full restoration of the employer CPF contribution rate to 20 per cent, may also make some lower-income Singaporean workers, even more expensive now to hire relative to some foreign workers.

Huge budget surplus again?

With regard to “Instead of the expected balance of S$1.3b (0.4% of GDP), “we now expect higher surplus of S$3.9b (1.1% of GDP),” says Mr Tharman” and an estimated overall budget surplus of 2.4 billion for the next year, why is there a need to raise taxes, like property and vehicle taxes?

This seems to be the same repeat story that budget surpluses invariably always end up to be much higher than estimates, such that we have huge surpluses in about nine out of every 10 years.

If we count the $5.6 billion top-ups to endowment funds, which other countries would not count as expenditure, then the surplus may be even higher at $8 billion.

More progressive tax structure?

With such huge surpluses, a more progressive tax structure need not necessarily mean higher taxes for the higher income or those who stay in higher value homes, as it can also be maintaining the status quo for them, whilst reducing for the less well off.

Also, as the annual value of properties rise in the future, even the middle class may end up paying more taxes in the future.

$600,000 lifetime benefits?

In respect of the $600,000 lifetime benefits in real terms that a lower-income family with two children gets, can we be given the breakdown?