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Chatting with Lim Swee Say Part 2

In Money, Politics on August 31, 2014 at 12:52 am

Tomorrow, a big change is going to sweep over one sector, or rather, cause a ripple in the way employers pay their workers. It has to do with the 40,000 or so cleaners in Singapore’s 900 companies. From then on, they will have a career progression path, much like most other workers. It means that they won’t be stuck at the $1,000-or-so a month bottom rung of the pay ladder. If they learn to operate machines, they can move up a step or two, and this will be accompanied by a raise in pay. No big deal you say? After all, it is the case in other parts of the labour market. You do more, you earn more. Except that the cleaning sector is an odd place.

And that’s because of people like you and me…   

Mr Lim Swee Say, head of the labour movement, was in story-telling mode. The story had to do with how when he was Minister for Environment and Water Resources in 2003, he visited a hawker centre and watched how cleaners went about their work. A pail of water and a cloth, which became dirtier and dirtier with every table cleaned. He got to talking to the hawkers who said they each paid each cleaner $80 a month to clean the tables.  That was all the cleaners could do in a day. Would they pay them $120 ? They said they would, provided that the cleaners could do their work better and not have customers complain about the state of uncleaned and uncleared tables. That was when he worked with the contractors to see if the cleaners could do a better job as well as handle more stalls. The cleaning trolley, which  people now see in hawker centres, with different compartments for detergents and several “washing’’ containers, is one outcome. It allowed the cleaners to do their rounds a lot quicker. They could handle 12 stalls instead of eight. And it was a lot cleaner too. Their pay, therefore, went up. (He calls it ESS – easier, safer, smarter)

This a reason for Mr Lim’s obsession with labour-saving devic es. Pay can only go up if low wage workers can work faster and better (a Lim Swee Say phrase..). That means using machines. But there is another unique thing about cleaners: They do not work directly for their employers. They really work for third parties: the mall owners, building managements and hawker centre committees who are old fashioned about the way they tender out jobs for cleaners. They usually set a head-count, rather than define the job scope. That means they ask for a certain number of cleaners, which meant that it is in the interest of the contracting company to pay the cleaners as a low a wage as possible to win the tender. Mr Lim calls this “cheap sourcing’’. They should be leaving it to the companies to decide the number of cleaners needed for the job to be done, he said, or “best sourcing’’. (So he has a BSI – Best Sourcing Initiative…)

I thought that made sense. I see it for myself in my condominium when the queries are about the number of security guards rather than whether the job gets done. Because, really, why should we care how many people the cleaning or security company hires so long as the place is clean and security is assured?

But changing mindsets from cheap sourcing to best sourcing is a slow and arduous process. When a company loses a contract the next time bidding comes around or when the contract expires, it does not mean the cleaners or security guards lose their jobs. What happens then is that the new company hires them instead, and since the new company probably got the tender because it under-cut the rest, their pay does not go up. In fact, it might go down, if they prefer to stay in familiar surroundings. Hence, you sometimes see the same people all the time – in different uniforms. This is a spiral which goes on and on, leaving wages stagnant.

To raise their wages, a structural change must take place to “force’’ higher pay in the sector. Enter the progressive wage model which has been described variously as a minimum wage. (He calls this PWM. )

Mr Lim acknowledged that in the cleaning sector, as well as the security and landscaping sector soon, this will be the case. Companies are not allowed to pay cleaners less than $1,000 a month. This is the law and is part of a licencing condition that the National Environment Agency will oversee.  

But more than a floor, a series of rungs have been created, each tied to job scope and productivity. So is an indoor cleaner worth more than an outdoor cleaner? If there were different sets of machines, which ones can workers operate?  A cleaner’s ability will be matched against an industry standard of skill levels. (This, by the word, is WSQ – Work Skill Qualifications). And this is again set to different wage levels. Again, all this is law and a company which flouts this stand to lose its licence – and cannot operate at all.  

I proceeded to irritate Mr Lim with a few “buts’’.

But don’t foreign workers have a role in keeping wages low in the sector? If we kept the numbers small, the wages of local cleaners will go up no?

Mr Lim’s reply: Not with the dependency ratios in place. So if a company hires 10 locals, it can only hire one foreigner if the dependency ratio is set at 10:1. The number of foreigners hired is dependent on the number of locals. If the company can make do with fewer workers, it will lay off the foreigner first – unless of course, companies scream loud enough for dependency ratios to be changed.

But isn’t this intervening in the free market by using the blunt instrument of the law?

Mr Lim’s reply: Yes. And it has to be done because the market has failed to set the wages correctly because of the emphasis on headcount rather than quality of manpower.

But why not set a minimum wage for all labour intensive sectors?

Mr Lim’s reply: This would allow companies to sack people and hire others – at minimum wage. So it doesn’t matter how good you are, you will never be better paid because the headcount only cares about how “cheap’’ you are.

But a worker who is trained may get sacked anyway and what happens if joins a new company?

Mr Lim’s reply: He doesn’t start at the bottom. He takes his qualifications with him which will require that he be paid according to his skill level. (Hmmm….it’s like have a diploma versus a degree) A smart employer will make sure the salary is according to the job scope.

But the cleaning companies would be required to train workers or get new machines and where will they get money for this?

Mr Lim’s reply: Actually, he just rolled off more ABCs….more funds and schemes that will help pay for training. Then there is IGP, Inclusive Growth Programme, that will help pay for new machines. (Go read Part 1 if you want to know more)

But some cleaning companies won’t be able to qualify for the licence and will have to shut down. So where will workers go?

Mr Lim’s reply: Companies have had six months to prepare and it seems that most will be able to meet the Sept 1 deadline. If some have to shut down, others which are licensed will snap up the workers. He doesn’t think people should be too bothered if there is a shake-up because the bottomline is: cleaners’ wages will go up.

I’m glad I had a chance to talk to him. (Our meeting was supposed to be held at TCC at NTUC centre at OMB – yup, his subordinates speak in ABCs too – but was shifted to his office). There are too many complicated policies in Singapore. They are like jigsaw puzzles. Miss a piece and you won’t get the whole picture. The PWM or progressive wage model (may I ask that the NTUC not be so quick to turn everything into acronyms?) looks pretty workable to this layman although I pity the people who have to monitor its workings. I don’t know, though, if there are further ramifications for the labour market, in terms of salary distortions.  

Mr Lim said he’s only looking at the security and landscaping sectors, which suffer the same “market failure’’, for the time being. Slow steps. He went on to say that he hopes other sectors would voluntarily adopt the PWM (I don’t know how he keeps all the ABCs in his head).  

I have to say that I didn’t manage to irritate the genial man.

He answered questions so well, so fully.  

He irritated me instead.

Still poor or not?

In Money, News Reports on August 8, 2014 at 4:35 am

A new acronym has been inflicted on the reading masses: SPOR. It stands for Singapore Public Sector Outcomes Review, released by the Finance ministry. Shame on TODAY and BT for using this acronym that only a civil servant can come up with. At least ST declined to relay the affliction.

But on a more serious note, what does SPOR (haha) has to say about S’pore? It depends on which newspaper you read.

ST predictably rah-rahed on the higher pay of the lowest paid here, that 20th percentile of workers. Those at that level earned $1,800 a month, up by 6 per cent since 2009. That’s five years ago. I don’t know why it’s a five-year comparison, when the report is released every two years. Maybe because there isn’t too big a difference in wages of less well-off between 2012 and 2014? Anyway, this is real wage growth, after accounting for inflation.

In any case, the article led off with the closing Gini co-efficient as a key achievement of the G in the past two years.

What are the figures?
ST and BT say from 0.434 in 2012 to 0.412 last year (after taxes and transfers, says BT )
TODAY says from 0.478 in 2012 to 0.463 last year. (doesn’t say if this is before taxes and transfers)

Anyway, BT gave better insight on this income inequality story by pointing out that those wages went up because of transfers – the G forcing through higher wages because of clamp down on foreign labour and other wage policies. While things look better on the wages front, the productivity front “remains a concern’’. Economists now say full growth for this year will be 0.5 per cent, higher than 0.2 per cent previously but still way off 2-3 per cent G target.

So what’s the implication? That we are getting higher salaries that are “artificial’’ because it’s not underpinned by better productivity and it’s to do with G re-calibrating the supply front? Oh dear. Or is the argument really that the low wages have been kept “artificially low’’ in the first place because so many foreigners were doing the jobs? Really. Can argue anything in which way…

BT also has economists saying that core inflation which was 1.7 per cent last year will go up. And this means that real wage growth may not go up as much and that Gini co-efficient may widen yet again. Unless there are more G transfers?

Anyway, go read BT for a fuller story. But read TODAY also for other spores of Singapore, like how public satisfaction with public transport has fallen yet again.

Who’s the boss?

In Money, News Reports, Society on August 4, 2014 at 11:35 am

There is a security guard in my condominium who has changed into four different sets of uniforms over the past nine years. We insisted that he be kept on even as we switched security companies. I always wondered if he got a pay jump each time this happened. I hope so since residents viewed him as such a part of the environment. Then again, I have no real idea of how much we pay each company. I figure it’s probably less and less over time.

So I read in ST today that the labour movement was going to give a second shot at getting the security industry to sign up on the progressive wage model with some interest. Seems the industry rejected it the first time because of cost pressures. Yes, wages will have to go up. But it won’t be the security companies who will be doing the paying. It will be the managements of malls, condominiums and office blocks. So what’s the problem? The rest of us? We won’t pay a higher contract price for security service? We always go for the lowest bid by some fly-by-night operators?

Then I got to thinking that maybe the progressive wage model might not be well understood in the first place.

Here’s what I understand about it:

It looks much like a minimum wage structure, except that it isn’t. There’s a base, such as $1,000 a month for cleaners and a proposed $1,100 a month for security guards. But there’s also an increasing scale of higher pay for higher level skills and higher productivity. Also, for certain kinds of work, you need certain skills and those on the progressive wage model will be armed with certificates which say what they are capable of doing. And this would correspond with the pay grades that have been set.

This is really intervention in the free market, with the G playing enforcer. Cleaning companies who won’t or can’t sign up to this new “industry standard’’ can’t get a licence from the National Environment Agency. They must have this by Sept 1 if they want to continue to be in business. This is a legal thing with penalties, not a guideline or a code of ethics. It seems that as many as four in 10 aren’t ready. Which means they will fold. Which means what for their workers? Move to another company which is on the model? Good for them because they will be assured of higher pay? Especially if they have something to show for skill level?

That doesn’t seem bad at all

The whole industry gets an immediate lift and there will be no more under-cutting of contract fees because there will be no more fly-by-night cleaning companies. And companies will think harder about kicking out people whose pay got too high by dint of years of work and replacing them with fresh blood at the minimum wage. At least, I gather that’s what will happen. Except that everybody who uses cleaners, including town councils, will have to figure out how to pay them more – since a higher baseline will have been set.

I’ve always wondered about the productivity measurements though. Just because you are sent on a course to use certain machines, does this mean you will actually be more productive than before? What if you are employed in a role which doesn’t need more sophisticated handling? Or you are more likely to damage the machine than make use of it well? Still get paid more because you have the requisite qualifications? It will be interesting to see what happens to the cleaning industry after Sept 1.

And now the security companies seem more amenable to the idea, probably because there are so many shady outfits able to put in much lower bids – which their clients are willing to pay for. A third sector in the NTUC’s sight is landscaping. All in, that’s about 200,000 of our lowest paid workers who make a median salary of $800 or so a month.

Sometimes I wonder if we realise that it is we, the people, who put them in that position by keeping their salaries stagnant for years. Those of you who live in condos, do you think you will agree to pay more to the cleaner, gardener and security guard? What will HDB residents say about having to pay more for service and conservancy fees? The money has come to somewhere. The phrase often used is “cost will be passed to the consumer’’ but that’s not accurate.

Because most of us are really the paymaster – not consumer. It’s good to remember that some time.

CPF – Completely Perplexing Fund

In Money, News Reports on July 9, 2014 at 4:54 am

So two ministers have spoken on the CPF system, probably the most extensive elaboration we’ve heard in recent years. Funny how the CPF system has been in place for so long and it is only now that we’re told the ins and outs of its operation. I don’t suppose we have to thank blogger Roy Ngerng for this? Or would the explanation have come in any case because people no longer take increases in the CPF minimum sum as something that just sorta happens every year?

The pity is that the G’s explanation is not going to reach many people. Its feedback arm says that while eight in 10 have heard of the CPF system, too many do not know how it works. Half of the 1,000 plus people polled don’t even know that CPF Life will give them a monthly sum from age 65. But why would anyone really bother so long as the money goes to them, in full and in time? No one has received a bounced cheque from the CPF have they? In fact, the fund is ticking away just fine compared to other retirement funds elsewhere where benefits have to be cut or where there’s a risk of the funds going bankrupt. Why the kerfuffle now?

At the risk of over-simplifying, people simply want more/all of their own money back earlier. They think they know how to deal with their own money to plan for their retirement and can the G please butt out, thank you. Also, there’s this desire to want all their own savings to themselves before they die. In fact, what I would really like to know is, how much do people leave behind in their CPF when they die? Nothing? Very little? A lot?

I suppose the trigger was the increase in the Minimum Sum to $155,000. You know, this really affects those who turn 55 this year but many other people are hopping around thinking it applies to them too. Hmm. Well, the bad news is that it will get higher given rising cost of living. It has to, to be able to provide between $1,000 and $1,200 pay out every month after age 65.

Then the G makes it plain that people shouldn’t be panicking at the $155K figure. It’s really just half that because you can use the property to pledge the other half. The figure I would really like to see is whether this current cohort of 55ers do have the Minimum Sum, in cash and kind. I don’t see the figure anywhere although it must exist. But last year, just 15 per cent of the 55ers put up property pledge. That sounds not too bad; most still can handle the cash portion.

There’s a point that I am confused about regarding this property pledge. So we have CPF Life which is like an insurance scheme pooling everybody’s retirement accounts (which I gather will include the property pledges) So what happens to our “property’’ if something untoward happens to CPF Life? Is this so as to provide room for us to finally sell our homes if need be? Or forced into doing some kind of reverse mortgage? (Okay, my questions might be seem silly, but I really don’t mind an education)

BTW, I thought Finance Minister Tharman did an excellent job explaining the workings of the CPF system. There will of course be queries, like why set the CPF interest rate to a formula involving G bond yields anyway – and not closer to projections of how much GIC can make, which might be higher than the 2.5 per cent for Ordinary Account and 4 per cent for Special? After all, the G is confident of guaranteeing rates of return and has a buffer of “net assets’’ if GIC underperforms. Too volatile to do so? Too much dependence on market vagaries?

But what IS this thing about net assets? So the G sells stuff and uses the money to subsidise the CPF in the GIC’s bad years? It seems to have done so for eight years – and no one noticed or recorded it?

What I also found interesting is his explanation of why the CPF fund can’t be managed as a standalone fund but needs to be co-mingled with other assets to be invested. It’s to give GIC a much bigger base to play with so that it won’t be TOO conservative about investing simply to meet CPF interest rates.

Manpower Minister Tan Chuan-Jin also gave some interesting statistics.

a. 20 per cent of last year’s cohort of 55ers – about 12,000 people_- didn’t withdraw their excess OA even though they could. So I guess this was pushed into the Retirement Account which gives higher interest. I wonder who these people are. Probably those with enough money to spare and can’t be bothered to take it out to invest elsewhere. So they leave it to the G to make money for them. It would be good to hear from some of them

b. 10 per cent of those 55 years and older are still using their CPF to service their mortgages. I guess this is from the Ordinary Account. Half of them have to put out cash as well. How many exactly? Don’t know but Mr Tan said it was a “small group of people’’. I wonder why they still haven’t owned their homes by then. Because they have been upgrading homes through the years and been enjoying the asset enhancements without figuring that their CPF might run out?

c. Every year, about 500 of the post 55ers ask to be able to use their Retirement Account to service mortgages, that is, they’ve already exhausted their Ordinary accounts. About two-thirds are approved. The other one-third will be given other “financing’’ or “housing’’ options. I wonder what they are. Will they be asked to take a reverse mortgage or a lease buy back scheme? It would be good to know if people have had to do so.

I hope the above isn’t too hard-going. Oh. I didn’t give the mechanics of how CPF works because I did so in an earlier post. Read The Old Lady and her CPF Part 2.

Medi-Shielding the civil service

In Money, News Reports, Politics on July 5, 2014 at 1:46 am

So I know that civil servants had some pretty good news today on medical benefits but I pity the poor civil servant who has to wade through all the words in MSM to find out what the good news is all about. And what’s in it for them.
So here’s a dumbed-down version:

First, remember that everybody, including civil servants, will get 1 per cent more from employers that will go into their Medisave account from next January. This extra will help to pay for the Medishield Life premiums which will be higher than it is now under the current Medishield.

Second, there are two groups of civil servants.

The first group is a big group, 85 per cent of the 82,000 civil servants. For this group, the G ALREADY puts in extra money – 1 per cent – in their Medisave every month so they can buy current shield plans or other types of approved medical insurance. That is, they have portable medical insurance something which the labour movement wants employers to give to their workers. This means that even if workers quit the service, they can still bring their benefits along with them.

(Okay, I know it’s a far cry from the days when retiring from the civil service still means pretty good or even free access to healthcare. But it’s a lot better than most workers in private sector who are left in the medical lurch when company health benefits expire when they quit or retire)

Anyway, from January, this group will get 2 per cent, capped at $140 a month. This seems a pretty good deal given that monthly premiums will go between $3 and $6 every month when Medishield Life kicks in.

What about those who don’t earn as much as won’t ever be able to get as much as a $140 top-up? If they earn, say, $2,500 a month, the 2 per cent will amount to $48. Well, the G says those who earn $2,500 a month or less will get at least $50.

(Note to civil servants: you get this if you are on the Medisave-cum- Subsidised Outpatient (MSO) scheme)

The second group is on a different medical scheme, a much older scheme known as Comprehensive Co-payment Scheme which heavily subsidises health-care costs, including inpatient treatment at public hospitals and polyclinics. Mainly for the older and senior people. These people will get 1 per cent extra.

The third group comprised the retired civil servants, some 32,000 people, who are themselves divided into those who are on the scheme above and those with the really, really super duper medical benefits. Those who are on the scheme above will similarly get 1 per cent extra.

The rest will get their Medishield Life premiums paid for by the government. Lucky devils number about 19,200.

I don’t know how much this is costing the G because the news reports don’t say. But it looks like people who enter the job market or change jobs should be looking out for more than just what prospective employers pay in terms of salaries and bonuses. The question to ask should also be: What about medical benefits? This is something most people don’t pay much attention to, especially young job-seekers. They are more interested in the cash as well as whether they need to work shifts or weekends and the number of days of annual leave. I know of enough people who enter retirement with even more worries than while they were working. Suddenly, the comfortable corporate healthcare rug has been pulled out from under them. And they never thought to buy themselves any medical insurance while they are hale and hearty. So they enter retirement with their blood pressure even higher and find that they can’t be insured or would have to pay sky-high premiums if the insurance companies give the nod.

The good thing about Medishield Life is that those with pre-existing illnesses will be covered, yes, at greater cost. It’s relief to the sick although I am also hoping that this wouldn’t suddenly bankrupt us when the time comes to pay for their bills. There is a reason the private sector WON’T insure them.

The private sector should move quickly to having portable medical insurance. The small and medium sized companies have come up to say that it would be tough for them to give up an extra 1 per cent to Medisave accounts; it will add to employment costs. Fair point. I’m not even sure if most already provide medical benefits…

But what about the bigger companies who have company health benefits and group insurance schemes? Is it only inertia that is stopping the move to something that is clearly more beneficial to the individual, both in the long and short term? The issue deserves further airing. It seems the public sector unions were involved in the discussions with the civil service on topping up Medisave accounts. Maybe they should help their private sector union counterparts to come up with a plan to move the big corporations to do the same.

Cut off a few heads

In Money, News Reports, Politics, Society on March 9, 2013 at 11:10 pm

There was an interesting feature in The Sunday Times today about COE prices by ex-ST editor Han Fook Kwang. In essence, he recounted how various changes to Singapore’s car ownership story has caused the explosion in COE prices. The earth should have moved within the G ranks, he said, when COE prices shot up. It didn’t.

Here is his list of how this happened:

In 2003: car loan restrictions which had been in force from 1995 lifted.
In 2002: ARF reduced from 140 per cent of the open market value of a car to 130 per cent, part of a planned reduction in the tax which was brought further down to 100 per cent in 2008.
In 2009: COE numbers reduced to slow down the growth rate of the car population from 3 per cent a year to 1.5 per cent, and to 0.5 per cent this year.

“Should anyone be surprised then that COE prices exploded, hitting the $90,000 mark?
“In its defence, each of these changes could be justified on its own grounds, as indeed they were. But taken together, it was a recipe to break COE price records. It shows how important it is for policymakers to be clear about what they want to achieve and to be wary of unintended consequences.’’

What he wrote sounded a bit like what National Development Minister Khaw Boon Wan said about housing policy during the budget debate. So many tweaks over the years that we’ve lost sight of what is the G’s role in providing public housing – hence high HDB prices.

In 1971: HDB flats can be resold for a profit.
In 1989: HDB flat owners can keep their flat, even when they buy a private property.
In 1993: Buyers can take loans based on the prevailing market value of the flat,instead of HDB’s historical selling prices.
In 2003: HDB flat owners can sublet their flats.

In between, the housing policy is used as a social tool for everything from making sure families stay together, encouraging the formation of families, raising the value of housing assets by subsidising upgrading, catering to the accommodation of foreigners and PRs, ensuring the spread of races…You name it, the housing tool can be used to fix everything so much so that the myriad renovations might well damage the supporting beam structure.

So Mr Khaw as well as other MPs are asking for a back to basics look at housing policy.

The trouble is, the genie is out of the bottle. Going back to basics and first principles mean that some groups which had benefited from the changes which made housing policy so complicated will be affected.

Mr Khaw raised the example of the income ceiling for HDB flats.
Should it be lowered, raised or lifted. Should executive condos continue to be offered? (Now we have to remember that ECs were in response to the housing needs of a sandwiched class who were priced out of both public and private property.)

Another example he gave was whether the HDB should return to pre-2003 days of strict owner-occupation. Then what would happen to the many retirees who rely on income from subletting or the younger homeowners who use it to help support their lifestyle?

A third example: Return to pre-1989 days when HDB flat owners have to sell off their flats when they buy a private residential property. What to say then to Singaporeans who aspire to live in a private condo and use their HDB flat for additional rental income?
Mr Khaw has been fighting fires (his words). He’s delinked BTO flat prices from the resale market to make them more affordable although he very cleverly said that those who want to figure out the discount should do the sums themselves (which property analyst will do this please?)

So housing will now be part of an in-depth conversation within the National Conversation. Mr Khaw’s back to basics re-look should apply to other policies as well. For example, have we lost sight of the G’s role in public transport (why should it subsidise transport operators?) and education (with calls now to nationalise pre-school education)?

In fact, one important facet of this discussion is what we, the citizens, want from the G in these areas. Our record is not good – we want the G to do everything. Every segment of the population wants something different that is in its interest, and policies are tweaked to cater to demand. The result is a many-headed monster of a policy. It is a Hydra that will eat the next generation, not mine or my parents’ – since we probably would have got most of what we wanted over the years.

Maybe, we should just do this: Come to an agreement on the G’s role in each area and state its mission and vision in the provision of housing, transport, education and healthcare, plus the underlying principles that will underpin its operations to fulfil its vision. Then we should look at the monster with a view of cutting off some of its heads and making sure they don’t grow back. It’s easier said than done of course.

But it would be an interesting political and intellectual exercise.

Why is my salary STILL so small?

In Money, News Reports on March 4, 2013 at 2:07 am

I don’t think anyone is going to object to getting a bigger pay packet and it seems that seven in 10 workers might well be made very happy with the Wage Credit Scheme going by what ST reported today.

The question is whether employers will bite – and why not, you say? Well, the worry about what happens after the three years of wage subsidy is up will be on their minds. Can they afford to take up that 40 per cent portion of G-funded wage rises, especially if productivity efforts did not work? Will they clamour for a continuation of that gigantic $3.6 billion package, given that, hmmm, the next general election will be due then? The political pressure will increase for continued help with even more dire scenarios of companies closing shop painted.

Another issue that hasn’t been quite canvassed: The reaction of workers. I think we can expect pressure of another kind, this time on employers to raise pay. Expectations of seven in 10 workers will rise. All will be scrutinising the size of their wage packet and doing their sums on whether they should have got more, given that the G is giving bosses a helping hand. Employers will be doing their sums too with an eye on Year 3, and might well be more careful in doling out pay raises. So expect dashed expectations.

I guess some workers will also argue that since the G is already willing to give 40 per cent and the employer has already thought about a pay rise, then the pay rise should be more than 100 per cent. That way, wages are definitely raised – which is what everyone likes, no? They might not view the G subsidy as an effort to help the companies use the money for productivity improvements. The argument will be: since the G is giving you money, you can afford to give us more.

This will be a pretty short-term view, but mightily important to those earning less than $4,000 a month with children to raise and bills to pay. After the three years, then what? If the company cannot sustain its wage bill on its own steam, then woe betide those who have enjoyed three good years. I can hear the clamour: the scheme should continue or you’ll see how I will vote come 2016.

I think the objectives of the wage credit scheme should be clarified for the common man, to contain expectations that their wages will increase dramatically because of this help. That the effort is more about helping employers to restructure and re-skill their workers so that at the end of three years, both employer and employee will be comfortably off. This means workers must have a clear idea that they in the scheme along with their employers, that they have a stake in making the company work smarter so that they don’t find themselves worse off after three years. It means that within the three years, you don’t going looking for another job because it pays a bit more, that you have an obligation to the taxpayers, really, who are funding your pay increase to give your companies some respite.

Therefore, the objective of the Wage Credit Scheme must be clear and not only directed at employers, some of whom might well game the system for their own ends. It is important as well to reach those seven in 10 workers, not a small number, who will be waiting for a fatter wallet.

READ http://www.breakfastnetwork.sg for a Chef’s Special on how EMPLOYERS might react to the Wage Credit Scheme

Shift gears = New fears

In Money, News Reports, Politics on February 27, 2013 at 12:19 am

I reckon that the best thing about the debate on the Population White Paper is that most of us will be able to comprehend the Budget 2013 much better than in the past, when we will probably be zooming in to see what’s in it for us.
So many reactions now, so here’s a summary of some new points that have emerged following DPM Tharman’s speech yesterday culled from media reports.

- The construction sector, that really unproductive part of the economy, is going to be hit so hard that it will be a wonder if we can get our infrastructure plans in place. Construction companies which have been going around the quotas by paying a $650 monthly levy for every additional foreign worker will have to pay more, $950 next year and $1,050 in 2015. Now that’s a psychological barrier that’s being breached. Smaller companies are expected to fold or merge.

- The retail and restaurant business people are extremely angry that they have been hit so heavily with higher levies and lowered quotas on foreign workers. Some operations simply cannot be automated, they say, and no matter how much you pay, Singaporeans just won’t do certain jobs. Seems though that there is some kind of workaround: A flexible job scheme that was piloted in the hotel sector to get foreign workers to multi-task will be extended to the whole services sector. So a waiter can double as a dishwasher in this new scheme (hate the word!) that will have its own quotas? Seems we’ll hear more about this later.

- That Wage Credit Scheme in which the G foots 40 per cent of pay rises for those earning less than $4,000 a month might well prove to be a double-edged sword. Bosses may feel compelled to pay people more than they are worth; people would start expecting higher pay even though there is no increase in productivity. And what happens after Year 3, when these credits stop? Can companies afford to foot the wage bill? Would their companies have had enough time to re-structure and raise productivity by then to justify the cost of manpower? The opposition parties, the Singapore Democratic Party and Reform Party, have weighed in too, suggesting a minimum wage law would be a better instrument.

- Some real drama is playing out in car companies. First, they had to deal with last minute orders with people started shopping on Monday night to beat the clock – higher cash payments, ARF etc will kick in. Now, people who had ordered cars are calling to cancel because they don’t know how the new figures will play out. There’s a shift of gear here: the G seems to be moving from curbing car usage to restricting car population. Not fair, the car people say.

- The Workfare Income Supplement to give cash/CPF support to those with low-paying jobs should be extended to part-timers, said an economist. Calculate the income support on a per hour basis, he suggested. This might well bring in more workers into the fold and up the resident workforce numbers.

I’m looking forward to the debate. Stay tuned to this blog and http://www.breakfastnetwork.sg

A ground level look at Budget 2013

In Money, News Reports, Politics on February 26, 2013 at 2:30 am

What’s there not to like about Budget 2013? That depends on what’s your instinctive reaction after hearing/reading DPM Tharman speech yesterday?

Aspiring first-time car owner: “What? Forty per cent cash down for a car? How can? Can those China-made cars please come back? Wait, the COE will be higher than the price of the car..’’

Rich guy: “How dare they tax my second home at the Sail, my third at Sentosa Cove and my fourth in Bukit Timah! Time to buy a building at Iskandar.’’

Befuddled economist/pseudo economist: “The government is paying employers to pay workers who get a pay rise? Why not just implement a minimum wage scheme?’’

Sandwiched class: “Damn! More income support for the lower-income. From MY taxpayer money. Why don’t just cut GST and everyone will be happy since it’s most regressive tax around and G made so much surplus already?’’

Big -flat homeowners: “Again five-roomers and executive flat people lose out. The Government think we all not poor just because we live in bigger places ah? Better downgrade and use the Silver Housing bonus – but I love my big place!’’

About-to-be bankrupted restaurant owner: “I will now close my restaurant. I can’t get foreign workers and the Government not even doing anything about my rent. At least can tahan if rent not so high.’’

Earning below $4,000: “My boss had better give me a pay rise now since the Government is subsiding 40 per cent. Actually it means my pay rise can be higher BY 40 per cent from whatever my boss thought. But I bet the stingy fella will just save the money for himself.’’

Panicked mother: “At least got more kindergartens than just the PAP and NTUC one. MOE also starting its own. I think everybody is going to go to the MOE one. Sure got standard, got subsidy. Better queue now while Ah Boy is six months old.’’

I don’t mean to pour cold water over the Budget which I think is pretty cool. This is a G with ideas taking a big picture look at the present and the future. The budget is characterised as a shifting of gears and I so agree. We’ve been in cruise-control for too long – or running ragged at top gear?

How people react will depend on what bit bit them most. Hard to look at the big picture when you see your new car disappearing into the distance. That promise to fix the transport infrastructure MUST come true! Hard to be happy when you are facing the prospect of closing down your business. I mean, which retailer or restauranteur will say: Actually, this isn’t for me. I should change lines. (And become a cigarette smuggler: sure got demand! Kidding ok…)

I liked that steps are being taken to address income inequality; whether they are bold enough is the question of course. But, at least, something is being done to raise their incomes while at the same time sustaining the smaller enterprises who scream about lack of foreign manpower.

My worry about such handouts have always been whether the enterprising enterprises will find a way to “game’’ the system, not just the Work Credits scheme but also Workfare Income Supplement and Productivity Innovation and Credits scheme. Big money is being paid out, what are the checks and balances and at the end of the day, how do we measure results?

A healthcare begging bowl

In Money, News Reports, Society on February 25, 2013 at 2:02 am

We’re all talking about healthcare these days and whether we can afford to get sick in our silver years. Economists are wondering if the healthcare system should be reformed – why save so much money in Medisave when some of us need it now? Can’t the G share of the bill be higher? And my own favourite question: Has anyone ever been bankrupted by a medical bill?

So I read with interest The Sunday Times story on Medifund, that last safety net in our 3M system. I gather that this is for those who have depleted their Medisave (and those of their immediate family members?) and who didn’t sign up for Medishield. At least, that’s what I think the criteria is since it hasn’t been publicised with the G seeming to prefer a “case-by-case’’ basis.

I have friends who have been helped by Medifund, for which they are grateful to the G. It’s good that people are “grateful’’ but should it be the case that they look to G largesse to foot medical bills. I mean, no one intentionally gets sick. So I read about Health Minister Gan Kim Yong vowing that no one will be denied healthcare because they can’t afford it. He’s said it before, probably more than twice, and so has every Health minister before him. The ST led with this assurance – again, although the news should really be how many people have been helped by Medifund. I can’t help but think that the problem can be fixed at the root, but I will leave that to health economists.

Anyway, Medifund disbursements have increased from$78.7 m in 2011 to $90.8 m last year. Number of applications approved shot up from 480,869 to 518,389. The rise is attributed to greater flexibility to medical social workers to say yes to applications, although I still don’t know what is “flexible’’. As compared to what?

I tempted to say “wah, so generous now…’’ but I won’t. Because the figures are troubling. So many people need help with their medical bills, so much so that there is a “shortfall’’ – Medifund, an endowment fund, paid out more than its income for the first time. There is one more figure which appals me: That 96 per cent of the applications were for out-patient bills. I mean, so many people cannot afford out-patient bills? Something is wrong somewhere no? Especially since an in-patient received $1,295 while an outpatient get $103. So many people cannot pay $100 or so? How come? Is it because the medical problems aren’t covered by Medisave in the first place? Or they really, really are destitute?

I really think we need to look hard at the figures..

Then I read today in ST about medical centres in the Orchard Road belt. It’s an exclusive by ST I believe, so I’ll just sum it up here: Basically, the Raffles Medical Group wants to convert seven podium floors of Thong Sia building into a medical centre and applied to the URA to do so. As usual, there was a bureaucratic gobblededook response: “We evaluated the new proposed use taking into consideration specific site context, the impact of the proposed use on the amenity and surrounding uses, and the local road infrastructure capacity in that area, and decided to turn down the proposal.” In other words, the URA said no.

The ST has an interesting graphic on all the medical centres in the Orchard Road belt. Go buy ST. Did you know Pacific Plaza is converting the top seven floors of its 12-storey building into 22 medical “suites’’? The private medical centres are everywhere in the shopping district. Raffles wants to use Thong Sia to serve the “significant number of patients who live in District 9, 10 and 11’’ and foreign visitors, its spokesman said.

I don’t know why the URA said no. Apparently no parking space and complaints of residents have something to do with it. I don’t want to be envious, but I am. Nor do I want to say that private sector initiative should be stifled given Singapore’s bid to be a medical hub. But this story coming after the Medifund story really makes you think about the healthcare system in Singapore. Can we look after our needy sick in a better way than have them go with a begging bowl to the G?

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