Archive for the ‘Money’ Category

Over-charging over over-charging Part 3

In Money, News Reports on October 16, 2014 at 8:45 am

I have got to say I found the Law Society’s letter to the ST Forum Page, Don’t equate reduction of costs with over-charging, pretty annoying.

It starts by talking about how “much ink has been spilled following recent claims of overcharging by lawyers representing the Singapore Medical Council’’. I wouldn’t call a grand total of two letters “much ink’’. I guess my definition of “much’’ isn’t quite the same as the Law Society’s.

It goes on to say: “Without commenting on specific cases before the court and the inquiry committee, it appears necessary to explain the process to the public.’’

(Thank you very much but could you drop the condescending tone? In any case, I don’t think the explanation was very full.)

It then explains the “taxation’’ process. In a nutshell, a lawyer charges a sum of money to a client. Say, he wins the case for his client, then his bill goes to the loser, who can challenge it.

The quantum determined by the court is an amount that the losing party ought reasonably to pay, and not what a lawyer may reasonably charge the client.’’

I am not sure what that means. I guess it is something like this: What a lawyer might charge a client, isn’t the same as what the losing party pays the client (winning party) to defray fees of the lawyer. So if your client has deep pockets, the lawyer is in luck. Because the loser pays whatever amount that is “taxed’’ and I suppose the client foots the rest of the bill.

Then it tells us that we shouldn’t be surprised if there is a difference: “The law actually intends that there will be an appreciable margin between what a losing party pays in taxed costs, and what a winning party has to pay its lawyers. It is an attempt to reach a fair balance between the victor and the vanquished. ‘’

The question then is what is an “appreciable margin’’ – 10 per cent? 20 per cent? 100 per cent? And does the law really intend to have an appreciable margin? I didn’t know that! Yes, yes, I am not a lawyer.

It goes on: “In practice, most bills of costs submitted for taxation are reduced. The winning party’s lawyers have a duty to seek the highest quantum reasonably arguable, and the losing party’s lawyers have a duty to seek the highest possible reduction of those claimed costs. The court will balance both views and decide. That a winning party’s bill of costs was reduced on taxation should not automatically be construed as overcharging.’’

What a strange bargaining process! Keeps the judges busy…But this only happens if the losing side disputes the bill and brings it up to the court no? And the loser needs a lawyer to argue the bill down? What then is the definition of over-charging? How much above the appreciable margin should this be to be construed as “overcharging’’.

According to Rule 38 of the Legal Profession (Professional Conduct) Rules on Gross Overcharging: An advocate and solicitor shall not render a bill (whether the bill is subject to taxation or otherwise) which amounts to such gross overcharging that will affect the integrity of the profession.

I would have thought the Law Society would have referred to the above in its letter as part of its explanation of the difference between fee taxed down and overcharging. It would have been educational. And give examples please.

It also goes on to say that “if a client is dissatisfied with his lawyer’s bill, he can also tax that bill in court’’.

So you hire another lawyer to bring down your original lawyer’s fees?  Wow! I wonder if this is common practice? (Is this what the Singapore Medical Council should have done in the Susan Lim case? Or did it think the fees of $1m plus charged twice is a reasonable fee for the SMC to pay? Ooops! Wrong of me to refer to specific cases…)

Final paragraph: “The Law Society does not condone overcharging by lawyers, and complaints about overcharging are subject to a statutory regime. Complaints made to the Law Society are referred to independent committees for investigation. These committees are not appointed by the Law Society, and it has no control over them.  The public can have every confidence that there are long-established safeguards in place to address overcharging, whether by one’s own lawyer or by an opposing lawyer.”

Isn’t that so odd? There is an independent committee, which the Law Society has no control over, to deal with complaints. Which makes you wonder why the Law Society is spilling ink at all. LawSoc could at least give more details on how these committees work or the results of its work.

Here’s my response to the Law Society letter:

Much ink has been spilled by the Law Society on the general process of taxation by the courts. Without commenting on specific cases before the court and the inquiry committee, it appears necessary for the Law Society to elaborate on the phrase “appreciable margin’’ and define the term “over-charging’’. It might also be appropriate to disclose statistics on complaints of over-charging (after taxation and not through fraud or other action) and how many were acted on. This is so as that the public can have every confidence that there are long-established safeguards in place to address overcharging, whether by one’s own lawyer or by an opposing lawyer.

Over-charging over over-charging Part 2

In Money, News Reports on October 9, 2014 at 12:40 pm

I don’t know about you but I am getting absolutely confused about charges and fees of professionals. I’m glad I’m not a lawyer or a doctor. It means I am not in a position to impede access to justice or deny medical care to the sick. Of course, I also don’t make as much money. This piece is pro bono, by the way.

Anyway, I was thinking about the Dr Susan Lim case, or rather, its aftermath. How strange it is that the doctor guilty of overcharging a patient is herself now being overcharged. The case isn’t a straight-forward two party fight. So the Singapore Medical Council hired (?) a law firm to handle its disciplinary inquiries into her case. One committee was convened, and it later recused itself. Then Dr Lim tried to stop a second committee from forming by going to the High Court – and failed. She went before the second committee which said she was wrong, and therefore has to pay the SMC’s legal cost for both committees.

So Dr Lim was presented with two sets of bills, for the High Court case and for the two disciplinary committees. In both instances, she – or rather her husband – disputed the amounts that was put up by Wong Partnership to the SMC and so they went to court to get them “taxed’’.

In August 2013, a $1m-plus bill was cut to $370,000 – for the High Court case. And lately, a $1.33 m bill was taxed down to $317,000 – for the two committees. In total, the original bills amounted to $2.33million, and was brought down to $687,000. It is believed that the SMC will be appealing the second amount, as it did the first. We’ve yet to hear anything.

I gather that the process is this: the lawyers bill the SMC, and the SMC sends the bill over to the other side. Two writers to ST Forum page have already weighed in to say that the SMC, a statutory board under the Ministry of Health, seems to be paying private lawyers whatever fees they ask for without much scrutiny.  Bear in mind that the SMC is funded by taxpayers and doctors’ registration fees and you would think it would take greater care over its finances.

One immediate question on the Susan Lim case would be: Even if the amounts were taxed down, that is, Dr Lim doesn’t have to pay $2million or so, how does the SMC pay Wong Partnership then? Does it have to make up for the shortfall? Or did it pay everything first in the hope that the amounts from Dr Lim would not be disputed? The SMC owes the public an answer. If it did pay the full amount of $1m plus for the first set of bills (and I understand that this is the case and I really hope to be told that I’m wrong) then where did SMC get the money from?

Another question is this: Why did the SMC itself not dispute the lawyers’ bill, if not the first time, then the second time? Surely, the fact that the first set of bills was lowered so drastically would mean that it would look more closely at the second set of bills?

The SMC should really clear the air over this or it would seem that it – or its lawyers – was out to get whatever it can from the errant doctor.

Letter-writer Jeremy Lim said that the SMC should have the legal fees it has paid out over the years independently reviewed “to ensure there have not been other episodes of overcharging that have gone undetected’’. I agree. In this case, we have a doctor and her ex-banker husband, presumably with deep enough pockets to hire their own lawyers, disputing the fees. What about other less well-off doctors?

Another letter writer, Mr Peter Chen, said this: “I understand that legal fees incurred by a doctor in his own defence are not recoverable, even if he is cleared of wrongdoing. It is because of these astronomical legal fees that some doctors would rather admit guilt and face a short suspension than try to clear their names – and end up with a bill that might put them out of business.’’

Is that so? How come? Wouldn’t this mean that anyone with a (frivolous) complaint against a doctor can try his luck with the SMC – and not pay for the doctor’s legal cost of defending himself even if the doctor is in the clear?

As for the legal assessors and expert witnesses, surely the SMC is au fait enough with the fees such professionals had charged in the past to ensure that they were not so far out of line? After all, the registrar could cite several precedents involving the SMC when she taxed down the amounts.

Then there are the SMC lawyers themselves, such as the lead lawyer Senior Counsel Alvin Yeo. Dr Lim and her husband, Mr Deepak Sharma, want the Law Society to investigate him for professional misconduct – and that was over the first set of bills. A review committee of the Law Society didn’t think that was needed because there was no evidence of “impropriety’’. (This makes it seems like overcharging is okay, especially since there is a taxation process with the courts acting like a watchdog.   Doesn’t it take money to get the courts to look at the bill? And another lawyer to argue the case? )

Mr Sharma is going for broke and wants the court to review the Law Society’s decision. The irony is that he can’t seem to get a Senior Counsel to represent him (most cite knowing Mr Yeo personally) and is applying to get a Queen’s Counsel to do so. Sheesh. Our legal fraternity is really so small! Everyone knows everyone, or at least every SC knows every SC!

With Mr Yeo’s second set of bills also taxed down, it would seem that Mr Sharma has more fodder…

I am now looking forward to the Singapore Medical Council’s reply to the two Forum Page letters.  Methinks Mr Yeo should say something too, especially since he is a Member of Parliament. He shouldn’t let his reputation and his integrity be called into question. Oversight? Mistake? Commercial decisions? Market rates? Or someone in the firm added one too many zeros?

Over-charging over over-charging

In Money, News Reports, Society on October 8, 2014 at 8:23 am

When I read the news reports last week about super-high fees asked for by lawyers for the Singapore Medical Council for their work on the Susan Lim case, I wondered if I was really reading something new. It all seemed so familiar. So I did a little digging and realised the reason for the sense of déjà vu. This case of lawyer-overcharging-the-overcharging doctor had been played out before – between the same protagonists.

Here’s the background:

Last year, the SMC lawyers, Senior Counsel Alvin Yeo of Wong Partnership, had put up a legal bill of $1,007,009.30. This was for work during a High Court case; Dr Lim had tried and failed to stop the SMC from convening a second disciplinary committee against her.

Dr Lim’s side disputed the bill. It was sent for taxation, that is, for the courts to review. This was slashed to $340,000.

The SMC appealed to get the figure up to $720,000 but the court only revised it up by $30,000 – to $370,000.

All this came to light in MSM in July this year, when her husband, Mr Deepak Sharma, who is funding her case, decided to go public on his complaint of overcharging. He had gone to the Law Society alleging professional misconduct on the part of Mr Yeo and was upset that the LawSoc’s Review Committee had dismissed his complaint as having “no substance’’.

Now he’s gone to the courts to get it to review the decision – as well as to bring in a Queen’s Counsel to fight his case. Why? Because at least 20 Senior Counsel here have turned him down, mainly citing their personal links with Mr Yeo.

Fast forward to the latest twist:  

A few months ago, the same SMC lawyers submitted a bill for $1.33 million, for work on two disciplinary committees convened to hear the case against Dr Lim.

Dr Lim’s side again disputed the bill. This was slashed to $317,000.

No wonder I get the sense that I was reading the same thing. Almost the same figures!

You wonder why the lawyers and the SMC hadn’t learnt from the earlier lesson. Unlike the latest case reported last week, there is no news report on what the first registrar said about slashing the first set of fees. But it appears that somewhat similar reasons were put up by the lawyers to justify their fees – number of lawyers involved and the hours spent, including getting “new’’ lawyers up to speed on the case. Except that the SMC didn’t get permission for more than one lawyer to be “certified’’ (some professional ruling) and it’s odd that Dr Lim had to pay for “refresher’’ courses.

Mr Sharma, who recently retired as global chairman of Citi Private Bank was reported in ST as claiming that in one of its bills, WongP was charging what amounted to $77,102 for each day they were in court. In another, it was $46,729 for each day in court. And, for the third bill, this amounted to $100,000 per hour of hearing.

He cited the difference between initial and final bill as evidence of  “gross overcharging’’ and “improper conduct’’. But the LawSoc review committee seemed to think that just because the bill had been taxed down significantly does not mean there was professional misconduct involved. There must be evidence of impropriety as well. Besides, it added, Mr Yeo wasn’t involved in preparing the bill….(which sounds like it’s his secretary’s fault)

(Everything’s topsy-turvy. Doesn’t that look like a reason Dr Lim herself could give for charging $24million to her Bruneian patient? And I thought the courts had settled on the ethical principle of professionals charging “reasonably’’ and not just what the client/patient can pay.  Or does that apply only to doctors and not lawyers? Okay…I will be very careful now…)

I got hold of what the second registrar, Jacqueline Lee, said recently and they make for really interesting reading. I wish MSM gave the full works but since it didn’t… here goes…

  1. The lawyers wanted $900,000 as legal fees. Taxed down to $180,000

Seems that they were trying to bill for three lawyers rather than just for one lawyer that is certified. The argument: there was just one lawyer (never mind who, junior or senior) at every stage anyway. The registrar described the argument as a “glib’’ one which made “a mockery of the regime for certifying the costs of one solicitor.

She also threw out arguments on needing to “refresh’’ lawyers since there were breaks in between hearings and new people brought on board. One key thing she noted: although there were two inquiries, much had been done at the first one already so it really wasn’t so hard-going for the second committee. Also, Dr Lim didn’t call any witnesses. And she wasn’t responsible for the first committee recusing itself, necessitating a second committee to be set up.

Plus, it seems the lawyers weren’t good at breaking down what they actually did during the hours they billed for: A total of 1,900 hours and $1,229,804.

The lawyers said: “Out of an abundance of caution, the amount stated is a reduced figure of the time spent.’’

The registrar’s reply: “I would approach that statement with great circumspection’’ The more relevant figure, she said, was 718 hours done by four lawyers.

What’s also interesting is how the lawyers threw in Law Minister K Shanmugam’s name into its “skeletal submission’’, saying that they had to handle correspondence from him while he was in the private sector acting for Dr Lim at the beginning of the whole kerfuffle.  The registrar ticked them off roundly and pointed out that the notice of inquiry was given in July 2009, “way after’’ Mr Shanmugam’s involvement ceased. “In my view, it was not necessary, and perhaps even mischievous, to highlight the long procedural history…’’

Woah! Lawyers also very good at name-dropping ah…

2. Legal assessors’ fees

I have been asking what legal assessors are and now I know: They are actually lawyers/legal people that the disciplinary committee can turn to for advice on questions of law. (No, I don’t know how they are appointed. Not public tender I suppose…)

The first disciplinary committee had Senior Counsel Giam Chin Toon who asked for $49,200 (at about $570 per hour) which the registrar described as “slightly above average’’. This was taxed down to $45,000.

The second committee had Senior Counsel Vinodh Coomaraswamy, who asked for $235,635.40 for some 224 hours of work done at $1,050 per hour. This was taxed down to $22,000 in all.

That’s a gigantic drop, mainly because the registrar doesn’t have information on what he did for 180 of those 224 hours that were billed. (Taking out 32 hours that could be accounted for because there were sessions held, it seems the rest of the time was lumped under “attending internal meetings’’ with the committee and “perusing and reviewing documents’’.)

Again, she pointed out that it was the first committee which recused itself, hence another legal assessor who would really only need to read about what happened in the first session. Dr Lim shouldn’t be made to pay for “duplication’’ of effort.

3. Expert witness fees

Dr Tan Yew Oo claimed $12,145, which was brought down to $9,000

Dr Hong Ga Sze wanted $40,000, and this was taxed down to $5,000

The interesting thing here is what constitutes an expert witness. The case was not about botched procedures or medical treatment which would require a specialist in the field, but a question of how doctors decide on what to charge.

In the case of Dr Tan, his expert witness bill was more than what he would charge as a specialist doctor – and his medical expertise wasn’t even required in this case. The registrar looked at precedents before bringing the figure down.

Dr Ho’s case was more interesting. He was charging higher than Dr Tan even though he was more junior, spent less time on the stand and did a shorter report. He was claiming $14,000 for giving expert evidence on just one day, even though it was really about billing practices. He charged $6,000 for “standing by’’ to take the witness stand and $6,000 for preparing his short trial report (Dr Tan charged $1,000). He had a $14,000 bill for trial preparation which started from a date even before the notice of inquiry was issued to Dr Lim!

4. The ring binders

Lawyers say $6 because have plastic sheets inside; but registrar noted they used $2.50 binders before….

That’s the full(er) story…I think. Anyway, I getting tired. Part 2 later.

Deciding who gets PR

In Money, News Reports, Society on October 3, 2014 at 4:53 am

Everybody knows now about the famous/infamous ex-tour guide from China who moved into a rich old widow’s home and was granted lasting power of attorney, giving him practically control of her life – and her assets. We can exclaim and call him names and get all xenophobic about his so-called influence, all of which makes for good dinner conversation. Now we will wait to see the outcome of investigations of supposed fraud and of the various official “probes’’ into his status here.

Couple of points I thought worth noting…

I am really glad the Office of Public Guardian stepped into this tangle between the widow’s niece and Mr Yang Ying – over who should be supervising the 87-year old’s finances. We seem to be so entirely sympathetic towards the niece and antagonistic towards Mr Yang that we seem to have forgotten that Madam Chung probably needs a third party’s protection. That neutral party should be the State or the courts because it all boils down to who she is giving power to. So Mr Yang claims he had a doctor certifying that she was capable of giving him power of attorney when she did so. Then, she got the power revoked last week. The niece says she was all right then as well, so a doctor said.


Experts on either side! Best to get an independent doctor assigned by the courts to do so. In fact, I keep wondering why the doctors weren’t named. I guess it is not considered significant who the doctor is – so long as he/she belongs on some list the OPG has.

The bigger point I think is that we might finally get some clarity on how the manpower and immigration authorities decide on employment passes and permanent residency status. It seems that both agencies are investigating now, as ST reported.

Thing is, it seems to me strange that he got an employment pass solely because he and Madam Chung set up a music and dance school. Maybe not strange since we all wonder foreigners to bring money with them. I wonder what’s the paid-up capital? I wonder (actually I don’t) who put up the money…

The address of the school/office is the home of Madam Chung. Amazing. I wonder if dance classes are held there. I wonder if ACRA kept notes of the school’s accounts or whether it is a dormant/shell company so that whatever supposed income Mr Yang gets can be funnelled here.  MOM says salary, qualifications, age and experience counts in assessisng employment pass. So Mr Yang is down as having a $6,000 a month salary and it seems he makes regular CPF contributions and pays taxes. Doing what I wonder? Seems to me it’s rather easy to get an employment pass under false pretences – or am I jumping the gun here? Then it seems the niece has documents which cast doubt on the authenticity of his degree from the University of Financial and Trade Beijing. In 2009. The same year he set up the Singapore company and moved into the bungalow.

The immigration authorities or ICA said they had rejected his PR application once. He applied for it ONE year after he got his employment pass, in 2010. But he got lucky(?) the next year. You know, I have heard plenty of stories about foreigners who “wait long, long’’ for PR status. And Mr Yang doesn’t have the added reason of having “roots’’ here, like a Singaporean spouse. I sure hope the immigration authorities didn’t buy his claim to be Madam Chung’s “grandson’’ or being a grassroot leader or an active member of the chamber of commerce – positions/roles which have since been questioned. I gather, however, that Singapore sponsors are required for permanent residency applications. Besides probably Madam Chung, who are they?

The ICA said it conducts face-to-face interviews, background and document checks in assessing applications. In this case, were they done? Or did everybody give such a good account of the man? The ICA also makes the point that an average of 30,000 PRs are approved every year. It looks like a heavy workload then. I wonder how many are “repeat applications’’ and what sort of average “waiting period’’ a foreigner has to go through before getting PR. Because, seriously, two years seems pretty short to me. It’s not as if Mr Yang is some tycoon whom we want here because of the ability to generate more for the economy….

Above are just some points that come to mind.

You know what? I wonder if Mr Yang had also applied for citizenship…

More jobs, higher wages, more pain?

In Money, News Reports on September 16, 2014 at 3:03 am

I suppose we should be happy with the half-year manpower report that was published in MSM today. Wages are going up – because employers can’t hire as many foreigners as before. Real median wage went up 4.6 per cent last year, and is likely to go up further. (Nope, got no updated half-year figures on income.)

I guess employers have no choice but to raise wages to attract locals to work. There are 63,900 jobs going a-begging as of June. So more jobs, higher pay for locals, as ST trumpeted today. But there’s a cautionary note that ST sounded as well, backed up by experts and economists.

What if employers just passed on the increased manpower cost to consumers? So, everything cancels out and real income growth, said one economist, will be “muted’’.  And it looks like this might well happen given how productivity is going down. It’s gone into “negative territory’’ or to put it simply, people are actually doing/producing less than before in the second quarter. It’s -1.3.

You can blame the construction sector. It’s the biggest drag on productivity. (I sort of wonder if this is because the construction sector is skimping on employment of foreign workers because of higher levies they have to pay. And if lack of labour is also a reason for more people dying on worksites.)

But hey, most of us are NOT in construction so wages shouldn’t be affected, right? Except that the services sector isn’t doing too well on the productivity front as well – and this is the sector that is facing a foreign labour squeeze in numbers. You wonder where the hotels and malls that will be opening will get their workers…They just have to pay more to get the fussy locals to work then?  Higher and higher wages, and higher and higher cost of living. What’s the point of holding more money if it buys you the same amount of stuff as before?

What if employers simply cannot find workers despite offering higher pay? They can do a few things – re-locate, bug the G for more foreign workers or fold.

MOM said in its statement: “The manpower-lean environment will continue to be a feature of the Singapore economy. As the economy restructures, some consolidation and exit of less productive businesses is expected.”

We’ve been hearing so much about wages that I wish we had a handle on how our employers are holding up, like how many had to “exit’’ less productive businesses. It will be good to look at bankruptcy figures to find out how SMEs are faring. Is this rate increasing? It should be, given that economic restructuring does mean that companies would have to “consolidate’’ or “exit’’. If so, retrenchment figures should go up too. But a total of 2,410 workers were laid off in the second quarter of this year, lower than the 3,110 workers who were retrenched in the previous quarter. What does this mean? Are we over the worst?

Experts interviewed by ST don’t seem to think so.

They noted that the authorities tightened foreign worker hiring policies with the aim of forcing firms to work more efficiently. But the reverse has happened in some companies. It quoted Singapore Business Federation’s chief operating officer Victor Tay as saying that a lack of workers has pushed some firms to focus on day-to-day operations instead of planning ahead to raise productivity.

In other words, some companies are too busy trying to keep head above water to think long-term.

ST also quoted Mr Victor Mills, chief executive of the Singapore International Chamber of Commerce, as saying that curbs on employment pass renewals have led to the rejection of “talented, committed and productive’’ foreign employees who could have helped raised productivity levels.

Hmm…they weren’t replaced by locals? Or the locals not as good?

Only 11,000 or so foreigners were hired in the first this year, mainly for construction. And this is half the number the year before. The labour market report, however, didn’t break down the figure into employment or S pass or work permit holders.

I think the people who wanted fewer foreigners here have got their wish. Except that now, we’ve got to persuade Singaporeans to do the jobs that foreigners used to do – for the pay that they did. Or if we want to make even more money, we simply have got to be better (read: productive) than the foreign workers were.

It’s time to make productivity sexy.

Is it CPF-only for retirement?

In Money, News Reports on September 11, 2014 at 2:59 am

I was a bit disappointed to read the terms of reference for the panel to review CPF. It seems to me so itsy-bitsy. I guess that’s the point. The Prime Minister has made clear the CPF isn’t in need of an overhaul but some tweaks. So the panel now has to think about what sort of minimum sum would be needed in future, after next year’s $161,000 for those who turn 55. The PM has promised a moratorium of sorts on the rise so I guess it will be for the panel to decide how much, and when.

Then the other terms of reference are what the PM has already let fall in his National Day rally speech, on the possibility of lump sum withdrawal, allowing some people to get higher returns on their CPF and a graduated re-payment scheme (small to bigger returns over the years).

ST was predictable in getting the panel members to talk about their role. TODAY went further to ask non-panel members what they thought of the terms of reference. I agree with those interviewed that they do seem narrow.

TODAY reported NUS economics lecturer Chan Kok Hoe saying that the CPF’s adequacy as a retirement vehicle depends mainly on two factors: How much funds people are able to accumulate for retirement and what returns they can obtain relative to inflation.

It reported:

The terms of reference do not include looking into the first factor, which would involve the allocation of funds between housing and retirement as well as overall CPF contribution rates, he said. On the second factor, the panel is tasked to study how to adjust CPF payouts to increase nominally over time, but not to examine whether CPF funds should be invested in special inflation-indexed government securities, he said.

I agree. If the issue is retirement adequacy, shouldn’t we go further than examining what sort of  minimum sum would be able to give a regular payout till day of death? Like looking at the ratio between setting aside cash in the CPF and putting money into housing? Or have we settled that retirement adequacy includes assets such as housing? Well, there needs to be a big mindset change over “unlocking’’ the value of housing if so. And shouldn’t we also be looking at CPF contribution rates now set for employee and employer?

But I could be wrong. These could well be questions subsumed under the Minimum Sum scheme re-look.  

Then again, there is the big explosive question on withdrawal age. So it’s still 55 at the first key unlocking CPF and later, at 65, you start getting payouts? Or should be 60, and then 65 given the rise in retirement age? It will be immensely unpopular to raise if you think back to the days of the Howe Yoon Chong report. I really think that is a question the panel could pursue and give all the numbers that go with its recommendation. It doesn’t mean that the G would have to adopt whatever the panel  proposes – it will be a political decision outside the panel’s ken – but it would be a good education for all concerned, especially who want their CPF, like, now.

ST has an interesting piece by academic Donald Low commenting on another aspect of retirement adequacy outside of the CPF scheme, the Supplementary Retirement Scheme which gives tax savings if you put aside a certain sum in a bank every year contingent on withdrawal at age 65. It’s not a very well-known scheme and taken up mainly by the higher income. Mr Low talks about making it compulsory or at least an “opt-out’’.

I suppose if the panel had to look at so many different aspects, like what sort of interest the CPF should make or what the money should be invested in (inflation-indexed securities?), it would take more than its allotted one year time frame.

But I also wonder if we should move away from looking at CPF (cash and home) as the people’s sole retirement income. Mr Low’s SRS option is one. Maybe other groups should be working in parallel with the panel, to study the amount of insurance among various groups of people, for example, as well as what sort of family financial support is now given to the elderly. Just like parents give pocket money to their children, I am sure adult children do the same for the elderly. Or has this gone out of fashion and the elderly are now supposed to fend for themselves?  

This is just my one cent worth. Not accounting for inflation, of course.

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.


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