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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.

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

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