Yesterday, Saturday news also got some post-election "surprises" for us voters....
June 10, 2006 - Straits Times
Not the time to restore CPF cuts: Boon Heng
He rules it out in the 'foreseeable future', citing wage cost concerns [b]
NOW is not the time for restoring the cuts made to the Central Provident Fund (CPF) rates, said labour chief Lim Boon Heng, who noted that workers are asking for it to be done. Yes, the economy is powering ahead and unemployment figures are down, which could make for convincing arguments to raise CPF rates. But what concerns Mr Lim is the low employment rate among older Singaporeans and the need to keep an eye on rising wage costs. Such increases could drive more companies to move overseas, resulting in more job losses.
[b]This, he said, is why existing CPF rates are not likely to change. 'For the foreseeable future, I do not see any prospects for higher CPF contribution,' he said in a commentary in the labour movement's publication, NTUC This Week. The CPF system was 'retuned' in 2003. Monthly contribution rates for workers aged below 50 and their employers was set at a range of 30 to 36 per cent in total.
The current rate stands below the maximum, at 33 per cent: 20 per cent for employees and 13 per cent for employers. Noting that the new rates are 'more sustainable', Mr Lim added: 'As they are lower than before, the scope for CPF cuts to get us out of future recessions is limited.'
This is also another reason to spur companies to move to a flexible wage system which is more responsive to the ups and downs in the economy and of business, he added. 'Employers in non-unionised firms should get their act together now. They should not expect to be bailed out again by a CPF cut,' he said.
Asked when CPF rates should be restored to 36 per cent, Mr Lim said it was tough call to make. 'The economic situation in the world is very volatile,' he said in an e-mail reply to The Straits Times. 'Therefore, it is very difficult to set a timeframe for any rise in the employer's contribution rate to CPF.'
But he hoped there won't be a need to change for a 'long, long time'.
'The only time I can think of when we may want an increase in CPF contributions is when the labour market is very tight, so tight that wages rise sharply. The rise in CPF contributions would then be to dampen inflationary pressures,' he said. Mr Lim, Minister in the Prime Minister's Office, noted that some had asked for a restoration of the CPF rates. They did so last year when the state of the economy and unemployment improved. Likewise this year, after the National Wages Council noted that workers can expect larger pay packets.
But such calls by workers probably stem from their lack of understanding of what the retuning of the CPF was about, said Mr Lim.
'They think it is like previous cuts in CPF. So...it is our duty to explain.'
Hence, his commentary, which set out the reasons for CPF changes in 2003.
It was not a short-term measure to get out of the recession, but to establish a sustainable rate to meet three objectives: more competitive wage costs, create and save jobs, and to help older workers get jobs.
Now, as then, the same principles apply, said Mr Lim, NTUC's secretary-general. He is also convinced that when companies hand out better wage increases and higher bonuses this year, workers, especially the low-income, would prefer the wage increase to be paid out in cash rather than in the form of higher CPF rates. 'If we care for them, then we should not push for higher CPF contribution rates.'