Budget Intervention Speech at Parliament
Dr Tan See Leng, Minister, Ministry of Manpower
Mr Speaker Sir, I speak in support of the Budget. Minister for Finance has put out a comprehensive suite of measures in his Budget Statement.
Today, I would like to speak mainly on three issues. The first, on the Workfare Income Supplement, and the second, to assure our business community, especially small and medium enterprises, or SMEs, of the direction and pace of our foreign workforce policy. Finally, I would also like to address the points brought up by Workers Party members on distribution of the tax burden.
First, on Workfare.
Earlier in this debate, Leader of the Opposition, Mr Pritam Singh, Mr Gerald Giam and Ms Jessica Tan, raised concerns about the $500 minimum income criterion for Workfare.
I would like to correct the misconception that this is a cut back for lower-wage workers.
First, we estimate that around 20,000 Workfare recipients will be affected by the criterion, all of whom are casual or part-time workers. Leader of the Opposition has estimated that the number of affected recipients is 46,600 by referencing the number of employed residents aged 15 and above earning below $500 in 2021. This is inaccurate.
Not all of these 46,600 qualify for Workfare due to criteria such as age, spousal assessable income, and annual value of their place of residence. In other words, nothing to do with the salary they earn. Some would be students earning extra pocket money while they study or some of them are from higher income households. They are not the intended targets of Workfare.
Furthermore, 46,600 is based on 2021 data, and does not take into account the expected wage growth from the Progressive Wage Model (PWM) expansion and new Local Qualifying Salary (LQS) requirements that would uplift many employees beyond the $500 threshold.
Should any of these 20,000 workers subsequently work more and earn more than $500 per month, they will automatically requalify for Workfare.
Second, $500 per month is a reasonable and achievable wage for most regular workers under our Progressive Wage Model approach.
With the new LQS requirement, firms that hire foreign workers must pay all their locals working part-time, at least $9 per hour. At this wage, a part-time worker only needs to work about two working days a week to meet the $500 minimum income criterion.
Third, we recognise that there may be some workers who want to work more but are unable to earn $500 per month due to their personal circumstances, including persons with disabilities and ComCare recipients. We will provide them concessionary Workfare payouts, so they will not be excluded from Workfare.
Hence, if Ms Jessica Tan’s resident requires additional financial assistance, she can apply for ComCare. If she qualifies, she will receive concessionary Workfare as well.
In short, for workers who are earning less than $500, the best way to help them is to help them find a job of the appropriate quality and quantity of working hours to earn at least $500. Then Workfare can come in to provide an additional boost. To help such workers, we have a whole suite of employment facilitation programmes and initiatives ready to assist.
Moving on to the second point which I would like to raise, on foreign workforce policies.
The Minister for Finance laid out a multi-year road map to:
Increase the qualifying salary for Employment Passes;
Increase the qualifying salary and levies for S Passes; and
Reduce the Dependency Ratio Ceiling, dismantle the Man-Year Entitlement system and adjust levies for the Construction and Process sectors.
I will speak more when MOM’s budget is debated in a few days' time. Today, let me touch on and elaborate on our thinking behind the moves, and how we will walk with businesses through these changes.
Businesses, especially our SMEs, have expressed concern about rising costs. I want to assure SMEs that we understand these concerns and have taken great care when designing the timing of our moves. We are well aware that if businesses do not succeed, there will not be good jobs for Singaporeans.
Besides SMEs, foreign companies are also quietly observing our moves. Even foreign publications have been speculating that Singapore is now less welcoming to talent. We must not allow such misperceptions to take root, because this will be very damaging for us.
Hence, I want to be very clear that the changes we announced are to ensure Singapore remains open to foreigners who can complement our workforce, so that our businesses can assemble the best team of locals and foreigners to compete on the global stage. Indeed, this strategy was affirmed by the House last year.
We recognise that having foreigners working alongside us and living amongst us can cause discomfort, even some tension amongst Singaporeans. My assurance is that we will be vigilant in managing the social frictions that may arise from time to time. We will also guard against anti-foreigner and xenophobic sentiments. Singapore has always been a multi-cultural society, and we intend to keep it so.
Our foreign workforce policies will have to balance the needs of businesses and workers. This has been the core guiding principle in MOM.
The announced changes to the Qualifying Salaries for Employment Pass, or EP, and S Pass are part of this series of adjustments to maintain a balance.
The wages of our local workers have risen over the years. This reflects the growth of our economy, and the deepening of skills in our local workforce.
This also means that the quality of the EP and S Pass holders that we bring into Singapore must go up. That is why our EP and S Pass qualifying salaries are adjusted regularly to keep pace with local wages.
If we do not do so, firms may choose to hire foreigners simply because they are cheaper than locals. There will not be a level playing field. Our efforts to upskill our workforce and sharpen our business competitiveness will therefore be diluted.
We know that businesses would want more lead time to adjust, before these changes take effect. This is exactly we have done – we announced the moves early but we’ve also incorporated a long runway between the announcement and implementation dates of all these moves.
We are being transparent, so that businesses have ample time to adjust and certainty to plan ahead.
Let me use the S Pass changes to explain in greater detail.
We have given businesses six months’ notice for the first move to take effect. This first move will increase the qualifying salary to $3,000 for new S Pass applications. In other words, come September 2022, all existing S Pass holders are still not affected, and only new applications are affected.
We only apply the new qualifying salary 18 months later – from September 2023.
And the renewals will not all happen at the same time. It will take another two to three years, so up to 2026, before the last S Pass employee on the old qualifying salaries comes up for renewal.
In reality, businesses will have a minimum of 18 months’ notice, but it could take up to four-and-a-half years before all existing S Pass holders have to be renewed under the new rules.
The same goes for the levies. The Tier 1 levy will be gradually raised to $650 by September 2025, in not just one step, but three steps. That is around three-and-a-half years before the changes take effect fully.
I know these adjustments take effort and change is never easy. But at the same time, it is only through continuous innovation and improvement that our businesses will grow from strength to strength.
Rest assured that we will walk this journey with our businesses.
I am particularly mindful of the many SMEs in our economy.
SMEs account for more than 70% of employment, a very significant proportion of employment, and they are a very important contributor to our economy.
I personally know and also met with many SME business owners, and have heard their concerns. Some are worried that they may be hit more than the MNCs because they have more financial constraints.
They find it more difficult to compete for workers, and they are concerned that higher costs for foreign and local manpower will mean higher business costs.
How can our SMEs make the necessary adjustments, and emerge stronger?
We have been regularly and progressively making updates to our framework.
Each time when we made these adjustments, SMEs have taken advantage of the support schemes we have available to transform, to pivot, and to adapt.
The result of that is that our firms have a more sustainable and robust business model, continue to thrive, and continue to be able to tap the labour market for their manpower needs.
With this round of changes, we will continue to support businesses. I would like to offer some suggestions, and share some examples of Government support that businesses may wish to tap on.
Businesses can review their wages, and look into redesigning jobs to make jobs more productive and attractive for employees. Businesses can tap on schemes such as the Support for Job Redesign under the Productivity Solutions Grant (PSG-JR) for job redesign consultancy support to complement and drive business and workforce transformation.
In addition, businesses can expand local hiring and upskill their local workforce. The extended SGUnited Jobs and Skills Package and the Jobs Growth Incentive will continue to provide a significant boost to the hiring of locals.
Together with tripartite partners, we will make sure that SMEs who are prepared to transform their businesses and increase local hiring will receive the support they need.
Some business owners told me that it is hard to find manpower even with the support, given that our unemployment is so low and our labour market is tight. They say that they need manpower across all levels, from the Professionals, Managers, Executives and Technicians or PMET-level, to the Rank-and-File (RnF) levels.
Yes, our unemployment rate is low, which is something that we are very glad for. But there are still untapped sources.
One such group is women outside the workforce. For a whole myriad of reasons, there are about 20% or 260,000 women aged 25 to 64 who are not in the labour force. There are vacancies across all occupational levels with varied qualifications and needs which could potentially be filled by this group.
In order to tap on this segment of our population, businesses will need to consider how the jobs they offer can be more flexible and attractive to locals. As flexible work arrangements can come in various forms and some may be more relevant for certain jobs than others, businesses can adopt the most suitable flexible work arrangements that suit their organisations’ as well as employees’ needs, including for those in frontline or shift work.
Some businesses are already doing so, and we should press ahead as best and as fast as we can.
Some SMEs also tell me that they wish to hire at the Work Permit level to manage their manpower needs, but are unable to do because of the rules, such as the source country restrictions.
These rules are there for a reason, but we can find a way to offer some flexibility.
This is something that MOM has been working on. I will address this during MOM’s COS.
Lastly, as we continue to refine our policy levers, we will ensure there will not be a disproportionate impact on SMEs.
For instance, there have been suggestions for the Government to look beyond qualifying salary in our EP framework, which may be a blunt tool.
We have considered this feedback seriously, and I will elaborate in MOM’s Committee of Supply debate about how our refinements of the EP framework have taken into account the size of the firm.
We know that businesses are trying hard and exploring various options to transform and adjust to the changes. And we know that the border controls have made things more challenging. As of end-January 2022, there are around 46,000 approved work permit holders who have yet to enter Singapore due to border controls. But with our border reopening in a calibrated manner, some of this pressure will be relieved.
This should help in the interim, but SMEs and businesses alike need to start to plan ahead on what works best for their business model and their workforce.
Training and re-structuring takes time, so I hope businesses will take a longer-term view on this.
To support businesses in their planning, we have laid out our foreign workforce policy moves for the next few years, so businesses have greater certainty, predictability and time to adjust.
Finally Mr Speaker Sir, allow me to also address some of the points made by Honourable Members from the Workers’ Party.
They oppose the Budget because of the GST increase.
But they agree with the moves we are making to shore up social compact.
They accept greater Government spending.
In fact, they would like us to spend even more. I believe their position is: Agree with all the good and nice things we propose; say not enough; ask for more.
But what they oppose is how we intend to do the difficult thing – raise the revenues to pay for all the good things they like so much that they want even more.
The WP suggests that we can do away with the GST increase if we raise more taxes through other means. That is a revenue shortfall of $3.5 Billion.
They say put a heavier load on some Singaporeans, so that we don’t have to have a GST increase. Sounds simple and attractive. But ask yourselves, is it really doable?
Mr Speaker, there is a fundamental, philosophical difference in our approach.
Make no mistake, this Government’s approach is that the rich should carry a heavier load. We are raising income taxes on the top earners; property taxes on higher-value properties; and the Additional Registration Fee for luxury cars.
That was the mantra in my colleague the Finance Minister’s Budget speech this year: The well-off will pay more and receive less; and the less well-off will receive more and pay less.
But there is a significant difference between what constitutes a fair load, and what constitutes a punitive load.
It is not possible to get the entire the GST amount, the $3.5 Billion, by loading it all on just those at the very top.
Amongst the revenue options proposed by the WP, they had suggested increasing Personal Income Tax and Property Tax even more.
If we were do that, we will have to raise the tax rates on income and property even more substantially. And we have to make more people, including middle income earners, pay more.
Why? Because it is not possible to have extremely punitive taxes on just the top 1% or 5%.
So, the consequence is that we will have to raise income taxes for not just those at the very top, but it will pervade and percolate down, to our middle and upper-middle income. Including those who have benefitted from our education system, and our years of social mobility, toiled and worked very hard all through the years, to move up from more modest circumstances.
We will have to apply higher property taxes to a larger base of properties – not just the luxury condos and landed properties which will already see a significant increase – but also all condos, ECs and eventually perhaps, even larger HDB flats, 5-room. Residents from across the island – my residents in Marine Parade, residents in nearby East Coast and Joo Chiat, in Bukit Timah, Thomson, Upper Thomson, Bishan, Upper Bukit Timah, in Sengkang and Aljunied too – will all be hit.
These are the people who may have to make up the difference.
So this debate, the impression I took away of what the Workers’ Party really want is two things: one they say loud and clear, the other they don’t say at all
Loud and clear: I like all the nice and good things you are proposing. But more would be better.
But what they are not saying at all, but as a consequence is: I like that you are raising taxes on the wealthy, and more of such taxes, would be even better. However, have they considered that the burden would inevitably have to borne by and applied to a wider group and a wider variety of Singaporeans and taxpayers.
The first “more” they shout from the roof top; the second “more”, relatively muted, hoping nobody will notice that’s what they are proposing.
Mr Speaker, we fundamentally disagree with what the WP’s proposal will imply for our society.
It will ultimately result in a system where our approach to revenue is to just squeeze anyone who does well – from the middle income upwards, potentially.
Where we tell Singaporeans, “look, there’s someone better off who can afford to take on all of the burden, you don’t have to put in your fair share.”
That is not good nor is it sustainable for our social compact.
All of us have a stake in our society, and we benefit from public services and progressive policies.
In fact, those with less will get back much more than what they pay in additional GST. And we give generous help to those who need the help, while everyone pays something. It is both an individual and our collective responsibility.
And if we do what has been suggested, the middle class, those who have worked hard and perhaps done better than their parents’ expectations and aspirations, will feel betrayed.
If we take WP’s approach, we will as a consequence, have to increasingly shift and raise the tax burden onto the middle class. That, I believe, is the surest way to unravel and destroy our social compact and trust in our society, and Singapore will not hold together.
To conclude, it is not an easy task ahead for all of us. There are difficult things we must do together. But as long as all of us – workers, unions, businesses, fellow citizens and Government – are prepared to play a part and work closely together, with the long-term interests of Singapore and Singaporeans at heart, I believe we will continue to live long and prosper.
With that, I support the Budget.