NTUC’s Letter in Response to Commentary in The Straits Times "CPF adjustments to benefit workers"
28 December 2006
The Editor
Forum Page
The Straits Times
1 In his commentary on the Central Provident Fund (CPF) published in The Straits Times on 27 December 2006, Nizam Idris opines that an increase in the CPF rates would actually make workers, particularly the low wage ones, worse off. He also urges the labour movement not to push for a restoration of the CPF rate, unless it is to help workers save more for their retirement.
2 He may have misunderstood what the labour movement is actually proposing vis-à-vis the restoration of the CPF cut. The National Trades Union Congress (NTUC) is not proposing an increase in the CPF rate in isolation. Instead, NTUC is proposing some structural changes to the CPF.
3 Firstly, make it more rewarding for low wage workers to work by increasing their take-home pay through reducing their CPF contributions. Now, workers contribute 5% if their monthly wage is $500, and the rate rises to 20% when the monthly wage reaches $750. We suggest phasing this more gradually from $500 to $1,000 instead.
4 As this would mean that low wage workers will not accumulate enough in their CPF accounts for retirement, housing and medical expenses, we urge the Government to top up their CPF accounts through Workfare, now to be the fourth pillar of our social security system. Workfare payments would make work more attractive to low wage workers, as it supplements the wages they receive from employers. We feel strongly that part of it should be paid into workers’ CPF accounts.
5 NTUC would also suggest, if the Government collects enough from the proposed 2% increase in the Goods and Services Tax to be able to top up more into low wage workers’ CPF accounts, that employing low wage workers be made more attractive to employers by reducing employers’ contributions to CPF.
6 Therefore, NTUC’s proposals will help, not hurt low wage workers.
7 At the same time, NTUC has also suggested restoring part of the cut in employers’ contribution to the CPF for middle income workers. A 1.5% restoration can be absorbed by rising wages caused by the current tight labour market for skilled workers.
8 If part of this increase in the CPF contributions goes to the Ordinary Accounts, then those servicing their mortgages will find it beneficial. Those who now have to pay their mortgages partly in cash because of inadequate CPF contributions will then have more disposable income to spend.
9 Several of my colleagues have urged that Medisave contributions be increased. Healthcare cost is a major concern of workers. It is an even bigger concern for older workers. Therefore, it is prudent to save a bit more in Medisave. A structural change in the Medisave portion should be made. Part of the restoration in employers’ contributions to the CPF should go to Medisave. My colleagues have also urged more efforts be made in advising workers to take up “Shield plans” over and above Basic Medishield.
10 I believe Nizam Idris will agree that the NTUC is not proposing using the CPF as a counter-cyclical tool, but is proposing some structural changes that will benefit workers. For coping with the ups and downs of the business cycle, we again strongly urge employers to develop the flexible wage system suited to their needs. Do not depend on a CPF cut to bail them out.
Cham Hui Fong (Ms)
Director
Industrial Relations Department
National Trades Union Congress
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