Workfare, foreign worker policies, tax burden distribution: Top-of-mind issues for Singapore's Manpower Minister from Budget 2022

With locals' wages rising over the years as their skills deepen, it's only fair that the quality of EP and S Pass holders entering Singapore would also need to go up, Dr Tan affirmed. Thus, the regular adjustments to the qualifying salaries.

In his Budget Intervention speech on Tuesday (1 March 2022), Singapore's Minister for Manpower Dr Tan See Leng addressed three topics of concern for the ministry, following Finance Minister Lawrence Wong's Budget 2022 speech on 18 February (Friday). 

These topics covered by Dr Tan include the Workfare Income Supplement, foreign worker policies, and distribution of the tax burden on society, as summarised below.

Workfare Income Supplement

Dr Tan tackled three main points related to the Workfare Income Supplement (Workfare), for which Minister Wong had introduced a minimum income criterion at S$500 per month to "encourage part-timers and casual workers to take up regular, full-time work."

Minister Wong also shared the following:

• From 1 January 2023, the qualifying income cap will be raised the current S$2,300 to S$2,500 per month, thus allowing more workers to benefit from Workfare.
• Workfare payouts will also be raised.
  • Those aged 35 to 44 will receive a maximum annual payout of S$3,000; those aged 45 to 59 will receive a maximum annual payout of S$3,600.
    
    
  • Those aged 60 and above will receive the highest maximum payout tier of S$4,200 annually. This same maximum payout tier will also be extended to all persons with disabilities, regardless of their age.

In his speech, Dr Tan first addressed concerns about the minimum income criterion.

"I would like to correct the misconception that this is a cut back for lower-wage workers," he said.

"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 S$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 the 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."

Further, the number 46,600 is derived from 2021 data, and does not take into account the expected wage growth from the Progressive Wage Model (PWM) expansion and new local qualifying salary requirements (LQS) that would "uplift many employees beyond the S$500 threshold," the minister added.

Dr Tan also shared that if any of the 20,000 workers who are affected by the criterion subsequently work more and earn above S$500 per month, they will then automatically requalify for Workfare.

Next, the minister noted that S$500 per month is "a reasonable and achievable wage" for most regular workers under the country's PWM approach. He explained: "With the new LQS requirement, firms that hire foreign workers must pay all their locals working part-time, at least S$9 per hour. At this wage, a part-time worker only needs to work about two working days a week to meet the S$500 minimum income criterion."

Last, Dr Tan said the government recognises that there may be some workers who want to work more, but are unable to earn S$500 due to their personal circumstances. These include persons with disabilities, and ComCare recipients. 

"We will provide them concessionary Workfare payouts, so they will not be excluded from Workfare."

In short, the minister shared, for workers who are earning less than S$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 S$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."

Foreign worker policies

In his Budget speech, the finance minister laid out a multi-year road map to increase the qualifying salary for Employment Passes (EP); 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 sector. [More here] 

Tackling these, Dr Tan shared: "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."

The minister added that Singapore's foreign worker policies will have to balance the needs of businesses and workers, and that the qualifying salaries for EPs and S Passes are part of a series of adjustments to maintain this balance.

With locals' wages rising over the years as their skills deepen, it's only fair that the quality of EP and S Pass holders entering Singapore would also need to go up, Dr Tan affirmed. Thus, the regular adjustments to the qualifying salaries.

"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 what 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."

In supporting businesses through the adjustments, Dr Tan offered a few suggestions and examples of measures for these businesses 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 for job redesign consultancy support to complement and drive business and workforce transformation.

• Businesses can also 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.

More on this will be shared in MOM's Budget debate.

Tax burden distribution

The final topic Dr Tan touched on was the distribution of the tax burden on segments of the society, which was a key issue raised in the debate this week. 

Shooting down any possibility of imposing the tax burden on the middle class, Dr Tan pointed out that everyone has "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."

Concluding his entire speech, Dr Tan highlighted that it will not be "an easy task ahead" for all. "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."

Image / Screenshot of Dr Tan See Leng's speech excerpt, Gov.sg's YouTube