Thursday, March 07, 2013

Restoring CPF rates and the disdain to our people

The joy brought about by the announcement of restoring our CPF rates in the Budget 2013 [Here] was short-lived. It was naïve of me to expect PAP’s conscience to be pricked overnight and thereby restoring our employers' CPF contribution rate to the pre-1999 rate.

Further details of the Budget reveals that the government’s intention of restoring employers’ and the employees’ CPF contribution to the current rate only extends to those low-income earners. This in turn leads to another fact discovery, at least for me, that employees earning less than $1500 per month all along are not entitled to the same employers’ CPF contribution rate as those who are earning more than $1500 of the same age group. The rationale of reducing CPF contribution rates for low-wage workers is to “make them more employable”[Here]. And isn’t this a line which is overly-familiar to us?  

Equal CPF contribution rate by employers and employees

Now going back to the pre-1999 employers' CPF contribution, specifically those years between 1994 – 1998 (Chart 1). It was a period where both employers and employees enjoy an equivalent CPF contribution rate. It was also a significant period for me as I entered the workforce, living through the detriments of CPF changes and with the trust in PAP gradually eroding by the actions evinced by the incumbents.

                              Chart 1(Source: CPF Trends and Highlights)

The Asia financial crisis struck in 1997, leading to the change of the CPF contribution proportion in 1999. 10% employers’ CPF contribution was taken off in one shot (Chart 1).  

The proportion of CPF contribution between employers and employees changed several times during the life time of our CPF and I won’t even look back at the era where the proportion of the employers’ contribution surpassed that of the employees' but staying focused on the pre-1999 rate as that was the period where both employers and employees share the equal burden of CPF contribution.  

In the midst of the Asia Financial Crisis, the same rhetoric of improving employee’s employability during hard times was used and employees were expected to take the brunt which to be fair, might be a genuine call then. There are times when individual sacrifices must be made for the greater benefit of all. However, as we know that the CPF rate has never been restored to the pre-1999 rate till this date and in retrospect, the Asia financial crisis became the golden opportunity for the incumbents to slash off the price of our labour for good for the sake of improving our “competitiveness”.

Between 1999 and 2013, one and a half decade has passed during which our Cabinet has generously increased their salaries twice:

(1)  In 2000, PM (Goh Chok Tong) received a pay rise of 14% from S$1.7 million to S$1.9 million. [Here] In that same year, employees were returned with a peanut 2% of their employers’ CPF contribution. 2% restored out of the 10% (Chart 2) deducted whilst PM’s salary jumped by 14%, demonstrating PM's greater interest of his own salary than the people’s.  

(2)  In 2007, PM (who is Lee Hsien Loong by this time) saw a 25.5% jump [Here] in his salary to S$3.09 million whilst restoring a mere 1.5% of employers’ CPF contribution to the workers bringing the employers’ CPF contribution to a 14.5% (Chart 2).

                                  Chart 2 (Source: CPF Board)

In between 2000 and 2007, our economy was hit by another round of recession in 2003 and our workers suffered CPF cuts again on the employers' contribution side by 3%, after regaining 6% in the previous 3 years. PM’s pay was reduced by 17% in 2001 [Here] , taking the “brunt” alongside with the workers. Nevertheless, he subsequently rewarded himself substantially for his “sacrifice”  and by 2010, he was already earning S$3.07 million, an 80% increase from the 1998’s S$1.7million figure. In that same year, our workers saw a mere climb of 0.5% in their employers’ CPF contribution.

Pace of CPF restoration and GDP growth

Seemingly, recessions became useful excuses to cheapen our local labour price.

Our GDP went into a negative 2.2% in 1998 (Chart 3). By 2000, our GDP made a rebound to 9%, yielding an overall GDP amount of S$165, 358.9 million, surpassing the pre-recession figure of S$145, 964.8 (Chart 4). For the effort of enduring a 10 percentage pay cut in 1999, our workers were rewarded with only a 2% restoration to their pay in exchange for a 9% GDP growth.

    Chart 3 (Source: Singapore Department of Statistics, updated as at 22 Feb 2013)

 Chart 4 (Source: Singapore Department of Statistics, updated as at 22 Feb 2013)

Our overall GDP figure grows each year for 12 out of the 15 years (negative growth for 1998, 2001 and 2009) between 1998 and 2012. By 2012, our GDP overall figure has doubled the 1998 figure. Ironically, employers’ CPF contribution has only been restored by 6% and we are still shortchanged of 4%.

GDP grows in leaps and bounds since 1999 while the pace for CPF restoration has been excruciatingly slow. And I won’t be surprised that I will not live to see the daylight of the last remaining 4% of our employers’ CPF contribution being restored to the pre-1999 rate. This amount was deducted off our pay under the pretext of the welfare of our economy. Coincidentally, PM’s pay has grown by 80% in the duration.

The incumbents who expect our workers to tighten their already-tight belts to tide the country over the bad times are the ones who entitled themselves to the larger share of the economic pie while casting the meagre crumbs for the workers. It has to be disdain that the incumbents have for our people to enrich themselves at the expense of the people. Not merely in failing to restore our CPF rates but also by eliminating the price bargaining power of our local labour with the open-door policy to cheaper foreign labour.

Practising what they preach is often not the case with the incumbents. And LHL said just this Jan during the Punggol East by-election that the PAP has stood on the side of the people [Here]. I genuinely believe that he must have sincerely thought that he was behind us. By standing on the employers’ side and kicking us into the dirt from behind.