This year’s government budget will be best remembered by a new spending, known as the Wage Credit Scheme (WCS). $3.6 billion is set aside for this scheme to cover 3 years of use of this fund.
“Under the WCS, the Government will co-fund 40% of wage increases given to Singaporean employees earning a gross monthly wage of up to $4,000. Wage increases that are given in 2013 to 2015 will be eligible for WCS.”
“Eligible employers will receive a payout automatically annually. The first payout will be in the second quarter of 2014, and the last payout will be in 2016.” (Singapore Budget)
$3.6 billion set aside for the scheme is no small amount. Much of the funding came about because of budget surpluses for FY2011 and FY2012 of $4 billion and $3.86 billion respectively.
The WCS is in fact helping to pay part of salary costs of all employers (both private and public). So long as there are Singaporean workers involved; there are increases in gross monthly wages (including bonuses) in a year, WCS will fund 40% of these salary increases. The scheme applies for Singaporean workers earning up to $4,000 a month and it runs for 3 years.
The 3-year transition support package is to encourage employers to pay more salary and at the same time improve productivity of these employees to justify for higher salary. What happens after 3 years is not in the planning parameter of the current budget.
The $4,000 monthly gross salary threshold will include about half of the working population, which means the lower and lower middle income wage earners.
Will employers bite?
Bear in mind that salary increases once given will be hard to claw back once the 3-year transition ends (unless in a severe recession). Employers still have to pay 60% of salary increases and they must be able to justify wage increases with business profits and productivity increases. The bottom line is whether businesses can survive with improvements in operation and increased sales to customers. How many employers can continue to operate with increasing wage costs into the future?
Can employers encourage more Singaporeans into jobs shunned by locals?
I wrote a post on this not so long ago. WCS can help a little as employers can offer slightly higher salary increment since 40% of it will be paid by government. Take the example of cleaning industry, so long as the cleaning contract fee remains depressed, it is difficult for employers to keep increasing salary to attract Singaporeans into this kind of work. There is a limit to how much salary can go up.
Workfare Income Supplement to help low-wage workers
“The Workfare Income Supplement (WIS) Scheme will be enhanced to further supplement the income and savings of low-wage workers, as well as encourage them to remain in the workforce. With these enhancements, WIS will benefit 480,000 workers.” (Singapore Budget)
Workers earning up to $1,900 per month will now be eligible for the scheme (and age 35 years old and above). $650 million per year is set aside to fund this scheme.
Now $1,900 per month wage is classified as low-wage in this context . Time has changed and with high cost of living in recent years, the threshold to be considered low-wage earners has gone up. This is just a touch below a fresh polytechnic graduate’s median salary of $1,950 (GES2012).
WIS is an important scheme to level up low-wage workers. It is only hoped that employers can also play their part to continue to engage Singaporean workers with salary increments.
Taken as a whole, government has been generous in trying to raise take-home pay of Singaporean workers. Now it is up to businesses to utilise these two schemes to raise salaries of some segments of Singaporean workers to combat sticky inflation rates.