Lim Chong Yah’s comments expose Workfare scheme failure

April 11, 2012
Singapore Democrats

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Nanyang Technological University economist Professor Lim Chong Yah is the latest to add his voice to the growing concern of income inequality in Singapore.

More importantly, his calls for the raising of the income levels of low-income workers is another signal to the Government that the Workfare Income Supplement (WIS) Scheme  is not working. $CUT$

PAP MPs have been defending the WIS aganst the idea of minimum wage. But Mr Lim says that the income of poorer workers need to be raised by 15 to 20 percent over the course of three years. This is effectively calling for the introduction of minimum wage

The Singapore Democrats have been making this point since the late 1990s and we campaigned on introducing minimum wage as early as the 2001 general elections.    

Back then, Mr Lee Kuan Yew said that the SDP’s proposals would bankrupt the system. The PAP stubbornly refused to legislate minimum wage. Instead, it introduced the WIS in 2007. Under the scheme, retirees who returned to work would get additional payouts from the Government which would go into their CPF.

The drawbacks of the WIS are many, the most obvious one being that younger low-income workers are left out. But the PAP continues to adhere to dogma and ignore hard evidence that WIS is a failure:

  • In 2008 after the implementation of the scheme, the average household monthly income change for the poorest 10 percent barely registered a pulse – 0.1 percent increase from the previous year. Compare this to a 6.3 percent increase for the richest 10 percent of families in Singapore.
  • Two years later in 2009, those 1- and 2-room households with working persons saw their median incomes decrease by -8.9 percent from 2008. Compare this to those living in condominiums and private houses, the decrease was only -1.1 percent. 
  • Among households with working family members, the poorest 10 percent saw a decline of -3.8 percent in average wage per household member – the biggest drop compared to the rest of the population (see here).

If the WIS is as effective as the PAP makes it out to be, why are lowest of our low-income workers seeing their household incomes fall – and for that matter fall the most drastically among the income groups – even after its implementation?

Prof Lim’s latest salvo is yet another indication that something must to done to narrow the income gap and that something is minimum wage. It looks increasingly that the SDP’s call for minimum wage is on the right track.