Singaporeans have often been viewed as the nation’s best resource globally. In 1989, however the work force was a shrinking resource. As part of the strategy to improve the efficiency of labor in Singapore, the Singapore Government initiated Labor Market Reforms, so that enterprises and workers can respond to fast changing business conditions. The CPF changes and the ongoing push for wage reform are important parts of this effort. The Government believes it would help to preserve existing jobs and create new jobs for residents of Singapore.
The CPF Sum was a scheme launched in 1987, to help members secure an amount of CPF savings to provide for their retirement. This is done by requiring CPF members to keep aside a sum of money in their Retirement Account at age 55 and this sum of money is known as the Minimum Sum. The Minimum Sum provides CPF members with monthly income from age 62 (members' retirement age) onwards.
The Government made major changes to the CPF scheme to maintain the cost competitiveness. Employer contribution rates were reduced and the CPF salary ceiling would be brought down in steps. This has resulted in a lighter burden on employers and made Singapore workers more competitive. At the same time, the Government is raising the CPF Minimum Sum.
The Government observed that CPF changes were long term structural adjustments, not tactical responses to transient conditions. Though it would make Singapore more competitive, the Government believed that it cannot be guaranteed that the wage levels would not become too high one day. The Government proposed to have flexible wage structures, so that companies can respond quickly to changes in the business environment. This in turn would enable companies to stay viable and preserve jobs during a severe downturn, while giving them the confidence to reward workers and increase employment during good times.
The Government set the Tripartite Taskforce on Wage Restructuring. It has given strong backing for wage reform. Its report mentions clearly as to how companies can implement wage restructuring for greater flexibility and competitiveness. To have wage flexibility would require strong commitment from employers, unions and workers. Employers must put in place schemes that link remuneration to individual and company performances. Unions must take a broad long-term view of workers’ interests, and persuade them of the benefits of these changes. Finally, workers must recognize that in a more volatile and competitive environment, flexible wage structures offer the best chance of job security. A coordinated effort was needed to achieve wage reform targets.
Training and Upgrading
Training and upgrading workers skills, was given attention to enable workers to seize new opportunities and adapt to the changing needs of the economy. With regards to this, The Singapore Workforce Development Agency would strive to upgrade the skills of workers, especially those with secondary education or less, so they can stay employable and take on new higher skilled jobs.
These programs are partly financed by the Skills Development Fund (SDF), which employers contribute to through the Skills Development Levy (SDL). The 1% levy applies to all workers with a gross monthly salary of $1,500 or less.