The Reform Party Economic Policy Proposals
Extracted from The Reform Party economic policy discussion session on 5 Dec 09 at RELC hotel.
Minimum Wage
• Real earnings for less‐skilled workers falling because of competition from foreign workers. Average monthly income of bottom 20% of households fell from $1,309 in 1997/98 to $1,274 in 2007/08. Over this period the CPI rose by 15%.
• In absence of minimum wage with current liberal foreign worker policy no reason why ultimately the real wages of those in the bottom 20% should not fall to levels of India, the Philippines, Burma and China.
• Suggested level of minimum wage around $5 per hour to provide minimum income of $1,000 per month for 200 hours.
• Exemptions for older workers and lower minimum for young workers below the age of 25
• Sectors in which Singaporeans do not work, e.g. domestic workers and construction, to be exempted from minimum wage
Productivity
• Singapore has poor record on productivity which has been falling since 2007. In 2008 labour productivity fell by 8% and continued to decline in 2009.
• Productivity record particularly poor in comparison with other countries such as the USA where labour productivity has continued to rise strongly even during recession.
• Companies have no incentive to raise productivity when they can bring in foreign workers at lower wage rates than they are currently paying their Singapore workforce.
• GDP growth of poor quality because wholly achieved by increasing the workforce rather than producing more with same workforce.
• Ultimately Singaporean living standards can only rise if we increase the productivity of Singaporean workers.
• Reform Party will focus on raising investment in education and training as best way to improve quality of our own people rather than rely so much on skilled foreign labour.
Education and Training
• Our government currently spends only about 2.8% of GDP on education which is very low compared to other developed countries. Both UK and US spend over 5% each while Sweden spends 8%.
• The Reform Party will raise spending on education to improve the quality of teaching and reduce class sizes. This will be funded by savings in other areas or by a smaller surplus or borrowing from reserves.
• Current favourable international comparisons largely due to exclusion from sample of pupils performing less well, e.g. ITE stream and children with disabilities.
• Expand tertiary education in Singapore and increase loan schemes for
Singaporeans
• Foreign students to pay the full cost of their education unless they do National Service.
• Mothers back to work specific training scheme for women away from the work place in excess of two years. Free or means tested after school care in after school and homework clubs to help working mothers in recognition of the decline of the extended family network.
Immigration and Foreign Workers
• Conduct a transparent cost‐benefit analysis of current government policy of allowing liberal use of foreign labour at all levels focusing on impact on average Singaporean
• No change in current policies for sectors where Singaporeans do not work, e.g. Domestic workers and construction.
• Move to points‐based system so we give priority to workers with special skills the economy needs
• Place obligation on employers to demonstrate positions cannot be filled locally first.
• Bar employers from being able to sack their Singaporean workers to bring in cheaper workers from overseas except in failing business cases.
• Level the playing field by bringing foreign workers within the CPF scheme and taxing them at a higher rate to compensate for the fact that they are not required to do NS or reservist training.
Privatisation of SWFs
• Increased disclosure and transparency of the accounts of GIC and Temasek.
• The Reform Party would set up a committee to examine possible privatisation of GIC and Temasek with distribution of shares to Singapore citizens as one option. Alternatively direct linkage between returns on investments and CPF returns.
• No convincing economic reason for government to continue to hold controlling stakes in most of the major Singaporean companies as these are now largely mature and slow‐growing.
• The Reform Party would the size of the state sector by selling off or privatizing the GLCs and focus on the private sector as the engine of growth and wealth creation
• This can be coupled with the retention of a “golden share” in government hands if necessary to prevent foreign takeovers that are deemed not to be in the national interest.
Increasing Domestic Consumption
• Currently Singapore has one of the lowest shares of employment income and also of domestic consumption in GDP at around 40%.
• Our external savings in the form of our current account surplus is also one of the highest in the world at around 20% of GDP.
• Singaporeans are foregoing consumption and living in poverty so that we can accumulate unproductive overseas assets far beyond what is required for exchange rate stabilisation or prudent reserve management
• The Reform Party would increase domestic investment and consumption by increasing government spending in areas with a high social rate of return, such as education and health while cueng taxes and fees on the less well‐off, e.g. GST reductions or exemptions, reduction in HDB fees, abolition of school fees etc.
• The Reform Party would also maintain or increase infrastructure spending so as to ensure that Singapore maintains its attractiveness as a destination for foreign investment while at the same time conducting a more rigorous cost‐benefit analysis to ensure money is spent effectively.
Liberal Tax and Investment Regime
• The Reform Party would maintain the current liberal foreign investment and trade regime in line with its emphasis on liberal free‐market policies.
• Burden of corporate and personal taxation to be kept low so as to maintain Singapore’s attractiveness as a destination for foreign investment.
• Focus on nurturing and supporting domestic entrepreneurs through tax breaks and subsidies rather than on government control of economic activity through GLCs
• The Reform Party will place particular emphasis on green and energy‐saving technologies going beyond the present government’s efforts and aim to help local SMEs take advantage of opportunities arising from current global carbon reduction efforts
• The Reform Party will examine competition policy with a view to strengthening it and making it more pro‐consumer if necessary. Increased regulatory scrutiny or introduction of greater competition into sectors, such as public transport, currently excluded from the Competition Act.
Housing Policy
• The Reform Party will focus on improving the affordability of housing particularly for first‐time buyers and those on low incomes.
• It will push for increased transparency of the HDB’s accounts and examine the conflict of interest and anti‐competitive nature of the government’s position as a major landowner and its position as a property developer through the HDB.
• The Reform Party will examine why HDB building programme has slowed right down since 2000 and the effect this and the failure to build cheaper units is having in pushing up property prices at the lower end.
• Require HDB to build more of the cheaper 2 and 3 room units or for URA to release more land to private developers of low‐cost housing.
• The Reform Party will seek to introduce greater competition from the private sector into the provision of low‐cost public housing.
CPF and Healthcare
• The Reform Party will push for privatization of CPF after part has been used to fund a genuine public health insurance scheme and to fund a basic pension for all Singaporeans who have paid CPF for a certain number of years.
• All Singaporeans should be covered for basic health care and hospitalization expenses, not only for catastrophic illnesses, without regard to the ability to pay and without being excluded for pre‐existing conditions.
• After these expenses are met, it will be up to the individual to decide how much they wish to save (up to the current CPF limits) but they will lose tax exemption if money is withdrawn early. CPF can continue to be used for housing.
