Economic outlook and performance
RISING costs remain a concern for both businesses and households. The
pass-through of higher business costs into consumer prices, together
with the sharp increase in Certificate of Entitlement prices, has kept
upward pressure on Consumer Price Index inflation in the last two years.
Household incomes have risen, in 2012 and over the last five years.
Adjusted for inflation, the median Singaporean household saw income per
member grow by 14per cent over the last five years, cumulatively.
Lower-income households at the 20th percentile also saw real income per member grow by 10per cent in the last five years.
Excluding imputed rentals on owner-occupied homes, which do not
involve actual spending by households, both the median and 20th
percentile households have, in fact, experienced growth of 19per cent in
real incomes over the five years. This reflects both higher individual
wages and greater employment opportunities, part-time and full-time.
However, many Singaporeans who work in jobs at the lower rungs of the
income ladder, especially cleaners, waiters, and security guards, have
not fared as well. They have been able to get jobs easily, but have seen
little or no rise in their real incomes over the last five years.
These jobs should be paid better, and our schemes will help ensure that they are.
For cleaners, the Government is working with NTUC and the business
community to equip them better and to uplift their pay through the
recently introduced Progressive Wage Model. We will be doing likewise
for security guards.
This Budget will also introduce further measures to support our workers, including those with the lowest wages.
Slowing or stagnating incomes are a real challenge for many economies
around the world. It has happened not only in the advanced economies
like the United States, but also in the Asian countries that are in the
same league as Singapore. Chart 1 shows the experience of the "Asian
Newly Industrialised Economies".
The median Singaporean household has seen its real income grow more
than twice as fast as that in Hong Kong. South Korea and Taiwan have
seen little or negative growth in real median household incomes.
We do not set our goals based on whether our incomes do better than
in other countries. Many of them, in fact, have strengths that we lack
in Singapore. But their experiences provide a sense of perspective. They
illustrate the realities of the highly competitive world that every
country now faces.
We cannot change that reality. But it means that we have to work
harder, through both our economic and social strategies, to help
Singaporeans improve their lives and build a truly inclusive society.
A better Singapore: Quality growth, an inclusive society
MANY Singaporeans, through Our Singapore Conversation platforms, have
been sharing their hopes for Singapore - the kind of home we want to
build for our families and our children. There has been a rich diversity
of views. But a common set of aspirations is emerging, a common vision
of the future that Singaporeans want:
- A home with a strong Singaporean identity and sense of belonging
- A Singapore with a robust and vibrant economy, and with good jobs that enable a more fulfilling
pace of life
- A home with strong families, and where our seniors can age with dignity
- A society that takes care of the disadvantaged
- A Singapore with affordable living
- A society with greater sense of togetherness, and where the Government and the people have a more collaborative relationship.
This is the Singapore that we want to build together.
The Government is making major moves to support this endeavour. Since
2010, we have embarked on major steps to transform our economy so as to
create better jobs and allow for a better pace and quality of life. We
are also making important shifts in social policies, as announced in
last year's Budget, to foster a fair and more inclusive society.
We will need to make further moves; so that, by the end of the
decade, we will have a better Singapore, a better future for all
Singaporeans.
Immediate challenges: Housing and transport
FIRST, we have pressing challenges in housing and transport. The Government will spare no effort in resolving these problems.
We want to reduce the cost of housing relative to the incomes of
young Singaporeans. Prices in the HDB resale market and private market
have risen too rapidly in the cycle that began as we recovered from the
2009 economic crisis. We have taken major steps to cool the housing
market.
We have also ramped up the supply of HDB flats, which will help
first-time buyers book their flats faster as well as ease prices in the
resale market. And we have increased the supply of private housing
through Government Land Sales.
We have to make many improvements in public transport. Congestion and
waiting times are a daily problem for Singaporeans. We are ramping up
bus capacity, especially feeder services, to improve frequency and add
new routes. We are accelerating the rollout of the additional 800 buses
that we made provisions for last year. In addition, the Land Transport
Authority will be tendering out routes to private operators.
Our rail network will expand by more than 50 per cent by 2021. That
is still eight years away. But in the meantime, we will see improvements
that will help relieve congestion. Parts of the Downtown Line will
start operating from the end of this year, and new trains will be added
to existing lines from next year. We will also introduce other measures
to reduce crowding, including significantly enhanced incentives for
commuters who travel during the "shoulder" periods before and after the
morning peak hour.
An economy and society in transition
WHILE we fix these immediate problems in housing and transport, we
have to press on with our priorities to help Singaporeans have a better
quality of life over the medium to long term.
We have to shift gears for an economy and society that is in
transition. We are no longer a developing economy, but we have not
achieved the level of productivity and income of an advanced economy. At
the same time, our own workforce is growing more slowly, and is
gradually getting older.
We must make every effort to achieve quality growth: growth that is
achieved mainly through innovation and higher productivity, and growth
that will benefit all Singaporeans - our children, working families, our
elderly and disabled. Our strategies for achieving quality growth and
an inclusive society are in fact tied inextricably together.
Raising productivity is not just our most important economic
priority, but enables us to build a better society. Higher productivity
is the only sustainable way to raise incomes for ordinary Singaporeans,
and provide jobs that give people a sense of responsibility and
empowerment. Higher productivity is also necessary for us to shorten
working hours over time and allow Singaporeans to enjoy a better
work-life balance.
Our society is also facing the pressures of widening income
disparities. This is happening in cities globally and in Asia, but it
matters more to us because Singapore is not just a city but also a
nation. We must take further steps to temper inequality. We also want to
do more to enable our seniors to have a sense of economic security and
fulfilment in their retirement years.
On both economy and society, therefore, we need to shift our
thinking: In government, where we are reshaping policies and driving new
initiatives, especially to sustain social mobility and strengthen
support for older Singaporeans; in the business community, which has to
innovate and adjust to the permanent reality of a tight labour market;
in our society at large, where we have to accord ordinary workers, not
just better pay, but greater respect; in the community, with non-profits
and other voluntary groups pursuing the causes we all believe in, and
working with an active partner in the Government; and for all of us
individuals, to do our best to improve and to contribute to our country
in our own ways.
Our foreign worker strategies going forward
FOREIGN workers now comprise 33.6per cent of our total workforce. The
Government had in 2010 accepted the Economic Strategies Committee's
recommendation that we moderate the growth of the foreign workforce so
as to avoid its proportion of the total workforce increasing
significantly beyond one-third.
While our mix of policies must allow for foreign worker numbers to
fluctuate in the course of the business cycle, or when we have major
infrastructural projects under way, as is the case currently, the
proportion of foreign workers to the total workforce should not increase
indefinitely. Our foreign worker policies remain guided by this
objective.
This number excludes Foreign Domestic Workers, consistent with the
definition adopted in 2010 for the purpose of setting a long-term target
for the proportion of foreign workers. The actual proportion at that
time was almost one-third.
We have to make further adjustments so that we can continue
moderating the growth of the foreign workforce, but they will not be
across the board. The adjustments will reflect the circumstances of each
sector.
First, we will make selective further Dependency Ratio Ceiling cuts
for sectors where there has continued to be significant growth in
foreign worker numbers, and where productivity levels are still well
behind international productivity leaders.
Second, we will increase levies for all sectors to ensure that
businesses continue to reduce dependence on foreign manpower and improve
productivity. The levy increases will be sharper for firms that are
most dependent on foreign workers.
However, while there will be significant levy increases for
less-skilled workers, we will not increase levies for skilled workers in
most sectors after the previously-announced rates for July 2013 kick
in. So most companies will not need to pay a higher levy if they rely on
skilled Work Permit holders.
Third, we will encourage companies to pro-actively develop the
talents and skills of our Singaporean workforce and reward them fairly.
Why we cannot pause in restructuring our economy
WE CANNOT cut off the flow of foreign workers abruptly, but we have
to slow its growth. We are therefore making these further adjustments,
and we have to do so in full knowledge of the difficulties they will
pose for many of our companies. There has been extensive feedback from
businesses and associations about the challenges that employers face in
finding local workers.
And as everyone knows too, there are many sectors such as the
construction, marine and process industries, and even in some service
industries, where there will remain a significant shortage of local
workers and where we will continue to need foreign workers for some time
to come.
However, the basic reality is that these sectors which are most
dependent on foreign workers are also the ones furthest behind
international standards of productivity, and which account for the lag
in productivity in our overall economy.
The tightening of foreign worker policies is therefore aimed mainly
at reducing reliance on manpower, not merely replacing foreign workers
with locals. That is the only way we can significantly improve
productivity and avoid an indefinite increase in the ratio of foreigners
in our workforce.
Further, within the services sector, industries like food and
beverage and retail that have been most reliant on foreign workers have
also seen low wages and low wage growth for local workers in certain
jobs. Waiters are an example.
We cannot carry on in the same way. If we pause now and postpone the
restructuring of these industries, we will face the same problems of low
productivity, low wages and low profitability in these industries in
the future.
The problem does not merely lie in individual enterprises, but in the
structure of industry. In construction and services, there are many
small firms working very hard to survive, and to attract local
employees. Sometimes, the owners themselves double up as workers. Many
find it difficult to scale up to a point where they can invest in
significant productivity improvements or build up and retain a pool of
skilled employees.
Building a more inclusive society
MADAM Speaker, let me move on to the second thrust of the Budget, which is about making our society even more inclusive.
We have two key concerns. First, income inequality and the risk that
it poses to social cohesion. We have to take further steps to ameliorate
inequality and give every Singaporean a real chance to do well and have
a fulfilling life.
We have a special challenge in inequality that stems from the fact
that our education system and economy have been completely transformed
over the past 40 years. Many in our present-day older generation of
Singaporeans had very little education - barely half were able to go
beyond primary school. Their pay was very low in the first few decades
of our development.
Younger Singaporeans have benefited from vastly-improved
opportunities in education, with the bulk of them going on to tertiary
study. As a result, a disproportionate number of middle- and high-paying
jobs are taken up by younger Singaporeans, while older Singaporeans
(those aged 55 years and above) make up more than 40per cent of workers
in the bottom fifth of the income ladder. Our schemes to help low-income
workers, therefore, pay special regard to our older Singaporeans.
In conclusion
THIS Budget is for a better Singapore. We will fix our problems in
housing and transport. We are transforming our economy so that we can
have quality growth - growth that will provide all Singaporeans a better
quality of life.
And we are taking further steps towards a more inclusive society -
starting with our children, helping lower-income workers, and providing
better lives for our retirees.
But our policies will ultimately succeed by building on the strengths
of Singaporeans - the skills and mastery in every job, the compassion,
the sense of collective responsibility, and the belief in this country -
Singaporeans who are, in their own ways, building a better tomorrow for
themselves, their families, and for Singapore.
Like Ali Marzuki Abdul Rani, whose father passed away when he was 18.
He was determined to succeed and support his younger siblings, got
bursary support to see him through his studies at Nanyang Technological
University, and is now doing well as a project engineer and giving back
to society.
Or Madam Yeo Hui Imm, 58. A former factory operator, she found a job
in a cafe, and decided to go for English lessons so that she could play a
bigger role in her workplace. She is now a team leader, with more
responsibilities and pay.
And Alfred Yeo, a young accountant, hearing- and speech-impaired. He
is a tireless source of feedback on public transport and cycling paths,
using emails, photos and even videos that he takes himself.
They each tell us something about our strengths, and about why we will have a better Singapore ahead."
For more news and analysis on Singapore Budget 2013, click here for ST's Big Story coverage.
HELPING SINGAPOREANS AND BUSINESSES TOO
Our immediate priority is to solve the housing and transport issues.
At the same time, we must upgrade our economy through productivity and
innovation. Budget 2013 will help our businesses cope with much lower
foreign worker growth over the next few years.
It also contains schemes to enable every Singaporean to benefit from
growth. For example, the Wage Credit Scheme will incentivise employers
to raise salaries of their lower-income workers, as the Government will
pay 40 per cent of these salary increases for three years.
We will also focus on promoting social mobility, especially through
education, so that children from less privileged backgrounds are not
disadvantaged in our society.
- Prime Minister Lee Hsien Loong on Facebook
IT'S ALL ABOUT RESPONSIBILITY
Budget 2013 is about responsibility, it's about the Government being
responsible, playing an active role to help those in need, active role
in keeping social mobility growing, and active role in helping the SME
community make this major transition in our economy.
But it is also about the responsibility of businesses to do the right
thing for their workers, to upgrade them, train them, pay them better.
And to do the right thing for their own future, take responsibility to
upgrade now.
It's about the responsibility of individuals, we all have to do
better, try to develop some mastery in every job, and every Singaporean
can develop mastery no matter how simple the job.
- DPM Tharman Shanmugaratnam during a televised forum following the Budget speech
"Singaporeans who are in their own ways building a better tomorrow for themselves, their families and for Singapore."
Annex A
