SELF-EMPLOYED/CONTRACT WORKERS

SELF-EMPLOYED/CONTRACT WORKERS:

(Workfare benefits): 1.

Mr Christopher de Souza asked the Minister for Manpower how will the Government ensure that the self-employed or contract workers who earn so little that they can barely make ends meet and hence unable to make Medisave contributions, are able to benefit from Workfare if Workfare is to be tied to Medisave contributions.

The Minister for Manpower (Dr Ng Eng Hen): Mr Speaker, Sir, the Government recognises that low wage workers do have financial difficulties in meeting their needs. This is the reason why Workfare, as the fourth pillar and a long-term commitment of work-related social support, is being introduced. Because

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Workfare will be a structural long-term feature in our system, we must be careful to start it on the right principles. Otherwise, as other countries have experienced, it can slide into welfarism and become unsustainable as costs escalate. So we have been very careful to base it on right principles.

Requiring some Medisave contribution from the self-employed or informally employed to receive Workfare benefits is designed to draw more self-employed and informal workers into the Medisave net, which is one of the fundamental pillars for provision of healthcare needs. It will underscore the principle that each individual must set aside for his own needs. It is consistent with promoting self-reliance and effort before Government assistance is sought or given. The long term goal must be to try to include every worker, including the self-employed and informal workers, into the Medisave system. This can only be achieved if each contributes to his own Medisave account, even if he is earning a little.

However, to allow more of such workers to enter the Medisave CPF system and to benefit from Workfare, Government reduced the contribution rate for the self-employed, as suggested by NTUC.

Mr Christopher de Souza (Holland Bukit-Timah): Sir, I would like to ask the Minister whether his Ministry has taken into consideration the fact that there will be some who will not be able to pay this small percentage to Medisave, and what is the percentage who will fall through the net.

Dr Ng Eng Hen: Sir, I have already said that we have addressed some of that concern through reducing the Medisave contribution rate.

Let me put it in perspective. Say, a formal employee who works for a

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company earns $600. He is now required to pay about 16% of his wages into his own CPF account. If he earns $600, he has to pay about 16%. If you are a self-employed earning the same wage, he used to be required to pay, depending on his age, say, 7-8%. We have increased it by 0.5%. So it is 7.5% or 8.5%. We have now reduced that rate to less than 3%. So there are significant reductions, and the scheme is designed to incentivise people to enter the CPF system. As a starting point, it is a correct one.

How do we then help those who find that they are not earning enough to meet their needs and that they find it hard to save? Sir, we can encourage them in a number of ways, but we should not, in the process of trying to address this group, then undermine the entire larger system which addresses and helps 90-95% of our employees. So I think we will have to find other ways to help them. But if you are earning $600 and pay 3% with some savings, you can contribute. And the amount of CPF you get is a few times what you put in. So I think it is a fair system.