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Helping seniors work longer, build up CPF savings a crucial first step despite uncertain economy: Josephine Teo

SINGAPORE — The moves to enable seniors to work longer and build up their Central Provident Fund (CPF) savings mean that businesses, still smarting from an escalating trade war that has no end in sight, will have to shoulder higher manpower costs, Manpower Minister Josephine Teo has acknowledged.

Manpower Minister Josephine Teo said it is important for "labour constrained" Singapore to increase the pool of workers through measures such as the raising of the retirement and re-employment ages.

Manpower Minister Josephine Teo said it is important for "labour constrained" Singapore to increase the pool of workers through measures such as the raising of the retirement and re-employment ages.

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SINGAPORE — The moves to enable seniors to work longer and build up their Central Provident Fund (CPF) savings mean that businesses, still smarting from an escalating trade war that has no end in sight, will have to shoulder higher manpower costs, Manpower Minister Josephine Teo has acknowledged.

But she stressed the need to maximise the pool of workers in “labour-constrained” Singapore.

On Monday (Aug 19), the Government unveiled a 55-page report produced by a tripartite workgroup — of which Mrs Teo was an adviser — that examined these issues. 

Mrs Teo recognised that businesses face tough times ahead — with “the likelihood of turbulence over the next decade... probably higher than when we first started the discussions” in May last year.

However, she said that there is still a need to provide "some certainty" in making the first incremental move on the changes — the raising of the retirement age from 62 to 63 and the re-employment age from 67 to 68 by July 2022 — while providing flexibility for changes later.

The eventual goal is to raise both retirement and re-employment ages to 65 and 70 gradually by about 2030, as announced by Prime Minister Lee Hsien Loong at his National Day Rally on Sunday.

Similarly for CPF contribution rates, the first change will take effect in 2021, with subsequent ones to be carried out over the next 10 years or so, “depending on economic conditions”, Mr Lee said.

These were among the 22 recommendations made by the workgroup, comprising representatives of the Government, labour unions and the private sector, which has been studying the issue since it was formed in May last year.

Fifteen of the recommendations focused on changes to the retirement and re-employment ages as well as the CPF contribution rates, while the rest touched on issues such as job redesign and career planning for older workers.

The Manpower Ministry said that those born on or after July 1, 1960 will benefit from the higher retirement age of 63, while those born on or after July 1, 1955 will benefit from the higher re-employment age of 68.

Singaporeans born in January 1951 or after will benefit from the higher CPF rates.

Speaking to the media at a press conference on Saturday, when the workgroup talked about the recommendations a day ahead of the announcements, Mrs Teo said: “The way in which we choose to work is that you cannot predict exactly how the next decade will look like.”

She added: “So the challenge for the workgroup really is this — knowing that the next decade would be more turbulent, do you still have a deterministic schedule or you say, ‘Well, let’s decide on the first move because otherwise no one can make preparation, but after that you need to retain the flexibility’?”

CAN THE DEADLINES BE PUSHED BACK?

The decision to set the timeframes in raising the retirement and re-employment ages as well as the CPF contribution rates was not made lightly, she noted. It seriously took into account the prevailing economic conditions and its possible outlook in the years ahead.

However, analysts said that even if the trade war ends in the next year or two, companies could still be reeling from its aftermath.

Asked if there is a possibility of shifting the deadlines of the first wave of changes if the economic situation does not improve, Mrs Teo pointed out that fundamentally, Singapore is labour-constrained and that is “not something that is cyclical in nature”.

One has to look at the overall timeframe of 2030 and decide whether it is better to make the first move and give flexibility in the later part or to keep shifting the deadlines, she added.

Mrs Teo said that no date has been set as to when changes to the legislation will be made.

“So, I would say that unless there are very grave circumstances that would change how we look at the retirement age and re-employment age changes, I would say that our determination is towards making those changes."

And what if the economic situation clears up later on and the economy is expanding again, will the Government then accelerate the changes?

She replied: "It would be a little bit risky to try and say upfront, 'Under these economic conditions we will not go ahead, under these conditions, we will go ahead'. The whole point of flexibility is to give the ability to say that overall, the assessment is better not to move ahead (or) overall, the assessment is we can move ahead. It would be a matter of judgement as well."

Weighing in on this, another member of the workgroup, labour chief Ng Chee Meng — who is the secretary-general of the National Trades Union Congress (NTUC) — said that when the economy brightens up, “we can also accelerate and ask the tripartite workgroup to consider implementing some of these recommendations earlier”.

“If economic conditions take a turn for the worse, then we discuss. But if it brightens up, likewise we’ll sit down and discuss as well so that workers’ interests will be taken care of,” added Mr Ng, who is also Minister in the Prime Minister's Office.

INCREASED COSTS BUT CHANGES ‘NECESSARY’

Dr Robert Yap, president of the Singapore National Employers Federation and who is also part of the workgroup, said at the press conference that working out the recommendations “has not been a very easy process”.

“Because as you know, any increase in costs is a pain for employers,” said Dr Yap, adding that there will be significant employment cost increases from the changes.

On that note, he called on the Government to provide businesses with some form of support.

To help businesses adjust to the changes, Mr Lee said in his National Day Rally speech that the Government “will implement a support package” for them, with details to be announced by Deputy Prime Minister and Finance Minister Heng Swee Keat in next year’s Budget.

In its report, the workgroup said that one measure could be the Special Employment Credit scheme, which was introduced in 2011 to provide wage offsets to employers hiring older Singaporean workers aged 55 and above. The scheme, which was extended again this year, expires at the end of 2020.

Having a wage offset scheme to accompany the changes “will show clearly that the Government is committed to supporting employers as they make these changes”, said the workgroup.

Nevertheless, Dr Yap pointed out that the changes are “necessary” for Singapore’s employment landscape.

“If we do not deal with this, then in the longer term it would be even more difficult because we don’t have enough workers in Singapore,” he added. “The faster we deal with this, the better for the overall scene in terms of employment sustainability.”

In a statement on Monday, NTUC said that it supports the recommendations, which will “strengthen older workers’ retirement adequacy and further promote just and progressive workplaces that value older workers”.

The Government, as a major employer, will take the lead in implementing those changes. The Public Service Division (PSD) will raise retirement and re-employment ages of its officers a year earlier — in 2021 instead of 2022.

PSD said in a statement on Monday that the first round of changes will benefit more than 2,000 of its public officers turning 62 and 67 from July 1, 2021 to June 30, 2022.

Legislative changes alone “are not sufficient to help officers achieve employment over a longer career”, it said. As such, it will step up efforts relating to job redesign, reskilling and expanding job options through various programmes such as digital literacy, PSD added.

WHAT EMPLOYERS SAY

Business owners welcomed the raising of retirement and re-employment ages, although they noted that the increase in CPF contribution rates would definitely increase business costs.

For cleaning company Spic & Span, some of its workers are already above the retirement and re-employment ages, its founder Benjamin Chua said.

He added that there is value in hiring older workers as they tend to manage conflicts in a calm manner compared with younger workers who can be more “hot-headed”.

But a “huge concern” would be whether the corporate health insurance policies would be able to cover these older workers at an affordable rate.

Mr Chua said that the only way to mitigate the cost increases would be to scale up with technology, but workers have to be willing to learn how to use new cleaning equipment.

“Workers have to know that, we have to adopt technology and they have to learn. If not, we would be in a Catch-22 situation… where the business costs keep increasing but nothing else is done,” he said.

“I think it’s a perfectly reasonable request to our workers. If we need to keep them and we want to continue utilising them, they have to continually upgrade with the company. If not, we’ll be stuck in the traditional way of working.” ADDITIONAL REPORTING BY JANICE LIM

Related topics

Jobs labour trade war retirement re-employment cpf NDR2019 Josephine Teo

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