Improve Workfare not press for Minimum Wage

In Economy, Political economy, Political governance, Public Administration on 13/10/2010 at 6:34 am

By arguing the case for minimum wages, the SDP, Tan Kin Lian, RP etc are allowing the govmin to get away with being mean to the poor under the present arrangement which does have an element of “minimum wage”.

Tharman said in February this year that the enhanced Workfare scheme will cost the government S$100 million annually and benefit around 400,000 low-wage workers. S$100 million in the S’pore context is “peanuts”. It is 0.3% of the operating expenses under the latest Budget*.

And Workfare payments end up largely locked up in never-never CPF land. OK I’m being unfair, but the fact is that the poor need cash now. Yes they will need it in the future, but when you are living hand-to-mouth, and hungering for hawker or restaurant food (as the welfare minister insinuates), you need $ now.

So the Opposition and others like TKL  should be pressing for more to be spent on Workfare and for more $ to be disbursed today rather than at 65. The govmin cannot argue against Workfare, juz how much to give, and when to give it. The government will have a hard time defending the tiny amount set aside for Workfare.

BTW, I’m surprised that the do-gooders have not raised Kaushik Basu’s suggestion of how to help the poor.

Kaushik Basu of Cornell University and chief economic adviser to India’s finance ministry says it is not enough that the income of the bottom 20% rise at the same percentage rate as the average. Instead, they should get an equal absolute share of the income the economy.

Let’s translate this into S’pore terms.According to the CIA Fact Book, in US$ terms (using purchasing price parity) the S’pore’s GDP was US$235.7 billion. Based on MTI’s latest growth estimate of 4.5-6.5% growth in 2010, this would work out to GDP of US$246.3 — US$251.0bn. The increase would be S$10.6 — 15.3bn. If this formula were adopted the poorest 20% would get S$2.1 –3.1bn.

And election winner? A one-off transfer of US$2.1 or S$3.1 billion to the poorest 20% of S’poreans. Less than GIC’s paper loss on its investment on UBS or Temasek’s realised loss on Merrill Lynch.

And as it’s one-off, there is no fear of welfarism creeping in. The govmin is right to be fearful of welfare getting out of hand. The BBC reported that 40% of UK  govmin expenditure goes to welfare payments. Talk of entitlements running riot.

Update — Academic research supports PAP view

Update in Dec 2010

*This may give the impression that that is all govmin spends on Workfare. If so I apologise.  “[A] total of $1.65 billion in the last five years, or $400 million a year, to help 400,000 low-income workers” ,the PM reminded in November. So the spending in Workfare is now S$500m or 1.5% of the operating expenses under the latest Budget. Still peanuts and remember the Kiddie Games cost S$387m. It was budgeted at S$122m. And yes I know that 1.65bn divided by 5, doesn’t equal 400m. Taz why I quoted PM.

Update on 4 January 2011

The meanness of Workfare in $

A gd writeup on the nitty gritty of WF

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  1. [...] Improving Workfare must be surely better? [...]

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