Why widen Workfare to younger workers?
It could be that 'outdated skills' may not explain lagging incomes or make-up of lower-wage workers is changing
WHEN the Workfare Income Supplement (WIS) was introduced in 2007, it was framed chiefly as a scheme to help older low-wage workers who might be left behind by restructuring.
Now, the eligibility age for the scheme is set to be lowered to 30, from the current 35, as announced in the National Day Rally on Sunday.
One might wonder if this extension to younger workers represents an acknowledgement of a broader need to boost incomes, quite apart from contingent concerns about restructuring - or if it merely reflects changing realities in the demographics of low-wage workers.
When the WIS was introduced in Budget 2007, then Second Finance Minister Tharman Shanmugaratnam said: "Older low-wage workers are the ones most affected by the changes in our economy. They find it harder to learn new skills and upgrade themselves, they find it harder to get re-employed if they lose their jobs, and their families find it more difficult to make ends meet."
Workfare was thus introduced to "supplement the wages and savings of older low-wage workers", he said.
The main target was full-time workers aged above 45 who earned S$1,000 or less. There were also lower payouts for those aged 35 or older, earning up to S$1,500, "so that we do not miss any deserving cases, and also so that workers whose earnings increase beyond S$1,000 do not suddenly lose all their Workfare benefits", said Mr Tharman at the time.
The income ceiling for the WIS has since been raised to S$2,300. This is in line with how incomes at the bottom have risen: gross monthly income for full-time employed residents was S$1,356 at the 20th percentile in 2007, and S$2,340 in 2020.
In that sense, the WIS continues to target the bottom fifth. But how should its extension be viewed?
After all, the Manpower Ministry's website still describes Workfare as supplementing the incomes and retirement savings of "older lower-wage Singaporean workers".
One possible reading is that the move is an acknowledgement that market-determined wages might be too low not just for older workers whose skills are less updated, but for lower-wage workers in general.
In 2007, Mr Tharman noted that the WIS marks the first time that "the state will be supplementing the market wages that low-wage workers receive". Extending WIS to younger workers could thus be a recognition that "outdated" skills may not suffice to explain lagging incomes.
Another, perhaps less optimistic reading, is that the WIS has to change simply because the composition of lower-wage workers is changing.
It might have once been easier to view lower wages as a primarily cohort problem. Such a view may not remain tenable if there is a worry that, say, younger workers may make up a growing share of the bottom fifth.
It remains to be seen how the WIS changes will be framed when details are eventually released, and whether the scheme's older-worker-targeted origins will even be noted.
But in an interesting coincidence, Budget 2007 was also when the timing of the previous Goods and Services Tax (GST) hike was announced, after Prime Minister Lee Hsien Loong foreshadowed it in 2006.
Mr Tharman said then that the GST hike will broaden the tax base and enable the implementation of schemes such as Workfare; and in turn, even after GST offsets were distributed, Workfare would "continue to provide significant support for low-income workers on a continuing basis".
With the next GST hike due by 2025, a similar explanation might well make its way into Budget 2022.
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