In tight labour market, reducing CPF rates based on age needs a rethink

LATER this year - as Finance Minister Heng Swee Keat reminded us in Monday's Budget speech - the Tripartite Workgroup on Older Workers will release recommendations on policies such as the retirement and re-employment age, and Central Provident Fund contribution rates for older workers.

Ahead of this, the latter topic resurfaced in January when a ruling party advocacy group suggested the rates be raised and equalised with those of younger workers. In a paper submitted to the government, the People's Action Party Seniors Group said this would improve retirement adequacy and ensure fair pay for the same job. The CPF employer and employee contribution rates now begin at 17 per cent and 20 per cent respectively for workers up to age 55, then fall thrice, eventually reaching 7.5 per cent and 5 per cent for workers older than 65. Similar calls in the past have often met with resistance from beleaguered firms facing cost pressures, or the worry that this would hurt older workers' employability. Responses from business leaders and employers to our recent question on this issue, for our Views from the Top section, however, suggest that the winds have changed.

Although the aforementioned past concerns received a fresh airing, a majority of respondents were in favour of equalising CPF contributions for older and younger workers. They included, notably, Singapore International Chamber of Commerce chief executive Victor Mills, who said: "The policy of reducing CPF contributions based on age is no longer relevant and needs a rethink. We have a much tighter labour market today than we had 30 years ago." Today's labour market situation is perhaps the strongest argument against the fear of disadvantaging older workers. The demographic trend of an ageing population cannot be ignored. Nor, therefore, can we deny the importance of the silver workforce.