Is now the right time to begin restoring employers' CPF contribution rates? How quickly can this rate be raised and by how much?

As the economy strengthens, inevitably wage pressure will head up and the issue of CPF restoration will become increasing pressing. CPF is many things to Singaporeans – Ordinary Account (OA) means compulsory savings, monthly housing repayments, tertiary education repayments, funds for selective investments, etc. Special Account (SA) is available for withdrawal as a monthly life annuity from age 65 under the CPF Life scheme, and the Medisave Account (MA) can be utilised for medical expenses and Eldershield insurance premiums.

Any increase will be good news for the workers and naturally the employers will feel the burden of increase wage load. In times like today with short boom-bust cycles, it is hard to use CPF as a blunt tool to moderate wage loading for employers. In economic downturn, all factors of production costs would be moderated downwards and human cost will take a direct impact leading to wage freeze, cut or worst retrenchment. Increasing CPF by 1-1.5% technically has nominal impact on total wage loading on the employers since the quantitative increase is marginal. In my opinion, in an economic crisis, when government imposes a reduction in CPF contribution for employer, the reduction is more notional and symbolic and demands a certain risk and pain sharing by workers. If the government is to subject the CPF to move in tandem to the rhythm of the boom-and-bust cycles which are becoming increasing short, it will become clumsy flipping and flopping. Only the workers suffer as they need the CPF for their house, medical insurance and payment for their annuity.



The government should consider a complete one-off restoration and thereafter leaving the CPF fixed. Making multiple-step adjustments is like many tiny pricks. One swift prick is better than many irritable tiny pricks for employers. The government can use other monetary and fiscal policies to help employers cope with wage loading in poorer times like providing taxation reliefs for wage components. They can even calibrate increased taxation reliefs for older workers. This will spur the employers to re-look at the factor of production costing and to tweak other variables in the equation other than manpower costs.



CPF should be immediately restored.