| 106. There are two key financial
measures to encourage work. One is the additional
CPF Housing Grant, and the other is the Workfare
Bonus. The additional CPF Housing Grant is a
permanent scheme, consistent with our policy
of helping Singaporeans
to be homeowners. It will help provide lower-income
HDB first-timers with a significant sum for buyers
to own their homes - a significant sum over and
above the subsidy which all HDB buyers already
enjoy. $20,000 is equivalent to 20 percent of
the selling price of a three-room flat, and an
even
bigger proportion of the selling price of the
two-room flats which HDB will be building. So,
we have made
one very big move on the additional CPF housing
grant, which is permanent, and which is targeted
at the lower-income groups.
107. The Workfare Bonus marks a significant
step because it provides low-wage workers with
a cash bonus. If you work, you get the cash bonus
at the end of the year, twice - this year based
on 2005 work, next year based on 2006 work. It
is a once-off scheme because this is the first
time we are doing it. Payments will be for two
years. We should experiment and gain experience
with the scheme first, before considering whether
we need a more permanent work-based assistance
scheme like this, and if so, what form it should
take.
108. With once-off schemes, we can afford to
make mistakes. But with a permanent scheme, mistakes
will be much harder to reverse and we have to
be mindful of unintended consequences. Will a
scheme like this cause employers to push wages
down permanently? Will it reduce the incentive
to upgrade to a higher paying job? How do we
deal with a problem, which Mr Chiam talked about,
where somebody works hard, goes from $1,200 to
$2,500 doing overtime and then, as a result,
falls out of the net and does not qualify? To
some extent, that is unavoidable but how steeply
do you want the bonus to tail off with income
so that for each extra dollar of work, it is
still worth your while to go for that extra dollar?
This is the sort of problem we have to watch
out for and study. How complex will the Workfare
scheme be to administer? How do we prevent people
from over-claiming? Nobody over-declares when
you pay income tax but when you claim negative
income tax, over-declaration can be a significant
problem.
109. But, however this Workfare idea evolves,
we must never allow it to expand into a permanent
needs-based welfare scheme that is not conditional
on work. Because that is the way to financial
ruin and worse still, as many MPs have pointed
out - Amy Khor, Chong Weng Chiew, Wang Kai Yuen
and Tan Boon Wan - it will breed a crutch mentality.
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