Joint MOF-MOM-MSF Response to the Minimum Income Standards 2023 Study on Household Budgets in a Time of Rising Costs by LKYSPP and NTU

General

1. We welcome research studies which provide additional insights to our public discourse on social policies and how we can collectively develop a social compact.

2. In developing consensus around our social compact, it is important to involve a wide cross-section of the population, including those who have greater needs and those who have the means to lend a helping hand. The Government too is a partner, facilitator and major funder.

3. The Minimum Income Standards (MIS) 2023 Report states that it is not just about basic needs like housing, food, and clothing, but also what “enables a sense of belonging, respect, security and independence”. We should therefore interpret the findings and recommendations through the same lens – that this is what individuals would like to have. As a society, we will need to have conversations around how we can collectively reach this goal. In some cases, self-help will suffice. In others, community support gives access to resources and networks. For yet others, the Government needs to step in with monetary and other forms of assistance.

4. The Government’s fundamental approach is to invest in and build human capital throughout life, to enable Singaporeans to obtain better jobs and higher incomes. We support this through broad-based subsidies and transfers in education, healthcare, and public housing, which benefit the majority of Singaporeans. 

5. Over the last decade, our social spending has almost doubled from $18 billion in FY11 to $34 billion in FY21 [1]. Our assistance schemes (e.g., ComCare, Public Rental Scheme, MediFund) are targeted at who are from lower-income backgrounds or those who are unable to work, as we tilt more support towards those who face challenging circumstances. Resident households staying in HDB 1- and 2-room flats received more than $12,000 per household member on average from Government schemes in the whole of 2022 [2]. 

6. The Government is committed to supporting Singaporeans, especially those in need. We will continue to work with fellow Singaporeans, researchers including the authors of MIS 2023, and community partners to build a consensus around what we aspire to be and how we get there. 

7. We provide some comments on the policy recommendations and methodology of the report in subsequent sections.

Policy Recommendations

8. The researchers proposed a few policy recommendations arising from their study. 

9. First, on wages, we support the intent of ensuring that our lower-wage workers have jobs that pay them a decent wage. A universal wage floor is not necessarily the best way to achieve this. Set too low, the wage floor will benefit fewer workers than the Progressive Wage Model (PWM). Set too high, workers who are less-skilled risk losing their jobs, especially if their jobs can be automated.

10. Tripartite partners have recently expanded the PWM to more sectors like retail, food services and waste management, as well as occupations like administrators and drivers. Over the next few years, the PWM wage requirements will also increase significantly. For example, PWM wages for retail workers will increase by over 8% per year from 2023 to 2025, while the PWM wages for most cleaners will increase by over 10% per year from 2023 to 2028. 

11. In addition to PWM, the Government has introduced other measures to uplift our lower-wage workers under the significantly expanded Progressive Wage approach, which now covers up to 9 in 10 lower-wage workers. 

12. Second, we are reviewing how we can strengthen retirement adequacy. Members who work and contribute consistently to CPF will be able to meet their basic retirement needs through CPF. We recognise that there are groups who are unable to benefit fully from the system, including those unable to work and/or accumulate sufficient CPF savings (e.g., lower-income workers, caregivers). We have been strengthening support for such members through other means such as the Majulah Package for seniors aged 50 and above, and upcoming enhancements to Silver Support and Workfare.  

13. Third, to ensure that our schemes remain relevant and adequate, we regularly review the scope, coverage and payout quanta of our schemes. For instance, the amount of cash assistance and the per capita household income benchmark for ComCare was just raised in August 2022 and July 2023 respectively.  

14. The regular reviews go beyond updates to scheme parameters. We also review longer-term trends and introduce new policies or schemes to address emerging or new challenges. For example, we recently introduced moves to address the retirement and housing adequacy of platform workers, by aligning the CPF contributions by platform workers and platform companies with that of employees and employers respectively. 

15. Finally, from time to time, we have introduced one-off measures to deal with specific issues or as part of bonus sharing with Singaporeans. These do not replace permanent elements of our social safety nets. 

Comments on Methodology and Data

16. We note that the 2023 MIS report is based on methodology developed in the UK and replicated in places such as France, Ireland, and Japan. The authors have also made use of publicly available data and certain simplifying assumptions to derive their findings. In 2021, we highlighted the limitations of the approach used in the MIS report. These limitations remain for the 2023 report: 

     i. The MIS approach used is highly dependent on respondent profiles and on group dynamics. As the focus groups included higher-income participants, the conclusions may not be an accurate reflection of basic needs. For example, the estimates of what constitutes MIS included discretionary expenditure items such as jewellery, perfumes, and overseas holidays.

     ii. The report also assumes that lower-income families would receive the same amount of financial help as median households. However, lower-income families qualify for and receive more financial help.  

     iii. As such, there is a risk of over-stating the Minimum Income and under-stating the amount of Government support received by lower-income families.

     iv. Our own analysis suggests that the proposed monthly MIS budget of around $1,680 per capita is similar to the average monthly expenditure of $1,650 per capita for all families with children rather than reflecting a more basic set of needs  [3]  

17. Nevertheless, the report offers an additional data point on the expectations and aspirations of Singaporeans, which will continue to evolve over time. The Government regularly reviews our scope and coverage of assistance to ensure it is relevant and adequate. 

Issued by:
Ministry of Finance, Ministry of Manpower, and Ministry of Social and Family Development 
Singapore
14 September 2023

[1] Includes spending from Ministry of Education, Ministry of Health, Ministry of Culture, Community and Youth, Ministry of Social and Family Development, Ministry of Communications and Information (excl. Info-Communications and Media Development), and Ministry of Manpower (Financial Security and Lifelong Employability). Excludes Special Transfers and Top-ups to Endowment/ Trust Funds, and COVID-19 spending.

[2] Source: 2022 Key Household Income Trends report, Department of Statistics

[3] Source: Occasional Paper on The Consumer Price Index for Retiree Households & Households with Young Children, Department of Statistics