CPF contribution rate hike to hurt elderly workers' employability

What could be done to alleviate this?

According to DBS, fostering inclusive growth remains in the spotlight. Measures were targeted towards alleviating the cost burden of the lower and middle income groups and in facilitating social mobility.

Indeed, while there has been a decline in the Gini coefficient, narrowing the income gap remains the key to fostering inclusive growth.

Here's more from DBS:

Tax rebates and more GST vouchers have been given. More subsidies have also been announced in the areas of healthcare and education. These two cost components have been the two fastest rising cost factors within the CPI basket behind transport and private accommodation costs.

More forceful subsidisation in medical care will go a long way towards the well-being of the disabled and children with special needs. The increased subsidy on education is consistent with the economic principle of creating equal opportunity for all and to facilitate social mobility. In addition, while the hikes in employers’ CPF contribution will hurt companies, it will help Singaporeans to meet their medical needs going forward. But beyond higher subsidies, a review on costs in our medical and education institutions may help too.

The Pioneer Generation Package has taken centrestage in this budget. Heavier subsidies on healthcare, medical insurance and transport costs have been introduced. Significant Medisave top-up has been all been announced. Beyond giving due recognition to the pioneer generation for the sacrifice that they’ve made in nation building, this also marks another step in fiscal policy towards preparing the nation for the challenges of an aging population. However, the relatively larger hike in employers’ CPF contribution rate for elderly workers may hurt their employability. This will warrant some attention especially given that the number of unemployed older workers (above 50 years old) has been rising despite the labour crunch.

The year 2014 marks the halfway mark of this journey to restructure the economy. The economy is at a crossroads. Pain has been incurred even as some success has been achieved. Budget 2014 is a well calibrated continuation of the effort to steer the economy towards Singapore’s longer term economic goals. Success in the next phase of the restructuring will require a mindset change. Singaporeans must adapt to a new social norm, a new way of life. And companies must embrace the paradigm of conquering new challenges in order to survive.

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