Many low-wage workers prefer Cash plus CPF mix

Study finds only 14% of such workers always prefer to get paid in cash

By Melissa Tan, The Straits Times, 11 Aug 2012

Ahead of next year's Workfare Income Supplement (WIS) review, a study published by the Ministry of Trade and Industry (MTI) has found that many low-wage workers would prefer a package that combines cash and Central Provident Fund (CPF) contributions over one that is purely cash.

The study aimed to examine low-wage workers' preferences for cash versus CPF. Its findings illustrate how difficult it is to structure Workfare payments in a way that satisfies everyone.

Women and homeowners were more likely to prefer CPF payments over cash, for example, while the self-employed and those with diplomas or university degrees valued cash more.

The pollsters asked respondents to choose between a cash payout of $1,200 and a combination of cash and CPF where the combined sum may be above or below $1,200.

Of the respondents, 47.8 per cent always picked the CPF combination package, regardless of the total sum. Only 14 per cent always preferred cash payments, found the study, which polled 1,000 low-wage households in the last quarter of 2011.

The WIS is made in both cash and CPF in the ratio of 1:2.5 - that means the CPF payment is 2.5 times as large as the cash one. The CPF portion is split evenly between the Ordinary, Special and Medisave accounts. Self-employed workers get the entire WIS paid into Medisave. The WIS is weighted in favour of CPF - roughly 71 per cent of an employee's WIS is paid into CPF, according to the report.

There has been feedback for the cash component to be boosted. MP Zainal Sapari told The Straits Times yesterday that while the respondents who always preferred the CPF combination package understood the need to save for retirement, those who chose cash were likely to be struggling to cope with the cost of living.

Inflation remains stubbornly high at 5.3 per cent for the second quarter of this year and could come in at 4 per cent to 4.5 per cent for the year, far above the historical average of about 2 per cent.

The WIS was introduced to help low-wage workers build a retirement nest egg, said Mr Zainal, who heads an NTUC division that looks after contract, casual and low-wage workers. "But the reality is that their net incomes are actually insufficient to help them cope with rising costs," he said.

He called for the Government to review the total WIS amount it was giving low-wage workers to see if it could give them more cash without reducing the CPF portion.

Mr Chng L. H., 65, who earns around $1,700 a month including overtime pay as a security officer, would like to have his WIS payment in cash or made entirely to his CPF Ordinary Account so that he could use it to pay off his housing loan. He pays about $400 a month for his four-room flat in Woodlands, where he lives with his unemployed wife and 30-year-old son, who is an odd-job worker.

Mr P. Ganesan, former president of the Amalgamated Union of Public Daily Rated Workers, said it was better for the WIS to be paid into CPF, especially to Medisave accounts given higher health-care costs, than in cash, which could be spent quickly.

Union leader Gary Haris added the Government should consider raising the income cap from $1,700 as workers sometimes refuse promotions in order to stay below that income level.

The WIS will be reviewed next year. A Manpower Ministry (MOM) spokesman said the MTI had worked closely with MOM on the study and that it "will take into account the findings in the review of WIS".