Budget 2015 - Study economic outcomes before any policy change

Monday, 9 March 2015

THE STRAITS TIMES
FORUM LETTER

Study economic outcomes before any policy change

Published on Mar 7, 2015 1:09 AM

NON-CONSTITUENCY MP Lina Chiam has called for the removal of the goods and services tax (GST) on some items ("Remove GST on essentials"; Thursday) and MP Inderjit Singh has repeated his call for a minimum wage ("Minimum wage 'will offer comprehensive longer-term solution'"; Thursday).

Our Government is one of the top governments in the world. Most of our policies have stood the test of time and worked well for our unique culture and population size.

We ought to study the economic outcome of each policy carefully and not give in to populist demands if a policy does not benefit the majority of Singaporeans or leads to long-term adverse effects. Once a wrong policy is implemented, it would be hard to reverse it.

Mrs Chiam called for GST exemptions on certain necessities, such as milk powder, diapers, medicine, health supplements, mobility aids and exercise equipment for the elderly.

First, how do we define necessities? Let us suppose we come up with a list of top 10 necessities, including milk powder, diapers and mobility aids. Singaporeans who do not benefit from such exemptions would demand the inclusion of more items.

Second, the market prices inclusive of GST for such goods have stabilised over the years. Some suppliers also absorb GST for their consumers and retailers.

Would the removal of GST lead to a direct reduction of prices or simply a higher profit margin for retailers? A better suggestion to help the poor would be to give them discount vouchers directly.

Mr Singh called for a minimum wage across the board for low-wage workers. What are the effects of such a move?

First, there would be pressure for medium-wage workers' salaries to increase. When wages collectively rise without an enhancement in productivity, inflation occurs. Second, the cost of all businesses with low-wage employees would rise across the board, making Singapore less competitive or leading to further government spending on wage subsidies.

Labour chief Lim Swee Say has hit the nail on the head by saying that the way to fund our future generous Budgets is to focus on productivity growth, and by emphasising that Singapore workers must commit to their own role ("Seek change, with eye on the future: NTUC chief"; Thursday).

Alice Chong Chui Ping (Ms)