What do huge Budget surpluses really mean to lower-income workers?

I refer to the article “GST decision made after all other options studies: Heng” (Straits Times, Feb 21).

It states that “The decision to raise the goods and services tax (GST) was a difficult one, but it is the most appropriate option to help Singapore raise revenues at this stage, said Finance Minister Heng Swee Keat.

Over the past year, the Government thoroughly scrutinised all possible alternatives, he said.

“We looked at all the different taxes that we could change, even non-tax measures that we could take. Each of these has its pluses and minuses and when we looked at the overall scheme of things, we decided that at this stage the GST is still the most appropriate.””

As to “It is difficult news for Singaporeans, Mr Heng acknowledged yesterday, but he added that he hoped they can see the bigger picture” – I talked to some lower-income workers – and they all echoed similar concerns – “all these pages of analysis and commentary in the newspapers and TV mean nothing to me – what matters most is why my take-home pay keeps dropping and the cost of living keeps increasing?”

So, I decided to try to see what the pay of lower-income workers have been in history, in spite of about $30 and $200 billion of reported Budget surpluses and Cash Budget surpluses, in the last decade or so.

According to the Department of Statistics’ web site –

• – the income of the 20th percentile of workers was $1,383 and $2,106 in 2001 (earliest year in the table) and 2016, respectively. This works out to an increase of 52.3 per cent over the 15 years or so.
• Since these figures are including employer CPF – I understand that the total CPF contribution rate was reduced by 10 per cent from 40 to 30 per cent in around 2000, after the 1999 financial crisis.
• Inflation was about 30.9 per cent from 2001 (CPI 75.568) to 2016 (CPI 98.932).
• So, if we deduct inflation (30.9%), the reduction in the CPF contribution rate (10%), and the 7% increase in the CPF contribution rate (to 37% now -meaning that 7% of the increase in income was not really an increase, but rather due to the increase in the employer CPF contribution rate), from the increase in income of 52.3% – we get 4.4% (52.3 – 30.9 – 10 – 7%).
• Does this mean that the real increase in income was only about 4.4% in the last 15 years or so, or about only 0.29% per year(4.4 divided by 15)?
• At this rate of increase of 0.29% – the income of $1,383 would only have increased in real terms to $1,444 in 2016.
• This works out to a real increase of $61 ($1,444 – $1,383) or $4.07 per year.
• Adjusting this for the 37 per cent CPF contribution – does it mean that the real increase in take-home pay per year was only about $2.80 ($4.07 less 37% CPF)?
• Leong Sze Hian