Inflation and GST- two words that are emotionally charged. It can change a casual chat into a loud and sometimes angry debate, or it may even deflate your spirits as you rework your upcoming plans that require money.
Beyond the dismay, most feel about the rising cost of living in the anxiety that things may run out of control. Many are unnerved because ten dollars could buy less now than, perhaps, two years back.
Thus, it’s essential to try and make sense of what is happening and how inflation really affects us.
Most importantly, how do we deal with the rising cost of living?
What is inflation?
A full tank of petrol now costs $20 to $30 more than what it used to be. A cup of kopi is now $0.30 more expensive. And a hawker will raise his prices by 300% soon?
While these examples may be anecdotal, the murmurs of dissatisfaction about how expensive things are now getting louder by the day.
In December 2021, Singapore’s overall inflation surpassed its expected projection of 3.7% and rose to 4%. Meanwhile, the core inflation rate in the same month also stood at 2.1%, the highest since July 2014.
Strong recovery in global growth, significant demand for COVID-19 vaccines, recent geopolitical tensions, rising oil and gas prices, and pandemic-related disruptions to international’s supply chains are some factors driving the inflation figures.
And when there’s inflation, it usually means the money in your pocket doesn’t stretch as far as it used to.
Using food as an example- for $5, it would be considerably more challenging now to buy a packet of chicken rice and a drink for lunch.
However, a little bit of inflation is not a bad thing because it can generally be considered a sign of a healthy economy.
As the economy grows, demand for goods and services typically increases, which in turn pushes prices higher.
But too much of a good thing eventually becomes bad. In this case, high inflation can damage the economy and livelihoods.
With everything becoming expensive, is this an appropriate time to increase GST?
Goods and services tax (GST) is a broad-based tax paid on goods or services consumed domestically, including imports. In other countries, GST is known as value-added tax or VAT. The additional revenue collected from GST has kept different types of taxes such as personal income, property, and income from the business to be kept low.
Currently, Singapore’s GST of 7% makes it among the world’s lowest. And the supposed increase of 2 points will make it 9%. However, the average rate is 12% in Asia, which means Singapore’s GST rate will still be lower. In 2021, the global standard rate is 19%. In the UK it is 20%.
On average, the GST has contributed more than one-fifth of the total tax revenue collected by the government over the past five years. If consumption patterns remain the same, this GST increase would add more than $3 billion a year to Singapore’s reserves.
Since the pandemic outbreak two years ago, the government has drawn $53.7 billion from the reserves. This amount has gone into the various schemes and grants to support different groups of people and businesses. Thus, there is a need to rebuild public finances, especially as the constitutional requirement for the government to balance the budget by 2025. Also, Singapore’s growing aging population means the government has anticipated more social and healthcare spending.
So, will inflated prices mean we need to deflate and manage our aspirations?
Speaking to the media at a session on 7 February, NTUC’s Secretary-General Mr. Ng Chee Meng shared the key to managing the rising cost of living is to ensure “our workers have good jobs. We will continue to work with our partners to make sure business can thrive; and in that process, help our workers earn good wages and keep pace with any changes in costs.”
In his Facebook post, Mr. Ng added, “NTUC has always been helping Singaporeans, especially when cost pressures are felt. NTUC FairPrice group has done so for many years. We will, in 2022, look at possibilities and measures to mitigate the cost of living increases that are impacting society.”
He summarised NTUC’s focus areas in 2022 in these three points:
- Training workers and transforming businesses to enable better wages and work prospects.
- Protecting and representing a wider group of workers in different segments.
- Continuing to cushion the impact of the cost of living through NTUC social enterprises.
Safeguarding our workforce’s income and security growth through training and transformation
In the last 60 years, workers have always been at the forefront of all NTUC’s efforts and initiatives. It has always been about the vulnerable workers – protecting and advancing their interests, uplifting their lives, and, in turn, strengthening the social compact.
To achieve this, NTUC would continue to pay close attention to safeguarding the workforce’s income and security growth this year.
NTUC and its affiliated unions have set up 811 company training committees (CTCs) since its launch in April 2019. These CTCs identify workers’ training and skills to keep up with transformation.
To supplement the CTCs, NTUC also set up the training and placement ecosystem in 2021, complemented by the operation and technology roadmap (OTR) process, which has been completed by 266 companies.
Beyond the CTCs, tripartite partners are also working to transform businesses and workers at a sectoral level. For sectors where transformation is needed, NTUC will collaborate with relevant partners to establish tripartite academies which will cater to industry-specific training and reduce job-skills mismatches.
And to further encourage continuous learning among workers and companies, NTUC is committed to its ongoing effort on LearningHub Learning eXperience Platform (LXP).
Another initiative launched by NTUC in 2020- the Job Security Council (JSC) has also taken off with more than 46,000 workers matched to new or secondary jobs by NTUC’s e2i.
All these are done to create more exciting growth opportunities ahead for workers here so that they continue to stay relevant and competitive.
Championing and representing more workers
Mr. Ng highlighted the Labour Movement continues to look after and protect different workforce segments in 2022. The worker groups include the lower-wage, PMEs, the self-employed, older workers, youth, and women. Some of its efforts this year will consist of:
- Working with tripartite partners to quicken and widen the implementation of the Progressive Wage Model PWM for Lower- Wage Workers.
- Identifying key areas such as fair workplace opportunities for local PMEs, strengthening the Employment Pass framework and process in favor of local PMEs, and supporting local PMEs who are involuntarily unemployed.
- Improving working terms and conditions and medical and injury coverage for the Self-Employed.
- Identifying the next steps in raising the statutory retirement and re-employment ages to 65 and 70 and the increase to the CPF contributions of Older Workers.
- Partnering with institutes of higher learning (IHLs) to ensure real placement opportunities for fresh entrants to the workforce through programs such as internships.
- Providing support to womenlooking to return to work through targeted assistance and dedicated job matching. NTUC is also working closely with companies to redesign jobs and adopt family-friendly practices.
So coming back to the first question- how do we deal with the rising cost of living?
Inflation is, unfortunately, something that cannot be avoided simply because of Singapore’s geographical location and its significance in international trade.
In a market economy like Singapore, most prices are determined by the interaction of demand and supply in the marketplace. As such, economists generally attribute the causes of inflation to either demand or supply factors, with different implications for the conduct of monetary policy.
Managing the rising cost of living, therefore, needs to be countered with us staying current and competitive. Take ownership of your own skills development to continue being relevant in our jobs or pivot into new growth areas or when the right opportunity arises.