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Work In Progress: Supporting Low-Wage Workers With The Workfare Income Supplement


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In this Explainer, find out...

  • How has the Workfare Income Supplement Scheme (WIS) evolved since its conception?

  • Does the WIS fit into Singapore’s social security framework?

  • Has the WIS been effective, and what are some gaps that exist?


Introduction


Did you know? In 2024, Singapore’s Gini coefficient, which measures income inequality, reached its lowest level in the past two decades. It achieved a low of 0.371 after taking taxes and government transfers into account.¹ 


One example of government transfers is the Workfare Income Supplement Scheme (WIS), which seeks to top up the incomes and Central Provident Fund (CPF) contributions of low-wage Singaporean workers and encourage them to continue working.²


What makes the WIS so important in Singapore? Read on to learn how the WIS has evolved, its role in Singapore’s social security framework, and its effects on low-wage Singaporean workers.


Introducing the WIS


The WIS was first announced in Budget 2007 amidst concerns over rising income inequality in Singapore.³ Income inequality had increased in the early 2000s, as strong economic growth was not accompanied by wage increases for low-wage workers. After their wages were adjusted for inflation, the lowest 30% of workers’ incomes had decreased by 0.5% per year from 2004 to 2006. This disparity in wages was reflected by an increase in Singapore’s Gini coefficient, rising from 0.442 in 2000 to 0.468 in 2005. 


State intervention was necessary to stymie rising income inequality and wage stagnation. However, the Government also wished to provide support to low-wage workers without encouraging reliance on state welfare. The Government was opposed to a system that provided welfare for the unemployed, fearing that this would disincentivise them from seeking work and losing their payouts.

 

To avoid such issues, WIS payouts were made conditional on being employed. This has allowed the Government to focus its support on low-wage workers while discouraging unemployment. It also kept the policy in line with the Government’s emphasis on self-reliance, hoping that low-wage workers would primarily support themselves through long-term employment, with minor payouts from government assistance.


Evolution of the WIS


When it was first introduced, the WIS provided payouts for low-wage workers earning below S$1,500 monthly. This was provided through cash and CPF contributions, in a ratio of 2 : 5. This means that for every S$1 in cash payouts received, S$2.50 would be deposited into the low-wage worker’s CPF accounts. This structure of providing payouts through cash and CPF contributions is still present in the WIS today. In addition, the choice to provide most of the payouts as CPF contributions remains as the goal of boosting low-wage workers’ retirement savings has not changed.

 

The WIS underwent its first major change in late 2007 with additional payouts announced for older workers to provide greater pre-retirement support. Compared to the original annual payout cap of S$1,200, workers aged 55 to 60 would receive up to S$1,800 in payouts, while those above 60 would receive up to S$2,400 (see Figure 1). The introduction of payouts tiered by age reflected the Government’s desire to encourage seniors to remain or re-enter the workforce, by providing financial incentives to reward such behaviour. 


Figure 1: Payouts from the WIS in 2007  


The next major change to the WIS came in 2012, focusing on persons with disabilities (PWDs). Specifically, the Government extended WIS payouts to PWDs to promote PWDs’ entry into the workforce.¹⁰ Between 2012 and 2022, employed PWDs, like other low-wage workers, received different WIS payout amounts based on their age.¹¹ However, since Budget 2022, all PWDs in employment would qualify for the highest WIS payout regardless of their age.¹²


There have also been many changes to the ratio of cash to CPF contributions over the years. As of 2024, low-wage workers receive cash and CPF contributions in a ratio of 3 : 5.¹³ This change to the cash-CPF contribution ratio entails a careful balancing act. A higher cash payout will increase the amount of disposable income available to low-wage workers for their daily needs. However, it comes at the expense of higher CPF contributions for retirement savings.


As for self-employed persons, WIS payouts are made via cash and MediSave top-ups in a ratio of 1 : 9.¹⁴ In this case, WIS payouts are disbursed as MediSave top-ups instead of CPF contributions as self-employed persons do not receive MediSave contributions from employers. Thus, an alternative source of funds is required to ensure that they have enough savings for their healthcare needs.¹⁵


The most recent changes to the WIS were announced in Budget 2024. They will take effect from 1 Jan 2025 and benefit around half a million Singaporeans. First, there will be an increase in payouts from S$4,200 to a maximum of S$4,900 per year. The higher payouts are intended to offer greater support to low-wage workers as the cost of living rises. Second, the qualifying income cap will be raised to S$3,000, up from S$2,500 today.¹⁶ This means that low-wage workers will continue to benefit from the WIS despite rising nominal incomes.¹⁷ To support these changes, an extra S$1 billion will be allocated to fund the WIS.


The WIS in Singapore's Social Security Framework


Changes to the WIS echo President Tharman Shanmugaratnam’s famous remark that Singapore strives to create a social safety trampoline, rather than a social safety net, for its citizens.¹⁸ 


In fact, the WIS is one of the many policies in Singapore’s social security framework, which comprises four pillars (see Figure 2). These four pillars work together to ensure that the lower strata of society remain supported, from retirement to housing needs. 


Figure 2: Four pillars of Singapore’s social security system¹⁹ 


In the fourth pillar which focuses on retirement support, Workfare exists with Silver Support. Workfare is targeted at those in the workforce, namely low-wage workers, older workers and PWDs. This is done through the WIS and the Workfare Skills Support (WSS) scheme.²⁰ While the WIS provides more immediate and direct support to raise the incomes of  low-wage workers, the WSS encourages low-wage workers to undergo skills upgrading, and thus, be able to command higher wages eventually.²¹ Unlike Workfare, Silver Support specifically targets older workers who earned low incomes in the past, offering cash supplements and post-retirement incomes to ensure that their basic needs are met. 


Is the WIS Working?


The WIS’ success can be assessed on two fronts: 1) whether it has helped to raise the incomes of low-wage workers, thus reducing income inequality, and 2) whether it has encouraged its beneficiaries to seek or stay in employment.


Raising Incomes and Lowering Income Inequality 


First, there is some evidence suggesting that the WIS has helped to raise the incomes of low-wage workers, and in turn, lower income inequality. 


Between 2016 and 2021, the real median income of full-time employed residents in Singapore increased by 2.1%. In comparison, the real income of residents in the bottom 20th percentile, which includes low-wage workers, increased by 2.7%.²² This suggests that the WIS and other policies targeted at low-wage workers have helped to raise their wage growth. 


However, it is important to note that the income gap has still widened in absolute terms. This is because theabsolute value of a 2.1% increase at the median income level is higher than the absolute value of 2.7% for the bottom 20th percentile.²³ 


Nonetheless, the fall in Singapore’s Gini coefficient since 2013 demonstrates that Singapore’s social security system, which includes the WIS, has played a part in reducing income inequality here (see Figure 3).


Figure 3: Singapore’s falling Gini coefficient value²⁴


Encouraging Employment


Second, the WIS has also encouraged low-wage workers to seek employment. According to the Ministry of Trade and Industry, the WIS has increased the employment rate of low-wage workers by between 2.7% to 7.3% from 2007 to 2010.²⁵ 


Among the various age groups, older low-wage workers between the ages of 60 to 70 years saw the largest rise in employment. Having older low-wage workers re-enter the workforce promotes self-reliance as they can continue earning incomes to support themselves, rather than depend on government handouts. This is important as government handouts alone may not be adequate to cover daily expenses.²⁶ Instead, the Government aims to provide welfare support in small amounts and only in situations of dire financial circumstances that one may encounter. 


Such sentiments are supported by the Government: Deputy Prime Minister Lawrence Wong, for one, emphasised during his Budget 2024 speech that “simple handouts and blunt measures do not solve poverty.”²⁷ In this vein, all citizens should have adequate savings, or a regular source of income to support themselves and their families. 


A Work in Progress


The WIS has helped to raise incomes, reduce income inequality, and encourage low-wage and older workers to stay employed. However, gaps in the scheme still exist.


Discouraging Work and Work Effort


First, the WIS may discourage low-wage workers from working longer hours or putting extra effort into work due to its eligibility assessment criteria. The WIS assesses individuals based on their gross monthly income. However, gross monthly income includes any overtime pay, bonuses and commissions.²⁸ 


Thus, if a person’s base salary is S$3,000 per month (which makes them eligible for the WIS in 2025), but they choose to work overtime for a month, earning an extra S$500, they are automatically ineligible for the WIS. This is because the average gross monthly income goes above the qualifying income. 


In turn, workers would rather work less, since earning overtime pay may cost them their WIS payout, and they are better off not working the extra hours.²⁹ The same logic applies to putting more effort into work and earning bonuses or commissions.


Factoring the Number of Dependents


Second, a lot of workers have dependents, i.e. family members who rely on them financially, such as young children or elderly parents. Low-wage workers with dependents are the ones who may require more financial assistance than low-wage workers without dependents. However, WIS payouts do not vary based on the number of dependents a low-wage worker has. This may cause some to deem the support it offers is inadequate. 


That being said, one must recall that WIS, at its core, seeks to provide social security to the individual worker rather than the whole family.³⁰ Thus, it must be considered together with other government schemes meant to help low-income families support raising young children and caring for elderly members.


Accounting for High Inflation


The WIS is not currently indexed to inflation, meaning that payouts do not automatically increase with inflation.³¹ As a result, the real value of WIS payouts will fall significantly during bouts of high inflation. This could be detrimental to low-wage workers drawing WIS payouts since the amount of support they receive will continually fall unless the Government intervenes to raise WIS payouts.³² 


Conclusion


The WIS was introduced in response to rising income inequality, especially among low-wage workers. Through its payouts, the WIS has succeeded in raising the income levels of low-wage workers and contributed to lowering income inequality. It also boosted employment rates, especially among older workers who were incentivised to continue working. Along with the enhancements announced during Budget 2024, as well as other policies like the Progressive Wage Model, more support will be provided to lower-wage workers to ensure they are not left behind as Singapore progresses.³³


MAJU_2024_14_Work In Progress_ Supporting Low-Wage Workers With Workfare Income Supplement
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This Policy Explainer was written by members of MAJU. MAJU is an independent, youth-led organisation that focuses on engaging Singaporean youths in a long-term research process to guide them in jointly formulating policy ideas of their own. 


By sharing our unique youth perspectives, MAJU hopes to contribute to the policymaking discourse and future of  Singapore.

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