Is 10% really deeper than 12-15%?

BG Lee says that ministers will take a 10% cut, "the deepest in the civil
service".

I wonder how he arrived at his depth calculations........

The 10% CPF cut applies to those making less than $12,000 a month. That is
because the maximum CPF contribution is $2400 from the employer and employee.

Therefore, the average Singapore worker who makes $2,000 a month ($2200
including employer CPF contribution) and gets an 8% NWC recommended cut in
addition to a 50% cut in the employer contribution (yes, that is what the "10%
cut" really is) is going to wind up with $1940 (including employer CPF
contribution). Total cut=12%.

On the other hand, we pay BG Lee approx. $90,000 a month ($92,400 including our
contribution to his CPF). A 10% reduction in that leaves him with a miserable
$83,400 a month to survive on. (as our contribution to his CPF has already
reached the max).

I know I did not get a double first in Maths, but am I missing something?

STRAITS TIMES  NOV 25 1998
 Ministers to take a 10% pay cut 
 DEEPEST CUT IN CIVIL SERVICE

MINISTERS will take a pay cut of 10 per cent in their annual wage, the deepest
cut in the civil service. 

 This is on top of the 10 percentage point cut in CPF. 

 Deputy Prime Minister Lee Hsien Loong revealed this when unveiling the
Government's move to take the lead in implementing the National Wages
Council's revised wage recommendations. 

 The combined effect of the Government's cuts in monthly and annual variable
salary components will result in higher-level civil servants taking steeper
wage cuts than more junior officers. This is in line with the proposals by the
NWC, which had also proposed a wage cut of between 5 and 8 per cent. 

 In terms of annual pay, the cuts range from 5 per cent for Division III and
IV officers, to 10 per cent for Staff Grade officers, including ministers. 

===================================

Lee Wai Leong: [7 Dec]

In reply to "Is 10% really deeper than 12-15%?" by Patski

I understand what the writer means, but do note a few things:

1. Newspaper headlines have got to have a superlative. If it's not
Biggest, Best or Tallest, it can't go into the headline.

2. I think the 'deepest' in this case means that it is the most, in
dollar terms. Certainly, if BG Lee is cutting $9,000 from his own
salary, that's the deepest in the civil service. Your 15% or anyone
else's 15% is not as DEEP (in dollar terms) as his.

3. PAP likes to count hairs, go thru every detail, particularly when it
comes to lawsuits. But I don't think we should stoop to that level in
Sintercom discussions. Let's discuss issues broadly, not nitpick.

===================================

YM Chay, CFO, NEL HQ: [17 Dec]

I thought the mssg was very clear :

"MINISTERS will take a pay cut of 10 per cent in their annual wage, the
deepest cut in the civil service. This is on top of the 10 percentage point
cut in CPF. "

My interpretation is : In addition to the 10% CPF cut, there would be
another 10% cut in salary. Compared to the 15% total wage cut recommended,
it is obvious that this is a deeper cut. Unless we study English
differently, I don't see why one can get confused.

===================================

Patski2 replies: [18 Dec]

The simple solution is to look in absolute terms. The maximum CPF contribution
is $2400 ($1200 from employer and employee). 
If you are earning a miserable $40,000 a month which is less than half of
LHL's new pay, your CPF contribution at the old rate of 20% from employee and
20% from employer is $2400 (the maximum), not $16,000.
Under the 10% CPF cut, your CPF contribution is now $2400 (the maximum - if
there was no maximum, it would have been $8000 from you and $4000 or 10% from
the employer, but thanks to the maximum rule, it is still $2400.)

The difference between $2400 (20%+20%) and $2400 (20%+10%) is the 10% CPF
paycut that the ministers are taking. It amounts to a total of $0/- AFAIK.

That is why they had to announce an "additional" 10% pay cut in addition to
the 0% real CPF cut, to save themselves the embarrassment of suffering so much
less than the ordinary Singaporeans who took 12-15% pay cuts so willingly that
the world was amazed.......

===================================

YM Chay, CFO, NEL HQ: [21 Dec]

Patski2 is making too many  assumptions. It is unfair to make your own 
assumptions and  then say the resulted numbers are not fair. It could well be :
10% cut from what you are  paying. ( I.e. use the existing formula to compute 
your CPF first, then x 0.9  ).  So, let's don't talk about embarrassment until  
there is one. In that event, I will join you to poke at the PAP  ministers. 

===================================

Justin Chee, USC, Economic Development Programming : [24 Dec]

I believe that the current exchange of angry words on sintercom
regarding their pay is a result of past rhetoric that was used to
justify paying MPs higher wages for their services. the singaporean
public, even with the grudging minority, accepted the pay hike in the
early 90s because they were seduced by our government's promises of
unending milk and honey if we paid our MPs a few dollars more. now that
the economy is shrinking and the number of employed increasing, the
public is unnerved and wants some of these highly paid MPs to come
through with their election promises. 
let's be realistic, a 10% pay cut does not hurt any ministers personal
pocket. even with a cut, their pay is already at a level which satisfy
most of their human needs and a whole lot more. it is a political
exercise to encourage the general public and the rank and file
bureaucracy to swallow their share of austerity. 
we have to understand that a family with an income of $30,000 taking a
10% pay cut assumes a reduction in their savings and disposal income
levels by more than 20%, while that of higher incomes (>$50,000) assumes
only a 5% reduction in their savings and disposal income levels. 
 
Frankly, I would pay our MPs a bonus, not cut their pay if they can
bring our country out of our economic doldrums. and in this light we
have to consider which MPs are active in restructuring the economic
scene in Singapore. and for those deadweight MPs who were need to fulfill
the GRC requirements, they like all top and middle managers undergoing
an economic restructuring, should either be retrenched or given golden
parachutes. this is one of the best times to streamline our government,
rethink our policies, and come out with a more efficient business model.
be true to SINGAPORE INC. think about it, we don't need so many MPs, and
that one that Sintercom cited in the mobile phone license fiasco is one
MP we don't need. 
  
===================================

Eleanor Wong, Orrick, Herrington & Sutcliffe LLP: [5 Jan 99]

I don't have any specific information regarding Minister's CPF but, based 
on my experience administering a small office here, my understanding of 
the way the CPF cuts will take effect supports the analysis of Patski. 
That is, although the employer's percentage has been cut, the maximum 
amount is still S$1,200. (I don't believe that there has been any special 
regulation for Ministers which would suggest that this general scheme 
applies to them as well). Doing the sums, this means that anyone who 
earns about S$12,000 per month would not be affected by the cut in CPF 
rate because such person would have been at the max. deduction both 
before and after the cut. Persons earning between S$6,000 and S$12,000 
per month would suffer a cut somewhat less than the full 50% cut (the 
effective percentage cut _decreasing_ as the pay increases). Persons 
earning less than S$6,000 suffer the full 50% cut. 

Based on what we know about Minister's pay, they probably fall in the 
category which will be unaffected although maybe some of the lesser-paid 
Ministers of State (maybe?) could be in the middle (partially affected) 
category.

===================================
Pastski2: [13 Jan 99]

I am not making any assumptions - the CPF rules are clear and stated in those
nice full page ads they put in the ST or in their regular statements, the
minister's salaries have been reported on before. I may have been less than
precise and I appreciate the opportunity for a clarification. Also, the MOM
has recently come out clearly with the rules on the cut (see below).
To take concrete figures then (references below): The average worker gets a
salary of $1625 a month. His salary including CPF then is $1950. With the NWC
8% pay cut, Mr Median gets a salary of $1495. Employer CPF contribution is cut
to 10%, his total pay is now $1644.50. The total extent of the cut is 15.6%.
If his company is extra generous and instead of the 8% pay cut, he gets the
minimum NWC recommended 5% pay cut, the overall cut is still 12.9% (from $1950
to $1698).

Contrast this with the ministers making the "deepest cuts".
With LKY's salary at $81,800, his gross with CPF comes up to $84200 (given the
max of $2400). With a 10% paycut, his salary comes down to $73620 while his
CPF comes down to $1200 according to MOM. Thus the overall pay is $74820.
The grand total cut amounts to 11.1%.

I think it is the deepest hypocrisy to argue that a 11.1% cut from a million
dollar minister is deeper than the 12.9%-15.6% cut suffered by Mr Ordinary
Singaporean.
That was the purpose of the original post, I did not really intend to "poke"
anyone, just to put a few figures straight!


References:
Business Times (Singapore) 
February 6, 1997 
SECTION: Pg. 1 
Prime Minister Goh Chok Tong now earns a monthly salary of $ 66,900 while
Senior Minister Lee Kuan Yew gets $81,800. Mr Goh earns less because he had
declined to receive salary hikes which were passed in 1995 at his own urging
to attract private-sector talent into the cabinet. The monthly salaries of other
ministers range from $ 36,700 to $ 59,500.

STRAITS TIMES   OCT 10 1998 
Forum:
 I REFER to the letters "Give profitable companies option of not cutting CPF"
and "Smaller CPF cut for those with lower income" (ST, Oct 7) and the letter
"Is CPF cut fair to all?" (ST, Oct 3). 

 Any CPF cut will be applied across the board and affect all members
proportionately regardless of their income levels. For those earning more than
$6,000 a month, the employers' CPF contribution is currently based on 20 per
cent of $6,000. 

 If there is a cut, the employers' contribution would still be based on $6,000
but at the new reduced rate. Hence, high-income earners would also receive a
lower CPF contribution, similar to low-income earners. 

 The ministry has also received feedback that some companies have already
moved to cut wages of senior executives. Therefore, it is not true that high-
income earners are not affected by the cost-cutting measures. 

 How a member would be affected by a CPF cut also largely depends on the CPF
contribution that he has committed to servicing his home mortgage. As the
Government announced earlier, assistance measures will be introduced to help
home-owners affected by a CPF cut to continue to service their mortgage loans.

 Such assistance will be available to both HDB home-owners and owners of
private properties.

ELAINE SWINN-TAN
Assistant Director
Corporate Communications
for Permanent Secretary
Ministry of Manpower

Business Times 12 Feb 1998 
20% of workers earn at least $3,000 a month

<snipped>

Overall, the gross median monthly income stood at $1,625 last year, up from
$1,500 in 1996. Men drew a higher median pay of $1,850, compared to $1,408
among the women.