Monday, February 27, 2017

Future economy needs future-ready social safety net

Chua Mui Hoong
Opinion Editor

FEB 26, 2017

As job insecurity looms in a world of churn, we need to attend to the well-being of citizens too
As a consumer, I love start-ups. Airbnb, Uber and car-sharing apps transformed my vacation experiences, opening up cheaper - and more interesting - accommodation and transport options. You can live in someone's lovely house, get to know them and their family, drive a neighbour's car, order food in when you feel like it, and even make new friends instantly via social meet-ups.

In Singapore, I use Uber, Grab and food-delivery platforms. I order food in restaurants from iPads. (Smartphone QR code ordering should be next.) I console myself that when my job is taken over by a robot one day, I can make extra income from renting out my car and extra room in my apartment.

[For people in her generation, who were able to secure a home and a car under the old economy, she can now leverage on these "assets" to generate income. What about the generation in the new economy who has not been able to afford their home and car? The "new economy" isn't new. It does not create any new value. It does not create wealth. It merely monetises the extraneous assets of the old economy.]

As a shopper, I like cheap goods whose unit production cost have been brought down by automated manufacturing, and whose delivery cost is now negligible, because logistics is being streamlined, with robots taking over warehouses,and eventually, driverless vehicles and drones making deliveries.

As a journalist who likes new ideas to write about, I find it exciting to live in a world of churn, where technology and automation are disrupting jobs, enriching our consumer experience, and challenging existing social orders, all at once.

But as a worker, and a frail human being, I find the trends towards automation, and looming massive job losses, rather disturbing.

In a word, they add up to a feeling of job insecurity.

Experts point to looming, massive job losses. Forrester, a market research firm, predicts that robots will eliminate 6 per cent of jobs in the United States by 2021, including customer service representatives, and truck and taxi drivers.

Professor Moshe Vardi, computational engineering don at Rice University in the United States, predicted last February that robots will take over at least 50 per cent of jobs in 30 years.

Singapore is fully aware of the trends. This is why the report of the Committee on the Future Economy (CFE) tries so hard to say what Singapore must do to prepare itself for that tumultuous future.

There was a lot in the CFE report about industry transformation, scaling up our enterprises, going global, and reskilling workers.

But there isn't enough about how to help workers adapt. For example, what about social safety nets?

As former civil servant turned academic Donald Low wrote: "The CFE missed an opportunity to discuss how Singapore's social security and regulatory systems might be adapted for what is widely referred to as the 'sharing economy'."

I too feel there is a huge gap in the conversations we are having about the future economy, and it has the changing employment status of workers and the gnawing, invidious sense of job insecurity that will affect many.

While 50 per cent unemployment rates may still be one or two or three decades away (one hopes), today, more work is already being done ad hoc, not via full-time, permanent paid employment.

In Europe, half of new jobs created since the global financial crisis were offered through temporary contracts. In a 2015 report, the McKinsey Global Institute found that 162 million people in Europe and the United States - 20 to 30 per cent of the working-age population - were doing some kind of independent work.

Singapore lacks data on the number of workers in such casual work, although the Ministry of Manpower tracks part-time employees and own account (self-employed) workers. The latter include taxi drivers tied to cab companies but excludes Uber drivers.

Without permanent work, people could suffer an acute sense of job insecurity that erodes their dignity.

No government can protect citizens from the forces of disruption. It can't guarantee everyone full-time, permanent, meaningful work with a comfortable salary that lets them plan for their future.

[It is particularly an issue in SG, when our retirement plans are a defined contributions plan (CPF - you get out of it, what you put into it. If you can't have a secure (long-term if not permanent) job, you can't contribute regularly to your CPF.]

It can, however, make sure existing social provision programmes are future-ready.

Last year's widespread discussion in some countries of a universal basic income - an allowance doled out to all, regardless of work - is one such attempt to give financial security to citizens.

In Singapore, we need not think of such a radical measure yet. But we can certainly do a lot more to assess if our social security systems are adequate for a world where many people don't have work, or work part-time, or do micro-jobs for micro-pay for many different people.

Professor Laura Tyson, who chaired the President's Council of Economic Advisers under the Bill Clinton administration, has argued that there is some consensus on what kind of social security benefits would work in a gig economy:

"They should be portable, attached to individual workers rather than to their employers. They should be universal, applying to all workers and all forms of employment. And they should be pro-rated, linking employer benefit contributions to time worked, jobs completed, or income earned."

Singapore is fortunate in that our Central Provident Fund (CPF) system is already portable and universal, as is our MediShield Life. Can CPF also be pro-rated?

Under current laws, those who employ part-time workers need to pay CPF. But not if the workers are deemed contract or freelance workers, or own account workers.

Can a system be devised to have pro-rated CPF payments? I don't see why not.

MP Tan Wu Meng in a commentary last November suggested: "What if a minimum employer CPF contribution were specified, for each hour worked or each unit of labour?"

Once you set a unit CPF payment for each hour or dollar of work performed, you can then develop a system where workers can get multiple CPF micro-payments from employers, or companies that buy their services.

The Uber or Grab driver, part-time house cleaner, honestbee grocery shopper, or TaskRabbit worker, will get his fee, plus an X per cent more to his CPF from the employer or buyer of his service, that can be used for his future housing, healthcare and retirement needs.

Beyond the CPF system, there is also the question of whether the protections employees take for granted are available to gig economy workers. Examples are annual leave, medical leave, maternity leave, defraying of medical bills, and workers' compensation under workplace safety and health regulations.

Even our much-vaunted CPF system has a serious drawback in a disrupted economy of the future: It works only when you have a job.

In fact, most of Singapore's social security measures are funnelled via employers, to employed workers. The CPF system assumes you have an employer who tops up your fund. Many medical benefits are given by employers. The Workfare Income Supplement tops up your income - if you have a job.

If you are jobless, all the above benefits disappear. Singapore does not have unemployment insurance. For those with low savings, a few months of joblessness could leave them and their family in penury.

The labour market has been tight for decades and jobs are aplenty. But in the disrupted future economy, we can't rely on that. Already, the younger, more tech-savvy Uber driver is disrupting the livelihoods of many taxi uncles, some of whom will find it hard to get other jobs.

The prospect of joblessness, or job insecurity, is looking very real.

As a nation, we should be paying as much attention to the future of citizens' well-being, as to the future of the economy. For what is the point of having a vibrant future economy, if hundreds of thousands of our citizens suffer acute anxiety from joblessness, or job insecurity, and without adequate social safety nets?

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