Second Minister for Manpower Josephine Teo, however, warned of "serious downsides" to a redundancy insurance scheme.
By Jalelah Abu Baker
8 May 2017
SINGAPORE: During an adjournment motion in Parliament on Monday (May 8), the Workers’ Party (WP) refloated its proposal for an insurance scheme aimed at helping retrenched workers while they look for another job, saying a “modest” public consultation on the scheme was encouraging.
Non-Constituency Member of Parliament (NCMP) Daniel Goh said that the Redundancy Insurance scheme would reduce financial pressure, especially on older workers above the age of 40 who find it harder to get re-employed, and also reduce insecurity for younger workers, who are being increasingly laid off. Older workers face a “triple whammy", with higher risk of getting laid off, having to support their children, and their elderly parents, and paying more bills, he said.
The scheme calls for monthly contributions of 0.1 per cent of monthly salary shared between employers and employees, which works out to an average of S$3.80 per worker. This would mean up to S$1,200 payout monthly for six months, he said. Associate Professor Goh said that such systems exist in other countries like Canada, Japan and South Korea, and that the proposed scheme has been adapted to the local culture, situation and existing programmes. He added that if it is “properly calibrated and launched in a timely manner", the fund could become self-sustainable in the long run and cost close to nothing to the Government
The scheme would also reduce under-employment, as retrenched workers will not jump into the first job they get out of desperation, he said. With the financial independence provided by the payouts, workers could retrain without worrying, or getting distracted, he stated.
The opposition party first called for a redundancy insurance scheme during the Committee of Supply debate in April last year. WP chairman Sylvia Lim said then that it was a “feasible scheme” that would provide workers with a safety net to tide them through difficult times. WP published the proposal in November last year.
In her response to the proposal, Second Minister for Manpower Josephine Teo said that the 0.1 per cent figure sounds “too good to be true", given that South Korea paid a 1.35 per cent premium in 2013 and that the figure stands at 2.2 per cent today. She said that the figure will need to be at least 1 to 2 per cent here, and highlighted an increase in cost to the employer. She added that the unemployment in the countries mentioned are generally significantly higher, and that many people in these countries can see themselves having to depend on the payouts. Singapore is not in the same position, as there has been a focus on employment support through training and subsidies, with the full support of unions and employers, which other countries find harder to do, she said.
Mrs Teo said that the PAP Government has never taken its eye off job creation. This approach has kept Singaporeans employed, and unemployment low, she said. When restructuring became necessary and a concern, the Government built programmes, she said, highlighting the Career Support Programme for professionals, managers, executives and technicians (PMETs) that gives up to S$42,000 in salary support to help someone who loses a job to find a new employer, and the work trial programme, for rank and file workers, and short-term relief options like ComCare. The schemes all have a single purpose to get workers back at work with new and useful skills, she said.
She added: “We have not hesitated to give generous wage support and training subsidies but always conditional, on the worker making the effort, by attending a training course or accepting a placement opportunity.”
Assoc Prof Goh suggested that the insurance scheme could be included in the Government’s Adapt and Grow initiative, which helps workers find new jobs or switch jobs. While acknowledging that there is help for the retrenched, he said that programmes in place will only work if retrenched workers turn to the Government for help. “After many years of cultivating a resilient and independent workforce, turning to the Government immediately for assistance on labour market endeavours after losing one’s job is a foreign concept for Singaporean workers,” he said.
[Yes. In the immediate aftermath of rolling out such insurance, newly retrenched may not turn immediately to the insurance. BUT what about 5 years down the road? 10 years? 20 years?]
Addressing counter arguments to the scheme that he had prepared, Assoc Prof Goh said that it was “quite ridiculous” that workers would be discouraged from saving because of a potential maximum S$7,200 payout. Another argument against Redundancy Insurance is more insecurity, as employers may be more willing to retrench workers, or give less retrenchment benefits, but these criticisms are “only valid if employers operate in an unregulated and demoralised environment", he said.
“I find it strange that employers would push their workers off the building knowing that there is a safety net below,” he added.
[Look at Singapore Drivers. They pay road tax and they think they have a right to the road against all other users who do not pay road tax (pedestrians, & cyclists). What will happen when employers pay unemployment insurance? Will they think that they have paid for the right to use the safety net?]
Mrs Teo said the most serious downside to redundancy insurance is that it reduces incentive to find work. She referred to a study in Denmark that showed that while many get a job within the payout period, many more wait till just before payouts expire, delaying taking jobs up.
“This is a real pity, because the longer a person stays out of a job, the harder it is to find work. As a result, long-term unemployment goes up,” she said. Mrs Teo also questioned if employers would offset the premium by paying their workers less, and have less obligation to retain and retrain, and be less willing to pay workers retrenchment benefits.
“All things considered, we should persist with our present approach, do everything possible to help displaced workers find replacement jobs, and give displaced worker every incentive to make the effort to help themselves. This is the right strategic approach and will go a long way,” she said.
In concluding her response, Mrs Teo said: "Whatever our political persuasion, we can all agree on the need for protection against unemployment. But how we do it is important. And the experience of other countries should give us caution."
Getting it wrong could mean more long-term unemployment, more redundancy, lower retrenchment benefits, higher cost burden to businesses and a false sense of security for the workers, she said.
She reiterated that there are many schemes to help workers in Singapore keep their jobs, and help those who lose their jobs find new ones.
"We provide generous wage support, training subsidies and temporary relief. We grow the economy to create more good jobs. The Government provides full funding for these programmes without putting the burden on our businesses. To guard against unemployment, we emphasise employment support because it is still the best way forward," she said.