Saturday, April 9, 2016

No need for unemployment benefits in Singapore: Lim Swee Say

Responding to questions by Members of Parliament, the Manpower Minister explains why it is not appropriate for the Republic to put in place unemployment benefits or redundancy insurance for those who are retrenched.
By Linette Lim
08 Apr 2016

SINGAPORE: Low unemployment rates and a widespread practice of companies in the Republic paying retrenchment benefits are reasons why it is not appropriate for the country to put in place unemployment benefits or redundancy insurance, said Manpower Minister Lim Swee Say in Parliament on Friday (Apr 8).

[That's right. With Low Unemployment rates, there is no need for unemployment benefits such as Unemployment Insurance, for example. Just like Fire Insurance. Is your home currently on fire? No? Then you don't need Fire Insurance! ]

Mr Lim made this case in response to calls by Nominated Member of Parliament Azmoon Ahmad, and MPs Patrick Tay and Sylvia Lim for greater support to retrenched workers.

[Note: Sylvia Lim's proposal is for "Redundancy Insurance". There were not a lot of details, but then, it is just a speech. It would be for workers made redundant by technology. Again, not a lot of details and certainly specifics can be negotiated. But not if it is dismissed out of hand.]

Rejecting the suggestions mooted, Mr Lim said that Singapore’s employment situation is “quite different” from that in countries providing unemployment benefits.

“Our unemployment rates are low, our long-term unemployment rates are also low,” he said. “At the same time, the practice of paying retrenchment benefits is widespread.”


Citing an MOM survey, Mr Lim said it was “standard practice” for companies in Singapore to pay retrenchment benefits, with nine in 10 retrenching firms doing so. At the same time, nine in 10 retrenched workers received retrenchment benefits, including from non-unionised companies.

“I do sympathise and empathise with workers who are affected by retrenchment and I appreciate the suggestions by various members,” said Mr Lim, emphasising that efforts to help those retrenched must be focused on getting them to “go back to work as quickly as possible”.

[See? If your house is on fire, what you want is the Fire Brigade to come immediately. Fire Insurance is NOT going to put out the fire. Our government has rightly focused on providing Fire Fighting service.]

Responding to a question by MP Lim Biow Chuan, he also explained why Government does not support making retrenchment benefits “compulsory”.

Noting that this is a topic discussed from time to time, the Manpower Minister said the tripartite partners agree that it is important to allow for the “flexibility to negotiate … rather than prescribing it in the law”.

“This is because different retrenching companies are in different circumstances. And therefore there should not be a one-size-fits-all rule,” he said.

- CNA/ll

[As investment advisers will tell you, past performance is not a predictor of future performance. That we have had low unemployment and a "standard practice" of providing retrenchment benefits so far DOES NOT GUARANTEE anything in the future.

More importantly, 9 out of 10 retrenching firms provide retrenchment benefits. Nine out of 10 retrenched worker receive retrenchment benefits. That's GREAT! If you are one of the 9.

But that also means that 1 in 10 do not get any retrenchment benefit. So what does Mr Lim Swee Say say to him? "Too bad"? "Eat shit and die"?

I don't disagree that our unemployment rates are low. But low is not zero. Yes, we make policies to cater for the majority, but there will be some who fall between the cracks, or fall off the edge. What do we have for them?

I agree that the current focus on getting people re-employed and to secure retrenchment benefits for them when they are retrenched is the best approach. Most, maybe even all can be helped this way. But what if some cannot be helped this way?

Unemployment insurance need not kick in straightaway. It could be activated only 12 months or 9 months or 6 months after retrenchment. And provide a proportion of the last draw salary. Sylvia Lim's suggestion is 40% of last drawn salary for 6 months. 

Who pays for this unemployment or redundancy insurance?

Well, the beneficiary (the worker) should. If we adopt the Medishield Life approach of sharing the risk, it would be quite affordable.

Or the employer can pay for the basic cover - 40% of last drawn salary for 6 months (using WP's suggestion), that will only kick in 6 months after retrenchment if the worker is still unemployed (and has not turned down job offers with no good reasons. If Lim Swee Say is correct and there is re-employment, then the unemployment insurance would almost never kick in. Most retrenched workers would be re-hired within 6 months.

Employees can enhance their cover for a premium. They can either enhance the quantum of monthly payout (50% of last drawn salary), the duration of the payout (12 months instead of 6 months), or shortened the time for the benefits to kick in (within 3 months).

It would not be a free ride. It would simply present a safety net. That will only deploy after other measures have been exhausted or have failed. 

This is actually an idea worth looking at. I won't be surprised if PAP spins this into a new policy to the rolled out in the future, under a different name. ]

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