The need to do more about unemployment in Singapore
Bread line for the unemployed during the Great Depression - Source: AP Photo
In an article by Channel News Asia:
SINGAPORE: With more retrenchments expected after the post-festive period, union leaders said they will do their best to help those affected. But they stressed that workers need to approach the job market with an open mind to increase their chances of getting hired.
Some workers who lost their jobs last month attended their first day of a week-long retraining course, from February 2 to 9, which will prepare them for jobs in other industries.
Retraining is a common policy used to combat structural unemployment (the mismatch of the worker’s skills with the labour demand from the economy). However, the current recession is caused by a global downturn leading to a demand-deficient in the labour market. In layman’s terms, there is insufficient demand for labour, especially in the manufacturing industry.
Therefore, we are facing cyclical unemployment, which need an expanded set of employment policies to reduce.
If cyclical unemployment is the issue, then how effective will retraining be in improving the employability of these layoff workers?
Although unionists are expecting a slump in the number of manufacturing jobs available, they are predicting an increase in job opportunities in the service sector.
The e2i (Employment and Employability Institute) currently has more than 6,000 immediate vacancies available in their jobs database.
If the former manufacturing workers can be retrain to fill the roles these service industries require, perhaps the structural unemployment (it could still happen if there are vacancies in other industries) can be reduced, hence overall unemployment drops.
However, is the week-long retraining course adequate to redeploy these workers in the service sector? If it just need a week to retrain and be prepared to switch industry, then why do we accumulate diplomas and degrees for?
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The government needs to do more than just offering retraining and supply-side measures.
Despite more retrenchments expected after the Lunar New Year, workers can look forward to more help. The Workforce Development Agency (WDA) will be doubling the number of training places from 110,000 to 220,000 under the Skills Programme for Upgrading and Resilience (SPUR) to retrain workers.
The help that the workers need is job availability, not just retraining programmes.
Unemployment rate has risen from 1.7% in Dec 2007 to 2.6% in Dec 2008, with bulk of retrenchment coming from manufacturing (-59%) and service (-1.5%) sectors. Only construction sector registered an increase of 57%, which I believe the majority goes to foreign workers rather than locals.
Budget 2009 produced broadly supply-side measures to mitigate the effects of the global downturn. As Tharman, Singapore Finance Minister said in his budget speech that the government’s stimulus package “will not get us out of the recession,” but rather “help avert an even sharper downturn.”
The government also said that the budget’s top priority is to keep jobs for the workers. Does it mean that for those who are retrenched, good luck to you, but we can offer you retraining if you like.
More can be done to reduce cyclical unemployment and help retrenched workers be re-employed. The government needs to stimulate demand for labour which means increasing government spending and perhaps a proper tax cut (rather than a deferment).
I do not support keynesian deficit spending for Singapore because of the high import leakages, so I recommend that the government spend on targeted policies that improve the quality of infrastucture that not only target a few industries (construction, IT, etc) but a wider range of industries, especially those in the service sector.
Then perhaps, 2009 will not be so difficult for the retrenched workers or those who might be layoff this year.
Update: Kelvin Tan has an interesting take to the unemployment situation in Singapore. He uses (Robert) Lucas’s critique to argue against the simplistic use of Keynes’s involuntary unemployment and “sticky” wages theory, in Singapore’s public policy.
The retrenched would have been better helped with some monetary help for x time. With a demand-led recession, no amount of retraining can help. The new skills learnt still needs a demand (agree here).
Some bloggers have already mentioned that there no strings attached to companies taking the subsidy and still retrenching leaving the retrenched in the same hole.
SS: Thanks for your comments.
I’m not so sure about giving them monetary help for some period because that will be unemployment benefits. I have yet to develop my ideas on the use of unemployment benefits as social welfare, but my feeling now is they are not good in the long run.
I’m not sure about the no-strings attached notion that you mentioned. But the job credits will only be paid after the eligible employee has work for a quarter (the scheme is paying for 4 quarters for a year only). So I don’t see how the companies can abuse the scheme. I’m assuming you are talking about the job credit scheme when you said subsidy right?
Sharp observations. But I still feel retraining is less risky compared to the govt directly stimulating demand. As you acknowledge, there are high import leakages, and Singapore has a small multiplier, so fiscal policy may not be effective.
Retraining can increase productivity and lower unit labour cost. This will help to keep workers’ wages competitive, and make them more attractive to hire once growth picks up. Though the recession may be caused by demand-deficiency, supply-side measures can still boost short-run aggregate supply, mitigating the decline in growth.
Well as always, we’ve to take the bitter medicine.
Hey Al, thanks for your comment =)
However if one is retraining to take on a different industry job, would that increase productivity? One might argue that having knowledge of different industry help the worker to have a macro view of things or even able to transfer skills across industry, I think this benefit is somewhat negligible.
I am supportive of the supply-side measures but the government can do more to stimulate labour demand to enhance the effects of the supply-side measures (They actually increasing job demands in the public sector).
Therefore, I’m suggesting that the government stimulate demand in industries that is indifferent to hiring locals or foreigners or better yet, geared towards hiring locals. As coupled with the job credit scheme, locals can compete on a more equal footing to low-cost foreigners (assuming they are both qualified for the jobs).
I agree, the retraining schemes seem to be geared to helping the individual switch industry hence considering that the retrained will be competing with the existing veterans any productivity might be minimal.
Are there any industries that favor hiring locals?
local militia perhaps. lol.
What do you think of the government stimulating private sector infrastructure investment? Annecdotally, at least, it seems that our government (IT at least) infrastructure is quite a bit ahead of private sector (banks).
Mike
Yes the JCS.
I feel there’s social safety net is weak even before this recession and nothing seems to have been put in place (even thought out?) for the retrenched. Targetting at the lowest strata of the workforce with re-training is also easier said then done given that not many employers will hire without experience unless it’s a really low paying job and IF the foreign workers have not become a steady pool by now.
Re-training PMETS is alot more challenging in terms of relevance and switching chances and I feel not enough has been done about this. Don’t forget, this group are assumed to be better off financially may be a fallacy given that they may be more highly geared then non-PMET’s.
Plus this group has the highest acceptance issue in taking a lower ranked job even if they are willing. I am assuming I don’t have to elaborate the number of distraught PMET’s who have been retrenched in the past and recently who have expressed their difficulty in being ‘trusted’ to be really willing to accept a lower paying job.
I would have preferred monies spent to allow retrenched (all groups) to be sponsored plus some sort of financial help after proof that they have done what they can to cnnserve (like selling off car !). We can’t of course encourage hand-outs to feed their luxuries before taking public money. Naturally a time limit should be set to prevent over-reliance or becoming a permanent dole.
Hope I have made myself clearer.