About Jobs Credit Scheme

Nominated Member of Parliament (NMP) Siew Kum Hong made a good argument questioning the effectiveness of the Jobs Credit Scheme (JCS) and whether this policy is the best bang-for-buck policy available.

Opposition MP Low Thia Kiang also gave a good presentation at the budget debate on the JCS’s effectiveness in saving jobs. It seems to me that he is suggesting if the government can take a targeted approach to JCS (a better and cost-efficient) rather than a benefit-all one. He posited that profitable companies that have no retrenchment plans might profit from the JCS where the money could have been put to better use.

Both have raised reasonable doubts about how much jobs JCS can save, in which the government did not provide any estimations. Maybe they do have as I assume they do rigourous econometric research before coming up with such a scheme.

It’s a smart scheme, I must say. Because first, this is incentives for companies to retain workers and second, it is a good way to kick out foreigners (which explains why there is a snaking queue outside Immigration & Customs Authority to apply for PR so that they are eligible for the JCS) and give their jobs to locals.  Third, employers and employees benefit because the government foot the bill.

I am not xenophobic but at times of recessions, I will rather save locals’ jobs than foreigners’. Hey, every citizen for himself or herself!

However the scheme is temporary so the marginal increase in job opportunities for locals due to attractive corporate incentives is lower.

I’m not sure if the government can come up with a better scheme than the JCS, I think JCS is pretty innovative and impressive. It is a temporary wage subsidy like what NMP Siew said, so it is unprecedented.

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Introduce some targeted demand stimulus to complement supply-side measures

My gripe with the budget is that it is too concentrated on supply-side measures . Some demand stimulus will be nice to enhance the effectiveness of the JCS.

Siew and Low’s main concern is that there is insufficient demand for labour because of falling inventory demand, therefore given a choice to cut costs, companies will retrench workers rather than accept the JCS. Simply because they are exhibiting loss-minimising behaviour. Costs of retaining the workers are higher than retrenching them as inventory demand has fallen. Hence, stimulating demand for the company’s inventories will increase demand for labour. With the wage subsidy incentive, companies are even more likely to retain or hire workers.

in today’s article, PAP MPs also agree with increasing spendings to stimulate demand . They gave suggestions like cut GST to giving consumptions coupons which I have mentioned in my review of SDP’s alternative budget proposal yesterday.

Of course this is all nice in theory and probably need to be subjected to some data-crunching to quantify the effectiveness.

Effectiveness of JCS and why the scheme should not be seen in isolation

I think JCS should be questioned about its effectiveness as what Siew and Low have done and the government should provide proof of the efficacy of the policies they recommended. Just as I questioned the quantifiable basis for the figures that SDP proposed, I will also questioned the same from the government.

And lighten up, Singapore government, we are not questioning your ability or mandate to govern, we are just providing different and constructive perspectives to help you in designing better policies.

Finally, the JCS should not be seen in isolation but as a complementary measure to other job-saving measures that the government might come up with in its budget and off-budget policies. Economics is all about linkages.