Wednesday, 10 May 2017

Helping with jobs 'best way to tackle unemployment' not redundancy insurance

Josephine Teo rejects call for redundancy insurance by WP's Daniel Goh, citing the cons
By Toh Yong Chuan, Manpower Correspondent, The Straits Times, 9 May 2017

Singapore's focus on helping workers to keep their jobs and assisting those who have lost their jobs to find new ones remains the best approach to tackle unemployment, Second Minister for Manpower Josephine Teo said yesterday.



She was responding to a proposal by Workers' Party (WP) Non-Constituency MP Daniel Goh that workers who are laid off should be covered by some form of insurance funded by premiums they and their employers pay when employed.

Dr Goh said such a scheme will provide workers with a safety net as structural unemployment rises due to economic restructuring. He was reviving the party's long-held idea of redundancy insurance.



Rejecting the call, Mrs Teo said unemployment insurance and redundancy insurance are "not crazy ideas, and neither are they new".

Several MPs from both sides of the House have raised the idea.

But it is not easy or cheap to implement, she said, in her maiden speech in the House as a full Cabinet minister. The best way to guard against unemployment is to create jobs and help unemployed workers get back to work, she added.

Dr Goh presented the scheme in Parliament as unemployment rose to 2.3 per cent in March, from 2.2 per cent in December. In their May Day messages, Prime Minister Lee Hsien Loong and Manpower Minister Lim Swee Say warned that unemployment could rise further.

Dr Goh said to implement the insurance scheme, workers and employers will each contribute 0.05 per cent of a worker's monthly salary to an Employment Security Fund. A laid-off worker will get up to 40 per cent of his last-drawn pay for a maximum of six months, or 40 per cent of the median salary of local workers, whichever is lower.

This costs workers, on average, $3.80 per month in premiums and they can get up to $1,200 a month for six months.

"We propose the minimum payout would be $500 a month to benefit low-wage workers," said Dr Goh. The scheme can include the self-employed as well.

It relieves the woes of laid-off workers, he said. "The intention here is to minimise the distraction of financial pressures so that affected workers would do what they should be doing in such a situation: focus on getting the next job."

He added the scheme will complement government programmes by giving laid-off workers "breathing space to retrain and upgrade their skills to match demand in the labour market".

He also dismissed the notion that such schemes will encourage employers to let workers go and not pay retrenchment benefits. "I find it strange... that employers would push workers off their buildings knowing that there is a safety net below to catch the workers."

"This is to suggest that after so many decades of tripartite partnership, union representations and governmental promotion of workers' rights, our moral economy of stable industrial relations is going to be undermined by a mere social insurance programme," he added.

On the timing of the move, Dr Goh said such a scheme needs to be in place when unemployment is low, like now. But the warnings that unemployment is set to rise mean "the window of opportunity for implementing a redundancy insurance scheme is closing fast".

"Many developed countries have established some form of redundancy insurance to ameliorate problems arising from their maturing economies," he said.

Replying, Mrs Teo said while developed countries have had unemployment insurance for years, "their unemployment rates are generally significantly higher than ours". "Unemployment and redundancy insurance also have their downsides, which the WP has not talked about," she said.

"The most serious downside with automatic insurance payouts is that it reduces the incentive to find work," she added.

In Denmark, studies found that jobless workers waited until just before the benefits expire to take up available jobs, she noted.

WP's claim that a redundancy insurance scheme needs only 0.1 per cent of a worker's monthly salary is "too good to be true", she added, noting similar schemes cost 4.4 per cent of wages in Canada and 2.2 per cent in South Korea.

She pointed out the WP has not explained why its proposal costs so much less than other countries', saying realistically, it costs at least 1 per cent to 2 per cent of wages.

There are schemes to help workers who lose their jobs find new ones, she said. These include wage subsidies to encourage employers to hire them and short-term financial aid for their families. The Government is also growing the economy to create good jobs.

"To guard against unemployment, we emphasise employment support because it is still the best way forward," said Mrs Teo.

"I urge Members not to get distracted," she added. "Let us stay focused on making our employment support programmes the best that they can be for all Singaporeans."

























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