TL;DR – Do we really want it?
Parliament is in session again this week, and the mainstream media has dedicated the most coverage to the escalating cost of infant formula (aka baby milk powder) and on a smaller scale, the Redundancy Insurance proposed by NCMP Daniel Goh of the Workers’ Party.
This is not the first time Workers’ Party has brought this up; they had raised this Redundancy Insurance proposal late last year too. Personal finance blogger, My15HourWorkWeek, had made some interesting points about it back then.
The Redundancy Insurance scheme proposed by the Workers’ Party calls for monthly contributions of 0.1 per cent of monthly salary shared between employers and employees. They’re looking at 0.05 per cent from both employees and employers, and this works out to an average of S$3.80 per worker. Goh said this would work out to S$1,200 payout monthly for six months.
In response, the newly-minted Second Minister in the Ministry of Manpower, Josephine Teo, had this to say,
There are a few points to note from the exchange above:
- Redundancy Insurance is meant for retrenched workers, i.e. workers whose jobs have been made redundant. This is not the same as Unemployment Insurance, which covers workers who are out of jobs under whatever circumstances. So, this is not the cure-all that some people seem to be looking for.
- Redundancy Insurance can only cover you for a short period of time, and our best bets are still Jobs, Jobs, Jobs.
- One key challenge we foresee is how the scheme is premised upon the employers acting in an honourable manner, and making known redundancy exercises.But what about disguised retrenchment?
“Some had their contracts terminated without clear explanation — just before their firms moved overseas. Others were let go because they did not meet their performance targets. Or so they were told.
But investigations later show that they are actually disquieting examples of “disguised retrenchments”, a trend the National Trades Union Congress (NTUC) is concerned about.”
– NTUC’s assistant secretary-general Patrick Tay
Helping with jobs ‘best way to tackle unemployment’
WP’s persuasion for a redundancy insurance has the good intention to provide workers who lose their jobs due to structural unemployment. Daniel Goh proposed the minimum payout to be $500 a month to benefit low wage workers. Daniel proposed that to implement the insurance scheme, workers and employers will each contribute 0.05% of a worker’s monthly salary to an Employment Security Fund. A laid-off worker will get up to 40% of the median salary, whichever is lower.
This will cost workers $3.80 per month in premiums on average and they can get up to $1200 a month.
While I can see how helping workers with their daily sustenance is good-intentioned, the proposal still has not resolved the issue of (getting them) jobs. The idea is not in solving a short-term issue of daily living expenses – which the government has different help schemes to help these distressed workers without the insurance – but to get them back to work.
What schemes? They have training allowance, social support through grassroots which automatically kick in when these affected workers seek help. The government, together with NTUC through its e2i, will move in to proactively help workers migrate to new jobs and point them to the necessary training courses needed to adapt to the new job scope. The salary and wage support from the government can be up to 70% for employers willing to work with the tripartite partnership to bring meaning back to the workers who lose their jobs due to retrenchment. With these schemes, the total outlay by the government is even more than what the insurance will cover. Hence, this is about getting a job, not keeping them temporarily afloat with no job. There is a key fundamental difference between the two.
The workers will get their full salaries in their new jobs while training is being provided. Of course not all retrenched and structurally unemployed can get a job from this pathway. For those who cannot find relief through these schemes, there are many courses available under the SkillsFuture initiative where workers can be retrained for new roles. While they are undergoing training, they can get training subsidy and allowance to help them through the period of adaptation.
At the end of the day, it is still about getting those retrenched a job, one way or another. So the key is to effectively place them in jobs with training. In between, government through its agencies and its tripartite partners will provide training allowance so that living day to day is not an issue for a short time.
The government’s advocacy is self-reliance and the development of strong work ethics.
While Daniel’s persuasion to provide outright money to workers is well-intentioned, is there any scope in his proposal for sourcing for new jobs for the retrenched and down-and-out workers? After six months without a job, what is next?
Then are these workers to apply for social welfare which may be less than the minimum $500 earlier disbursed? Or for those who are on social welfare, will they suddenly go scramble for the redundancy benefits without the incentives to get them back to work? My question really is what happen after 6 months of receiving the redundancy benefits?
While the government may not now adopt the redundancy insurance, they are already providing daily sustenance to workers who are willing to go for re-training. Is this not better?
Train and place is still a more viable pathway – it’s more sustainable and meaningful.
What the WP has failed to also mention is: Most of these developed countries with redundancy insurance have unemployment rates higher than in Singapore. Very likely they are also trying their best to lower their unemployment rate while burning through the funding for such program -which is a loss-loss dilemma.