Speech in Response to Motion for Adjournment on Redundancy Insurance in Parliament at Parliament

Mrs Josephine Teo, Second Minister for Manpower

Focus on jobs and employment

1. When I was serving in the Labour Movement, we always said that a job is the best welfare and full employment is the best protection for our workers.
2. That’s why the priority has always been to help workers in jobs keep jobs and to help workers who lose their jobs find new jobs.
3. It is also why the PAP government has never taken its eye off job creation.
4. This approach has kept Singaporeans employed, and unemployment low.
5. However, as our economic situation changed, and restructuring became a necessity and a concern, we have built up many schemes to help workers who lose their jobs. This is something that Assoc Prof Daniel Goh has acknowledged.
6. Firstly, schemes to help them get new jobs, such as the Career Support Programme for PMETs, that gives up to $42,000 in salary support to help someone who loses a job find a new employer, or the Work Trial Programme for rank and file workers. Plus, extensive subsidies to equip workers with skills for new jobs, including more than 60 Professional Conversion Programmes across more than 20 sectors. We also have schemes like ComCare that provide short term-relief to Singaporeans while they are out of a job.
7. There are many schemes but all have a single purpose – to get workers back at work, with new and useful skills, and to ease the transition and moderate the impact on their families.
8. We have not hesitated to give generous wage support and training subsidies, but always conditional on the worker making the effort, by attending a training course, or accepting a placement opportunity. This approach has worked.
9. But, as PM and Minister Lim Swee Say have pointed out, there is still a risk that in future our unemployment rate will rise beyond what we have been used to.
10. What should our response be?

Redundancy insurance: serious downsides

11. The Workers’ Party has proposed redundancy insurance. Unemployment insurance, including redundancy insurance, are not crazy ideas, and neither are they new, as Assoc Prof Daniel Goh acknowledged.
12. In fact, many developed countries have had some form of unemployment insurance for years.
13. But their unemployment rates are generally significantly higher than ours. Many people in these countries can see themselves having to depend on the payouts. As a result, their attitude is “if we have to pay premiums, so be it”.
14. Singapore today is not in the same position. We have focused our efforts on employment support through training and re-skilling, with full support from employers and unions, which other countries find harder to do.
15. Unemployment and redundancy insurance also have their downsides, which the Workers’ Party has not talked about.
16. The most serious downside with automatic insurance payouts is that it reduces the incentive to find work. In Denmark, studies¹ have shown that while many jobless persons do get a job within the payout period, many more wait until just before the benefits expire to take up available jobs.
17. In other words, the jobs are there but the unemployed workers delay taking them up. This is a real pity, because the longer a person stays out of a job, the harder it is to find work. As a result, long term unemployment goes up.
18. The second downside is that redundancy insurance is not cheap. The Workers’ Party claims that we only need 0.1% of monthly salary, shared equally between employers and employees.
19. However, this is too good to be true, even based on your own research findings. Using data you provided, just comparing countries with similar benefits, Canada’s premium is 4.4%. The Republic of Korea needs 1.35%, which is at least 10 times your estimate, and that was back in 2013. Today, premiums in the Republic of Korea have risen to 2.2%.
20. The Workers’ Party has not explained what is so different about your proposal that costs so much less. If we make more realistic assumptions, the scheme is more likely to cost at least 1-2% of wages, and then we have to consider how it will raise costs for employers. That worries me, especially for SMEs.
21. There are other questions to worry about. Will employers offset the premiums by paying their workers lower salaries? Will employers feel less obligation to retrain and retain, resulting in higher redundancies? Will employers be less willing to pay workers retrenchment benefits, since they have already paid the insurance premiums for redundancy?
22. Therefore, all things considered, we should persist with our present approach – do everything possible to help displaced workers find replacement jobs, and give the displaced workers every incentive to make the effort to help themselves.
23. This is the right strategic approach and will go a long way.

Redundancy up close and personal

24. Mr Deputy Speaker, during the global financial crisis, I served as a union leader.
25. A few days before Chinese New Year in 2009, some 600 employees in one of our unionised companies were told they were being laid off. The timing was cruel and the union had not been consulted, but we had to stay focused on helping the workers.
26. We knew the workers were in for a tough time. It was the middle of the crisis. The ILO was projecting up to 50 million job losses worldwide. Most of our members had only ever known one job their entire lives. Naturally, many of them were downcast.
27. On the workers’ last day, we arranged for special buses to take them immediately to e2i. I went early to receive my brothers and sisters. We wanted them to know that the union would walk this journey, together with them. They were not alone.
28. We briefed our members about the union’s assistance package. e2i colleagues set up rows of interview counters for everyone who needed help. They could get face-to-face consultations and follow-up support on the spot.
29. Most of our members found new jobs and continued to provide for their families. In subsequent Chinese New Year’s, we could still get together to tell stories of children and grandchildren doing well.
30. My brothers and sisters have lost their old jobs, but through new jobs, they kept their livelihoods, and their dignity.

Conclusion

31. Whatever our political persuasion, we can all agree on the need for protection against unemployment.
32. But how we do it is important, and the experience of other countries should give us caution.
33. If we get it wrong, we could end up with more long term unemployment, more redundancy, lower retrenchment benefits, higher cost burden to businesses, and worst of all, a false sense of security for the workers. None of these are intended, of course, but they could happen.
34. We must do it right in Singapore. We have built up many schemes to help workers keep their jobs, and help those who lose their jobs find new ones. We provide generous wage support, training subsidies and temporary relief. We grow the economy to create more good jobs.
35. The Government provides full funding for these programmes without putting the burden on our businesses.
36. To guard against unemployment, we emphasise employment support because it is still the best way forward.
37. Even in tough times, Singaporeans want to feel the sense of dignity and pride that comes from standing on one's own feet. I saw it in 2009 in the eyes of my retrenched brothers and sisters whom we helped to get new jobs, and today, each time a fellow Singaporean gets a new job through our employment support programmes, we see it again.
38. I urge members not to get distracted.
39. Let us stay focused on making our employment support programmes the best that they can be for all Singaporeans.