Committee of Supply Speech (Part 3) by Mr Gan Kim Yong, Minister of State for Manpower, 08 March 2007, 11:55 AM,

Mr Gan Kim Yong, Minister of State for Manpower

EMPLOYMENT OPPORTUNITIES FOR ALL SINGAPOREANS

Introduction

1.   There are several important challenges facing our workforce. These challenges are driven primarily by two major factors: demographics and globalisation.

2.   First, from the demographic angle, we are facing the challenge of an ageing population. This problem is not unique to Singapore as many countries face the same challenge. An ageing work force, coupled with longer life expectancy, will require a major shift in mindsets and expectations on the part of both employers and employees, as well as changes in workplace practices.

3.   Second, globalisation has increased market efficiency, and created new opportunities for us. However, the process of globalisation has also created new challenges. Outsourcing, for example, challenges the traditional employer-employee model, as well as long standing workplace practices. Many companies have to restructure to remain competitive.

4.   The way forward for us is to recognise these challenges and engage various stakeholders in addressing them. Our key advantage is that we have developed a strong Tripartite relationship over the years that allows us to address these critical issues with openness, mutual trust and confidence.

Ageing Work Force

5.   Let me first deal with the challenges of an ageing workforce. MOM recognises that there is no simple and neat solution that can address all the challenges. Rather, a multifaceted approach is needed. 

6. We also recognise that ultimately, it is economic growth that will create jobs and drive the demand for workers, including older workers. This is evidenced by the improvement in the employment market over the last two years. We have made progress in raising the employment rate for older workers. Last year, 61% of those aged 55 to 59 were employed, a 5 percentage point improvement from two years ago. For those aged 60 to 64, the improvement is even more marked – up 8 percentage points to 42% in 2006.

Expand Employment Opportunities

7.   Nonetheless, we can still do more to raise the employment rates for older workers. As my Minister mentioned yesterday, the other group which we need to focus on is women. In fact, the two issues are related. If you look at the employment rate figures, two important points are noteworthy. First, the employment rate of male residents from 55 to 64 is already quite high, and comparable to that in the developed economies. [Chart 1: Country Comparison of Male ER 55-64] Second, the employment rate of female residents aged 25 to 39 is also high, and comparable to that in the developed economies [Chart 2: Country Comparison of Female ER 25-39]. However, after the age of 40, the employment rate of female residents starts to lag other developed countries, and we do not fare so well in the 55 to 64 age group. [Chart 3: Country Comparison of Female ER 55-64].

8.   Therefore, one of the key efforts is to keep more mature women in the workforce, or if they have left the workforce, to bring them back in.  This is an area that the Tripartite Committee on Employability of Older Workers will be studying further.  In the meantime, the tripartite partners have already recognised the challenge and have swung into action.  A “Women Back to Work” Committee has been set up under the leadership of NTUC and comprises members from WDA, SNEF and the self-help groups to identify the key barriers that women face in returning to the workforce and to help them overcome these obstacles.

9.   A big part of the solution will lie in the availability of flexible work arrangements to help women juggle between family responsibilities and work.  The tripartite partners are therefore encouraging companies to create part-time or flexible working opportunities as well as promoting family-friendly employment practices among employers. Our efforts in improving Work-Life strategies and promoting more family-friendly workplaces will help to encourage women to go back to work.  Senior Parliamentary Secretary Hawazi Daipi, who chairs the Tripartite Committee on Work-Life Strategy, will elaborate on this later.

10. In connection with the employment of older workers, there is also the issue of the private sector to provide portability and better manage the cost of medical benefits to employers. This is not easy as many companies already have existing medical benefits which have generally served them and workers well. Nevertheless, a number of companies have taken up the challenge of providing comprehensive yet portable medical benefits. One example is the Salvation Army, which has shifted its 400 employees from a group medical insurance plan to an Enhanced IncomeShield Plan for every employee. NTUC Fairprice is also introducing a similar scheme for its employees. MOM will continue to work with our partners to promote the adoption of medical benefits schemes which enhance the long-term employability of workers.

11. The legislated retirement age in Japan took effect only last year. Early indications are that the legislation is working relatively well, due to several factors. First, there is a strong desire on the part of workers to continue working. At the same time, older workers are able to adapt to new roles after retirement. What is also critical is that companies start discussing with employees on re-employment early to prepare them and to set expectations. Some companies in Japan do so as early as 5 years before the workers retire.

12. However, Japan's experience also shows that the implementation of re-employment legislation is not without difficulties. It is a challenge for employers and unions to agree on the criteria that workers have to meet, to qualify for re-employment. It is also not easy for some re-employed workers to accept the adjustments, which are necessary to keep them cost-competitive. These are some of the teething problems faced by Japan.

13. The Tripartite Committee has been discussing the feasibility of introducing a re-employment law in Singapore. The unions and employers are receptive of the concept because of the flexibility the system offers. However, greater flexibility also means that re-employment is more complex to implement as the Japan experience has shown. In fact, many Singapore companies do not yet have systems in place to prepare workers as they approach retirement age, and help them make the transition including to different positions where necessary. Employers have to put the system in place. Workers' attitudes also need to change. Today, many workers begin to withdraw from the labour force after the age of 55. Given the longer life expectancy of 78 for men and 82 for women, retiring at 55 may no longer be an option for most of us. The Tripartite Committee will finalise its report soon, which will include its recommendation with regard to re-employment legislation.

14. On the employment rate targets for older workers for the next 3 years, Minister Lim Boon Heng has set a medium term target of 65% employment rate for those aged between 55-64. We will work towards that but we should avoid setting short term targets as employment rates are subject to short term volatility in the economy and other factors.

15. On MOM's part, the ADVANTAGE! Scheme launched last year is an important instrument to help older workers stay employed. So far, grants under the ADVANTAGE! scheme have been used primarily to redesign jobs or processes, to make them more suitable for older workers. More than 300 companies have participated in the ADVANTAGE! scheme and committed to implementing age friendly practices ranging from re-employment of workers above 62, automation, changing of benefit and wage structures, and the creation of new jobs. Collectively, these companies have committed to hire more than 2,500 additional mature workers and re-employ more than 3,400 workers beyond the retirement age. These jobs will be in a variety of sectors, including retail, manufacturing, finance and hotels, and will include positions such as store managers, technicians and aircraft engineers.

16. A key lesson in many of these projects is that very often, simple changes can make a huge difference. You can reap significant benefit, at very little cost. For example, Croda Singapore, a specialist chemicals manufacturer, leveraged on the funding support from ADVANTAGE! to purchase specialised equipment that eliminates the need for its workers to bend their backs and lift heavy loads when packing the materials produced by the company. Not only does this allow Croda's mature workers to continue in the job with lower risks to their health and safety, it also increases workers' productivity. 

17. Going forward, we will use ADVANTAGE! grants to help companies restructure their HR systems and introduce re-employment.

18. Next, let me touch on the issue of the quality of jobs for older workers. There are concerns that the increase in employment of older workers had been mainly in low-skilled jobs¹. While it is true that in 2006, 68% of workers aged 50 and above were employed in lower skilled jobs, this proportion has been declining over the years². Increasingly, older workers are being employed as professionals, managers, executives and technicians as well and we can expect this trend to continue as the educational profile of our older workers improves.

Shaping Positive Perceptions; Countering Discrimination

19.  Let's put into context the issue of discriminatory employment practices.

20. MOM receives an average of about 70 complaints on discrimination at the workplace each year³. These complaints are mostly related to age, race or language requirements, and pregnancy. So, the problem is not excessively large compared to the size of our workforce.

21. But I think we need to be more flexible, selective and creative in dealing with the issue of discrimination. We have adopted a promotional approach, leveraging on our strong tripartite partnership. In May 2006, following the recommendation of the Tripartite Committee, we set up a Tripartite Alliance for Fair Employment Practices (or TAFEP). The Alliance, co-led by Mr Bob Tan from SNEF, and Mdm Halimah from NTUC, has done very well in raising awareness of fair employment practices through its range of initiatives and programmes, including the publication of Tripartite Guidelines on non-discriminatory job advertisements.

22. To address the issue of inappropriate questions asked in interviews, TAFEP will soon be launching a set of Tripartite Guidelines on Fair Employment Practices. These Guidelines will not only cover the do's and don't's for interviews, but also deal with the issue of job application forms and other in-employment practices.

23. While Guidelines serve as important reference points, real and sustained changes in employment practices will come about only where there is commitment by employers. TAFEP has launched a Pledge of Fair Employment Practices, which organisations are encouraged to voluntarily endorse, as a sign of their commitment to the cause. To date, about 330 employers, including various chambers of commerce and other employer federations have come on board, which shows that commitment is growing.  I hope more companies will join this movement.

24. More can also be done to change mindsets and practices, besides exhortation and promotion. TAFEP will set up a Tripartite Centre for Fair Employment, to expand its activities to reach out to and benefit more companies and workers. The Centre will also serve as a focal point to promote the awareness of fair employment practices. It will receive public feedback and give advice to employers and workers on fair employment practices. The Centre would also provide assistance to employers who are keen to adopt good employment practices.

25. MOM, SNEF and NTUC will jointly provide the resources for the Centre. Details of the Centre and its programmes will be announced by TAFEP at a later date.

26. My Ministry does not condone discriminatory practices and we will continue to play our part in regulating employment practices. The Retirement Age provides an avenue for redress for workers whose employment is terminated on grounds of age. Likewise, section 14 of the Employment Act provides an avenue for redress for a worker who has been unfairly dismissed, which would include a dismissal on discriminatory grounds. This would apply to a female employee at any stage of pregnancy.

Outsourcing

27. Let me now move onto outsourcing and CPF contributions for outsourced workers. 

28. When a company outsources a function, it can do so in two possible ways. The first is for the outsourcing company to hire individuals as contractors to perform the task. In such a case, the independent contractor is treated as self-employed. He, and not the outsourcing company, is liable for CPF contributions, as for all self-employed persons. This model is more likely for advanced and specialised functions such as consulting work. It is highly unlikely to be the arrangement for outsourced jobs that are performed by rank and file workers. If any company claims that its team of 20 cleaners are each working as independent contractors, our enforcement officers will certainly scrutinise the arrangement very closely, and will need strong evidence to be persuaded that it is bona fide. Indeed, in 2006 CPF Board took action against 180 companies which tried to evade their statutory obligations by labelling their employees as independent contractors, and we will continue to be vigilant against such practices.

29. The second way of outsourcing is to engage another commercial entity to take over the function. This new commercial operator would then hire its own employees to perform the job. In such a situation, the new commercial operator is the employer and is obligated to comply with the CPF Act and Employment Act. In other words, the worker does not lose his rights just because there is outsourcing.

30. Although the responsibility to comply with the law now rests with the new commercial operator and not the outsourcing company, the outsourcing company could and should do more to promote greater compliance. For example, they can exercise their influence as purchasers of services to require their suppliers to comply with CPF and Employment Act requirements.

31. There will be employers who will try to circumvent the law. Both MOM and CPF Board will step up enforcement against errant employers, including the directors of companies, who do not pay CPF for their workers. Doing so will also help ensure that their workers can benefit from Workfare. MOM and CPF Board will also continue to work with the tripartite partners in educational and outreach efforts.

32. Our existing laws are already adequate to protect workers' CPF and employment rights.

33. In addition, temporary and casual workers should not be disadvantaged in terms of access to training opportunities.

34. Training is also important for older workers. This is an area which WDA has studied carefully. That is why WDA has reviewed its funding system, and established 2 avenues of funding – employer-based, and worker-based – to make training more accessible and affordable to all workers. While temporary and casual workers do not have employers to support their training, they can access WDA's worker-based funding where financial support is not tied to employers, but channelled through the training providers in the form of subsidised fees. WDA funding support will kick in and the worker pays only the subsidised fees for training. 

35. Even then, some casual and temporary workers are reluctant to go for training as it would result in a loss of income for them. I encourage these workers to take a longer term view and to avail themselves to the many training opportunities, including WDA's Place-and -Train programmes which are open to them and are subsidized under the Lifelong Learning Endowment Fund.  In doing so, these workers not only improve their skills, but more importantly, are in a better position to find permanent employment.

Conclusion

36. Mr Chairman, this debate has covered many issues arising from an ageing workforce and the impact of globalisation.  These trends are inevitable and cannot be ignored. Together with our tripartite partners, MOM has been working on practical responses to the challenges ahead. I want to emphasise that the strong spirit of Tripartism nurtured over the years has allowed us to develop out-of-the-box solutions in a consensual and constructive manner, in our own unique Singapore manner. That is one key strength of our labour market, and an important reason why the Singapore workforce continues to be ranked highly in the eyes of international investors. We must work to preserve and strengthen this tripartite relationship between unions, employers and the Government.  Thank you.

² The proportion of workers aged 50 and above employed in lower skilled jobs over the years are:   1991 – 77.4%; 1996 – 70.9%; 2001 – 67.8%; and 2006 – 68%.

³ MOM received 67 complaints of discrimination at the workplace in 2004; 66 in 2005; and 68 in 2006.