Committee of Supply (Speech 1) by Mr Gan Kim Yong, Acting Minister , 13 February 2009, 12:00 PM, Parliament

Mr Gan Kim Yong, Acting Minister , Parliament

Building Resilience, Preparing for the Future

(I) Labour Market Update and Outlook

(A) Global Downturn, Rising Unemployment

1. We are facing challenging times. Recently, the IMF had forecast that world growth in 2009 will fall to just half a percent in 2009, the lowest rate since World War II. The World Bank has projected that world trade volume will contract 2.1% in 2009, the first decline since 1982. How long the recession will last, how deep it will be, is still too soon to tell.

2. A major challenge for many countries is rising unemployment. The International Labour Organisation has estimated that globally, the number of unemployed could increase to 230 million in 2009 if the situation continues to deteriorate. In the US, unemployment surged to 7.2% in December last year, the highest in 16 years. In China, millions of migrant workers returned to the coastal provinces after the Chinese New Year festivities, but found that factories remained closed. Across Europe, rising unemployment and fears of job security have led to unrest in countries like Britain, France and Greece.

(B) Our Labour Market is Still Relatively Resilient, but Outlook is Expected to Weaken

3. In Singapore, our labour market has benefited from strong employment gains in recent years. Unemployment is lower than in many other countries. We are therefore combating this downturn from a position of strength.

4. The labour market performed strongly in the first half of 2008, but eased in recent months, resulting in 227,200 new jobs for the whole year, lower than the 234,900 jobs in 2007.

5. Singaporeans have benefited from more as well as better jobs.

• More Singaporeans are employed than ever before. Based on our Labour Force Survey in 2008, the employment rate for the resident population aged 25 to 64 rose to a new peak of 77%, mainly due to more women and older workers joining the workforce.
• More Singaporeans are employed in Professional, Managerial, Executive & Technician (PMET) jobs. PMETs now form the majority, or 51%, of the resident workforce in 2008, up from 41% a decade ago.
• Wages have risen. The median monthly income from work for full-time employed residents rose over the year by 11% to $2,590 in June 2008, higher than the gain of 7.7% in 2007. After adjusting for inflation, the increase in real median income was still a healthy 4.1%.
• Median monthly household income from work increased by 13%, from $4,380 in 2007 to $4,950 in 2008, or 6.2% in real terms. Stronger growth was reported amongst lower income households. Consequently, the Gini coefficient – which is a measure of income inequality – decreased for the first time since 1998 to 0.481.

6. However, in recent months, the impact of the sharp economic downturn has been felt in the labour market.

• Employment growth slowed significantly for both locals and foreigners in the last quarter of 2008. Out of the 26,900 jobs created in the last quarter, more than half went to local workers.
• Overall unemployment crept up to 2.6% in Dec 08, while resident unemployment rose to 3.7%.
• Nearly 16,000 workers were made redundant in 2008, a five-year high. More than half of this happened in the last quarter alone.

7. Going into 2009, the Singapore economy is projected to contract by between 2% and 5%. Our labour market will weaken considerably. Jobs growth will moderate further, while redundancies and unemployment will be higher than last year.

(II) Building Resilience for the Economic Downturn

8. We must all work together as a strong and united team, to weather the downturn and emerge stronger.

9. The Government has rolled out a $20.5 billion Resilience Package. On the jobs front, $4.5 billion will be dedicated to preserving jobs through Jobs Credit. In addition, $650 million has been set aside for the Skills Programme for Upgrading and Resilience, or SPUR, to train and upgrade our workers, as well as help companies manage excess manpower.

10. We will take a three-pronged approach: First, help businesses remain viable and save jobs, second, help Singaporean workers keep their jobs and third, help the unemployed find new jobs.

(A) Helping Companies Save Jobs

11. Our first strategy is to save jobs by helping businesses manage their costs.

• First, the Tripartite Guidelines for Managing Excess Manpower and National Wages Council (NWC) guidelines offer employers and unions practical alternatives to retrenchment, such as shorter workweeks, temporary lay-offs and even wage adjustments, if necessary.
• Second, Jobs Credit gives employers a 12% cash grant on the first $2,500 of monthly wages for each local employee. Compared to a CPF cut, Jobs Credit helps businesses without affecting workers' retirement adequacy, housing and medical needs. It also helps to make local workers more cost-competitive, as foreign workers do not qualify for Jobs Credit.
• Third, SPUR helps to further reduce manpower costs when employers send their employees for training, through the enhanced course fee subsidies as well as absentee payroll. SPUR is also an important scheme to match workers to jobs and I will talk more about this later. Today, SPUR covers over 800 courses in 24 industries, with a very generous 90% course fee funding across the board.

12. The progress on SPUR has been encouraging. Through the efforts of the tripartite partners, just two months after SPUR started (as at end-January 2009), more than 20,000 workers have already been committed for training. Close to 300 companies, spanning SMEs to multi-national companies, have committed to send nearly 13,000 workers for training. Another 7,500 individuals have signed up for training directly at the CET centres, ITE and five local polytechnics.

13. We have also been working closely with employers who are participating in SPUR to ensure our courses stay relevant and effective. How do we decide on courses to be included under SPUR? SPUR must focus on equipping people with skills that are in demand. That is why we work closely with the industry to identify the types of skills to be included in the Workforce Skills Qualification system, and select courses that are nationally-recognised, valued by industries and employers, as well as delivered by quality training providers. This approach will yield better outcomes from training. We will also facilitate placement of the participants after training, and monitor the outcome. The list of SPUR courses will be regularly refreshed to take into account the manpower and skills needs in the different industries.

14. To address the issue of absentee payroll for training outside working hours, if a company sends its workers for training outside working hours, the absentee payroll is paid to the worker, and the employer just tops up the remaining 10% to 20%, $1.50 an hour or less. This sum is small but the element of co-payment from the employer is important because it demonstrates the employer's commitment and partnership with SPUR.

15. Workers employed on shorter workweek and sent for SPUR training can get at least a part of their absentee payroll. This is indeed the case. Employers and workers on shorter workweek will always be better off if workers are sent for training as they can both benefit from the absentee payroll.

16. Selected Workforce Skills Qualifications (WSQ) ATOs which have performed satisfactorily under WDA's quality assurance system, will be included under SPUR to expand the range of quality providers available for training workers. More than 60 WSQ ATOs will qualify for SPUR. More can be included later if they meet the performance criteria in future.

17. Jobs Credit and SPUR are already having an impact on the ground.

18. Mediacorp, for example, is a company that will be implementing comprehensive measures to control costs and save jobs. Amongst the measures it will adopt are an Alternate Short Week Scheme, and a suspension of the policy to carry forward leave, wage restraint and a cut in their variable bonuses. As a responsible employer with 2,700 staff, MediaCorp makes it a point to consult the union in decisions that will impact its staff. More recently, it has plans to leverage on SPUR to up-skill an estimated 30 – 40% of its workforce, over a two-year period. MediaCorp welcomes the SPUR and Jobs Credit schemes as means to manage their business costs.

19. Other companies are using the Jobs Credit and SPUR to seize new business opportunities. Charles & Keith, a well-known retailer, is using Jobs Credit and SPUR to expand their operations and raise their service levels to greater heights. They will be hiring 25 more workers to support their expansion locally and will be sending them for Retail WSQ training.

20. Unlike some countries which provide extensive unemployment welfare to displaced workers, our measures help employers preserve jobs to minimise retrenchments and unemployment. This will benefit workers. I strongly urge employers to work with their unions, and workers to take full advantage of Jobs Credit and the training opportunities under SPUR, so that we can continue to sharpen our competitiveness and enhance workers' employability during this downturn.

(B) Helping Enployees Keep Jobs

21. Our second strategy is to help employees keep their jobs. By participating in SPUR, workers can upgrade their skills, improve their productivity, enhance their employability, and contribute more to their employers. They will become more valuable and more cost competitive to their employers. This way, we help them keep their jobs. During the downturn, employees also need to be more flexible in their expectations. Some of them may need to be redeployed, adjust their work schedule or accept lower bonuses and wages, to help the company stay competitive and viable.

22. Even as we try to keep jobs, this downturn will inevitably affect some low wage workers. To help older low-wage workers and the self-employed, some of whom may see a reduction in their income during this economic downturn, the Resilience Package will also provide a one-off Workfare Special Payment. The Special Payment will be given entirely in cash to help workers meet their financial needs. They will receive up to a total of $1,200 paid over three payments, or up to $400 for each payment. Let me explain how the Special Payment will work.

23. We will make Special Payments for work done in 2008 and 2009, together with the regular Workfare payments. The first payment will be made in March, a month earlier than the usual Workfare payments, so that workers can receive help earlier. This will be based on work done in 2008 and on the same criterion as the regular Workfare scheme.

Details of WIS Special Payment

24. We recognise that some low wage workers may experience less regular employment this year during the downturn. Therefore, the work criterion for the 2009 Special Payment will be less demanding to make it easier for low wage workers to qualify. Under regular Workfare, a worker would need to work at least three months out of any six-month period to qualify for each of the half-yearly payment. For the 2009 Special Payment, so long as the worker has worked two months in any six-month period, he will be entitled to half that payment. If he works three months, he would qualify for the full half-year payment, just like the regular Workfare.

25. Like WIS, the Special Payment is also available to self-employed and informal workers, as well as contract and part-time workers, provided they make CPF contributions and meet the criteria. I urge self-employed persons and informal workers to make Medisave contributions to qualify for WIS and the Special Payment. Their contribution rates have already been reduced two years ago, and the Special Payment is made entirely in cash.

26. The assistance provided by Workfare and the Special Payment is significant. Let me give you an example. Consider Mdm Siti, a 62 year-old hawker who earns an average of $1,000 per month. As a self-employed person, she is required to make an annual Medisave contribution of $339, or less than $1 a day for two years – 2008 and 2009. This can even be paid for using the GST Credits which she would receive in March and July. If she works in 2008 and 2009 and contributes to her Medisave, she can receive $800 cash from the Special Payment and $3,200 in WIS into her Medisave. The total help from Workfare and Special Payment for these two years of work is $4,000. This is equivalent to four months of her income.

(C) Helping Unemployed Find Jobs

27. Our third strategy is to help unemployed workers. Even in the downturn, new jobs will be created. At least 45,000 new jobs are expected over the next two years, including many at the PMET level. In the public sector alone, the majority of the 18,000 jobs will be for positions that require at least a Diploma qualification.

28. My Ministry is working with economic agencies to see how we can provide more on-the-job training opportunities in areas that will be especially beneficial to fresh graduates. EDB has announced a $100 million programme, PREP-UP, which includes support for on-the-job training in science, technology and engineering. This will allow companies to develop and retain a pool of experienced manpower within an industry, so that the manufacturing and exportable services sectors can seize new opportunities when growth recovers.

29. There are also existing jobs out there at all levels, ranging from allied health professionals, hotel executives and F&B managers, to engineers and workplace safety and health officers in manufacturing and construction. But some job seekers may not have the skills to take up these jobs, they may need to re-skill to move into new careers in a less familiar industry and they may need help to find opportunities in these industries. We will help them, through training under SPUR, through career counselling, and through job matching services.

30. SPUR benefits all jobseekers, whether they are less-educated and low-skilled, or PMETs. For the less-educated, low-skilled workers, other than the generous 90% course-fee subsidy for SPUR training, they may also receive a training allowance. Unemployed job seekers can approach career consultants at the Community Development Councils (CDCs) and NTUC's Employment and Employability Institute or e2i. The career consultant will assess the jobseeker's training needs as well as his commitment to find a job after training, in deciding whether he will receive a training allowance. Jobseekers may also be advised to take up Employability Skills System (ESS) modules to close gaps in language proficiency and numeracy skills. In addition, low wage workers will be eligible for Workfare Income Supplement (WIS) and the WIS Special Payment, which I have elaborated on earlier.

31. This rigorous and yet flexible approach is better than a rigid set of criteria for granting training allowance, which may not cater to the varied needs of different individuals.

Helping PMETs Find Employment

32. For PMETs, the subsidy rate for SPUR-approved PMET courses has been increased from 80% to 90%. This makes skills training even more affordable. The range of Professional Conversion Programmes, or PCP, which helps unemployed PMETs to up-skill or convert to new sectors, will be doubled from the current 23 currently to around 40 by the end of this year. PCPs will also be expanded to include tertiary level courses in areas where there is demand for skilled workers, such as social work, infocomms, logistics and hospitality.

33. Since the PCP started in 2007, close to 580 trainees have been placed in jobs through the PCP. Another 520 trainees are currently still undergoing training in PCP, which can last up to three years.

34. WDA has strengthened the career services and job matching capabilities of all the Career Centres at CDCs to cater to jobseekers, including PMETs. They have started regular workshops conducted in conjunction with private specialists, on personality self-assessment, resume writing, interview tips, skills and jobs in demand, and meeting with potential employers. For PMETs who may have been in the same field for a long time and require more intensive help to transit to a new career, more specialised assistance will be provided through career consultants, supported by outplacement specialists and career coaches.

35. The PCP allowance of up to $1,000 a month for longer courses is a reasonable amount. It is not intended to support the needs of the whole family. PMETs typically have more resources and should tap on these first. The government is also providing additional help for households through GST Credits, personal income tax rebates, rebates for utilities, property tax, and service and conservancy charges. Let's monitor the progress of the programme for the time being.

36. To improve the sourcing of jobs and the efficiency of job matching. Today, WDA already links up with the economic agencies like EDB to match job vacancies with jobseekers. WDA officers actively work with employers who are looking for skilled workers, to identify vacancies that can be matched to Singaporeans. Also, we have about 20 Place and Train (PnT) programmes, and will continue to work with employers to launch more in spite of the downturn. We have also enhanced WDA's website to be a one-stop resource portal for jobseekers and tips on how to write resumes. JobsNet has links to public and private sector job portals, information on recruitment events and the labour market, training opportunities as well as career search tips.

37. While we do our utmost to help, jobseekers must ultimately take the driver's seat in managing their own careers, so that they can stay ahead of the curve. The government can provide help and support, but jobseekers must have the right mindset and expectations, be proactive in their job search, be prepared to take up training, and be open to jobs in industries different from their previous occupations.

38. Let us learn from two fellow Singaporeans.

39. Mdm Hamidah Bte Abdul Ghani, aged 51 and with secondary education. She had been unemployed for a few months when she first approached North West CDC Career Centre for help. Previously, she had worked in the hospitality industry in a range of jobs, such as a part-time towel attendant earning $500 a month. To secure a better paying job, she decided to switch to a different sector and signed up for the WSQ Higher Certificate in Therapy Services with Health Management International. When her training ends in May this year, she can look forward to finding a job in the healthcare sector as a therapist assistant earning about $1,100 a month, doubling her previous income. She will also be entitled to Workfare as well as the Special Payment, equivalent to about $100 a month. She will receive $5,900 of course fee subsidy and another $2,300 of training allowance in cash. This works out to over $8,000 in total, which is a generous support for her.

40. In another example, Ms Debora Neo, aged 43 with a Masters in Business, was previously working as a Purchasing Projects Leader at an electronics company. She was retrenched in December last year, due to a downsizing exercise. After she went to a North East CDC job fair, she applied to join the PCP for Tourism, which is a 12 month work-study programme. Commencing next month, the programme will not only equip her with a WSQ Diploma in Tourism, but also offer her practical apprenticeship experience with Sentosa Leisure Group across four different business areas – Retail, F&B, Attractions and Events. She has just been successfully selected for the programme and I wish her well in her endeavours.

41. These examples show that if one is open to different possibilities, willing to undertake the necessary training, be flexible and embrace change, this economic downturn can actually open up new opportunities to rewarding careers. Just like the Chinese saying 山穷水尽疑无路，柳暗花明又一村, we can therefore be more confident and adopt a positive attitude.

(III) Preparing for the Future: A Globally Competitive Workforce

42. While we tackle the challenges of the downturn, we must also keep our eyes on the future. Over the past few years, we have strengthened the competitiveness of our workforce, invested in skills upgrading, pushed for wage restructuring, re-balanced CPF contribution rates and implemented Workfare. We are now pushing for re-employment so that older workers remain employed beyond the statutory retirement age.

43. We must press ahead with our efforts to build a Globally Competitive Workforce, so that we can seize new opportunities when the economy recovers. Our three key strategies are:

(A) Improving Productivity - The Means to Sustainable Growth

44. Our ability to improve the standard of living over time depends on our ability to raise productivity. Improvements in real wages can only come about with sustained productivity growth over time.

45. Over the 10 year period from 1997-2007, Singapore's labour productivity grew by 2.4% p.a. However, in the last four years, labour productivity actually fell by 1.2% p.a. There is room for improvement.

MOM, MTI Inter-Agency Committee to Oversee Productivity Issues

46. My Ministry and the Ministry of Trade and Industry are co-leading an inter-agency committee to look into productivity issues. We will need to take a differentiated approach for the different industries, so that our strategies can be tailored to the specific needs of each industry.

47. For their part, industries and companies must be prepared to take ownership and spearhead initiatives to raise productivity. In the current downturn, there is even greater impetus for companies to review their business models and operations and aim for higher productivity. The services sector, for example, can focus on the following:

• First, emphasise Service Excellence. We need to nurture a service culture among our service workers and professionals, so as to achieve excellence. This includes ensuring that they have the necessary language ability to service their customers effectively.
• Second, develop People. Employers and workers must continue to invest in industry-relevant skills upgrading, by leveraging on SPUR. They can also tap on SPRING-WDA's HR Capability Package which provides a framework, guidelines, tools and templates to help strengthen HR abilities to attract, develop and retain talent.
• Third, embrace constant Innovation to stay ahead of competitors.
• Fourth, industry associations can initiate Benchmarking and Research projects to help industry players adopt best-in-class practices.

(B) Promoting Mobility

CET Masterplan - A Strategic Long-Term Investment

48. The second key strategy is promoting the mobility of our workers through skills upgrading. Our economy is constantly undergoing restructuring to keep pace with changes in the global economic landscape. This is even more apparent in a downturn when the restructuring is faster and broader. Singaporeans will need to be equipped with skills not only to move upwards in their careers, but also to move across industries into new jobs.

49. Last year, we launched the CET Masterplan, a blueprint for building up a first-class national CET infrastructure over the next decade. Our investment for the longer term is already paying off dividends. This has allowed us to roll out SPUR in a short span of time.

50. The number of CET Centres has more than doubled from 18 to 42. The number of training places will be doubled to 230,000 this year. The Institute for Adult Learning (IAL) was established to develop professional adult trainers, and to conduct applied research into adult training to raise training quality and outcomes.

National CET Institutes

51. Over the years, WDA has been building up a rigorous quality assurance system to ensure that training programmes offered by our CET Centres are relevant and benefit trainees. I am pleased to announce that three of our CET Centres will now be appointed as "National CET Institutes" (NCI). They are the Centre of Urban Greenery and Ecology (CUGE), the Tourism Management Institute of Singapore (TMIS) and At-Sunrice Globalchef Academy. They have established a top-quality, rigorous continuing education and training programme with excellent outcomes for training and placement. I look forward to them continuing to lead the way in building stronger industry capabilities and developing CET in Singapore.

(C) Maintaining Labour Market Flexibility

Flexibility in Foreign Manpower Policies to Maintain Our Competitive Edge

52. Foreign manpower augments our workforce on three fronts. First, availability of foreign talent is a key competitive advantage that helps to anchor strategic investments and to bolster our growth industries. Second, we need foreign workers for jobs in sectors such as Construction and Marine, and in areas that Singaporeans might not have the required skills for, or are not willing to do. Third, foreign manpower help keeps our businesses globally competitive.

53. The number of foreign workers will come down eventually with the downturn. We should not undermine our competitive advantage of a flexible labour market or deviate from the fundamental policy to attract and retain talent, as we address the short-term challenges of the recession. Singapore has to remain an attractive place for businesses, so as to retain those which are here and attract new investments which will bring in more and better jobs for Singaporeans. Recently, we heard of Rolls Royce which has decided to relocate their global headquarters for their marine division from London to Singapore, creating jobs for Singaporeans.

54. It is like running a race in an athletic meet. One easy way to win the race is to get rid of those who are running faster than us. This way, we are sure to win, never mind that we may be the only one running. But, such a victory will be short-lived. Soon, you have to compete not in a local race but on the global stage, at the Youth Olympics which will be held here in 2010. We cannot get rid of all the other competitors just because they are faster than us, and make it into a locals-only game. It is better for us to train our athletes, make them strong and help them compete. Similarly, Singapore must compete globally to survive and to progress.

55. If we add restriction or cost to companies' access to foreign manpower when our economy slows down, they may very well relocate to countries where they can have unrestricted supply of cheap labour. Instead of hurting businesses and sending the wrong signal to investors, it is better for us to go for a win-win strategy. This is what we have done. Our approach is to spur our athletes on by improving their odds of winning – subsidised training, quality equipment, better running shoes and good coaches – to gain an edge over other runners in the race. Likewise, we are enhancing the employability of Singaporeans through training opportunities under SPUR, and enhancing their cost competitiveness through Jobs Credit and WIS, thereby significantly tilting the balance in favour of local workers. This is in addition to the dependency ratio and levy imposed on employers.

Enhancing the Quality of Foreign Manpower Supply by Refining Criteria for S Pass Holders

56. Having said that, we should nonetheless continue to improve the skills and quality of foreign workers coming here. The S-Pass introduced in July 2004 was meant to provide flexibility to employers, to address the shortfall of skilled manpower at the diploma and post-secondary level. We will raise the criteria of S Pass holders coming here to improve their quality. MOM will be briefing the industry on these changes.

57. We are stepping up enforcement efforts to preserve the integrity of controls over foreign workers. MOM is currently investigating 33 cases of possible use of phantom workers. An owner of a food and beverage outlet has been charged in court for allegedly falsely declaring phantom workers in work permit applications.

Conclusion

58. Our resilience to the economic downturn and our key strategies, are all underpinned by Singapore's tripartism. The mutual trust and shared interests among the tripartite partners have enabled the unions, employers and the government to work together during difficult times, to implement tough measures to help businesses and workers weather crises, minimise job losses, and reposition for growth in future.

59. Sir, we are not running a singles race; but a 4X100m race. Who are the runners? Workers, unions, government and employers. Workers are not running alone. I believe we have the resources, the fortitude and the trust to weather this storm, if we work together to build a brighter future for Singapore and Singaporeans.

Factsheet on Spur Programme for Upgrading and Resilience (SPUR)

Factsheet on WIS Special Payment

Factsheet on National CET Institute