An extract of the speech delivered in Parliament by NMP Siew Kum Hong, querying the effectiveness of the Jobs Credit Scheme. To read the full speech, visit his blog.
I NOW turn to the Jobs Credit scheme. It is one of the lynchpins of the Budget, and it seems to have caught the imagination of Singaporeans. Call it what you will, but it is fundamentally a wage subsidy for employers. It equates to a 9 percentage point cut in the employers’ CPF contribution rate. It will cost taxpayers S$4.5 billion dollars, and will be funded by our reserves.
The objective of this scheme is to save jobs. But how effective will it be?
Clearly, the effectiveness of the scheme for each employer will depend on the proportion of its costs attributable to wages. If wages form just 10% of an employer’s overall costs, then the Jobs Credit scheme will reduce its total costs by up to 0.8%. On the other hand, if 70% of costs are wages, then the scheme will reduce total costs by a maximum of 5.5%. These are theoretical maximums, based on improbable assumptions of 100% local employees, all earning $2500 per month or less.
The Minister has explained that the global economic crisis is caused by a worldwide collapse in demand. Simply put, there is massively reduced demand for the goods and services produced by our economy.
Last week, the EDB released a report on the manufacturing sector’s business expectations for the next six months. This report paints a shocking picture of just how dire things are expected to get. An across-the-board negative outlook for the first half of 2009 for manufacturing, with similarly negative forecasts for output and employment for Q1. For instance, 92% of data storage firms and 81% of precision engineering firms predict a drop in output.When demand falls off a cliff like this, many businesses will face a drop in revenue far exceeding 8%. Businesses will have no choice but to cut costs to stay afloat.
In this context, I suspect that the Jobs Credit scheme will turn out to just a band-aid. Yes, it will provide a temporary cushion for businesses, especially SMEs. Yes, it will make employers a little bit more reluctant to lay off locals. Yes, whatever protection it creates will probably benefit the low-income more than the high-income. But it will still only be a band-aid at best, in stopping job losses.
And what a very expensive band-aid it will be. Citigroup’s head of Singapore research Dr Chua Hak Bin has pointed out that if the Jobs Credit scheme helps to save 50,000 jobs, then the cost of saving each job is $90,000 – three times the median annual salary of each job in Singapore. Even if it helps to save 100,000 jobs, the cost of saving each job is $45,000 – still 50% more than the median annual salary.
And contract workers, who are probably most at risk when a business cuts staffing costs, may not benefit from the Jobs Credit scheme. Contractors are usually hired by employment agencies and farmed out to companies. The agencies will receive the subsidy. They have no incentive to pass it on to the companies. Unlike with property tax rebates, the Government has not exhorted these agencies to pass the savings on to their customers. And so, the scheme could make contractors, who form a growing proportion of the workforce, even more vulnerable than they otherwise would be.
I agree with people like NUS professor Shandre Thangavelu, who has said that the Jobs Credit scheme will only have a short-run impact on the retrenchment behaviour of employers. Even the MOF team who designed the scheme is unable to predict just how many jobs it will help to save, and for how long. Mr Poon Hong Yuen, who led the team that put the scheme together, said:
“If just because of this they rethink (retrenchments), then I think it’s already quite an achievement.”
I would praise the Ministry for its willingness to take a chance on the Jobs Credit scheme. I think this sort of policy risk-taking is important and helpful. But I don’t think the risk will pan out in this case. And I think Mr Poon sets a surprisingly modest target. At $4.5 billion, I would expect more.
The Jobs Credit scheme will end up benefiting capital owners disproportionately. It will reduce business costs, but I do not expect it to save very many jobs, and even then not for very long. It is essentially a special transfer to capital owners, such as business-owners and entrepreneurs. And considering that around 50% of the Singapore corporate sector is foreign-owned, a big chunk of this transfer will leak out of Singapore.
Today’s Straits Times Forum carried a letter from someone who works in an SME, praising the Jobs Credit scheme. But if you drill into the details, it is clear that the business was not considering retrenchments in the first place. Instead, it is considering using the Jobs Credit funding to invest further in its business. In these times, that is not a bad thing. But it clearly shows up the limitations in the scheme’s ability to achieve its stated goal of saving jobs.
The Jobs Credit scheme will have, at best, a marginal impact on businesses’ decisions on whether to retrench. Businesses facing collapsed demand will still retrench. Businesses doing well will reap a windfall benefit. MNCs will still, by and large, follow their corporate headquarters’ directions on retrenchments.
True, the Jobs Credit scheme is not meant to be the complete answer. It is not a panacea. It is one piece of the puzzle, albeit a big centrepiece, and there are many other measures to reduce business costs and help businesses through this difficult period. But the question must be whether spending $4.5 billion on the Jobs Credit scheme produces the most bang for the buck for Singaporeans.
This is a hand-out for businesses. But we have always opposed hand-outs for Singaporeans. Why are businesses different? In giving all this money away to businesses, are we somehow being psychologically held hostage to the ideological dogma that the best way to help Singaporeans is to help businesses, instead of helping Singaporeans directly?
what i meant is come back again if you unfortunately retrenched in this crisis. u are very welcomed. :)
148) Observer(SG-HK),
“I would have thought they put in at least some criteria such like in order to qualify for JCS, the ratio of employed personnel in an organization is 1:3 or 1:5 (i.e. for every Foreign Worker there must be at least 3 to 5 Singaporean employed).”
I may be wrong, but i believe it is Singapore Resident instead of singaporean ?
The employment statistics are in Resident figures.
Where, as you already know, Resident = Citizen OR Foreign Nationals on long term work permit aka PR.
Someone tell me i am wrong. thanks.
So, what i meant was, can a company hire PR instead of citizen?
I seen one company having all employees who hailed from somewhere in the indiana ocean. And the boss is prolly citizen and there is 1 pr there also but the rest i see are all from around the indiana ocean on permit. But then, maybe in their backoffice, there are some more citizens. So, this is the basis for my asking. Also, we note that Singapore Resident is now very much the term used for employment and job statistics.
149) patriot on February 7th, 2009 1.50 pm
That is so true. Many companies are simply cannot-make-it due to poor management and product or services or business model or their boss gambled away the net income after tax and squandered it all wealth away in toxic assets , for example. Or maybe due to corruption where the chief siphon away company wealth.
If there is no easy way to check which companies are profitable, is there any assurance that companies would not abuse the JCS?
These are basic expectations and questions and hope ANY of the 80 talented talents can answer them. so, any takers?
153) Pinkie gone missing on February 7th, 2009 3.17 pm
Thanks for the compliments and agreed on the employment statistics used (i.e. Singaporean owner, foreign majority employees a.k.a PRs or Singapore Residence).
That is so true in the example you have cited. And that, I think they do not deserved any form of help from our precious Past Reserves..
Just in case I am being accused of advocating protectionism, I must clarify that I am more for free market with constraints. But for adverse time like this, I am sorry but I would opt for the rank and file first. It is my country, my fellow country man matters more. As I have said before, if Singaporeans do not help each other, who will?
PRs are less known during the 80s (where Singapore economies really takes off with the help of true blue Singaporeans discipline and hardwork as this was directly quoting from M&M conversation with the Tharman in one of his survey trip for the IR site. If ordinary native citizens are well taken care of, I am fine with foreign imports with lesser stringent rules. But history has proven that this lax policy has created a lot of avoidable social issues. I do not blame the PRs as it is indeed the governing rule that is at fault. They seriously need to rethink and make necessary changes. We have to learn from History.
Now, as it is cleared that the government is tapping the “PAST” reseves that were built for the country from its citizenry. I see no reason why NOT Singaporeans (as in NATIONALITY IDENTITY) should come first? This really baffles me. The more I re-read the budget document, the more I felt the government had short chain her very own guardians (AND YOU WANT US TO TRUST YOUR JUDGMENT?). CAN YOU HONESTLY PUT YOUR HAND TO YOUR HEART AND SAY I DO? Adverse situation certainly brings out the best in a person. It is exactly situation like this where we see the TRUE COLORS of the ABLEMEN running the country.
Strictly speaking from a Singaporean point of view, we are as good if not better than the Foreign Talents if given the opportunity to excel “without strings attached”. I could not claim that statement in the 80s (as it is a fact then that Singaporeans are known as nanny’s kid and often labeled as kiasi, kiasu well frog ~ just like some of the MPs and their co-opt assistance).
Today’s common Singaporean are very much aspiring and more willing to take calculated risk since many had branch out of Singapore and had gain exposures and learned from their counterparts in overseas. Also, the advent of the internet makes information much more easily accessible that may help in fostering better decision making business management. It also makes view exchanges and sharing in a fly. I see no reasons for the government NOT to be a little more pro-Singaporeans (NOTE: SINGAPOREANS NOT Singapore Residents) especially in this adverse situation.
For any governing officials or government employed think tank who are reading this, just ask yourself this question or do a survey to all PRs, will they defend Singapore if ever an invasion occurs? If, yes, why not ink their signature and take a step further to take that sacre oath to become a REAL SINGPOREAN?
On closing, to the Ministry, if we netizens do not care for this country and the betterment of this country for our fellow country men, we would never give a hoot what had been done. So please do feel the ground and be more receptive in critical views. We may not be as articulate and more intellectual in our thinking as compared to you guys who are supposed to be the creme of the crops, but we are not ignorant souls neither are we peasants of the early days of Singapore. WE ARE TRUE BLUE SINGAPOREANS WHO CARE AND HAVE CONSCIENCE AND COMAPSSION TOWARDS OUR SUFFERING BROTHERS AND SISTERS. Please do the RIGHT thing.
Observer(SG-HK), I agree with your point given. I guess the JCS does need some tuning to make it relevant for the business community. JCS, like I said earlier, is a good first step (I never said it was a perfect scheme). Now the next step from the government should be how to encompass the JCS such that it would be part of a bigger scheme to help employers retain Singaporean employees.
Also, Observer, your last post was well said. At the end of the day, the people holding the Pink ICs are the ones living, working and dependant on our nation’s well-being.
PK : “I think you are making a sweeping statement which is so convenient to confuse the more innocent mortals. Are you alleging that MPs have asked for welfare state? Are you debunking yourself? Can your words stand up to being dissection?”
I’m not making a sweeping statement, nor am I implying MPs are asking for such a state. It’s a reply to some posters who have requested for such a welfare state. We have seen, through the course of history, countries which suffer economically in the long run when bowing down to requests for a welfare state system.
Take the UK for example. With the costs of healthcare borne by the government, there are those in the workforce who actually misuse the system and use it to gain medical leave from work. Absenteeism comes with a high cost, economically. I’m not saying that there is absolutely no absenteeism in countries which do not have a welfare state system, but what I’m saying is that economically speaking, the tendency is a lot higher.
PK : Are you alleging or do you have concrete evidence what you said? While you choose to mention only the alleged ills, I question why you choose not to highlight the good effects ?
I’m not alleging anything as I got a good look with my own eyes. Yes, there are good effects as the economic demand is still stimulated by those who receive such handouts. However, the efficiency of the use of such resources are questionable. Furthermore, the very fact that these people (though not all) can afford such luxury, on a payment that is based on providing a bridge between employment and unemployment, it does say a lot about expenditure patterns and investment and savings patterns.
PK : One common sense example is TW uses Consumer Vouchers which boosted their economy.
The government has always provided NTUC vouchers, food rations and transport vouchers for the needy. It was never a one-off thing and is available all year round. These people who need them just need to visit their MP for such a request. Are you saying you’d rather receive a one-off voucher rather than constant assistance for the needy?
Pinkie, yup. As explained above.
Patriot, agree with you fully. Poor management = poor results = poor sustainability. Humpty, at the end of the day, there still needs to be citizen cops like you and me in order to alert authorities to these misdeeds by owners. After all, good intentions are more often than not taken advantaged of and misused by unscrupulous cronies.
by the way, to those of you who think the JCS helps the poor think again.
Those employed at the coffeeshops, malls etc and probably old people who earns less than 500 (like to be the case because this group of people has pay stagnant for a long time), do not benefit directly from the JCS because they do not contribute to the CPF.
Also, as for the additional housing grants, they only benefit newly weds and the new immigrants because their parents and themselve probably never benefited from a hdb grant. For singles, since they have to form a unit with their parents do not benefit because their parents probably benefited a housing loan or grant or new hdb flat before.
So, please don’t think that the Mah BT is generous. He is just as stinky as ever.
136) neversaydie
“read this article and you will think that instead of doing JCS, pay people through other means like food vouchers, you end up spending less but achieving more.”
Pay food vouchers does not create jobs. We should not mix up the JCS with unemployment help.
Some suggest spending vouchers to encourage spending. Do you know that during Singapore’s boom time, our domestic spending is not a significant part of our GDP. We cannot spend our way out of this recession.
Is JCS the fix-all? No, it is a blunt tool to help companies reduce costs. Companies retrench because the drop in revenue and without a drop in the fixed costs makes companies fail to meet their business objectives.
The business environment is so dire that actions must be fast. Once the critical mass of companies winds up, there is turning back for job losses. You are worried about your reserves? If nothing is done fast, you will have no reserves left because every year we will be digging into the reserves. You are worried about the jobless and poor? Me too. Create an unemployment allowance as suggested by NMP Sylvia.
#156 fuzzy
PK : One common sense example is TW uses Consumer Vouchers which boosted their economy.
The government has always provided NTUC vouchers, food rations and transport vouchers for the needy. It was never a one-off thing and is available all year round. These people who need them just need to visit their MP for such a request. Are you saying you’d rather receive a one-off voucher rather than constant assistance for the needy?
Let me point out the difference between the vouchers you cited and the TW Consumer vouchers.
1. N Vouchers (fr singapore) : only for the needy as you said. Now, tell me, your definition of needy. Does a degree holder qualify? Does a poly grad qualify? Maybe you can educate me.
T Vouchers (TW) : given to EACH and ANY citizen de TW, without prejudice.
2. N Voucher purpose: to subsidies the needy as defined by them.
T Voucher purpose : For extra ordinary times, to boost the economy, help the needy and jobless , without prejudice. Having said, this does not mean N Vouchers are prejudice as it is meant for the needy only.
The EFFICACY of T Vouchers is PROVEN. unless you doubt the TW official news.
3. N Voucher : you said it is given ALL YEAR Round to the needy. I recall you Also said handouts is like welfare state and BAD BAD? Have you DEBUNKED yourself?
T Voucher : no free lunch all year round. Its Only given out for the mother of all Crisis. TW is the 1st country to implement this, as far as i know. It took their politicians very short time to come up with such a proven Effective scheme. That is leadership to me.
4. N Voucher : for daily needs of the ‘needy’. Not for Crisis per se.
T Voucher : for Crisis Specifically , targeted, calculated, implemented, economy boosted. Spending increased domestically.
Pinkie
Dear ALL,
Is there min wage in singapore?
What is the lowest wage a singaporean Can be paid?
Not is paid but can be paid?
What is the lowest wage a singaporean IS paid?
a simple calculation tells me:
1. 12% wage, if $1000, gives $120 to employer for continued employment of this employee for 3 months in a row.
How long does it take the employer to save 1 months salary for the employee?
more than 8 months (8 x 120 = 960) of this JC.
How can this JC save jobs?
Why does GSK Retrench ? http://www.channelnewsasia.com/stories/singaporebusinessnews/view/407328/1/.html
As it appears, companies Retrench when PROFITS drop. This I interprete as companies Still Profitable but earns Lesser may choose to Retrench. This is nothing wrong from a business requirement perspective. For survival.
So, I mean, if 12% JC is given to companies still profiting but profiting Less,
would it make them profit more than last year ? Would this avoid Retrenchment?
any takers for this question from a concerned citizen?
hello??? any body home?
fyi, some of the companies PROFITING LESS or Making Loss are :
GuocoLand reports H1 net loss of S$2m
Auric Pacific expects lower profits in financial year ended Dec 2008
Give money to the employers and nothing to the retrenched and that is how the garmen is going to save jobs.
Will it work?
There is no consideration over the welfare of the retrenched workers and their families.
What will their children eat?
How will their children cope with hunger in school. Will some of them become stunted?
Come on all the great social workers and psychologists of Singapore find out about these poor people. Come on the champions of the poor.
Today I took some fish from my fish pond and I ate some and I gave some to four lady university students.
I am talking about my retreat in the South Pacific.
Will the pap give some food for the poor and the retrenched?
to Please Makes Sense:
let me tell you this:
precisely because the external demand is more important to us that we need to do something right. Doing anything now when the Americans have not decided on their budget is silly. And if speed is that important: try asking the govt why it didn’t realise the gravity of the situation earlier? We have our PM telling us everything is ok just 3 months ago.
The key issue is the demand collapsing (which you cannot control since the Americans and the European and the Japanese have not decided on how to act) and wage level that had risen faster than the productivity level. The cause of the latter is indiscriminate immigration. We are simply not attracting the right crowd.
If it is the companies that you / govt is worrying about, the first thing to do is to reduce their cost, through electrical bills, rental, taxes etc. That can be done very quickly since the govt owns almost all these facilities. Why do we not do this quickly and more drastically? CCT (the REIT from Temasek) has a very high borrowing ratio? How did it get there? in any case, I suspect the monies (JCS) are destined for these GLCs to pass them monies to tide over the crisis. (as monies to them, the govt has control and can keep them in Singapore) The fact that they need it, shows how badly they were managed.
You don’t need to go to the parliament. Just use the current electoral cycle since you said it is sufficient?
Then talk about drawing down reserves and its rules later and much slowly. People take a long time to save that amount. I didn’t even want to talk about the investment losses.
Why didn’t we cut part of the contribution rates of employees to the CPF but govt take up the shortfall through the JCS funding. Employees have more money to spend to tide themselves over while they can still service their HDB loan. It is monies back to them still.
With or without JCS, if the company is going to retrench, it definitely will because JCS only reduce cost by 9% max but retrenching reduces cost by 100%.
For those companies, who doesn’t need to retrench, why are you giving them monies? That’s the question. They already got the rebates. Also MNC in Singapore enjoyed a lot of rebates from schemes from EDB.
Can’t you let them monies with the condition that they must keep their Singaporean employees? Singapore Govt has many loans schemes.
Companies are created by people. You don’t give people a sense of justice, how do you think they become loyal to you and help you create value.
if you top up the contribution rates for employees and employers, employees will feel better. sense of justice!
Why can’t we lower our exchange rate to make us more competitive internationally?
Have you looked at surveys which says that we are now more expensive than New York and London?
Your 9% reduction in CPF through CPF will correct that, you think?
Also, consumption by proportion is lower than many asian countries. We could improve on that.
As for leakage, we always pay a lot of monies to Foreign talent to manage our companies. You mean to say, we don’t have that talent in Singapore? our locals cannot grow to fit into that role but we have to pay “top” Foreign talent to do that? rubbish! I haven’t seen them prove anything so far, have you? the salary of those FT, you can pay many locals. You mean, when you take the ex CEO of m1 away and you see many locals stop using M1? I don’t see them adding value any way.
Their high pay in fact, help justify the high salaries of our ministers.
BTW, Where do you think they (the FTs) would keep their pay in? in Singapore dollars? Wouldn’t our high exchange rate benefit them?
Where do you think we get most of our advanced military equipment? Singapore or we get them overseas, our fighter planes? Do we need them now more than ever? We haven’t got a large lead over our neighboring countries and they don’t have their share of economic problems to look after?
These equipments are very expensive and is definitely a drain on our foreign reserves. Can we save on that? now at least?
You are telling me that there is a huge leakage but for an ordinary Singaporean with low pay, having taken into account the high contribution rates to CPF and housing, how much have we got left in a month? And you think these folks will go on a holiday overseas or buy expensive foreign goods? BTW, most engage locals to design their own flat if you think that activity is excessive. But the govt uses foreign architecture to design the new casino. Couldn’t we use locals for a change?
can’t we cut the military budget?
We are squandering an opportunity to trim the excesses in our budget/civil service.
And the JCS is not as effective as it claims to be. Besides, it takes 3 months to pay the employers. these employers will still have to pay first. It doesn’t make us more competitive for the amount we spent.
reserves draw down, put it back into citizens CPF account, I don’t see any thing very wrong since it still stays in the system.
The way you talk, it is almost as if speed is so important, we should disregard justice and accountability and value for monies consideration? it is like, hungry just eat… don’t even look at what you are eating. Silly!
Pinkie:
With regards to the vouchers, should these people be unemployed and unable to get a job, interim financial assistance is available at MPS with the MPs. Just need to go and visit him. The volunteers will be more than happy and willing to help out and tailor a solution for them, regardless of educational or qualification background. This help bracket is extended more so for this financial crisis, I believe.
Yes, I did say a full welfare state is bad. One way to counter is to provide this assistance not in the form of cash. maybe it’s my mistake for not defining the limits of the welfare state in question as giving cash handouts. I apologise and accept my fault in this matter.
Please make sense pointed out something as well which I had failed to notice. Singapore’s expenditure constitutes a small portion of the GDP. Boosting expenditure will not ride off the storm totally, but would at least help for the interim time being, as a more defined tool is being shaped.