If you held a steady job for many years, and you hear that your company has to downsize, what do you do? If you are retrenched, how are you going to find a similar job in a difficult job market? How are you going to pay your bills?
If you have some savings to draw down for a few months or longer, you may be able to tide over the interim period before you find a new job. What if you do not have any savings?
You can pray that you will be spared. But what about your colleagues who are axed?
It is time for us to consider the need for unemployment insurance. If 10% of the workforce has to be axed, an unemployment insurance scheme should pay them, say, 50% of the previous earnings for a period of up to 12 or 24 months. The cost of the unemployment benefit should be paid by those who have jobs. It should cost about 2% to 3% of the payroll. It is a cost that is worth paying to spread the burden.
An alternative to unemployment insurance is a relief loan to pay the above sum to the retrenched workers. As this is a loan, it should be repaid in the future. Interest should be allowed to accumulate with the loan at the same rate paid by the Central Provident Fund.
I hope that an unemployment insurance or relief loan will be introduced by the Government soon, before more people face financial distress due to retrenchment.
Tan Kin Lian
Its a Great Suggestion, Mr Tan!
ReplyDeleteAlso important is disability insurance, if you are unable to work due to illness or accident.
ReplyDeleteWhen you say "cost of the unemployment benefit should be paid by those who have jobs", are you saying that no one has the choice to opt out of this?
ReplyDeleteThus, "everyone" means every Singaporean who has a job, or everyone living in Singapore who has a job?
Actually, Singapore already has unemployment insurance built into our system, it is called "the civil service".
If it is borne by those who have jobs, does this mean that the more efficient, effective, perhaps more hardworking people will be penalized? Will this result in a social problem where workers will have less incentive to work hard and continually discover ways to work efficiently?
ReplyDeleteA crisis helps to weed out the least efficient companies. It also helps weed out the least efficient workers in the company. By weeding them out, they are forced to look for another company, with a different culture or field, where they can be more efficient in.
Hence, with such unemployment insurance, everyone will get less in wages, since the cost is borne by all the employed. And its not very beneficial for productivity. Will Singapore lose its competitiveness?
This sounds like a plan from the welfare state. It's not a plan I like because I don't like working people subsidizing others for not working. There's already something for that called tax. Unemployment insurance is additional tax.
ReplyDeleteI would rather have another "CPF" that have 10% employee contribution. This will be savings which the employee can withdraw instantly when retrench.
Even so, it's tricky to define the term "retrenchment". Is retrenchment because of the economy, or because the performance of the employee is not satisfactory?
I wish to respond to the view posted by Parka.
ReplyDeleteMany people do not like to subsidise other people - until they realise that they could be the unfortunate one that loses the job!
When you lose a job, you will find it difficult to get a similar job in a harsh market. You will be exploited by the market and have to accept very low pay, out of desperation.
This is the outcome of the free market system. The strong exploit the week. Some people earn a few millions dollar a year. Other people earn less than 1% of that sum.
Singaporeans are taught that welfare can be exploited. This is only partly true. It can also be properly managed. Without welfare, the weak will be exploited by the strong.
I know of many unemployed people who are willing to work, but they only ask for the opportunity to be available. They are willing to accept any wage.
But is this a fair society for them to be exploited by the free market, so that those in a strong position can continue to make excessive earnings?
Yes i completely agree that in a free market system the strong will exploit the weak. Further more the strong will get stronger while the weak gets weaker. An example would be how the income gap has widened, not just in Singapore but also in the US. This imbalance has to be addressed through social schemes. If the strong knows what is good for itself, it would also look after the weak. History teaches us valuable lessons, and 'welfare-ist' Europe appears to have learned from this.
ReplyDeleteSurely 12-24 months is too long a timeframe?
ReplyDeleteThere are unfortuantely many many loopholes which such a scheme may be exploited. For example, let us assume a simple scheme where a person works for 12 months. He contributes for 12 months and is then eligiblle to claim up to 12 months of benefits pegged at 50% of the last drawn salary.
ReplyDeleteIn this case, anyone who wants a 1 year subsidied vacation would simply have to work 1 year and then do their best get themsevles fired.
IMHO, a better solution would be a form of mortgage refinance scheme using HDB flats as collateral.
At this point in time, most of money of Singaporeans is tied up in the HDB flat which they live.
Such flats unfortunately cannot be used as collateral to obtain any kind of loan.
A useful system would be if we can have HDB extend out relief loans to the unemployed using HDB flats as collaterol. These loans can be at a subsidied rate and based on the amount of that has already been paid up for the flat.
I do not agree with your proposed system, but I understand where you are coming from.
ReplyDeleteMy main argument is tools are not guilty, its the users.
Free market system has it pros and cons and its loopholes. But we are a only a few thousands old civilization and there's much for us to improve.
What you propose seems to be a kind of socialist economic. You advocate freedom yet you took away the freedom of people who are wealthier. That's contridicting. Not all wealthy people are evil. At the end of the day, its about education and culture.
But yes, free market system is still pretty much flawed and exploited. We have to find out how we can fix the free market and not abandon it and adopt another.
It will be a never ending cycle. because free market is better when economic is good while socialist economy is better when the economic is bad.
We will never progress as a civilization like that.
The problem is we don't have a culture of saving for rainy days. We are too well off. Singapore always seems so wonderful to lives in until things start to collapse and yet some people still continue to live in their own dreamland.
I would think a system similar to the US equavilant of 401(k). A CPF system meant to cover for your unemployment period. And if never used, can be contributed to your retirement plan. Our loan from CPF.
Sorry if I find it harsh but what you propose is a very contridicting theory to what you always want singapore to be...
I am sure others may have noticed it as well...
ReplyDeleteRetrenchment is mispelled in your title :)