Tan Kin Lian's Blog: Reduce unemployment

Monday, October 12, 2009

Reduce unemployment

Shin Min and Sunday Times have covered my suggestion, posted in this blog, to promote flexible work by paying an hourly rate (instead of a monthly salary)

The key thrust of my proposal is to create employment for school leavers and for people who lose their jobs due to restructuring and other reasons beyond their control.

If a company employs 1,000 people working 40 hours a week, they can employ an additional 100 people, if each person works 36 hours a week. A person working less hours will earn less based on the hourly rate, but at least more people can be employed. This is fairer than having 10% of the people being jobless.

Working 36 hours a week means more time for the family, for hobbies, for continuing education and for leisure. Those who wish to have a supplementary income can continue to have part time work, e.g. provide tuition or other service. It diversifies their sources of income, and will not affect them badly if they should get retrenched.

Under the hourly rate system, there is no need for people to work longer hours, without overtime pay, just to impress the employer and keep their full time job.

There is a need to ensure that the hourly rate of pay provides long term security for employees. I shall address this point in a separate article.

Tan Kin Lian

6 comments:

wjsim said...: This is not fairer than 10% of the people being jobless. There is a reason why those 10% are jobless, under-skilled, overpriced etc. By involuntarily causing partial unemployment in productively employed workers, those 10% will still not be absorbed.

If this idea works, why not limit to 30hrs? Why stop at 36? Who decides?

Going along the same idea, why not we decrease the retirement age to 55. This would definitely cause more employment. The old people will now, on paper, be retired. and have more time for family, grandchildren and leisure.

Some people actually want to work overtime. I don't see how the hourly rate will cause people to not work overtime.

For a balanced view, http://mises.org/story/3690; October 12, 2009 11:02 AM
Don Lim said...: poor idea. It's more productive for the 1000 persons to work and give the 100 unskilled persons donation. The reason is simple. They are unemployed because they are unskilled. If they were to work in the company forming 1/11 of the workforce, it means this 1/11 portion is unskilled. The company would be less productive than when it employs 0/11 unskilled workers. The better solutions are:
1) train them
2) give them allowance while they are under training.; October 13, 2009 1:51 AM
Tan Kin Lian said...: To wjsim and lim

The unemployed people include qualified school leavers and qualified people who held high positions in the past.

They lost their jobs due to situations beyond their control.

This may happen to anyone. When it happens to you, you will then realise how unfair the current economic system is.; October 13, 2009 5:27 AM
wjsim said...: Although harsh, Lim made a valid point. If the unemployed are really beneficial to the company, they would already be hired.

I just don't think unemployment can be solved by underemployment.

If young people are the problem, I suggest raising the minimum age to work. It is obvious there is flaw in this suggestion. And it is the same flaw in limiting work hour.

Life is never fair. I wish it is too.; October 14, 2009 12:50 AM
Don Lim said...: Mr Tan,
Actually, the problem you raised is not really an unemployment, but an expectation, problem. You said of them, "qualified school leavers and qualified people who held high positions in the past."

So, why there are 3 basic questions:
1) why aren't they employed if they do have a market value?
2) how much should a company pay them by making them 1/11 of their workforce?
3) how does it help the overall labor market of Singapore.

To answer question 1, it seems that the problem lies largely with their unrealistic expectations. They are jobless not because they can't find a job here, because, as you said, they do have skills,, but because they do not want to accept a lower salary that is decided by the supply and demand factors in the market.

So the next question can be easily addressed. If you expect companies to create 1/11 vacancy for them, they must be willing to pay these people the unrealistic pay also. Otherwise, these people can't be employed. Remember that they can find a job elsewhere easily. It's just that they reject those paying lower salaries.

Lastly, does this system of vacating 1/11 of the workforce help the economy? No. It means that:
1) the GDP must be reduced because everyone is forced to reduce the number of hours worked which translates into GDP;
2) are we going to cut the number of hours worked further if there are more unrealistic people who choose to remain jobless by rejecting job offers paying them less than before?

So, this suggestion of yours isn't feasible. A better way to manage this problem is to distinguish the unemployed into:
1) those who are skilled who can be employed yet do not want to because of either unrealistic expectations or because the lower salary offered cant meet their financial commitments;
2) those are really unskilled who are unable to find a job even though they want to accept a reasonable salary like $1-2k/m.

From here, we then devise policies to address the respective types of problems. For example, if they have too high commitments, the government should implement policies for Singaporeans to downgrade easily. If they are in condo or 5-room flats and are now unable to find a job paying at least $5k/m, HDB should allow them to downgrade with minimal levy. Also, the amount of loan for property and car should be reduced to 70-80% of valuation by surveyor, and be even reduced further during the property boom period as determined by MND, to reduce housing bubble. This will reduce the likelihood of incurring a great loss when one has to downgrade.

As for those with unrealistic expectations, they should be allowed to play with their time and wait for the dream job and salary to drop from the sky. If nothing drops from the sky, they will ultimately have to face the reality once their savings in the bank run dry. We don't have to worry about this group.

Lastly, for the last category, if they are unskilled, the govt has a moral responsibility to ensure they are helped to upgrade their skills. As i suggested, they should be provided an allowance while undergoing training to encourage them to upgrade so that when they finish their training (preferably in those areas Singapore's economy need most), they will contribute to our economy.; October 14, 2009 4:17 PM
Anonymous said...: This is an interesting policy for employers and HR managers to consider.

I can see benefits in actively engaging the unemployed. There are social, commercial and health benefits.

Competitive, large employers will not bother lending a hand or giving charity unless it is in their culture to do so. Some companies may just do reshuffling to avoid giving people the sack.

We should just look at agencies and employers that are aligned towards engaging more workers in a meaningful way. Managing part timers requires added time and energy as well. The emphasis should be on how this can be constructively done.

Perhaps more creative job creation agencies can help.

Mike Zhan; October 28, 2009 5:01 PM