SINGAPORE — An upcoming scheme to provide unemployment support for workers who have been retrenched should include safeguards such as a time limit and training attendance, to encourage workers to level up their skills and find better jobs, instead of relying on the scheme as a crutch, analysts said.
Future versions of the scheme may also include support for workers who voluntarily quit their jobs to focus on training, so that they may be encouraged to proactively take charge of their career development instead of waiting to be made obsolete, the analysts added.
Deputy Prime Minister Lawrence Wong said that an upcoming revamp of the national SkillsFuture programme would provide “appropriately sized” support for the involuntarily unemployed, even though the Government has maintained a cautious stance regarding rolling out unemployment benefits.
This was in response to the “faster pace of change and churn in our economy”, Mr Wong, who is also Finance Minister, said during his keynote speech at the Economic Society of Singapore’s annual dinner on Tuesday (Sept 26).
TODAY spoke to some experts about the design and limits of introducing unemployment benefits in Singapore, and how to protect this system from abuse while encouraging retrenched workers to upskill or reskill while seeking re-employment.
HOW TO GUARD AGAINST PEOPLE WHO ‘GAME THE SYSTEM’?
A common concern of providing unemployment benefits is the moral hazard where individuals are less motivated to retrain or seek employment because of the financial support received.
Dr Kelvin Seah, a senior economics lecturer at the National University of Singapore (NUS), said: “How do we ensure people are not gaming the system by being at home taking a break instead of actively looking for a job?
“We want to be mindful that we do not make these payments so large or so long such that workers find it more favourable to be on these support systems for long periods instead of being employed.”
The amount of support, duration of support and the rules surrounding eligibility have to be carefully considered to prevent potential misuse of the benefits, he added.
As for who should be excluded from the scheme, these may include people who were fired from their jobs due to poor performance, since work performance is within the worker’s control, Dr Seah suggested.
Agreeing, Mr Song Seng Wun, an economic adviser from financial service provider CGS-CIMB Securities, said that implementing a time limit such as being eligible for only a few months of benefits will encourage the view of government benefits being a “temporary” support.
To ensure that people who receive benefits remain motivated to seek re-employment, the analysts suggested the following as well for them to qualify for the scheme:
They must have worked for a minimum period of time before losing their jobThey must have applied for a minimum number of jobs during their jobless period They must have gone for a certain number of job interviews during their job searchThere is support for them to seek guidance from government-linked career counselling centres on suitable career paths and opportunities for growthThey should go for training to ensure they acquire the relevant skills to take on new jobs
Mr Adrian Choo, who is the chief executive officer and founder of Career Agility International, a career consulting firm, emphasised that while financial support provides cash flow to those in need, reskilling with relevant skills for re-employment is paramount in a “skills economy”.
“The economy is shifting very quickly, because consumer behaviour and technology is fast-moving. Companies have to adjust accordingly and different skills are needed at different times.”
Mr Choo added that “people with more skills are more readily employed”.
WHAT ABOUT PEOPLE WHO ARE ‘VOLUNTARILY UNEMPLOYED’?
For future phases of the scheme, some of the experts said that the benefits may be expanded to include people who voluntarily leave their jobs to improve their skills in a proactive way instead of waiting to be made obsolete.
Mr Suhaimi Salleh, CEO of SSA Academy, a consultancy and professional training firm, said that extending government support to people who quit their job could “foster a culture of continuous learning” and encourage workers to take initiative in enhancing their skills and pursuing career changes.
“Workers who voluntarily quit to gain new skills and change careers are likely to become more adaptable and resilient in the face of industry changes and technological advancements,” he added.
He also said that this may help to reduce the stigma associated with job loss, recognising instead that leaving a job for career development can be a legitimate choice.
Agreeing, Dr Walter Theseira, a labour economist from the Singapore University of Social Sciences, said: “Most unemployment insurance schemes want to avoid moral hazard. However, the problem is that this contrasts with the objective of active career management.”
By “active career management”, he means leaving jobs because a worker self-identifies that the job is not a great fit or that the industry has diminishing prospects.
Dr Theseira said that it may be necessary to design a more flexible system where certain kinds of career moves such as quitting are supported with limits.
For example, workers who quit may be eligible for benefits if they seek training within a certain period or are from industries that are turning obsolete.
However, there is the view that an unemployment benefits scheme should help the retrenched workers first, and only once it is more established may the Government consider expanding it to include the voluntarily unemployed.
On whether the scheme should extend to those who voluntarily quit, Mr Song from CGS-CIMB Securities said that “there is the worry about whether such a scheme might be excessively abused”.
Mr Choo from Career Agility International also said that such inclusions may be introduced in a second phase, because these cases may be “harder to monitor against abuse”.
“For a start, let’s save our limited resources for those who are more urgently in need of support — the retrenched.”
WHAT OTHER CONSIDERATIONS SHOULD THERE BE?
The analysts also highlighted some considerations that the Government will have to keep in mind while designing the scheme, such as how benefits should be distributed based on demographics and the intention of the system.
When asked how this may be done, Dr Theseira said that this is dependent on whether the unemployment support policy is seen as part of an overall income support policy or a replacement income policy for workers.
He highlighted different systems such as the JobSeeker Payment programme in Australia, which provides unemployment benefits based on the “societal standard for a minimum income that you need to make ends meet”.
There is also the example of unemployment insurance in the United States aimed at replacing loss of income, where benefits are scaled to one’s last-drawn pay. This works because unemployment insurance is financed by the payroll contributions of workers and employers.
Mr Song said that since Singapore is a small country, it is “relatively easier” to conduct a “refined means test” to determine the amount of benefits one is eligible to get, based on factors such as household type and number of dependents.
Other factors that may affect the amount of benefits include citizenship, residential status and the type of work.
Dr Theseira said that the benefits are likely to extend only to Singapore citizens and permanent residents, and it is unlikely to cover people on employment passes, whose passes would be cancelled upon losing their jobs.
However, determining income security and support for self-employed persons is a separate challenge.
Although it was clear during the Covid-19 pandemic that self-employed workers such as taxi drivers were facing a loss of income, for instance, Dr Theseira said that during regular times, distinguishing between people who suffer due to some kind of fall in demand in their line of work compared to people who are choosing not to work is “very challenging to resolve”.