Saturday, January 24, 2009

Budget : Where are the safety nets?

The day after the "Resilence Budget" was announce, Straits Times was filled with articles on how it will save jobs and help Singaporeans during the impending hard times. The budget attempts to save jobs by giving companies a wage credit. The govt will subsidize up to 12% of the first $2500 of wages. This was reported as an innovative new idea to save jobs. I figured this is probably a rehash of an old idea - in the 1980s recession, employer's CPF contribution was slashed to lower the wage bills of companies. The lower wage bill helped to save jobs in the 80s recession. This time the govt probably wanted to do the same but cutting CPF is not possible because there is not much left to cut and many depend on it to service their HDB loans. The only way to lower the wage bill was for the govt to subsidize wages. However, this move will not save as many jobs as it did in the 80s. If you recall the 80s recession was caused in part by the loss of competitiveness due to the NWC recommending wages to be increased too quickly, the cut in wages helped Singapore to restore its competitiveness thereby saving jobs. This recession is very different. It is triggered by a massive abrupt collapse of external demand. Wages are not the issue - they are losing jobs by the tens of millions in China where the wages are the lowest in the world. Cutting wages will have a limited impact on retrenchments. Companies need to shed capacity because there is no demand for goods produced- Intel, Nokia, Microsoft, DBS etc etc have decided to cut jobs and these are companies that are still cash rich and competitive. When Lim Swee Say "scolded" DBS for retrenching staff instead of cutting pay, DBS replied that cutting pay is not the answer because certain segments of their business will not be revived for years and they just don't need headcount.

What is going to happen is quite predictable. There will be widespread retrenchments and our unemployment rate will rise because the measures in the budget will have limited impact. A few months ago, Alex Au wrote that it is time for safety nets to be in place. I agree with him completely. These can be removed once the crisis is over and jobs are plentiful again. A survey done recently showed that 30% of Singaporeans are worried about retrenchments ...they believe they will be retrenched. The last time something so abrupt happened was during the Asian Crisis. People simply queue up around the block at the MP office to seek help because they don't know what to do when they become desperate. The MP had to decide what help to give on the spot. It is all very unsystematic and haphazard. Its the worst way to dispense help. This is a crisis people need to clear about where to seek help, how they will qualify for help and what help is given so they can at least plan when the situation deteriorates. Many Singaporeans will become jobless through no fault of their own and many have no savings because of the rising cost of living made it difficult for them to save. We will face a problem for which the budget offers no solution.

I have long thought there will be a serious situation which will cause the PAP govt to overcome its aversion to giving help to Singaporeans when they really need it. When the crisis came, I thought "this is it"...they will have to do it. Afterall, Singaporeans contributed to the massive reserves which are meant for rainy days. The crisis we are seeing is a once in a lifetime event....for once in our life, our govt has a chance to lift you up when you go down. But the PAP helped to recapitalise Western banks with our reserves instead. There was no scrutiny when tens of billions are lost in those banks but when it comes to helping Singaporeans directly with the reserves the PAP just can't do it. Our PM recently brought up his fear of Singaporeans cultivating a sense of entitlement and dependency when the govt gives help - that is why there is no direct help for Singaporeans?! It is like not sending the fire fighters when someone's home is getting burnt because you think that the people will abuse the fire engines by not taking measures to prevent fires in their own homes. But this time someone threw a lighted match into our backyard, it is global systemic crisis and ordinary Singaporeans will get into trouble through no fault of their own. This is not a time to teach your citizens lessons about being self reliant or worry about entitlement mentality. The last time our PM was very worried....it was about he and his minister colleagues being not paid enough and he fought hard for the pay he believed they were entitled to. Isn't it time to worry about jobless Singaporeans who cannot afford the basic necessities? ....When will he fight for us?

22 comments:

Anonymous said...

The last time our PM was very worried....it was about he and his minister colleagues being not paid enough and he fought hard for the pay he believe they are entitled to. Isn't it time to worry about jobless Singaporeans who cannot afford the basic necessities? ....When will he fight for us?

问得太好了,答案恐怕还是会让人失望。

DanielXX said...

I believe when we do some calculations, Singapore is probably the runaway winner as the country which put the most amount of money relative to its GDP into the Western banks to recapitalise them over 2007-8. It has been a most imprudent exercise which many spoke out against due to its lack of sector diversification when it was first done one year back. That is the reason why we're not putting more money into people's hands for fear of it suffering import leakage ---- the reason is that we have already suffered one round of capital leakage through that disastrous Western bank rescue operation.

Guess where that money went to? Part of it went to John Thain's office renovation budget the details of which are now known to the world.

LuckySingaporean said...

DanielXX,

Part our reserves when to Thain's toilet and the other part to his $2000 dustbin. ...fools R US.

Anonymous said...

thank u for bringing out the fact that there is nothing in there to bring relief to those who have lost their jobs.

whats wrong with letting them "borrow" temporary from their cpf for living expenses?

instead u get the die also must make u pay hdb package.

the govt is really behaving like it is their money.

Anonymous said...

90% of Singaporeans live in public housing i.e HDB

CPF contribution is 30% of salaries. Of this 30%, very little actually stays in your CPF account as the bulk (20% of salary) goes to paying your HDB loan.

If one becomes retrenched, the government will happily continue to deduct from your CPF savings to pay for the HDB loan.

If the government really wants to, it can defer the payment of the loan when a person becomes unemployed and instead release that money as cash to the person, thus providing the person with a subsistence income equal to at least 20% of his last drawn salary.

The goverment can afford to do this since HDB flats at the end of the day belong to the government anyway. You're just using your CPF savings to lease the flat from the government.

Will the government do this? Nah!

Anonymous said...

then might as well cancel all the inflated loan?

then we all can retire. lol.

Anonymous said...

you guys deserved to be fucked if you don't know where the problem lies.lol

PK said...

@DanielXX

I believe there is some FUD you put up, Thain didn't use SG investment to renovate his office, he used the US govt's (taxpayers') TARP to do it.

As for SG investment it is part of the scam to separate the fools from their money.

Anonymous said...

I'm not a PAP member. I share the oonerns of Singaporeans, especially the needy.

I do not know anout terminology. I do find the targtted help is the way to go, whether one would call it safety net or not. To me, the comcare adn assistence schemes are safety net for those needy.

Yes may be we chould do more, but there is already soem form of safety ner, albeit targetted and adminstered through the grassroots.

If one does not agree with the machanism through which it is given out is a different issue. But let's not generalised to pretend that there is no safety net. The fact is. there is.

Anonymous said...

PK

Mdm Ho Ching pumped in quite a bit more $$$ into ML.

So please tell me what is so extra-ordinary about the Budget. I think the gahmen should have just given shopping vouchers to every household and appeal for the rich to donate theirs (like the Taiwanese).

Anonymous said...

there is safety net. a release valve if you want to call it. however, it is still a ....NET.

LuckySingaporean said...

anon 12:57,

Yes, there is some help in the form of ComCare, Workfare etc. However, these are not safety nets in the conventional sense of the word. Installing a cash card meter outside the homes of those who can't pay for electricity is not the same as providing a safety net.

If you want to find out what a safety net is take a look at Hong Kong and other 1st world countries.

Onlooker said...

Tontine money.

joe said...

Yes, there are nets but as read previously, some guy heard it from the horse's mouth (grassroot leader), the people manning the nets do not wave a big flag to invite you to use the nets.

For any applicant of the safety nets, you must find the offices of the nets first. If you do not know where, too bad. If you do not have an internet connection, too bad.

So much for safety nets for the people.

Anonymous said...

The direct benefactors of Job Credits are businesses. It lowers their costs. But so what? Busineses will shed jobs with or without the Job Credits. So once again it is a measure that benefits businesses instead of workers.

Anonymous said...

There is no need for safety nets because majority of the people here (about 66 %) are financially Ok. I assumed these 66% are those that voted PAP.

If my assumption is wrong, that's more wonderful for the PAP. Why? Because if people are financially not OK but yet voted for PAP, isn't that wonderful for the PAP?

The most important thing a Gahmen must do in a democratic country like Singapore is to ensure the majority are OK or rather the majority voted for them. Never mind the reasons.

As for the minority who are not OK, that's where the MP's meet the people session comes in. Even if the MP is not doing a good job or has a impossible job in helping, never mind. Over 60% (or 55% at worst case) will still vote for them (proven at every election) Just don't stand in Potong Pasir or Hougang.

Anonymous said...

in the first place, if they have not created "pit holes" for people, will there be a need for "safety nets"?

in any case, it's just a relief before we reprise the business of plundering the masses yet again or...getting them back on their feet for the next financial slaughter.

somebody must get butchered so our elites can enjoy ceo and minister's type of pay you know

now who is the...unlucky one?

Anonymous said...

No "pit holes" ... how to get rich?

My wealth at your expense!

Anonymous said...

Lucky Tan,
you are misleading and misrepresenting the reality of life in singapore.
Our citizens are very well off and well treat by Singapore government. Government even give the citizen free accomodation, free lunch, free stay, room, friends in Changi resort if they want. Don't believe me, just ask Dr Chee. Dr Chee enjoy the privilege as a citizen so much that he want to visit Changi resort so often at government's expenses.

So the public has alternative with Chee providing the good example of a government that full of love and compassion.

To ask how the citizen can enjoy the privilege, just follow where Dr Chee goes. Remember, it is a privilege not a right !

Anonymous said...

Well say, Lucky.

Thank you for assisting us to "collect" our thought and write it out. Unfortunately there are still many narrow-shallow-minded Singaporean who still think highly of our esteem MIW.

We are in a tunnel with false light, put out by the MIW, at the other end of the tunnel.

Our PM only concern was that more of his followers will have less opportunity for a $45K cooking lesson.

Anonymous said...

I think the PAP has no intention to teach you guys a lesson in being prudent with the reserves or being self-reliant. In fact, they have no intention whatsoever to use the reserve to help you at all at any time.

The reserve is for them to do investments that yield interests, which get channeled into their various Swiss bank accounts.

Volunteers for TKL said...

Published here.