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?