Next part found here.
Did you guys watch Low Thia Kiang in action yesteday[Link]?
He brought up the same 3 points in my earlier post about the effectiveness of the jobs credit, need to dip into reserves when the govt already has so much current surplus and the limited funds allocated to help the jobless. He was opposed by PAP MPs[Link].
A 2 days ago there was this story in the Business Times about how they came up with this "extraordinary budget" working late nights and eating porridge[Package for Singapore, by express delivery]. It was said in the article that the jobs credit emerged through an organic process. The budget was described by the local media as "creative" and "innovative"[Link].
Here is the truth about the jobs credit. I first heard about this term called the jobs credit during Barak Obama's campaign a few months ago. He wanted to subsidise firms for keeping and hiring workers. This idea was thrown out by his own party members, the Democrats, as unworkable (see Obama Shelves Jobs Credit Proposal) . Ironically, the support for this comes from the opposition Republican camp because it will put money in the pockets of businesses and in some ways has the same pro-business effect as a tax cut....not because of its ability to save jobs. It is ineffective because govt is paying for jobs that employers already intend to keep. In opposing MP Low yesterday, a number PAP MPs say that businesses can hire more workers now that they are receiving the jobs credit. The fact is the businesses can also keep the money and report higher profits or keep the credits as cash reserves. This is precisely why it is ineffective because of the current economic climate in which businesses are seeing a sharp fall in demand. The job cuts are driven by this sharp fall in demand(mostly external demand) and the jobs credit does nothing to address this. It can save a small number jobs at the margin....but what is does is put money in cash rich profitable businesses that don't need it including GLCs and the govt which is the biggest employer in Singapore.
Nevermind about the Jobs Credit being an unoriginal and an already rejected old idea. Suppose the jobs credit actually works and eventually saves a whopping 50,000 jobs. Dr Chua Hak Bin, a Citibank economist, calculated that each of these jobs will be saved at a cost of $90K per year for the tax payer. $90K is triple the median income. We are spending $90K to save jobs that pay $30K. Even if the jobs credit miraculously saves a 100K jobs, it will be at a cost of $45K per job. The jobs credit is ineffective use of tax payers money when it doesn't work and it is inefficient when it does work!
At the end of the day, we will have to deal with sizeable unemployment problem that has far reaching consequences. The default rate for HDB mortgages is 8% at the onset of this recession and the balance sheets of Singapore families are not in good shape. The income gap and poverty were worsening even before we got into this recession. The reserves of this country are not unlimited and have to be used carefully. The govt has to maximise the overall benefit for Singaporeans when they spend taxpayers' money and the best way to do it is to spend where it is most needed...giving money to cash rich companies that don't need it is not a good idea. Singaporeans laid off will need help to with medical care, children's education, utilities etc when their savings are exhausted.