Wednesday, February 04, 2009

The TRUTH about Jobs Credit!

UPDATE: Here is MP Low in action taking on one PAP salvo after another.



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.

53 comments:

Sham and Shame said...

OMG! what a sham and what shame - brandishing "jobs credit" as innovative and creative??? congrats to 154th, it's truly sunken to a new low.

i am convinced that the primary purpose is a "left-pocket-to-right-pocket" wage subsidy for glc/tlc companies.

why shld a company hire more people when there is simply NO DEMAND for any goods or services?! seow! josephine teo shld get a head examination.

Anonymous said...

They look at the big picture or "national" interest. How to make economic growth figures be better. Never mind if many of you don't benefit from that growth or even sacrifice personal interest in the process.

There are many other examples:
1. NS for male Singaporeans
2. Free flow foreign "talent" in jobs and education
3. Casinos to stimulate growth
4. Expensive (market linked) HDB flats
5. No reduction in GST
etc, etc

If they think helping ordinary folks does not contribute to the "big" picture, they won't help. Tell me, how does helping the poor and needy stimulate economic growth?

Anonymous said...

I am looking forward for another "necessary and painful" decision to dip into one of the largest foreign reserves in the world. Discussion? I think they only want to hear the "supportive voice", so they can have their LP carried. More "golden days" will come, Singapore.

Anonymous said...

Lucky, you should go into Parliament and make all these supposedly brilliant minds see the light!

Anonymous said...

Do you think there is a large reserves to dip into? With town councils can lose millions, what about our reserves, surely they invest that somewhere and maybe our reserves has shrunk, and they hoping that the crisis will blow over. In the mean time, here are some peanuts 2% was it of the total reserves? what if it is actually 20%... we don't know how much they hoard so far..

Anonymous said...

"The fact is the businesses can also keep the money and report higher profits or keep the credits as cash reserves."

This may only be true for private businesses. Since the government is the major employer in Singapore, either directly or indirectly (through GLCs), I am sure they will be able to ensure that at least the ministries, stat boards, agencies and GICs will retain staff or even increase employment. Even if the additional staff just sits around and do nothing... so that unemployment rate will be kept low, or just to ensure that Jobs Credit becomes a resounding success.

Anonymous said...

Can see the 80 over deadbeats in white are seriously uneducated and only know how to echo their master.

Anonymous said...

The irony, no the tragedy, of it all is that in the Jobs Credit Scheme, the govt is using the PEOPLE's reserves to help companies, big and small strong and weak, instead of the PEOPLE themselves, especially those aggrieved by job loss and wage cuts. In schemes like Work Fare and subsidies in medical care, the PEOPLE are subject to means testing. But not so in the Jobs Credit scheme. And the govt is rejoicing over that.

They forgot to BEGIN WITH THE END IN MIND which must be to make lives more liveable for the its PEOPLE in these horrific times. It's sad that they choose form over substance, hype over effectiveness. Nothing is easier done than giving hong paos away freely and yet they are not giving them directly to the ones most in need.

Anonymous said...

@anonymous 8.55am

Then how does NOT helping the poor will stimulate the economy.

Do you have any compassion?

Do you know what is hunger?

Do know how it feels to borrow money for bus fare to go for a job interview.

To answer your stupid question - think of the knock on effects of the poor paying their bills and buying food at the hawkers centres, etc.

What a f***king iDiot.

DB10 said...

Why should the gahmen help the poor when the poor will not stimulate the economy? Its the 80/20 rule. Give the money to the rich to help instill confidence in spending for the elite 20% possesses 80% of the money.

No money should be given to the poor, for the money will all come back to the gahmen eventually, through bills from HDB, SP services, SMRT, SBS etc. The poor don't have the ability to help boost domestic spending when they don't even have enough money for basic needs.

Ghost said...

I am all for dipping into the reserves but I question what it is being used for. There must be an oversight committee on the job credit scheme for example to ensure that companies do not take the government for a free ride

Anonymous said...

To help the poor to stimulate the economy,that is to put cash into their hands,but make sure that they could not spend the fund in Johore,KL or Bangkok.

Consumption voucher would be the next item that Minister Tharman gives,but it may be too late as the law of jungle is in practice here.

To save on life is a tremendous merit but obviously PAP does not believe in afterLife,even some of them do profess vigoursly as Buddiss,Muslims or Christians.

Amen!

a kind of chicken said...

I think that the budget is using our money to give to companies to pay directors fees/ dividends and what not.

As has been emphasised many times, singapore is not a bloody charity. If some companies need money, we should loan it at interest or ask for a stake in said company.

This is our money that is being given away? There should be more noise about this issue.

Anonymous said...

the problem with all these fiscal measures is that it lacks honesty. there is a systematic failure in our economic development which is not addressed. this failure has resulted in unequal distribution of wealth and constant destruction of resources in order to sustain inequity.


in helping the poor and disadvantaged, there must be purposeful building. no point talking about elevating the plight of the lower denominators by tapping the "generosity" of the rich because, as always, it is not without burdensome conditions and obligations.

i suspect, this leadership has no direction except to follow the smell of money.

Daniel Ling said...

"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!"

I lost the logic of this calculation.

A 30k/yr job to save it will be 12% x 30k = 3.6k

So shouldn't it cost 3.6k per yr to save 1 job tat will pay 30k?

So to save 100 job tat pay 30k each = 360k but it will save 100 jobs that actually pay out 3m.

Could someone pls enlighten me?

Anonymous said...

Anon 11.33 am

You are ill bred. No place for vulgarity here.

Onlooker said...

Our garment like to recycle ideas (hos that for respect of IP)to pay themselves millions of dollar.
A lot of our policies are copycat policies that is not properly thought/carried out.ie they saw the effect but the process of debugging is not there.

I wonder if these would work:-
Lower GST(promote local entrepreneur ie create business plus demand)
reestablish estate Tax(no brainer)
Set FT quota to 1:1 across all industries.(including the maintenance of estate)
Quantity generate profit,Quality generate Value.
Singapore have to be a Quality economy.Therefore there is a requirement for checks to be in place.
Note: our garment is suppose to be top quality materials but strangely enough indications are beginning to point to the fact that the contrary is true.
Perhaps that is due to a lack of competitions for them.
We need more Variety of Garments for true resilience.

Anonymous said...

Shame on them for borrowing the jobs credit idea and trying to sell it as original. What the cheek!

Anonymous said...

Daniel Ling,

The calculation is done as follows:

1. The jobs credit cost $4.5B.
2. If 50,0000 is saved by this scheme. $4.5B/50000 = $90K per job saved.

Anonymous said...

$4.5b is enough to fund jobs credit scheme for 1,250,000 jobs for one year, assumming the maximum payout of $3,600 per employee. Is this $4.5b amount a tad too high or is it for longer than a year?

I was under the impression that under the worst case scenario, job losses due to retrenchments will only be about 30,000 for this year. Even if the government pays those retrenched their full annual salary at an average of #30K per employee, the total amount will still be just $900m. So, Low Thia Khiang was right. Jobs credit scheme is just an 'employer's credit scheme' to help them show a fatter bottom line.

Lost Citizen

Daniel Ling said...

Hi Anon 2:37, thanks for enlightening. Can't believe i missed it... was looking at it from the other direction and the surplus can actually be used for something else.

But then again, they can just say that all those who currently still working and have CPF is CONSIDERED a result of job saved. So it can be described as millions of jobs saved isn't it? =(

Spinning.

Jason said...

The fact is the businesses can also keep the money and report higher profits or keep the credits as cash reserves.

Wait a sec, how can these companies "keep the credit" without keeping the workers?

As for the calculations, yup it is very expensive. But we have to bear in mind that without a scheme like this, maybe 50K Singaporeans lose jobs and the rest of us will have to take pay cuts.

Anonymous said...

guys,
here is the email address for low & siew.
if u think they had raised valid concerns & got unjustly fuxx by the pap dogs, do email them a word of encouragement like i did.

low: ltk@wp.sg
siew: siewkumhong@gmail.com (http://siewkumhong.blogspot.com/)

if kiasi, can use anonymous email here
http://anonymouse.org/anonemail.html

LuckySingaporean said...

Jason,

I was referring to companies that have no intention to cut jobs in the first place. They too will be getting the jobs credit.

Actually the burden of proof has to fall on the PAP because they took out $4.9B of reserves to do this and when asked in parliament how many jobs will be saved, how effective it is? The PAP govt was not able to answer the question. The very basic first cut research has not even been done before they go out to spend $4.9B. Is that the way taxpayers money should be spent? If you look at the stimulus package around the world, say USA, Obama's package plans to generate 3 million jobs - the outcome is quantified.

Most companies are retrenching based on contraction of demand (you look at announcements made by public listed companies). There is little we can do to save jobs. It is better to keep the bullets and help the people retrenched because we know for sure we are giving it to someone who needs it and its effectiveness is guaranteed. We can prevent job losses effectively through jobs credit only if high wages is the issue.

Anonymous said...

A lot of the $4.5 billion would be actually given away to companies which do not need the money.
For these companies, it's FREE MONEY, FREE MONEY, FREE MONEY ..... falling from the sky.
For the retrenched employees ..... need to "beg" for welfare, means-testing and what not.

pumpkin said...

I just wonder whether the President who holds the second key to the reserves did a due diligence study on the request to draw down on the reserves. The speed at which the request is approved may indicate that he just signed at the spot indicated to approve the request.

trishaw Ah Pek said...

Just give back the remaining reserve(if any left) to Singaporeans.

family man said...

To clarify - about the high cost of Job credit.

think of SMRT - profitable year in and out. All employees, including CEO, board of directors, SMRT probably pays their CPF. No one is going to be retrenched cos they have a healthier ridership with the downturn.

All these employees, SMRT will get Job credit and this will pump up their bottomline.

Fares can still go higher.
SMRT can still demand lower pay from their admin clerks,

Lower bonus.

Higher profits cos they get job credit for every employee.

That is why with this scheme - all (Singapore and PR?) companies will have their bottomline padded up.

And in the mean time 50 000 marginal cases are saved - many thousand are lost (Taxpayers suffer a few month) and those still surviving gets a wind fall - at the taxpayer's generousity.

Imagine - Saw Phaik Wah Delgro, and big GLC can again claim million dollar bonuses.

And the Govt salaries for minister reamin sky high - wonder how they will reply to Low TK on that...

family man said...

woah badspelling -

I am embarrassed.....sorry too kancheong - try again...

That is why with this scheme - all (with Singapore and PR employees?) companies will have their bottomline padded up.

And in the mean time 50 000 marginal cases are saved - many thousand are lost after a few months of enjoying tax credit (Taxpayers suffer a few months) and those still surviving with zero retrenchments gets a wind fall - at the taxpayer's generousity.

Imagine - Saw Phaik Wah Delgro, and big GLCs can again claim million dollar bonuses.

And the Govt salaries for minister remain sky high - wonder how they will reply to Low TK on that

Anonymous said...

financial aids cannot be fairly distributed to ailing companies if the authorities cannot ACCURATELY track the health, performance and viability of each enterprise.

question is, how do you do it?

Anonymous said...

for that matter, we can't effectively provide financial aids to the needy/retrenched without an accurate trace of all their consumption and expenditure.

if the obama admistration wants to limit bonuses to top executives, it has to be able to track the flow of money otherwise, loopholes will exist for abuse

if you can track the monies, you can tame high pay and implement a more equitable reward system.in fact, you can even curtail corruption and stabilize the whole economy.

Anonymous said...

yes, crimes will fall like dominoes too. :)

Anonymous said...

too good to be true? LOL

Onlooker said...

"It is better to keep the bullets and help the people retrenched because we know for sure we are giving it to someone who needs it and its effectiveness is guaranteed. We can prevent job losses effectively through jobs credit only if >>>high wages<<< is the issue."
Remember their motto:"there must not be any PAPer Failure (YCT).",Trust the PAPer, And PAPer never ever watch pron(yeah right).
I wonder if they will consider copying Obama's suggestion of a cap on CEO salary though(since they like to copy USA policy so much).That would be interesting,no?

Anonymous said...

what would happen if our unemployment rate rises sky high eventually anyway? PAP would still say its beyond the govt's ability since the factors r external.

Anonymous said...

JC to help the rich & penalise the poor??
Sad, sad, sad.......

Anonymous said...

LTK might not speak very good english but his brains definitely has more substance that those speak "queen's" english who either could not understand the questions, intentionally intepret them wrongly or simply refuse to answer the main points the ineffectiveness of job credit for company; it is useless to those is insolvent or don't need that amount of manpower due to falling demands.

I like point about failure by government to control the high cost of living for sporean which erode our competitiveness. Or rather, it could be the result of deliberate government policy to ensure sporean think twice b4 voting for opposition (as said by someone- let to have bigger 'stake' in spore)

Haha, funny how come the debate is ill-discipline, pap keep having the last 'clarification'... See how Lim Swee Say clumsily try to trap LTK- caught nothing and simply hilarious.

Is this quality we're getting from the multi-million paid to them? My goodnes...

Anonymous said...

That's the quality of their ideas, when they eat only porridge before launching their Jobs Credit idea.

Maybe Tharman should get Tan Soon Yong to cook some French food instead for supper. Then we might see some really good ideas to help Singaporeans.

Anonymous said...

if obama can impose a cap on senior exec pay, why can't we have the same for senior ministers here? Afterall their salary come from taxpayers' money? Singapore is corrupted and is poised for an economic apocalypse

Anonymous said...

Hi Lucky, thought you might like to read what our illustrious GIC watchdog, Tony Tan, said in Davos. I am appending the entire NYT column here:

February 3, 2009
DealBook Column
What if Watchdogs Got Bonuses?
By ANDREW ROSS SORKIN

DAVOS, Switzerland

Maybe someone deserves a bonus.

Like someone who sniffs out the next Bernie Madoff. Or jousts with tomorrow’s gonzo bankers. Or defuses the Next Big Crisis in whatever Next Big Thing is dreamed up by Wall Street.

Someone, in short, who regulates.

It is clear that the nation’s financial regulators were no match for Wall Street last time. The financiers were always one step ahead. But maybe that isn’t surprising. The financiers, after all, have a big incentive to outsmart the financial police. It is called a bonus. Wall Street lures a lot of bright minds with money. How can federal agencies compete? They can’t.

The numbers are sobering. Mary L. Schapiro, the new head of the Securities and Exchange Commission, will make about $162,000 a year. Timothy F. Geithner, the new Treasury secretary, will pull down about $191,300.

Both of them will make less than many 20-somethings made on Wall Street during the boom. And keep in mind that people who work for Ms. Schapiro and Mr. Geithner, and their counterparts at other regulators, make less than their bosses.

Wall Street executives champion the idea of incentives to defend their industry’s bonus culture. Those carrots, the bankers argue, make the markets work (at least when incentives are properly aligned).

So maybe regulators should embrace the bonus culture too — for themselves. As crazy as that might sound, the idea came up here last week at the annual corporate schmooze-fest in Davos.

Tony Tan Keng Yam, deputy chairman and executive director of the Government of Singapore Investment Corporation, suggested that one reason American regulators fell down on the job was that they were paid too little.

“You must have as good people working in the government in the regulatory authorities as those that are working in the private sector,” Mr. Tan said. “You do need, particularly in these very difficult times, capable people in central banks, in government, in the Treasury who can effectively supervise.”

Mr. Tan knows about this firsthand. He is a former regulator himself, and Singapore has a different view about compensation.

“We pay our politicians and our government servants very well,” he said. “We lock remuneration to the market.”

While Singapore’s watchdogs aren’t paid enough to afford private planes, some in top positions make seven-figure salaries.

Granted, not everyone is motivated by money alone. People become teachers, doctors, engineers and, yes, financial regulators for all sorts of reasons.

In the United States, many senior bankers move seamlessly between Wall Street and Washington. But in recent years, with Wall Street so flush, many young people didn’t give much thought to working for the government. The potential rewards on Wall Street were too good to pass up.

Paying regulators a lot of money may not go down well with taxpayers, particularly given the outcry over bonuses on Wall Street. But while bankers are taking the brunt of the heat for the financial crisis, regulators may soon be taking blame, too.

“God knows, some really stupid things were done by American banks,” Jamie Dimon, the chief executive of JPMorgan Chase, said. “To policy makers, I say where were they? They approved all these banks.” His comment may seem self-serving, but many regulators privately acknowledged that they didn’t see the economic crisis coming.

Other Wall Street denizens said the problem wasn’t regulators, but the misalignment of interests in their industry. “The government has gotten some very good people,” said Henry Kravis, the private equity king, “to work and do a very good job.”

Perhaps the most controversial idea over how to fix the regulatory system was suggested over a private Shabbat dinner hosted by the Israeli president, Shimon Peres, on Friday: why not pay bonuses to regulators for ferreting out frauds like Mr. Madoff’s? The bonuses could be paid with the bounty of fines.

Some at Davos thought the bonus idea could work. But anxiety over that approach was palpable. “They already treat us like criminals,” one hedge fund manager said.

A few said giving bonuses to regulators would be like giving bonuses to the police for issuing speeding tickets. Maybe the regulators, like Wall Streeters, would start thinking about the money, rather than what is right. But maybe that’s exactly what Wall Street needs to slow down.

LuckySingaporean said...

anon 11:13,

Thanks for the article. I'm shocked and speechless after reading it. I didn't know the Ivory Tower is now so tall it has protruded out of the stratosphere..

Anonymous said...

Yo Lucky

http://kwayteowman.blogspot.com/2009/02/jobs-credit-explained.html


"Lucky Tan compares our Job Credit to Obama's plan, which is actually to subsidise new hires. His plan will have to deal with problems of gaming: e.g. people firing and then hiring.

And also, Govt will not be getting any Jobs Credit for its employees. It makes no sense for Govt to give itself money which comes from the coffers in the first place.

Again, it seems (some) bloggers need to spend more time understanding before they write if they want to be taken seriously."

Daniel Ling said...

To be neutral, I do feel that Regulators should be given incentives to perform their task well.

But in the first place, this Incentive to boost performance may be somehow flawed...

LuckySingaporean said...

KwayTeow?
Goodness. If the Obama plan can be salvage into the same type of plan the PAP came up with by giving a wage subsidy for each worker that a company keeps for 3 months, they wouldn't have jettison it.

Actually, the proof has to be from the PAP why their plan will work and is effective because they are the ones who took the drastic step of dipping into reserves to do this. There has to be compelling proof, estimates and econometric modelling done to come to the conclusion that this is a good scheme. The PAP is spending $4.5B without being able to quantify its effects. Much of it is given to companies that don't need the money. MP Low asked how effective is this scheme? ...It is a simple question but the PAP can't answer. What are the facts, figures and number that convinced the PAP that the scheme will work? Show us...and prove MP Low wrong. Otherwise how to justify the use of $4.5B on this scheme.

If the money is on the other hand used to help the jobless, the impact is quantifiable and accountable.

Anonymous said...

Lim Swee Say is really useless. Not only is his final clarification an attempt to engage in partisan politics, he is attempting straw man arguments. Low, naturally doesn't bite the bait. With such deplorable ministerial calibre on show, no wonder the remaining MPs are so beh kan.

Anonymous said...

Lucky Tan,
if Lim Swee Say will to ask you the same type of question he cowardly ask Low, what will you answer ?

Okay, here's the catch , you can only select one of the two choices following the pattern of Lim Swee Say.

"Is it better to use the reserve to help the business (but not the worker) or is it better to continuous use it for SWF for more frailing investment in this bad time."

Please select one only."

Chee Wai Lee said...

Good ... I am not the only one who thinks Lim Swee Say is such a deplorable politician who never seems to have anything intelligent to say to the public or to his opponents.

Anonymous said...

let me fig this out - if a company has 2 workers and one is Singaporean, one is Malaysian, both paid $1200 and both with CPF.

I need to retrench one.

Who would I choose. The Singaporean with CPF, so I can get credit? Or the Malaysian as there is no credit for Malaysian CPF.

Answer - Malaysian - cos no need3 weeks reservist in ROC.

Aiyah, so many things stacked against Singaporean, how to work.

Anonymous said...

"To Anonymous said.. 9:39 PM
for that matter, we can't effectively provide financial aids to the needy/retrenched without an accurate trace of all their consumption and expenditure."

The needy/retreched need even more help as they are starting to live on past/little/no savings.

Perhaps, it is more expedient (easy trace) to help businesses (positive entrepreneurial image) with existing employees who happen to have their own consumption and expenditure pattern which are equally difficult to trace - and who have the lucky star of staying employed by enterprises which happen to be in the radar screen of this Job Credit thingy than those retrenched needy.

Anonymous said...

Why keep saying it's the people's money when we can't or should i say very unwilling to kick these butts out of our kitty bank.

SCORPIO said...

You are having a nice blog and posts and I like to read oftenly. Also I have a leading classifieds website from India to get more traffic through this.




Indian Free Classifieds


Shipping Directory


Part Time Jobs

Anonymous said...

I am not surprised about it.

Remember the Sichuan Earthquakes last time when there are charity shows around the world for donations.

Mediacork can say that they come up with an innovative and creative idea of having celebrities answering phone calls when donors called in.

When this is an idea thought of by Taiwanese.

Go google and verified this fact.

Билеты Формула 1 Валенсия said...

I consider every person should read this.