Tue. Mar 19th, 2024
via

TL;DR – You never know.

via

Workers’ Party (WP) Non-Constituency Member of Parliament (NCMP) Daniel Goh tabled a motion for adjournment on redundancy insurance in Parliament recently.

Under the scheme proposed by the WP, all workers will channel 0.05% of their monthly wage into an employment-security fund. Employers will contribute a matching amount. This will form a “risk-pooled” redundancy insurance.

Workers who are retrenched would then receive a monthly payout of 40% of their last-drawn wage for up to half a year, capped at 40% of the prevailing monthly median wage of workers from the insurance. The worker will only get payouts on the condition that they are seeking work through the National Jobs Bank or retraining actively. Under the WP’s proposed scheme, retrenched workers would receive a monthly payout of up to S$1,200 for six months, based on the 2014 median monthly gross income. To help low-wage workers, it further proposed that the monthly payout be S$500 at a minimum.

We think three things may happen if we were to put in place a redundancy insurance.

1. We may have more kids

Given how uncertain we are about the direction the economy is going in, some of our friends are worried that they might lose their jobs soon. Some of them are in their 20s, the age where they should be thinking about setting up families. However, they aren’t keen to have children.

Why?

Because they are worried that they won’t be able to provide for their children. They may have an income now. But they may lose their jobs. Then how? If it’s just them and their spouses, they might still be able to tighten their belts till they get a job.

READ MORE:  You ought to retrain before you get retrenched

But they won’t bear to see their children suffer. This fear that they might lose their jobs that would cause their children suffer is making them push back their plans to have babies. A redundancy insurance may go some way to lessen that fear in young couples.

The payouts from a redundancy insurance could be enough for a young couple to believe that their children won’t have to suffer even if they have to tighten their belts should they lose their jobs. That could be enough to encourage these young couples to have children. That, in turn, could help boost our total fertility rate.

2. Workers could stop rushing to dead-end jobs

If you have mouths to feed, then having an income is infinitely better than having no income. The more mouths you have to feed, the greater the pressure to have a source of income. Any source. Even if that source of income is a job that is in a sunset industry where you could well end up out of job again soon. Or a job that offers little or no opportunity for progression or professional development (e.g. be a Uber driver).

But if there is a redundancy insurance, then at least there is some income for a certain period. In that period, the pressure to find a job is reduced. That might just be the breathing space needed for the person to re-orient themselves, learn a different skill, and increase their chances to get a job that has opportunities for progression and professional development in a growing industry.

3. We may have less cash to spend each month

As we all know, there’s no free lunch in this world. Anything with benefits will have its costs. WP estimates that workers will only have to channel 0.05% of their monthly wages into an employment-security fund to make this redundancy insurance work.

READ MORE:  Shake Shack could be coming to Singapore soon

But Mrs Josephine Teo, Second Manpower Minister, said that WP’s estimation is “too good to be true”. More realistic assumptions from studying other countries’ models, she said, put it at 1% to 2% of wages at least. And employers would need to match that contribution. Employers would most likely reduce the salary that they are willing to pay by the amount of their contribution. The net effect is that the take-home pay of workers could reduce by about 5%.

Redundancy Insurance won’t work if there are “disguised retrenchments”

There may well be good reasons for a redundancy insurance system. But we must be aware of the costs.

And we also need to be aware of a little catch. It’s a redundancy insurance. Not an unemployment insurance. Only people who have been retrenched are entitled to the payouts. Not people who resign on their own or are fired because of poor performance.

This is where we might have a problem. There have been cases where workers have had their contracts terminated without clear explanation — just before their firms moved overseas or close or whatever. There have also been cases where workers were let go because they did not meet their performance targets. Or so they were told. But investigations later show that these were actually disquieting examples of “disguised retrenchments.

Victims of such “disguised retrenchments” will not be eligible for payouts from the redundancy insurance, since it will be tricky to prove that they have been retrenched. If a redundancy insurance scheme is to work, then NTUC needs to work harder to ensure that employers are fair, act responsibly, and follow the Tripartite Guidelines when laying off staff.

READ MORE:  5 x 5: Zika in Bangkok and GTA in Singapore

New economic realities, need new ways of doing things

The economic realities brought by the fourth industrial revolution mean that we need to drastically change the way we do things. This includes considering policies that we hitherto would have previously rejected without a single thought.

As such, we should seriously study whether there are ways to make a redundancy insurance system work, to minimise the costs and risks, while maximising its benefits. We would be doing Singaporean workers and Singapore a great disservice if we don’t.

By Joey Wee

I am nice, most of the time!