Monday, 9 February 2009

More thoughts on Jobs Credit scheme

After listening to Minister Tharman's round-up speech on the Budget Statement, here are my final thoughts on the Jobs Credit scheme:

  • It is clear to me, from the Minister's speech, that the direct intended outcome of JCS is essentially to give money to businesses, for them to spend as they desire. It is, as I said in my speech, a handout for businesses. If we accept that our reserves are so precious, then there is a valid question as to whether it is right to just give them out to businesses like that. Also, many, like I, would question the fairness of giving handouts for businesses, but not Singaporeans.

  • The Minister cited some examples of how the funds could be used, ranging from keeping workers to paying suppliers on time. But other possible uses include dividends for shareholders, bigger bonuses for CEOs, spending on incentive trips and remitting back to foreign headquarters for MNCs. In other words, saving jobs is only one possible use, and there is no direct correlation between JCS and saving jobs. I think this is quite different from how JCS was first portrayed when it was announced, and that mis-portrayal was one of the key reasons for my decision to focus on JCS.

  • The consequences of JCS include a stimulation in demand (as is implicit in the Minister's references to the multiplier effect from JCS), and retention of jobs through keeping businesses afloat. But the Government has repeatedly pointed out that demand stimulation in Singapore is of limited utility, due to the high leakage in our open economy. So I would not place so much weight on that as a benefit of JCS. As for retention of jobs through keeping businesses afloat, that is a very indirect outcome that is subject to many dependencies, including sufficient demand as I mentioned in my speech.

  • The Minister and many MPs have cited anecdotal evidence of businesses saying that JCS would affect their retrenchment decisions. I may be cynical, but I would take those statements of support with a big pinch of salt. If Santa Claus asks a kid who has just received a great big present for Christmas whether he was happy, would the kid say no? Especially when there is the prospect of another such present next year? In fact, I have received a lot of support from folks in the private sector agreeing with my speech privately. One even described the reasoning in my speech as being exactly identical to how his management team thinks through such issues.

  • Finally, it has been suggested that JCS will make businesses more ready to retrench foreigners as opposed to locals. This may not be quite right. The employers' CPF contribution rate for most locals (excluding older locals, etc.) is 14.5%. JCS equates to a 9% point reduction in that rate. So local employees are still 5.5% more expensive than foreign employees. An employer who is minded to think this way, of axing the cheapest employees, will still look to retrench locals first, since they are still more expensive even with JCS. The exception would be older workers, since the employers' contribution rate is lower. With JCS, the Government would actually be subsidising the business for employing these older workers.

These reasons are why, even though I thought Minister Tharman delivered a really solid speech, I remain unconvinced about the merits of JCS. But like I said, I hope I am wrong.


Buddhi said...

I just read that Credit Suisse just revised their initial estimate of job losses from 50,000 to 20,000 because of JCS.

If the objective of the scheme is to save jobs, it is a very expensive scheme to taxpayers.
4.5b to save 30,000 jobs is equal to $150,000 per unemployed. Even if we provide the unemployed with $1500 each month. We can provide them for 100 months, not just 1 year!

If we take away the 110,000 job credits the Civil Service will benefit plus the profitable companies in transport, education etc. There are a lot of money we can use to benefit targetted Singaporeans in need.

Perhaps JCS should only be given to companies in need and they have to apply for them. And we could take a cue from President Obama that these companies will be subject to restrictions like a cap on bosses salaries, "golden parachute" severance etc

Mr Siew, please continue to do the good work you are doing. I appreciate it, as I'm sure many too.

Chee Wai Lee said...

I do not understand why the finance minister tries to justify the scheme on anecdotal evidence from members of the business community. He's throwing $4.5 billion worth of doggie treats no-strings-attached, does he not expect wagging tails?

It is like the Bush tax cuts for the rich in the US. The rich do not need that tax cut, but if you asked them, I am pretty sure they would reply "Sure, I think it's a great idea! Who wouldn't want money coming my way for nothing?".

I am now curious how Credit Suisse came up with the figure of 30,000 jobs saved ... which sectors and across how many companies.

Daniel Ling said...

Hi Mr Siew, firstly would like to show my respect for your efforts as a NMP. =D

Now on your thoughts.

Thought 2:

Although yes, the funds given to the companies can be used in which ever way the companies deem fit, but in the first place, the funds will only be given to them if they retain the workers whom are required to contribute to CPF. So of course, these "savings" in the form of wage reduction will become a form of CASH to the companies which they can do whatever they wish to.

I feel that the concern should not be on how they spend the Jobs Credit but rather on What's Plan B if Jobs Credit (Plan A) do not save the jobs. And also what's Plan B for those who are still retrenched?

It's a given fact that even with Jobs Credit, some companies will still retrench and if they retrench Locals thus they will not be able to get the funds from Jobs Credit.

Thought 5:

Your Thought No 5 is what I think should be the Main Concern. Whether JCS will work. If it does, good. If it doesn't, where's Plan B.

Jason said...

I think the Minister has in mind that the JCS is superior (in terms of targeting) to a 9% CPF rate cut. And I think he's right on that.

But having a policy that is superior to a CPF cut isn't enough to pat yourself on the back. We certainly want to get the best bang for the buck. Mr Siew raises good concerns here.

Still, if the US is trying to save 4 million jobs with an USD$800 billion package, that's USD$200K a job, so maybe that's simply the kind of ballpark price people have to pay to save jobs during a recession.


Incidentally, many of the same concerns he raises on the JCS would theoretically apply just as strongly on a CPF rate cut.

Since rate cuts has been the primary policy tool for fighting recessions since 1986, one has to ask if those rate cuts of old (1986, 2001, 2003 etc) were also essentially handouts to businesses.

family man said...

I too have my misgivings about the job cedit scheme. While CPF cuts was direct and really cuts the wages of workers and stave off retrechment, somehow I find that more palatable than giving MNCs and GLC free welfare from our coffers.

I also share Mr Low Thia Kiang views about the auto unlock system by the president. Much was said about the system of the President being an independant party to unlocking the reserves. Minister Tharman's recountng of events alluded to the fact the President was only given a week to read the reports and thereafter gave his in-principle approval.
I guess if the President 'trusted' the PAP govt so much, (like we should 'trust Tharman' ) then there was no need to set up the expensive presidential office and paying him millions for making a 1 week deliberation.

Is it a done deal? Or can the council representing the advisors to President do its job and possibly link some KPIs to the job credit scheme eg salaries of their CEO having not more than $500,000 for companies applying to JCS. This will protect our reserves from filtering out to MNCs and their HQ - reserves built up by generations of Singaporeans.
This will help many SMEs and provide a source of financial help to SMEs.

eddie said...

Good evening Mr. Siew

JCS- 到底是奢侈的营养品还是对症良方?

My comment is short and sharp :)

family man said...

I just saw the speech on the police checking on your activities, as well as Mr Shanmu respond to you. Apparently what he has done is NOT to apologise for wrongfully holding back your survey for 1 hour, no sorry and no nothing.

This is scary.

FeedMeToTheFish said...

Dear Mr Siew,

If only the PAP MPs can have the sincerity and guts to do 20% of what you do in parliament, they would have helped make PAP manifesto of "staying together and moving ahead" more meaningful.

Alas, apart from a handful of less than 5 who dares, the other MPs are nothing more than sychophantic rubber stamps. Worse, they behave like attack dogs when their masters (paymasters, I might add) are threatened by truths that's too hard for them to swallow.

Your contribution to the budget debate which attracted those dying to bite was a good example of those trying too hard to earn brownie points without engaging their hearts and minds first.

The demeaning cheap shots that Shanmugum threw at you when you highlighted the police action on your public survey shows the quality of mintsters we are paying for.

Mr Siew, I salute you for not being cowed by those rich powerful bullies. I'm most grateful to have you for speaking for me and other ordinary folks. It's such a shame that our constituency's MPs are to scared to do so.

In appreciation of what you have done and continue to do for the benefit of Singapore, I hope you will not mind if I kiss your head (like what French soccer international Laurent did to goalkeeper Barthez in their matches) the next time I see you. If you don't mind :)

Please keep keeping up the good work!

Bless you!


eddie said...

我刚看过Siew Kum Hong: Police encounter at by-election survey.

Siew Kum Hong said...

To Buddhi: Thanks for the kind words.

To Chee Wai Lee: I would be surprised (but relieved) if we have only 20,000 retrenchments this year.

To Daniel Ling: I agree with you re "Plan B", and that's the point I made in my Budget speech. However, I am not so convinced that we should simply disburse the funds and then wash our hands of it. Why should we allow our reserves (and remember, last year Temasek lost $58bn and GIC lost an unknown amount which I am sure is also huge) to be remitted out of Singapore, declared as bonuses or dividends, or put towards some other use that benefits those who do not help when those who do need help, those who need a Plan B, are not getting it? So I can't agree there. These are Singaporeans' funds, and Singaporeans should most definitely care what they are used for.

To Jason: As many have said, the choice is not between JCS and a 9 percentage point cut in CPF. Yes, JCS is superior to a 9 percentage point cut in CPF -- JCS is a special transfer from the Government to business, while a CPF cut is essentially a transfer from individuals to business. The difference is who bears the cost of helping business, and I agree that it is better for the Government to bear this cost than individuals.

To family man: I agree on the desirability of more transparency in the President's decision, as I've said in my speech.

To eddie: To your first post, I think this sort of issues are too complex to be reduced to a simple either/or question, which runs the risk of being a false dilemma. To your second post, I agree. But it's not just that. It was very clear that we were not causing a public nuisance. Hence my follow-up question to the Minister on whether the police were empowered to make a judgment call, which I don't think was answered. I will be posting the transcript to that exchange shortly. And thanks for the link to the video!

To feedmetothefish: Thanks for the kind words. I'm not sure I deserve such praise or the PAP MPs deserve such criticism. In any case, I would prefer that you not kiss my head, but we can shake hands :)s

LuckySingaporean said...

Come on guys get over it - JCS debate over leow. Just wait and see lor.

My main concern is there is nothing in the budget to help those who become jobless. Regardless of the success of the JCS, the economic situation looks bleak - there will be significant job losses GUARANTEED.

The govt should be one step ahead thinking of what to do for the people whose jobs cannot be saved.

I think the govt plan is for these people to show up one by one at the MP's office and to give out aid piecemeal. No electricity? here is a voucher.... Cannot pay HDB mortgage - MP writes a letter. Cannot pay children's kindergarden fees go talk to principal and so on.

eddie said...

If Santa Claus asks a kid who has just received a great big present for Christmas whether he was
happy, would the kid say no?

开心的是三餐不温饱的穷孩子, 抱歉,富家人的孩子我不想体会。不想!

family man said...

Lucky Tan, and I think that is the weakness of Vivian Many helping hands approach.

While the Govt JCS method is so clinical and simple (Locals on CPF? - Pay, don't ask) I believe that Vivian can do the same thing. Locals who have disappeared from the payroll of CPF - HELP.

And I believe Mr Seng Han Tong do not deserve to be burnt. Neither does Denise Phua deserve to be threatened. But if calls to rationalise the many helping hands by Ms Phua is disregarded, we can see why Ms Sylvia Lim indicated that when requesting for help from CDC, the amount ranges from a couple of tens of dollars to a couple of hundreds, all so arbitrary. I can understand why people may feel enraged that some people get Ang pows from Temples, some do not, and they are handed out by PAP MPs, when the money is NOT from MCYS, but from the temple, so why put your MPs at such risk?

Many hand to help. I say please stop all these duplicating efforts that saps the public moneys. CDC, Mendaki, Com chest - Listen to Denise Phua and rationalise the help - use the CPF system as a first step to systematically find out who are the retrenched POOR (not 7 months golden handshake bonus) who may need help and follow up on them.

MCYS - don't be lazy. Revamp.

My Online Notebook said...

Dear Mr Siew, you said: "... The employers' CPF contribution rate for most locals (excluding older locals, etc.) is 14.5%. JCS equates to a 9% point reduction in that rate. So local employees are still 5.5% more expensive than foreign employees. An employer who is minded to think this way, of axing the cheapest employees, will still look to retrench locals first, since they are still more expensive even with JCS..."

I don't agree from an economic angle. If the employer is aware of the CPF part ex ante and offers a local a pay of $1,000/mth (the guy takes home $800 after CPF 20%), the employer will be indifferent to hiring a foreigner for S$1140 (the guy take home the full S$1140). The JCS does indeed make the local cheaper to hire for an "equivalent" foreigner by changing the relative "price". Singaporean are more "expensive" to hire because of the disruption for NS liabilities (although Mindef did "pay" the employer back). The other real reason is that many foreigners (from third world countries) are willing to do the same job for less because their dependents are living in a cheaper place elsewhere and they receive more cash for the same wage.

SengLee said...

Mr Siew, On your last point, the argument takes on only a static view. The dynamic world behaves differently. It may unfold in a way that mostly negates the effect of JCS on jobs. With their home economies in trouble, foreigners may just settle for less, even off-setting more than JCS to keep their jobs if necessary. The net effect is to reduce the costs of doing business in Singapore which is what it is all about despite all the dressing up to make it look better.

Seng Lee

Donaldson Tan said...

I hope you will win your 2nd term as a NMP. You have been a valuable input to our parliamentary system.

JT said...

NMP Siew,
This is my first time reading this blog (not because of any press article), and I agree that we need a differing voice in the Parliament. Your analysis of the JCS was well thought and insightful. It's a shame your points were addressed adequately. Thanks for spearheading impartial views in the public platform.

I know it is really tough, but I sincerely wish you and Ms Olsen the best in renewing your terms as NMP.

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