Wednesday, 4 March 2015
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Save wage support for a rainy day: NMP
Published on Mar 4, 2015 1:16 AM
By Marissa Lee
EMPLOYERS should not receive so many wage subsidies from the Government when the job market is healthy, Nominated MP Randolph Tan said during the Budget debate in Parliament yesterday.
Dr Tan, an economist at SIM University, warned against extending wage support programmes, in which the Government helps companies subsidise part of the salaries of local workers.
This is because the "overuse" of employment credits now, when unemployment is low, is done at the risk of limiting the Government's policy options in times of real labour market weakness, he said.
He cited three such programmes: the Wage Credit Scheme (WCS), the Temporary Employment Credit (TEC) and the Special Employment Credit (SEC). Saying that they "distort the labour market", he added that they "provoke serious concerns" and "deserve reconsideration".
The programmes are meant to help employers adjust to the pain of ongoing economic restructuring.
Under the WCS, the Government co-funds wage increases for Singaporean workers, while the TEC and SEC give companies payments to offset higher Central Provident Fund contributions and wage costs for older workers.
Under the WCS, the Government co-funds wage increases for Singaporean workers, while the TEC and SEC give companies payments to offset higher Central Provident Fund contributions and wage costs for older workers.
This year's Budget extended the WCS and TEC, while enhancing the SEC. But Dr Tan noted that the Government expects to spend $9.1 billion on the WCS, which was first announced in 2013.
This is more than double the $4.3 billion spent on the Jobs Credit Scheme following the global financial crisis in 2009 and 2010. That scheme, which gave businesses cash to retain workers, helped pull the economy out of recession.
This is more than double the $4.3 billion spent on the Jobs Credit Scheme following the global financial crisis in 2009 and 2010. That scheme, which gave businesses cash to retain workers, helped pull the economy out of recession.
As "the danger of a downturn is not negligible", Dr Tan urged the Government to "conserve" its policy options for a rainy day. He also said overreliance on temporary wage support schemes may lull firms into putting off moves to raise productivity.
While these schemes raise local workers' wages, "they also actually end up delaying the adjustments that businesses should make in order to complete restructuring", he said.
While these schemes raise local workers' wages, "they also actually end up delaying the adjustments that businesses should make in order to complete restructuring", he said.
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