SINGAPORE companies must start stepping up their efforts to create jobs for their older workers as the number of baby boomers start swelling in the coming years.

They should prepare for this growing graying workforce and not 'leave it till the last moment or hope to arrive ship-shape by muddling through', said Mr Heng Chee How, MP for Jalan Besair GRC, who is also deputy secretary-general of NTUC, on Wednesday.

RELATED LINKS  Speech by Heng Chee How

Speaking during the debate on President SR Nathan's address in Parliament, Mr Heng stressed that efforts to re-employ older workers must not slacken, even in the face of the downturn - or else Singapore will face a growing pool of 'financially strapped old citizens'.

He is also worried that reports of 'green shoots' of economic recovery in the US and elsewhere may distract firms from investing time and effort in the upgrading of their workers' skills and employability.

In his speech, Mr Heng also urged firms not to resort too readily to outplacement or converting their aging workers to contract service before retirement age as ways to side-step this need.

Explaining his concern, he noted that the resident workforce on contract terms has been rising. Between 2007 and 2008, it grew by 4.9 per cent to 189,000 workers, which is 12.4 per cent of the total local workforce. This figure does not include those on contracts for service.

Mr Heng said companies should not resort to contract workers as a cheap source of labour as this will affect the workers' earnings, employability and productivity.

'For a long time, the argument has been that for the sake of economic competitiveness, cheaper labour is one way for companies to keep down the cost. The upshot of this way of thinking is to bring in cheaper foreign labor and to outsource at lower rates,' he said.

'There are two problems with this. The first is the Race to the Bottom challenge, where cheap-sourcing will tend to drive down the earnings especially of lower wage workers. The cheap-sourcing mentality among buyers give rise to a lowest quote mentality among suppliers of services and goods, and the ensuing cut-throat competition will press down wages over time.

'The second problem with accepting this argument too readily is that there would be little motivation to think about raising competitiveness through raising productivity.

'Water flows toward the lower level. When there is a simpler solution for the immediate, the important is sacrificed at the altar of the expedient. This will wreak greater damage on the economy, even though short term gains may be reaped. And the statistics are already telling us this.'

While acknowledging that cutting costs to save jobs will help firms survive the downturn, he, cautioned: 'But to prosper in the upturn, we cannot hope to be competitive just by being cheaper than others in our inputs. We must be more value-for-money, or productive, than others.'