Unemployment benefits

Better to focus on raising number, quality of jobs

Office workers in the central business district.
Office workers in the central business district. PHOTO: ST FILE

While there are some upsides to the proposal for unemployment benefits, there are also downsides and trade-offs that need to be considered ("Help! I've been retrenched"; last Wednesday).

Such a proposal will be difficult to withdraw once it is implemented.

It bodes well to remember that unemployment benefits are the kick-starters to many Western-style welfare systems.

The downsides include the possibility that workers may have a false sense of security about unemployment and may have a lower drive to look for a job and do well in it.

It may be hard to prevent political opportunists and some workers from demanding more and bigger benefits.

To make matters worse, it may lead to the introduction of more unemployment welfare programmes that may erode our economic competitiveness and position.

Such a move may also cause unnecessary distortion to market efficiency by indirectly subsidising inefficient industries and enterprises.

To make the benefits work, there are many details that have to be put in place on macro and micro levels, including making provisions for additional expenses in our Budget on a long-term basis.

The proposal should be crafted and supported by relevant stakeholders, especially stakeholders in the private sector.

There should be provisions to cover only basic needs, and prevent the benefits from snowballing to a potentially inequitable level.

As the devil is in the details, the implementation plan should be well crafted and executed effectively to prevent unintended negative consequences.

Perhaps the more important focus is to continue to work on increasing the number and quality of jobs.

Just as importantly, we need to continue to improve workers' attitude, skill sets and productivity through, for example, the development of more training, job enhancement programmes, and productivity improvement tools.

At the same time, the authorities can continue to fine-tune policies for Workfare, recruitment and retention of foreign talent, as well as the regulation of foreign worker levies for different sectors, in response to changes in the economy.

These schemes are indirect ways to help workers who need the most assistance in looking for employment and to achieve an equitable wage level.

In short, it may be possible to improve current policies to achieve similar outcomes of unemployment benefits without having to carry the downsides perpetually.

Patrick Liew Siow Gian (Dr)

A version of this article appeared in the print edition of The Straits Times on April 20, 2016, with the headline 'Unemployment benefits: Better to focus on raising number, quality of jobs '. Subscribe