As the coronavirus pandemic drags on and the impact on businesses and jobs mounts, wage subsidies for employers to retain their local workers are being extended and will become more targeted. Under the $8 billion more in Government support that Deputy Prime Minister and Finance Minister Heng Swee Keat announced on Monday, the Jobs Support Scheme (JSS) will continue until March next year. But its latest version is scaled across different tiers. Given that the impact of Covid-19 has been highly variable across sectors, maintaining generous support indefinitely across all sectors would be a wasteful use of public funds. It would also have the effect of artificially propping up unviable firms.
Only firms in the hardest-hit aerospace, aviation and tourism sectors, which are currently receiving 75 per cent wage support, will get 50 per cent wage support for seven more months. The built-environment sector will get 50 per cent support for two more months, before this tapers down to 30 per cent of wages, paid up to March next year. Other sectors will get 10 per cent support for seven more months. More buoyant sectors, such as biomedical sciences, financial services, and infocommunications technology, will get this amount of support up to December. But even at 10 per cent support, the payouts cover more than half of employers' CPF contributions, which will help shore up workers' CPF savings. It would help if firms that are coping well, such as in supermarkets and e-commerce, voluntarily return or donate their JSS, which can then be recycled to those in greater need.
Nevertheless, while the more targeted JSS will go some way towards preserving jobs, more retrenchments and business closures are inevitable. As the Government previously acknowledged, it cannot save every company or every job. The smaller $8 billion package compared to the four Budgets this year, as well as the tapering-off of support measures, is a signal to companies that they have to think about transforming for the longer term. "Zombie" firms with unsustainable operating models could eventually be winnowed out. The latest measures also send a signal to firms that they have to right-size their manpower needs. Even those with higher levels of support to help protect their core capabilities, such as in the aviation sector, cannot avoid making painful adjustments as air travel is not expected to return to pre-Covid-19 levels any time before 2024. More staff may have to be trimmed or redeployed to external organisations. Beyond saving jobs, the next phase of economic transformation is about reskilling workers to stay nimble in a changing labour market, accelerating firms' automation and digitalisation on initiatives, and encouraging them to move into new growth areas. Firms, and workers, will have to pivot or perish.