More focused assistance in new Covid-19 measures, but there will still be casualties

Firms that don't need extra help should forgo their subsidies for others in greater need, and support for the jobless may need to be extended even further

With the economy continuing to be buffeted by the impact of the coronavirus - as borne out by the weak second-quarter growth - and with ministers' recent hints of more help on the way, something beyond the support measures in the Government's four Budgets was well anticipated.

That has now come through.

The $8 billion package announced yesterday by Deputy Prime Minister and Finance Minister Heng Swee Keat has three key elements: the extension of wage subsidies to enable companies to survive; more incentives for them to hire, especially older workers; and more help for the unemployed and low-income workers.

The Jobs Support Scheme (JSS), which has been the centrepiece of the Government's support package for the corporate sector, has been extended until March next year.

But its latest version is more targeted and focused.

This makes sense, because the impact of Covid-19 has been highly variable across sectors.

And after the lifting of the circuit breaker measures in June, some businesses were able to resume operations, even if at lower levels of activity.

While many are still struggling, some, such as those in the finance and technology sectors, have managed to remain largely unscathed through the pandemic.

A few, like those in the biomedical sector and e-commerce, have done even better during the pandemic than before it.

Maintaining generous support across the entire corporate sector would have been expensive, wasteful and unfair. It would also have had the effect of artificially propping up unviable companies.

And so now, the wage subsidies under the JSS range from 10 per cent till the end of the year for companies in more buoyant sectors such as infocommunications technology, the biomedical sciences and financial services, to 50 per cent till March next year for the hardest-hit sectors such as aviation and tourism.

Others get varying levels of subsidies. The built environment sector, which includes construction, gets a 50 per cent subsidy for two months, tapering down to 30 per cent after that till next March, while the arts, entertainment, retail, food services, land transport, marine and offshore sectors get a flat 30 per cent subsidy for seven more months.

Shuttered shops in Chinatown Complex in April, two days after the circuit breaker started. Some sectors, including retail and food services, will get a flat 30 per cent wage subsidy for seven more months. ST PHOTO: GAVIN FOO


With this more targeted approach, subsidies under the JSS will more closely match different levels of need by sector.

That said, there will still be companies that do not get enough help, and some that get more than they need.

This is because even within sectors, there is great diversity and some companies may be more resilient than others. For example, within the retail sector, mom-and-pop shops and mid-level retailers are likely to have less staying power than big department stores and supermarkets.

The same difference would hold in the food and beverage sector between small family-run restaurants and big fast-food chains, or in the hospitality sector between five-star hotels, which can offer staycations, and smaller hotels and hostels, which cannot.

It would help if companies that do not need additional support - such as supermarkets and e-commerce giants in the retail sector - voluntarily forgo their subsidies which can then be recycled to those companies in greater need.

Nevertheless, while the more targeted JSS will go some way towards preserving several thousand jobs, there will still be retrenchments, as well as closures, in many of the sectors getting help.

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As the Government has previously acknowledged, it cannot save every company or every job.

It is therefore appropriate that the Covid-19 Support Grant, which provides benefits to the unemployed, will be extended to the end of the year. But it may need to be extended further or enhanced, given that unemployment is still rising and the impact of Covid-19 is likely to stretch into next year.

The Self-Employed Person Income Relief Scheme to help self-employed workers may also need to be extended after the last payment goes out in October.


To create jobs, a new initiative in the Government's package is the $1 billion Jobs Growth Incentive (JGI).

Under this scheme, which will last six months, companies will get wage subsidies of up to 25 per cent of salaries - subject to a cap - for new local hires for one year, and 50 per cent for hires aged 40 and above.

This scheme will be particularly relevant for companies in areas that are growing.

However, the number of takers for the scheme and the amount of new jobs created will depend on whether there is sufficient business to justify new hirings, even with subsidies. If there is, some companies might be tempted to outsource at least some of the work overseas at even cheaper rates - which is now easier to do, given the rise of remote work and the proliferation of global online job platforms such as Upwork, Freelancer and Fiverr that enable this to be carried out.

The scheme would work best for companies where business is growing and the jobs can be performed only locally, as in, for example, manufacturing, construction, warehouse logistics and personal services.

There would also need to be safeguards to ensure that companies do not "game" the scheme, for instance by retrenching first, and then rehiring to benefit from the wage subsidies.

Companies that retrench should not be eligible for the JGI, at least for a minimum period, such as three months.

To finance the $8 billion package, Mr Heng indicated that there will be no further drawdown on the reserves.

Instead, the funds will be drawn from planned development spending on projects that were delayed because of the outbreak.

This is prudent. Drawing on the reserves should be the option of last resort, not first resort.

And while the delayed projects will eventually need to resume, there will, by then, hopefully be less expenditure on emergency support measures as the worst of Covid-19 will be behind us.

But we're not there yet.

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A version of this article appeared in the print edition of The Straits Times on August 18, 2020, with the headline More focused assistance in new Covid-19 measures, but there will still be casualties. Subscribe