SINGAPORE - The economic fallout from Covid-19 has affected not just the most vulnerable workers, but also a broad swathe of the middle-class around the world.

This means relying on traditional solutions to inequality, such as passive and redistributive measures, "is not going to change the game", said Senior Minister Tharman Shanmugaratnam.

Instead, it is important to invest in education and public goods that will create new jobs and opportunities, as well as a sense of optimism, he added on Monday (Nov 16) when speaking on a panel on the topic "A New Deal for Workers" at the Bloomberg New Economy Forum.

The agenda for the four-day forum, a virtual gathering of business and political leaders, covers finance, trade, climate, health and cities.

The other panellists were: McDonald's president and chief executive Chris Kempczinski, IBM executive chairman Ginni Rometty, and Blackstone co-founder and chief executive Stephen Schwarzman. The session was moderated by Bloomberg Quicktake chief correspondent Jason Kelly.

Mr Tharman, who is also Coordinating Minister for Social Policies, said that in many advanced societies, there has been a loss of the sense that one can "move up in the old way".

"If you started off from the bottom, you actually had a chance of a middle-class life and there was a pathway," he said.

"That hope, that set of aspirations, is now diminished."

Covid-19 can be tackled in ways that also address these longer-term problems, he said.

He cited two major interventions that are needed.

First, there must be investments in lifelong learning and education, which creates a positive and self-reinforcing spiral of learning, skills accumulation and job progression.

Second, there ought to be a new era of investments in public goods - from basic science and research and development, to training and investments in infrastructure.

This involves re-focusing budgets and fiscal policy in a way that will broaden opportunities and job growth, which in turn creates a sense of optimism that unites people, he said.

Education and paradigm shifts in hiring

Agreeing with Mr Tharman's point on education, IBM's Ms Rometty said companies can open up new pathways for people that do not require a traditional university degree.

This requires a paradigm shift among employers, like hiring using a skills-first approach instead of over-emphasising qualifications, she added. "Today, 40 per cent of IBM's job requirements no longer require a four-year degree."

Blackstone's Mr Schwarzman said the business community must be deeply engaged in the school system, like providing apprenticeships: "If (people) are linked into the business community, they'll have a place to go to work and be taught increasing levels of skills."

McDonald's Mr Kempczinski noted how his company has had to work out multiple career and training pathways for its employees, from restaurant managers to franchisees.

Many others at McDonald's have even moved on to completely different careers such as nursing and teaching, he added. "We've found it's not one solution that we need to offer, but a range of different things, from learning English to life skills and basic financial understanding."

Agreeing, Mr Tharman said there is a need to move away from a dichotomy that has defined labour markets for too long - one that distinguishes between traditional academically-oriented graduates, and those who went through a technical education.

"It's inefficient. It's not as if the market actually required this, it was largely a job signalling device," he said, adding that the practice of using algorithms in hiring has reinforced the preference for credentials.

This is an area where the new generation of AI tools can help, he said, as they can identify, based on one's career history, the transferable skills that have accumulated along the way.

The reality for most blue collar workers worldwide is they move from one job to another without accumulating skills or human capital the way highly-skilled professionals do, Mr Tharman added.

"We've got to use technologies, top management attitudes and new social norms, to think differently about blue collar workers and ordinary white collar workers.

"Think of them as human capital...see them as people whose hopes and aspirations are achieved because they are invested in, and they themselves rise to the occasion."

Universal basic income

Responding to moderator Jason Kelly's question on whether governments should institute a universal basic income (UBI), Mr Tharman called it a "bad idea" on two counts.

Firstly, it is regressive.

"The idea of giving everyone (the same) quantum of money is very different from giving the poor and the lower-middle income group the support they need."

He added that while many UBI proponents have proposed it as a way of flattening the system of benefits, he thinks countries need to stack the benefits in favour of the poor and the lower-middle income group, not give them less.

"Secondly, to give the poor what they need through UBI, you've got to give everyone that same higher amount. In other words, you don't just flatten the curve but you've got to raise the curve. That needs much more taxes.

"And if we do the arithmetic, it can't just be taxes on the rich. You need much more taxes on the middle income group in order to give everyone the amount of benefits that the poor actually need."

Another argument for UBI is that new, far more powerful forms of automation and AI are going to displace humans from a much wider range of jobs, and some way must be found to distribute the productivity gains from automation and AI to a population that may not be fully employed.

"We might get to that situation, but we have no idea whether we will," he said.

More importantly, what happens depends on the actions taken now, he added, and the last thing countries should do is to "give up hope" and go for purely redistributive, or passive, strategies.

"We do need redistribution. But what we should be doing now is investing in public goods, investing in public school systems, and I'm quite optimistic about that potential."

He stressed that by investing in things that everyone can see opportunity in, for themselves and their families, people can be brought together because they have a feeling that governments are doing something for everyone.

This creates a more optimistic mood, he said.

"Let's talk about how we can do things to develop capabilities, develop hope and aspirations.

"If we lose the game in 20 or 30 years' time, we can start talking about UBI, but we first have to get started. We haven't gotten started in many countries."