Saving jobs in Budget 2021: what and whose jobs to save?

Singapore

WHILE the government's call to retrain and upskill has been a familiar refrain in recent years, the push to do so is probably about to intensify at Budget 2021, according to economists.

Describing this as a likely "core element" of the Budget, Sung-Eun Jung, an economist at Oxford Economics, said: "We expect the Singapore government to continue to nudge workers and businesses towards sectors that are likely to come out strong from the Covid pandemic, namely IT, technology, healthcare, financial services."

It would be part of an economic restructuring that will help workers to keep their jobs, while giving the unemployed opportunities to return to the workforce - after an unprecedented year spent containing the economic fallout from the Covid-19 crisis and saving jobs.

The effort appears to be paying off. UOB economist Barnabas Gan said data suggests that the labour market would have weakened further if not for the intervention of relief measures such as the Jobs Support Scheme and the SGUnited Jobs and Skills Package.

This was reflected in December's unemployment data, which fell for the second straight month to 3.2 per cent from November's 3.3 per cent.

However, the outlook for the hardest hit sectors, such as aviation and hospitality, remains grim and economists believe any wage support would be targeted at this group rather than broadened.

Although most economists agree that the unemployment situation has bottomed out, the labour market remains soft, with very different challenges for different groups of workers.

Low-income workers

Bearing the brunt of the pandemic is the low-income group, and this is a group that needs more support even as the economy recovers.

"Although we have all recognised that many low-income workers have been on the frontlines providing essential services through Covid-19, I am not sure that has translated into substantial income growth yet, especially since employers have been under significant economic pressure," said Walter Theseira, an economist from the Singapore University of Social Sciences.

The recovery would thus be an "excellent time" to ramp up the process of having low-wage work catch up in benefits and wages, Associate Professor Theseira said.

To begin with, the expansion of the Progressive Wage Model (PWM) - the government's alternative to having a minimum wage - should be hastened as soon as economic conditions allow it, he added.

Agreeing with the sentiment, Selena Ling, OCBC chief economist, noted that there was already increasing concern about growing income inequality and the slow progress of the PWM in terms of the industries covered even before the pandemic.

"Now with the Covid-19 pandemic, the displaced workers who are retrenched or placed on reduced hours or no-pay leave - they may still be suffering in the short-term," she said.

While there may be some demand for "more of the same" - such as Workfare top-ups and special payments - Ms Ling said there may also be "increased questioning" about whether social safety nets can be further improved for these workers.

PMETs

Professionals, managers, executives and technicians (PMET) face different problems - even though they have been relatively shielded from the economic fallout, thanks to their ability to work remotely.

"Some PMETs may have taken a pay cut given their relatively high salary in order to cut company costs. While some may have restored full salary, others may have to wait until economic recovery takes a more solid footing," said Ms Jung.

Prof Theseira said the most pressing issue for PMETs is that they may have had their career paths altered by Covid-19, particularly if they were laid off.

While retraining is possible, it could result in a "significant fall in income" at least in the short run, he said.

"PMETs are likely to have the greatest opportunities for career and income growth compared to lower skilled workers, but this depends on them finding positions where their existing skills are valued," he added.

Gig economy workers

Meanwhile, gig economy workers continue to be vulnerable to disruptions caused by the pandemic, as economic activity levels can dip again, said Jeff Ng, senior treasury strategist at HL Bank.

Gig economy workers, particularly those in the food delivery or ride-hailing industries, often lack income security and retirement adequacy.

For those who voluntarily joined the industry, Prof Theseira said the pandemic may have brought home the uncertain and risky nature of gig work, despite the flexibility it offers.

"I hope the recovery gives enough breathing room for them to look into organising for better benefits and conditions of work. They have experienced the difficulties caused by not having sick leave benefits, income protection against a fall in demand for their services, and difficulty with getting clients to pay. I think many of these problems could be addressed by stronger self-organisation of freelance workers," he said.

As for those who may have been forced by circumstances to become gig workers, DBS senior economist Irvin Seah said such workers can be considered displaced workers, many of whom would want to return to formal employment if given a choice.

This means that the focus should be on creating formal jobs to help such workers make the transition.

"Many of them have good qualifications. We have one of the best education systems in the world, and it's sad to see many of our younger Singaporeans becoming gig workers like drivers or deliverymen," said Mr Seah.

This also points to a need for a further tightening of Singapore's foreign labour.

"You have to create the opening that employment opportunities for all these workers that have been displaced, whether they are currently in gig, freelance or part-time work," he said.

Foreign labour policy

Singapore went through several rounds of tightening last year, including raising the minimum qualifying salary for Employment Pass and S Pass. Meanwhile, non-resident employment plunged by 181,500, or 16 per cent, as foreign workers bore the brunt of the pandemic's economic fallout, which raises the question as to whether there is room to cut back further.

Mr Seah believes this is the perfect opportunity for policymakers to reduce employers' reliance on foreign workers and truly build a Singaporean core workforce.

This is because the drop in foreign manpower indicates a fall in demand for them on the part of the employer, he explained.

In other words, the fact that employers survived the better part of last year after shedding part of their foreign manpower only goes to show this is not an impracticable option.

"Why don't we cap the demand at this level now, so that during the recovery, any increase in demand would have to be filled by locals," he said. "Otherwise, if you let this opportunity slip away, when the economy recovers and demand for headcount increases, companies would go back to the old way of hiring more foreigners. Then what's in it for Singaporeans?"

Prof Theseira agrees a rebalancing of Singapore's foreign labour policy design would be timely now to let Singaporeans make up for "lost ground" - in terms of wage increments and career opportunities - during the recovery.

"They can make this up, but will likely need to take full advantage of opportunities from the recovery to do so. A somewhat tighter labour market will help with job switches and wage growth," he said.

At the same time, businesses maximising the recovery should not be "starved of critical skills", he said.

Mr Seah believes specialised work pass categories like Tech.Pass are the way to go, to distinguish between "top global talent" and "skilled workers from abroad".

Ultimately, this could also force foreign workers to up their game over time.

Prof Theseira said: "It is clear that foreign workers, especially at the high skill end, will need to show that they have skills or capabilities that are hard to find in the local workforce, in order to justify their presence here, as we rebalance our manpower policy."

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