(Delivered in Parliament on 26 February 2019)
Budget Speech 2019
SOCIAL SOLIDARITY AMIDST DISRUPTION
In his speech, Finance Minister was right to point out the decline in support for globalisation. This decline in support is not an irrational one. There is evidence that globalisation has so far produced winners as well as losers. World Bank economist Branko Milanovic studied the distribution of incomes across the world as globalisation took root, over a 20-year period from 1988 to 2008. He concludes that, for individuals, globalisation has brought about divergent changes in real income. The “winners” included the bottom third of income earners, the middle classes of the emerging market economies in China, India & Indonesia, and the global top 1%. The “losers” were the middle class of the old OECD countries, and the poorest 5%. This could offer a partial explanation for Britain voting to leave the European Union, and for the triumph of US Presidential Candidate Trump’s election slogan: “America First”. Most analyses show that Asia is doing relatively well with the growth of the middle class, but Asia faces the challenge of growing domestic inequality. Thus, it is good to see the Finance Minister acknowledge that Singapore’s long-term challenges include social mobility and inequality, which will be stressors of our social unity.
Much literature has been published about what governments should do to manage globalisation for their citizens. Some have argued that living standards of citizens should be equalised as much as possible (with particular attention paid to vulnerable groups), financial markets and labour protection need to be regulated, and welfare policies implemented. It is suggested that taxation policies need to be progressive, with clampdowns on tax avoidance. On the fiscal front, there should be increased spending on health, education and social safety nets; labour markets should be reformed to boost labour’s share of income (Balakrishnan et al, 2013).
Coming back to Singapore, the direction of the government in economic transformation and workforce reskilling for relevant industries is necessary. The other pillar that is equally necessary is to have compensatory policies in the form of social safety nets, to cushion citizens who face disruption and are unable to fit into different industries immediately, or perhaps unable to catch up at all.
The theme of Budget 2019 is to “Build a Strong, United Singapore”. To this end, I wish to speak on the issue of disruptions to employment, under-employment and the vulnerable workforce.
Disruptions to Employment
We have heard a lot during this debate about ‘the Fourth Industrial Revolution. Across the world, the impact of Industry 4.0 on jobs has generated intense interest. Many predict major job losses due to automation. For instance, in a 2013 Oxford University study of computerisation’s impact on employment, authors Frey & Osborne predict that almost half of US workers would face risks of their job being automated by 2030. Economist Tyler Cowen has argued that automation could produce profound inequality as a majority of people will find their jobs taken by robots, and will be forced into low-paying service work; only a minority—those highly skilled, creative and lucky—will have lucrative jobs, and be wildly better paid than the rest. Others are less pessimistic, with MIT economist Erik Brynjolfsson noting that automation will eventually create jobs.
Singapore, being one of the most open and connected economies, is readily open to job disruption. To this end, there have been significant efforts by government and the private sector to respond to disruption, as seen in the massive digitisation efforts, automation initiatives and the professional conversion programmes. The message that workers need to adapt is clear. The question is how well such initiatives are serving to give economic security to workers. For instance, we are told that from 2016 to 2018, the Adapt and Grow Initiative has enabled more than 76,000 jobseekers to find employment. While the number seems impressive, it would be useful to know whether these jobseekers who switched industry had comparable remuneration or had pay cuts, and how many could not find new employment even though they tried to sign up for the initiative.
Another issue pertains to underemployment, which arises basically when a person is working but below his or her capacity. This is referred to by the International Labour Organisation as Labour Under-Utilisation. Today’s labour market is much more diverse than when the Merdeka Generation came out to work in the 1970s. In those days, it was common to hear of employees spending their entire working lives with one employer, and “job hopping” was frowned upon. Today, employees move more often, take on contract assignments and do gig economy work, including some university graduates.
As far as underemployment is concerned, there was a recent interesting survey published in 2017 by the Ong Teng Cheong Institute. The study discussed the issue of how to measure underemployment properly, and recognised that underemployment was too complex to measure with any one single indicator. It decided to adopt a multi-factor definition of underemployment, viz. persons who were degree holders and above, in full-time work, and earning less than $2,000 per month. The survey yielded an underemployment rate of 4.3%, which was higher than the Manpower Ministry’s rate of 3.3% based solely on time criteria. In the survey, the profile of the underemployed showed that they tended to be female, have no children, and stay at HDB flats; they were employed at businesses serving mainly the domestic market, with a median age of 35 years, and with 10-15 years of work experience.
As to the effects of underemployment, the study found that the underemployed reported facing challenges such as having lower status than what they deserve, being underpaid, feeling insecure about their income and job, and lacking finances for daily expenses. This group indicated that they were in their current predicament involuntarily, as they were found to want to better their prospects by re-skilling and up-skilling, although they are unsure of what skills may be in demand, and how to take the next step.
Turning to MOM’s figures, as at June 2018, the underemployed rate was 3.3%. This rate is derived based on a time-based definition of underemployment i.e. persons working part-time and would like to work full-time. Even by MOM’s measure, the 3.3% translates into nearly 73,000 workers. The MOM statistics also suggest that underemployment affects those with less education more: while underemployment for university graduates is at 2.3%, for those with secondary education, this rises to nearly 4%, and for those with below secondary education, the underemployment rate is 5%. This may suggest that there may be a class dimension to this as well, with the less educated more prone to underemployment.
It is food for thought to try to reconcile the results of the survey by the Ong Teng Cheong Institute with the MOM data. In order to get a better handle of how underemployment is affecting our society, I ask the government to continue to improve its measures of under-employment and to monitor the effects of under-employment on the well-being of different segments of society. I plan to talk more about this at the MOM COS debate.
Over the years, I have noticed that at the Meet People Sessions, residents of lower income commonly report doing gig economy jobs, such as furniture movers and in food delivery. Some have told me that they have few options and need the flexibility of time to attend to family issues which crop up often. They do not have paid help or family support, and find it difficult to take time off regular work to attend to personal matters. It is well-known that gig economy jobs come with hardly any employee benefits such as paid leave or bonuses, and do not attract CPF contributions, though I am aware that the government is looking into improving terms and conditions for gig workers.
The vulnerable workforce also has less ability to withstand the vicissitudes of life. I recently encountered a young single mother who had three children. She received no support from the children’s father whom she divorced. Due to her need to work and care for her young children, she took on a Gig job, delivering food on a motorcycle. In a moment of inattention, she beat a red light and was duly notified by the Traffic Police to pay a composition fine of $200. As she did not have the funds to make the payment, she came to the Meet People session for help. I do not know whether the law enforcement agencies have ever allowed payment of composition fines by instalments, but I know the clock is ticking to the deadline for payment. Failure to pay will result in the case going to court and attracting higher fines. So I did not write in to the agency, but instead found funds to assist her to pay. Time and again, I have seen residents who do not attend court being subject to Warrants of Arrest, over regulatory matters such as parking and smoking fines. I believe more compassion can be shown in this area, such as to allow instalment payments for composition fines.
The government has recognised that Singapore faces long-term challenges including inequality and social mobility. I acknowledge that significant efforts have been made towards economic transformation and upskilling our workforce. What we need to watch closely are the many stress points on our social solidarity, and address them, if we are to be a Strong and United Singapore.