Here's a letter from an armchair policy-maker.
Feb 13, 2009
THE Jobs Credit scheme has been allocated $4.5 billion (22 per cent of the $20.5 billion stimulus programme) to provide companies with incentives to retain workers and cut their wage costs. If it goes according to plan, the scheme will reduce the need for companies to retrench workers and reduce their costs, enabling more workers to stay employed and helping companies to stay competitive.
I have two reservations. First, companies are not obliged to keep their employees. They can easily retrench workers and use the cash grants to keep a minimum number of staff. There is no incentive for companies to keep workers on their wage bill if they have minimal orders, even if wage costs are partly subsidised by the Government.
This has been asked and answered. If companies have no choice but to retrench, they will retrench with or without Jobs Credit. But if they are on the margins where a little help can save jobs, Job Credit can make a difference.
This is not to say that the Government should not help companies alleviate the cost of keeping their employees. A more effective scheme is needed though. One way is to include mandatory rules for firms to qualify for the cash grants. Rules to limit retrenchment numbers to 10 to 20 per cent of overall headcount may nudge companies to limit retrenchment numbers. However, this seems inappropriate when the Government wants to encourage companies and not regulate with more rules.
Arguing with himself. Suggest rules, then concede that over-regulation is not the route to go. Edit your letter!
Another more efficient way is a progressive cash grant rate, much like a progressive tax system. Rather than a flat rate of 12 per cent, the Government could adopt a progressive cash grant rate for companies with more employees. For example, a company with fewer than 10 employees might get a 12 per cent cash grant. One with more than 10 employees might get a 24 per cent cash grant or a staggered cash grant of 12 per cent for the first 10 and 24 per cent for the rest. In this way, companies are encouraged to keep their workers.
Let me guess. You run a company with more than 10 employees?
A second consideration is cost-efficiency. Some industries are resilient against recessions. Examples include firms that produce necessities, fast-food restaurants, second-hand car dealers and budget shops. These firms are defensive cyclically and have no reduction in demand for their goods; some may even experience an increase in demand in a recession. Thus, these firms do not need to retrench workers, regardless of the existence of the Jobs Credit scheme. Would it be better for policymakers to consider which industry or sector to target to make the scheme more cost-effective?
Second guess: It's not a second-hand car dealership, a fast-food franchise, or a budget shop.
There are also some doubts as to how the scheme will help companies remain competitive, given that wage costs take up only a small portion of revenue. Singapore's major industries include electronics, financial services and biotechnology. Most have huge fixed costs, and the last two have highly paid employees. With a cap of $300 per employee for the cash grant, how much will it help industries compete? No doubt it will help those that are more labour-intensive and have lower-paid workers, but should Singapore take that direction - providing incentives for companies that are less productive, with less skilled personnel?
Third guess: you're in electronics, or financial services, or biotech. Or have family members in these areas. And your business requires skilled staff.
Reservations notwithstanding, the Government deserves credit for considering the welfare of low- and middle-income workers first. These are the people most affected and the scheme does give employers more incentives to keep these workers. Given the complexity of the current recession, it is important for the Government to implement a fiscal policy that is not only altruistic and timely, but also efficient and effective. Changes should be implemented to make it more versatile and targeted, catering to employers' needs, which would have a multiplier effect and ultimately save jobs and improve welfare.
"Altruistic"? Really? Policies are made based on altruism? Naive or Stupid?
All policies should be decided on pragmatic consideration. The truth is, if there is a lot of retrenchment, there will be a lot of unhappiness, a lot of unemployed people, a lot more crime as people get desperate, and a lot more social problems. The purpose of public policy and govt is to ensure that society functions - that people who want jobs can have jobs, and people who need workers can have workers and their contribution enriches society. Altruism has nothing to do with it, or else public assistance will be $450, or $600 or $1200 instead of the $360 and that was only just raised from $330.
Pragmatically, employment is better than welfare. Growth is better than Recession or Depression.
"Timely, Efficient, and Effective"? Timely, means this rebate needs to get to the beneficiaries as fast as possible. Efficient means in the least troublesome manner. With the least red tape. Jobs Credit as it is is simple and efficient, and can be implemented fuss-free. All the proposals will make things more difficult and will raise costs - to decide what industry should get more, and which should get less, and who gets 12% and who gets more. The proposals as a whole is self-serving and complicates things without contributing anything significant or being more defensible.
In this different crisis, different and flexible solutions need to be considered.
Bernard Ting
Feb 13, 2009
THE Jobs Credit scheme has been allocated $4.5 billion (22 per cent of the $20.5 billion stimulus programme) to provide companies with incentives to retain workers and cut their wage costs. If it goes according to plan, the scheme will reduce the need for companies to retrench workers and reduce their costs, enabling more workers to stay employed and helping companies to stay competitive.
I have two reservations. First, companies are not obliged to keep their employees. They can easily retrench workers and use the cash grants to keep a minimum number of staff. There is no incentive for companies to keep workers on their wage bill if they have minimal orders, even if wage costs are partly subsidised by the Government.
This has been asked and answered. If companies have no choice but to retrench, they will retrench with or without Jobs Credit. But if they are on the margins where a little help can save jobs, Job Credit can make a difference.
This is not to say that the Government should not help companies alleviate the cost of keeping their employees. A more effective scheme is needed though. One way is to include mandatory rules for firms to qualify for the cash grants. Rules to limit retrenchment numbers to 10 to 20 per cent of overall headcount may nudge companies to limit retrenchment numbers. However, this seems inappropriate when the Government wants to encourage companies and not regulate with more rules.
Arguing with himself. Suggest rules, then concede that over-regulation is not the route to go. Edit your letter!
Another more efficient way is a progressive cash grant rate, much like a progressive tax system. Rather than a flat rate of 12 per cent, the Government could adopt a progressive cash grant rate for companies with more employees. For example, a company with fewer than 10 employees might get a 12 per cent cash grant. One with more than 10 employees might get a 24 per cent cash grant or a staggered cash grant of 12 per cent for the first 10 and 24 per cent for the rest. In this way, companies are encouraged to keep their workers.
Let me guess. You run a company with more than 10 employees?
A second consideration is cost-efficiency. Some industries are resilient against recessions. Examples include firms that produce necessities, fast-food restaurants, second-hand car dealers and budget shops. These firms are defensive cyclically and have no reduction in demand for their goods; some may even experience an increase in demand in a recession. Thus, these firms do not need to retrench workers, regardless of the existence of the Jobs Credit scheme. Would it be better for policymakers to consider which industry or sector to target to make the scheme more cost-effective?
Second guess: It's not a second-hand car dealership, a fast-food franchise, or a budget shop.
There are also some doubts as to how the scheme will help companies remain competitive, given that wage costs take up only a small portion of revenue. Singapore's major industries include electronics, financial services and biotechnology. Most have huge fixed costs, and the last two have highly paid employees. With a cap of $300 per employee for the cash grant, how much will it help industries compete? No doubt it will help those that are more labour-intensive and have lower-paid workers, but should Singapore take that direction - providing incentives for companies that are less productive, with less skilled personnel?
Third guess: you're in electronics, or financial services, or biotech. Or have family members in these areas. And your business requires skilled staff.
Reservations notwithstanding, the Government deserves credit for considering the welfare of low- and middle-income workers first. These are the people most affected and the scheme does give employers more incentives to keep these workers. Given the complexity of the current recession, it is important for the Government to implement a fiscal policy that is not only altruistic and timely, but also efficient and effective. Changes should be implemented to make it more versatile and targeted, catering to employers' needs, which would have a multiplier effect and ultimately save jobs and improve welfare.
"Altruistic"? Really? Policies are made based on altruism? Naive or Stupid?
All policies should be decided on pragmatic consideration. The truth is, if there is a lot of retrenchment, there will be a lot of unhappiness, a lot of unemployed people, a lot more crime as people get desperate, and a lot more social problems. The purpose of public policy and govt is to ensure that society functions - that people who want jobs can have jobs, and people who need workers can have workers and their contribution enriches society. Altruism has nothing to do with it, or else public assistance will be $450, or $600 or $1200 instead of the $360 and that was only just raised from $330.
Pragmatically, employment is better than welfare. Growth is better than Recession or Depression.
"Timely, Efficient, and Effective"? Timely, means this rebate needs to get to the beneficiaries as fast as possible. Efficient means in the least troublesome manner. With the least red tape. Jobs Credit as it is is simple and efficient, and can be implemented fuss-free. All the proposals will make things more difficult and will raise costs - to decide what industry should get more, and which should get less, and who gets 12% and who gets more. The proposals as a whole is self-serving and complicates things without contributing anything significant or being more defensible.
In this different crisis, different and flexible solutions need to be considered.
Bernard Ting
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