Jamus discusses unemployment insurance.
11h ·
In the recent National Day Rally, Prime Minister Lawrence Wong provided more details about the SkillsFuture Jobseeker Support Scheme (JSS), the PAP’s version of unemployment insurance. The
#workersparty first raised its version of redundancy insurance (RI) close to two decades ago (it first showed up in a manifesto way back in 2006), and we offered substantial detail ten years thereafter (our 2016 policy paper is here:
https://wpsg.s3-ap-southeast-1.amazonaws.com/.../WP...). So I think it’s fair to say that we’ve been thinking about the issue for a while now. But the point isn’t about precedence—after all, such schemes have been a mainstay in advanced economies worldwide for close to a century—but about why it’s way overdue in Singapore.
As an aside, the PAP has chosen to sell the narrative that the JSS isn’t unemployment insurance, based on—as far as I can gather—how it is tied to jobseeking preconditions, and how it’s funded from general revenue, not a payroll tax. For me, these are distinctions without a difference. Tax revenue is fungible, so it all comes from the people anyway (even corporate taxes are ultimately paid by the company’s shareholders), whether the source was from an explicit payroll tax, or elsewhere. But if anything, funding it from general revenue makes it a little less fair, since it’s making non-workers subsidize workers for a program that benefits the latter. But since we’re overwhelmingly wage earners, this difference isn’t a big deal. And to be clear, in our proposal, we did suggest cost-sharing as well, with employers, workers, and government (see, we do believe in tripartism) chipping in to keep the scheme fair and sustainable. After all, protecting workers should be a societal responsibility.
Moreover, tying support to some evidence of jobseeking or retraining is standard in unemployment schemes around the world. Indeed, a primary consideration in any unemployment insurance scheme is how to provide a safety net, while discouraging moochers. Having been raised with an ethos that stresses scarcity (“we’ve no natural resources but our people”) and militates against welfare (“we cannot allow our people to rely on the state”), some have even gone as far as to ask if this move will create a dependency mindset. Setting aside how such fears strike me as overblown—most people, even in the West, do find value and meaning in some form of work—the question of how best to design a system that is more robust to freeriding (there’s that word again!) is nevertheless valid.
Unsurprisingly, economists have thought extensively about how best to design unemployment insurance schemes. While there isn’t a single answer for what would work best at all times, there are some general principles to keep in mind. The key balancing act is how best to calibrate how long unemployment support is offered (called the tenure requirement) against how much is being offered (the monetary requirement). An excessively long tenure discourages a return to the labor force, and will allow skills to erode. Ditto for a large payout, although if it’s too small, the unemployed will find the amount inadequate to sustain household expenses at a critical time.
The
#workersparty had suggested a fairly narrow scope for qualification—based on involuntary retrenchment, not just being unemployed—with a solid-but-not-excessively-generous payout tied to income (40 percent of last drawn), for a relatively short time (up to 6 months). The amount is average (but on the low side for advanced economies), and while the duration is on the short end (the OECD average is a year), it is also consistent with our country’s relatively brief unemployment spells (of around 2 months).
We also thought that introducing additional flexibility of access—basically, allowing the unemployed to front-load how much of the total they take—would also buy families some time as they adjust their spending to the job loss. Undoubtedly, there’ll be more debate on the specifics of the JSS, when the legislation winds its way to Parliament. But whether you call it JSS or RI or something else, expanding the safety net for our workers is something that the
#workersparty will always be fighting for.
#makingyourvotecount