Unemployment Benefits: Boon or Bane?

While there are some upsides to the proposal for unemployment benefits, research show that there are also downsides and trade-offs that need to be considered.

http://m.todayonline.com/singapore/redundancy-insurance-can-lead-long-term-unemployment-minister

This is a proposal that will be difficult to withdraw once it is implemented.

It bodes well to remember that unemployment benefits are the kick-starters to many of the Western-style welfare systems.

The downsides include the possibilities that workers may have a false sense of security about unemployment and may have a lesser drive to look for a job and do well in the job.

It may be hard to prevent many political opportunists and workers from demanding for more and bigger benefits.

It may also lead to the introduction of more unemployment welfare programmes that may erode our economic competitiveness and position.

If companies fund the unemployment benefits, in part or in full, it may erode the company’s competitive edge.

It may even compel these enterprises to move out of Singapore and affect the very workers that unemployment benefits are targeted to help in the first place.

It may also cause unnecessary distortion to market efficiency by indirectly subsidizing inefficient industries, enterprises and careers.

This move may promote a spirit of helplessness and run contrary to the spirit of self-responsibility, self-reliance, and self-regulated learning and improvement.

To make the benefits work, there are many details that have to be put in place on a macro as well as micro bases, including making provisions for additional expenses in our budget on a long term basis.

The proposal should be crafted and supported by relevant stakeholders, especially stakeholders in the private sector.

It should make provisions to only cover basic needs and prevent the benefits from snowballing to a potentially inequitable level.

As the devil is in the details, the implementation plan should be well-crafted and executed effectively and efficiently to prevent unintended negative consequences.

Perhaps the more important focus is to continue to work on increasing the number and quality of jobs, and help our workers improve their employment prospects and employability.

Just as importantly, continue to improve workers’ attitude, skill sets and productivity through, for example, development of more trainings, job enhancement programmes, and productivity improvement tools.

At the same time, the authorities can continue to fine tune policies for Workfare and Progressive Wage, recruitment and retention of foreign talents, and regulation of foreign worker levies for different sectors in respond to changes in the economy.

These schemes are indirect ways to help workers that need the most assistance in looking for employment opportunities and to achieve an equitable wage level.

In short, it may be possible to improve current policies to achieve similar outcomes of unemployment benefits without having to carry the downsides perpetually.

We should work on these policies as a priority and exhaust all the possibilities before introducing unemployment benefits.

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