Thoughts on the Job Credit Scheme
This year budget debate is mainly around the Job Credit scheme. Some had described the Job Credit scheme as bold', 'innovative' and 'cleverly crafted'. We are just lacking the 'made in heaven' description.
There is no doubt that the scheme is interesting but it is really not that innovative. It is basically based on the same pro business approach that the country has adopted over the years. Save the businesses, save the world. The idea is that if businesses do well, every one of us will do well since it relates to employment.
To save the businesses, it is generally by increasing their revenue or decreasing the cost. The government can help businesses increase their revenue by having more government projects but there are limits in this approach. If you are running a sex toy shop, you can't expect that the government buy cartons of vibrators from you to help you in the revenue part right?
So the next approach is to help business cut down on cost. These could be done by squeezing the employees in terms of wage cuts or tax rebate for businesses, etc. Jobs Credit scheme is just one of the possible methods. Instead of cutting wages, government gives a certain amount of money (depending on the employee wages) to the businesses, helping them to cut down their cost. With the cost down, there is lesser need for businesses to cut jobs.
However there are some limitations to the scheme. Different businesses have different cost structure and wages is just want of the many cost drivers. In the face of changing demands, businesses are still likely to go ahead with retrenchment if they are having problems because from a bigger picture and longer term perspective, the cost savings from this scheme is insignificant. For businesses that are doing fine, then it is basically a bonus from the government which I doubt would translate into wage increases for their employees.
However this scheme does have merits in cases where businesses are hiring foreign workers due to lower cost. It is insane to expect Singaporeans to compete in terms of wage level because the cost of living that we have to bear is different. Hence the scheme may make it possible for Singaporeans to compete with foreign workers in certain jobs hence giving jobs to fellow Singaporeans.
No doubt the scheme provides a certain degree of boost to
the economy but the key discussion in the budget debate is about the effectiveness
of the scheme. For every $1 that the government spends, we definitely hope that
there is a multiplier effect that leads to an increase of more than $1 in the
GDP. If the scheme is not as effective, the government should look at other
ways to spend the money. It could be schemes to help the retrenched instead of
the businesses, spending to improve the transport infrastructure, reduce cost
of living, looking at foreign labor policies, etc.
This is where I found the budget debate to be a
great disappointment. MPs are asking questions if there is
agreement that the job credit scheme helps and saying how the scheme helps
certain companies. Of course the scheme will help since someone must be
benefiting from the money that the government spends. The key question is on
the effectiveness of the scheme which somehow the MPs just don't seem to get
it.
In the debate, the MPs are more interested to prove that they are right and
having redundant responses in showing how good the scheme. Some even go as far to suggest that the choice is either the jobs credit scheme or a cpf cut which I think is totally out of point. This isn't a black and white issue. This is an opportunity to take a critical look at the scheme and hopefully refinement can be made so that we make the best use of the budget. It was a total disappointment that not a single one of the responses try to address how to solve or clarify the limitations that were brought up.
Perhaps the job credit scheme is the best alternative that we have at this moment in time but I find it a pity that the MPs were not able to demonstrate their ability to listen and take feedback constructively and take this opportunity to build up the trust in their leadership. I would definitely wish that the responses from the MPs were better thought out and of a higher quality.
