Extract 1

Help wanted for white collar jobless

As the economy goes through restructuring, more white-collar workers are losing their jobs. An estimated 30,000 professionals, managers, executives and technicians, or PMETs as the group is known, are jobless – victims of cost-cutting exercises, outsourcing, technological innovation and organizational change. Lay-offs in this group have risen over the past 10 years. Ministry of Manpower (MOM) data shows that, in the mid-1990s, around 7 out of 1,000 were retrenched each year. That was less than half the rate for production workers and labourers (15-17 per 1,000), traditionally the biggest victims.

Since 1998, however, the retrenchment rate for PMETs has been rising, overtaking that of lower-skilled workers, it hit a high of 24.8 per 1,000 in 2001. The following year, 20.2 out of every 1,000 PMETs were laid off, compared with 18.7 of every 1,000 production workers. In 2003, it was 16.7 versus 15.8. Those working in hotels, financial institutions and manufacturing were hardest hit. MOM data shows that most of the PMETs retrenched last year were between 30 and 50 years old. They were likely to be at the peak of their careers, with young families and large loans to see to. Worse, it now takes longer for retrenched PMETs to get a new job. In 1997, 75% could do so within six months. Last year, it was 59%. The plight of this group of jobless middle-aged managers and technicians has drawn attention of Prime Minister Lee Hsien Loong. He said last month that this was one of the three groups the Government would focus on, the others being older and lower-skilled workers.

For a long time, axed financial controllers, senior managers, marketing heads and so on were assumed to be able to fend for themselves. Most of the available training and skills programmes are targeted at less-skilled workers, as are job-matching efforts by the Government and unions. Now that white-collar retrenchment is higher on the Government’s agenda, the question is, what exactly can be done for this group? There are few jobs of comparable status and pay available for them. Management consultant Peter Lee of executive research firm Remuneration Data Services says some are still hoping to reclaim their high salaries and positions in the same industry, when these jobs have disappeared or left Singapore. Another option is to switch to new growth areas. The Government has a strategic manpower conversion programme which train professionals to move to the health-care and hotel sectors. It is also working on upgrading the skills of PMETs in finance and infocommunications.

The Singapore Professionals’ and Executives’ Cooperative (Spec) has about 5,000 jobseekers in its job-matching database. Its senior manager, Mr Chan Wing Seng, said it used to take them three to six months to find a job. Now it takes nine. Many become insurance and property agents, and even taxi drivers. Statistics from the Land Transport Authority shows a 16% increase in tertiary-educated cabbies from 2003 to 2005 – from 4,479 to 5,230 – even though the total number of cabbies went up only slightly – from 93,913 to 95,195.

Another option is for these workers to become management consultant. After all, many have had years of experience with multinational or local corporations, in Singapore or overseas. Specs run a three-day course that trains executives to become freelance consultants. It has a group of 30 consultants. But it’s a hard battle persuading clients to try them, because they don’t have a track record as consultants yet. Some jobless PMETs say employers should be more flexible. Sometimes, even if a person is willing to take a pay cut and stay, or take his place at the production line, employers don’t want them. Says Spec’s Mr Chan: ‘This mindset of employers must be changed. The message is always targeted at the employees that they need to change.’

Extract 2

Flextronics may expand S’pore office to manage Indian ops

(the advantages of outsourcing)

FLEXTRONICS international, the world’s No. 1 contract manufacturer of electronics, is likely to expand its headquarters (HQ) here in order to manage its fast-growing outsourcing of back-office operations to low-cost India.

Chief executive Michael Marks, who is retiring in January, told The Straits Times that the company is likely to increase the number of employees here as its operations in India grow. This is because while it is cheaper to run its information technology help desk and payroll processing functions form India, the management of these back-office operations is better done in a more developed country, he said. And Singapore, with its relative proximity to India, is the ideal candidate for that administrative function. ‘Now that India has come on the scene, it’s going to wind up to be the high-volume location for a lot of back-office functions. And those functions will be managed from Singapore,’ said Mr Marks

(increase in employment because of expansion of depth of operation)

Indeed, India’s rise will be a boom to Singapore, just as China’s meteoric rise as a manufacturing hub has increased Hong Kong’s importance as an administrative centre in the region for many companies, he added. Flextronics’ latest expansion plan should help allay fears of a hollowing out of Singapore’s manufacturing sector, industry watchers say. While low-level, assembly-line jobs have been lost to China, many manufacturers have found it cost effective to move higher-level activities to Singapore from their more developed home bases in the United States, Japan and Europe.

(increase in employment because of the escalation of the production ladder)

And that is why Mr Marks reckons that his company will continue to build up its Singapore operations, though not in its main activity of manufacturing. Apart from beefing up its HQ role here, Flextronics is also keen to expand its Singapore research and development team. Flextronics employs about 1,800 workers here, including 850 production operators.

(diversification of the economy – Research and Development)

Questions

a) Explain the causes of job losses among ‘white collar’ workers in Singapore. [8]

b) Discuss the policy options available to the Singapore Government to deal with unemployment in Singapore. [12]

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a) Explain the causes of unemployment among ‘white collar workers’ in Singapore. (8)

The rise of unemployment among ‘white collar workers’ is due to the following reasons:

Economic shocks – systemic factors such as Asian Currency crisis, September 11 and SARS will affect the economy extensively, contributing to falling demand for our products ands disruption of production and distribution structure. These incidents will prompt local and foreign enterprises to adjust their ‘organization structures’ leading to the retrenchment affecting the PMETs.

Demand deficient unemployment will arise and affect some of the industries employing PMETs. The fall in demand is the result of the fall in export demand which is caused by regional or global economic downturns. As Singapore is highly dependent on external market for growth, the impact has considerable consequences on the employment rate as production capacity will reduce. As wages are sticky downward as seen by ‘the workers’ hopes to reclaim their high salaries and positions in the same industry, when these jobs have disappeared or left Singapore’, disequlibrium will occur in the labour market where demand deficient unemployment occurs when the supply of labour exceeds the demand for labour.

The fall in demand will also lead to the enterprises to make adjustment to increase their competitive edge, giving rise to outsourcing and cost-cutting exercises which lead to retrenchment. These cost saving measures to provide the firms with more competitiveness are making it tougher for the older workers to sustain their employment. Though MOM tries to find new jobs for these laid-off workers, it may not be so easy as the workers may not match the skills of the jobs demanded by the new industries.

The change in the economic structure, giving rise to sunset and sunrise industries has also contributed to structural unemployment which is induced by technological changes. The PMETs laid off from the sunset industries may not have the relevant skills to work in the new industries. This is seen by the government needs to switch workers to new growth areas and for the government to introduce ‘strategic manpower conversion programme which train professionals to move to the health-care and hotel sectors.’ Technological unemployment also occurs because of technological advancement. As a result, industries like info-comm and banking needs to upgrade the skills of PMETs in finance and info-communications. ( to prevent skill incompatibility and displacement of workers)

In sum, Singapore is experiencing extensive structural unemployment brought about by its needs to adjust to world economic competition.

b) Discuss the policy options available to the Singapore government to deal with unemployment in Singapore. (12)

Unemployment refers the number of people in the labour force who are willing and able to work but cannot find a job. To discuss the solutions for unemployment in Singapore, it is important to understand the nature of unemployment. In Singapore, unemployment occurs due to demand deficient and structural changes.

Singapore experiences demand-deficient unemployment as result of the fall in the global demand and lower investment. To curb such kind of unemployment, there is a need to introduce an expansionary monetary and fiscal policy to induce greater level of private and public investment.

With an expansionary monetary policy, the interest rate will be lowered and the level of investment will be induced as the level of return on investment is higher due to a lower cost of borrowing. Similarly, increase in government expenditure will raise public investment while a lower tax rate for investment will induce private investment..

However, the effectiveness of such demand management policies commonly restrained by time lag and a small multiplier which is seen in Singapore as our MPS and MPM is high. Besides this, the fiscal policy is inflexible as it cannot be terminated easily and the spectrum of impact on the economy is limited. As for monetary policy, international competition and the liberalisation of the financial market has rendered the monetary tools ineffective in controlling the interest rate.

MP and FP cannot be used to induce the growth of external demand from FDI and export demand.

MP – qualitative manner – providing liquidity for firms to continue operation – prevent retrenchment

FP – expenditure is on infrastructural development – Singaporeans do not want to work in construction industry

- saturation of facility of development

- increase tax burden if the economy has large percentage of production from public sector

- crowding-out effect – excessive borrowing to finance govt exp. – increase dd for loan – increase in int rate – increase in cost of borrowing – decrease investment

- deprive the private sector fund for investment

- negate the expansionary effect of FP

As for export demand, the government can increase the cost competitiveness of the export by lowering the government related production cost to lower down cost of production so as to keep the export price level low. The government can also encourage the firms to improve their production method and engage in research and development to improve the quality of the product and thus enhance Singapore’s export competitiveness.

However, such policies require extensive government financing and support from the private sector. The government needs to be efficient in the management of resources and the implementation of policies to induce more research and development.

As for structural unemployment, it occurs in Singapore when the structure of the economy changes. It happens because of the changing production method and technology advancements. These result in certain industries and skills becoming obsolete. The workers do not have the skills that are needed by the industries and there is a mismatch between skills and requirements of new job opportunities. Hence occupational immobility occurs and there is time lag in training and relocating the workers. To solve structural unemployment, employers should provide retaining to increase labour mobility. Workers should also undergo upgrading to upgrade their skills and knowledge in order to have the requirements to work. Hence the government should come up with upgrading and retaining schemes for workers who need it.

However, it is not easy to encourage workers to participate in training development as the workers may not have the attitude and incentive for training if there is no adequate compensation for training as workers are forgoing their personal time for training. As for the employers, they may not be willing to send workers for training as the cost of training is high and it is difficult to retain the training benefit since the workers may leave the company after being trained.

Frictional unemployment occurs when labour is in between jobs. There is a time lag when people change jobs and frictional unemployment exists even at full employment level due to imperfections in the labour market. Information required by employers and workers, are inadequate or incomplete, so time is needed for both parties to find their required jobs and workers respectively. To tackle frictional unemployment, the government can set up a website or an agency to provide better, faster and more information on job opportunities for the workers who need to find a job. Another measure is to reduce or withdraw unemployment benefits to the short-term unemployed. In this way, they will need to work in order to have income, as the government is no longer helping them to a large extent.

In conclusion, the government can play an important part in solving unemployment in Singapore through various policies and schemes. However, there is a need to take note of the constraints of various policies.