Tan Kin Lian / Columnist
Just pumping funds into the economy will not do. It is also important to curb unemployment, and Singapore can do this by creating new "Economic Recovery" jobs.
Being an open economy, Singapore has been badly affected by the global recession with a severe contraction of the economy in 2009. Many people have lost their jobs.
There is an urgent need to create new “economic recovery” jobs for these displaced workers and new job seekers.
Examples of these jobs are teaching assistants in schools, health care assistants in hospitals, carers to look after children, elderly, disabled and the sick, customer service assistants in train stations, bus terminus, town centers and neighborhoods.
These assistants can reduce the stress from employed people who now have to spend work longer hours to keep their jobs.
I hope that the money that is set aside in the Jobs Credit Scheme can be used to create these “economic recovery” jobs to improve short term employment to large numbers of people and tide them over until the recovery of the global economy.
Availability and Security of Employment
There is now widespread recognition that the key to recovery is the availability, security and fair terms of employment. If people feel secure about their employment, they can continue to spend according to their capacity.
This will create a stable economy that works efficiently and creates the right balance of work and leisure that can give a satisfactory standard of life for the people.
It was once thought that the free market was the best mechanism to ensure that the right goods and services are produced and to give employment to people according to their skills. The global recession has shown the weakness of the free market.
Being largely unregulated, it has attracted large numbers of talented people to work in financial services that was creating false wealth. This system has now largely collapsed.
The free market is now not able to generate the new demand that will create employment for the large number of displaced workers and new entrants to the job market.
To solve this problem, we need a new source of employment, which can only be provided through the public sector. The state has to create new “economic recovery” jobs in the public sector and to build infrastructure.
President Barack Obama recognizes this role for the state. His administration is giving top priority to make this happen quickly. He is employing more teachers, more people to maintain state facilities and similar jobs.
Some people will argue that these public sector jobs may not be the best use of the human resources that can be better utilized in the private sector. This may be true in a few years time, when the economy has returned to good health.
Fair Terms of Employment
A good approach is to make these “economic recovery” jobs pay a minimum wage (and not a generous wage) and be for a term of two or three years only. When the economy is able to generate better paying jobs, the workers can abandon these “economic recovery” jobs and move to the private sector jobs.
The key is to make jobs available to anyone who is willing to work at a minimum wage or higher.
In a weak job market, workers can be exploited with low wages, even by companies that are operating profitably. Unemployed workers will be willing to get a job at any wage. The wages of the existing employed workers will also come under pressure.
If the workers do not get adequate wages, they will reduce their spending, causing delay in the recovery of the economy.
Therefore it is important to ensure that all jobs should give a minimum wage. If there is a supply of “economic recovery” jobs at this minimum age, it will set a floor on the wages in the free market. This will give the confidence to workers to have optimism in the future.
Stimulus spending not enough
In normal times, the free market works well in matching supply and demand and provides choices for people to find suitable jobs and to spend their income on products that best serve their needs.
A major shock, such as the global financial crisis, can cause many people to lose their jobs with a severe impact on the economy. Unemployed people have to curtail their spending. This caused other people to lose their jobs due to reduced demand. Even the supply of credit gets disrupted as bankers become more careful.
The economic experts did not foresee the severity of the collapse of Lehman Brothers on the global economy. If they knew, they would not have allowed this bank to fail.
Its failure has caused so much damage that it needed several trillions of dollars of stimulus spending in America, China and other countries, to stabilize and restore the global system. Even Singapore added its share of stimulus.
There is still much uncertainty regarding the positive contribution of the stimulus packages on the economy. Unemployment continues to rise. Consumer demand continues to fall, although at a slower pace. Economists are worried that these packages will take a long time to work, and recovery will be a slow and painful process.
Not a Planned Economy
Some people will perceive that I am suggested a centrally planned economy, where economic planners or bureaucrats decide on the number of people to be employed in each occupation and the wages to be paid for each occupation.
I am not advocating such a system.
I am suggesting that state should ensure that jobs will always be available at the minimum wage level to any person who is willing to work on these terms for a temporary period. This will provide competition to the private sector to produce goods and services of better value to consumers and be able to pay higher wages.
This will help to make the market economy work more efficiently by reducing exploitation and wastefulness, and giving workers the confidence to consumer according to their stable level of income.