There’s no such thing as a free lunch, not in Singapore. At least that’s the message we’ve had drummed into us from an early age. Giving out freebies makes people lazy and less hungry for success, or so the government rhetoric goes.
So it was no surprise to hear Second Manpower Minister Josephine Teo reject the idea of redundancy insurance by asserting that it would lead to higher long-term unemployment.
Retrenchments have reached a 7-year high, and families are fretting about what they can do when their main breadwinner loses his or her job—and is unable to find one that pays anything close to his or her previous salary.
While any attempt to put in place redundancy insurance must surely be accompanied by a litany of caveats and conditions, it’s not fair to say that there are no positive benefits to instituting such a policy.
Here are four benefits of redundancy insurance that might actually improve Singaporeans’ lives.
Fewer people will take on jobs they’re overqualified for out of desperation
While Singapore has a low unemployment rate, underemployment is rising, especially amongst university graduates. Underemployment happens when somebody takes on a job they’re overqualified for, or does a less-than-full-time job when economically speaking they should be working full-time.
Under the current system, if you lose your job, your income could immediately drop to zero. This leads to people searching for jobs out of desperation—hence the stereotype of the retrenched banker who goes on to drive a taxi or wash dishes.
This has serious implications for the economy. If highly skilled workers are too busy driving taxis, they have fewer chances to upgrade themselves or search for jobs more aligned to their skills. Underemployment can be almost as destructive to one’s wellbeing and morale as straight-out joblessness.
People will feel a greater sense of financial security
The majority of Singaporeans will probably never have to make a redundancy insurance claim. But the magic is that, even without making a claim, redundancy insurance gives people a greater sense of financial security in the knowledge that should something happen to their job, they won’t necessarily starve.
This could be the psychological shift that’s required to make Singaporeans more invested in finding work that resonates with them, rather than feel obliged to hang on to jobs in which they display as much engagement as a plank of wood.
It might also do positive things for the birth rate. Because no matter what handouts the government dangles, they’re doing little to alleviate the sense of financial insecurity that would-be parents feel. There’s still the prevailing sentiment that in order to survive in this dog-eat-dog world, a parent needs to work his or her brains out, which leaves him or her with little time to actually spend with the kids.
The actual financial wellbeing of people might rise
For those who desperately need it, redundancy insurance can prove a real lifesaver.
Realistically speaking, it is unlikely these payouts will be big enough to convince those Singaporeans who actually have a household to support to just take a year-long holiday on the government’s dime.
For these people, a few hundred bucks a month, at least until they manage to find work, can be a life saver.
What is more, there is evidence to show that the mere fact that redundancy insurance is available can boost the financial wellbeing of people—even for those who never make a claim.
A recent study has shown that unemployment insurance can not only boost consumer spending, which is useful in recessions, but also prevents foreclosures—that means fewer people losing their homes or going bankrupt.
But more surprisingly, it also enables poor households, including those who never actually have to make a claim, to gain easier access to credit. In Singapore, that would translate to greater ease in getting a home loan, since banks would be less wary about lending to someone in the event that they could potentially get retrenched.
Of course, the precise effects of redundancy insurance would be very different in Singapore than in the US. But if properly-calibrated, it’s hard to argue that there won’t be any benefits to society as a whole.
Do you think redundancy insurance would work in Singapore? Share your views in the comments!