During this year’s May Day rally, Prime Minister Lee Hsien Loon rejected growing calls for unemployment insurance. Instead, he reiterated that the government of Singapore has something even better for Singaporeans – schemes to enable Singapore workers to find jobs. Amid the massive number of retrenchments announced by foreign banks and oil and gas companies, such a move is inexplicable to me.
Firstly, I must clarify that I do not disagree with the government’s push for SkillsFuture. In promoting lifelong learning among workers, the movement enables Singaporeans to develop skill competencies relevant to succeed in the new economy. However, by telling Singaporeans that unemployment insurance is not needed is akin to a doctor advising his patient not to buy medical insurance and to stay healthy through regular exercises. Is this strategy even feasible in today’s challenging context?
We all know that life is fragile and can be unpredictable. Very often, even if you maintain a healthy lifestyle, it does not guarantee you against critical or even terminal illnesses like cancers. And what about unforeseen circumstances like workplace incidents or road accidents? There are simply too many circumstances that are beyond our control and it is naive not to insure our wealth.
Similarly, due to economy restructuring, companies may be forced to lay off workers deemed to be redundant. Even if you are a highly competent or qualified employee, you may not be spared from being retrenched. There are many factors that employers take into consideration and your salary might be one of them. In most cases, you are at the mercy of your boss.
No, I am not suggesting that unemployment insurance should substitute skill upgrade schemes. That will be an irresponsible suggestion as it could lead to a reliant mentality among Singaporeans. We don’t want to create a safety net that results in Singaporeans becoming complacent and not motivated to find jobs after being retrenched. Instead, what I am suggesting is for unemployment insurance to complement the existing skill upgrade schemes.
In today’s job market, PMETs who are in their forties face a dark prospect if they were retrenched. It is not uncommon to read stories of them unable to find jobs for months or even years. This group of employees is especially vulnerable because their skill-sets or knowledge may be obsolete and they face stiff competition from foreign and younger counterparts drawing lower salaries. Many of them give up finding jobs in their professional trades and struggle in their personal finances.
Indeed, being retrenched can be really devastating to one’s ego and financial wealth. The feeling of losing your income overnight can be distressing and may create deep anxiety to a person and his family. When such an unfortunate event occurs, there is certainly a need to adjust the family’s lifestyle. That is why I always advocate readers to build up at least 6 months of emergency fund, which would provide some buffer time for lifestyle adjustments.
Having an unemployment insurance would provide a peace of mind and ease your anxiety when you face retrenchment. The payouts would ensure that your family is well taken care of while you focus on finding jobs in your professional trade. You may not get similar pay in your next job, but at least the sudden impact on your wealth would be mitigated.
Secondly, I am convinced that there is an untapped demand for unemployment insurance and this is an opportunity for insurance companies to innovate new financial products. This is a win-win situation for the government and the society because in creating such financial products, the risk is transferred to enterprises. The government don’t have to worry about providing heavy subsidies or promoting the wrong values among Singaporeans because policy-holders would be paying their own premiums.
The Monetary Authority of Singapore (MAS) can consider encouraging insurance companies to develop unemployment insurances with payout of limited period like up to two to three years. In this way, Singaporeans who lose their jobs due to economy restructuring would still be motivated to look for jobs without having to worry about their finances.
What is your opinion of my proposal? Have you been retrenched before? Do you have any experiences to share? Join me in my investment journey and read my financial adventures for free!
SG Wealth Builder engages Singaporeans on topics related to personal finance, entrepreneurship and investments, such as shares and real estate.