Prepare Workfare to cover jobless

SINCE the start of this year, about 262,000 people have claimed Workfare income supplements. The state has given out $272 million, which works out to an average of about $1,000 per claimant.

Amid global financial turmoil, and within Singapore declining real wages, a less rosy jobs outlook, talk of a technical recession and record-high inflation, there’s a distinct possibility that jobs will shrink or disappear, with wages eroded by loss of overtime pay, pay cuts, or entire jobs being lost.

Will there be more claims for Workfare payouts in the next one or two years? Given the existing criteria which limits Workfare to those aged above 35 who earn below $1,500 a month, chances are that if the economy slows, the number of claimants will go up.

But Workfare, as currently structured, potentially leaves out low-wage workers at their most vulnerable times: if they lose their jobs altogether. Before Singapore faces the prospect of job losses on the scale of what happened in the early 2000s, it’s timely to review Workfare to plug the glaring gap that now exists in this otherwise stout social safety net.

Workfare is an income supplement scheme targeted at low-wage workers. It is contingent on work - which means only those who are already working get to benefit from it. The payout ranges from about $80 to $1,600.

Workfare marks a significant development in the People’s Action Party’s welfare philosophy.

From giving payouts only to the indigent (the destitute sick on Public Assistance), in the 1990s, the Government extended welfare to the interim (three- month payouts for the temporarily unemployed).

In 2006, welfare became institutionalised via Workfare - which is not interim but permanent; and not for the indigent or destitute, but for able-bodied workers.

While laudable, Workfare’s design now leaves a big hole in the safety net by not covering the low-wage worker when he loses his job.

This is not a problem in a galloping economy with jobs galore. But if the economy slows and tens of thousands of job losses occur - as happened around 2000 - an ironic situation will arise where those who hold on to their jobs qualify for state handouts, while those who have lost even their $1,000-a-month job get little assistance. This gap has to be fixed, by tying Workfare payouts not only to paid work, but also to training.

There are two key advantages to such an approach. The first is that it allows those who lose their jobs to continue on Workfare, if they go for training to help them become employable again. This removes the perverse outcome of removing help for the jobless who most need it.

The second advantage of tying Workfare to training is that it helps tackle the root problem of low-wage workers, which is their low skills.

Consider that Workfare is given out to those aged above 35. As the policy now stands, there is nothing to prevent a 35-year-old from becoming a permanent low-wage worker, content with a low salary and getting annual top-ups from the state. In theory, someone could be on Workfare for a good 30 years of his or her life. In that sense, Workfare can reduce the incentive to upgrade skills and get a higher-paying job, if there is a risk a worker’s new salary tips him out of the Workfare net.

Here’s where the experience of Denmark comes in useful. It has bucked the trend of high tax, high spending, high unemployment that cripples European welfare states. Its high taxes have instead created a flexible, competitive economy with low unemployment.

The hallmark of its social security system is ‘flexicurity’ - which allows for flexible hiring and firing so companies can adjust work practices according to production needs, and ties welfare and unemployment payouts to work and training.

Key to the Danish system are government-sponsored training programmes which give workers the security of knowing they get paid while undergoing skills training to prepare for new jobs. At the same time, unemployment benefits give them the security to tide them over while searching for a new job.

The result is a highly flexible labour force willing to improve skills and try new jobs. One estimate indicated that 800,000 Danes, or about 30 per cent of the labour force, change jobs each year, mostly to better positions.

Some form of training-for-Workfare benefits can be introduced in Singapore’s Workfare system, to motivate today’s low-wage workers to get reskilled and graduate out of Workfare to become tomorrow’s middle-wage worker.

There are lessons to be drawn from the experience of the Skills Redevelopment Programme introduced in 1997. Workers could get trained during working hours, and employers were paid from a mix of government and employer funds for workers’ time spent on training.

When the economy slowed down after the Asian financial crisis, SRP-sponsored training became a win-win option for workers and employers.

Instead of retrenching, employers reduced their wage bill by sending workers for training, and clawing back some of their wages through state-sponsored training grants. Instead of losing their jobs or having a shorter work week, workers spent their excess time on productive training that gave them a leg up when the economy improved.

Workfare can be tied to a similar programme. Or benefits can be structured in such a way that it encourages workers to go for training, and incentivises employers to send their workers for training rather than retrench them.

Workfare was introduced about 21/2 years ago amid a booming economy. With an economic downturn not unlikely, it is timely to improve this safety net so it covers low-wage workers during bad times when job losses are feared.

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