President John De Payva
Central Committee Members
Brother Norbert Van Hofmann
Brother Hartmut Seifert
Brother Wolfgang Schroeder
Brother Ulrich Kueppers
Comrades and friends
I would like to welcome our comrades from Germany.
When I met Brother Michael Sommer, President of the DGB (Deutscher Gewerkschaftsbund) in May last year,we were only just beginning to see signs of economic recovery from the Iraq war and the outbreak of SARS (severe acute respiratory syndrome). When I met him in Miyazaki in December, I could tell him that we had a year of recovery.
Our economy expanded by 8.1% in 2004. Our Ministry of Trade and Industry has forecasted a growth of 3 to 5% for 2005.
Changing employment and workplace practices
Globalization, enabled by technology innovation, has brought about profound changes. The falling cost of information technology has displaced many jobs. A wide range of activities can be contracted out, thus reducing the need for a large permanent workforce in the organization. Competitive product markets and shorter product life cycles have created pressure to reduce costs. The globalisation of financial markets has also put pressure on firms to maximize shareholder value, resulting in on-going cost-cutting exercises, especially of direct costs, such as wages and salaries. The constant downward pressure on costs may further impact on the organization structures, terms and conditions of employment.
China, India and Singapore’s neighboring countries which have lower labour costs, large domestic markets and improving investment climates, are catching up fast, prompting Singapore to move up the technology ladder and value chain as we have higher cost structures.
On the domestic front, Singapore is now dealing with the issues of retaining jobs and retraining workers whose industries are undergoing restructuring. These industries may move out of Singapore, streamline, restructure, outsource, upgrade, refocus or any combination of these measures.
Compounding this problem are the relatively low education of older Singaporean workers age 40 and above, and a rapidly aging population. As Singapore has the fastest growing ratio of old to young people in Asia after Japan, helping them for successful career transition is a major concern for both the government and the unions.
These changes have transformed employment and workplace practices.
In the old paradigm, jobs are characterized by well define boundaries of responsibilities and fixed requirements. In the new workplace, employees need to constantly learn new ways of performing their work while focusing on production and cost efficiency.
The long-held expectation of lifelong jobs, predictable career advancement and stable annual salary increment are becoming outdated and unattainable. Replacing it are lifelong employability through constant upgrading, nimble workforces adaptable to changes. There has been a rise in atypical jobs such as part-time and contract work. Government policies would have to attract new investments for new jobs.
Responding to the challenge through tripartite partnership
The labour movement in Singapore spearheaded by National Trade Union Congress (NTUC) is meeting the challenges with its social partners in the tripartite framework – the employers and the government.
The push for initiatives in terms of wage restructuring and having a flexible wage system in place is part of our pragmatic approach, with workers all coming together to embrace changes in the economic and employment structure and meeting challenges together.
Wage restructuring
As restructuring gathered pace, to save jobs NTUC advocated that the national wage system be restructured. Keeping wage costs competitive would retain jobs. A flexible wage system would allow companies to respond more quickly to changes in business conditions, mitigating the need to retrench.
There are three main aspects of the wage reform.
The first is to moderate the system of seniority-based pay, under which an older worker receives significantly more than a younger worker for doing basically the same job. This makes the older worker more expensive to hire and therefore more vulnerable to being retrenched, and much less employable should he lose his job if he expects the same wage.
The second is to link wages more closely to the performance of the individual worker. Performance bonuses typically make up only a small part of the total pay package.
The third is to link wages to the profitability of the company and to business conditions. Currently, too much of wages are regarded as fixed, and too little are variable payments which may go up or down depending on business conditions each year. So when a company does badly, it is very hard to cut these fixed wages, harder than retrenching workers. A monthly variable component (MVC) is introduced in the new wage system to allow responsive adjustment, particularly when cash flow is a key problem. In the event of sudden business downturn due to unforeseen circumstance, MVC of the wage can be adjusted quickly to avert retrenchment. A wage system that is pegged more to productivity; less to seniority will also help older workers to preserve their jobs.
2 years ago, both Government and employers came round to the NTUC’s point of view, and agreed to push wage restructuring in earnest.
Wage restructuring is based on five principles:
- wage should reflect the value of the job
- stability of wage reflected in the fixed component, higher variable component for higher income earners
- annual wage increases should lag productivity growth
- small service increment to recognise learning curve for the job
- wage restructuring for all levels of staff, from the rank and file to the executives.
Wage restructuring would be successful and accepted by workers only if they see it as fair. NTUC and unions have worked with the employers to devise clear and objective performance indicators to determine variable pay. Based on a Ministry of manpower survey, some 80% of the workforce in large enterprises and 42% in small and medium enterprises were under some form of flexible wages as at 30 June 2004. Overall, 63% of the workforce in the private sector was employed in establishments that have implemented at least one key wage recommendation of the Tripartite Taskforce on Wage Restructuring.
Social Security
Our instincts are to keep the jobs we have as long as we can. However, there will still be restructuring, at a pace that gives us more time to adjust. But what about social security in a more volatile economic climate?
Social security reform is a major concern in many countries today. The key issues include pension and healthcare reform.
Pension Reform
Pensions or savings for retirement are broadly classified into two types, the defined benefit scheme, also known as the Pay-As-You-Go Scheme, and the defined contribution schemes similar to our CPF scheme where each worker saves for his own retirement. Under the Pay-As-You-Go Scheme, payments collected from today’s workers are used to pay for the pension benefits of today’s retirees. In turn a future generation of workers will pay the pension needs of today’s worker when he retires. Such schemes were introduced years ago when there was a large pool of young workers supporting a relatively small number of aged, who in any case did not live long. However, this system is no longer sustainable.
Pension reform in countries which rely on the Pay-As-You-Go system is necessitated by several factors including low birth rates and longer life expectancy. For example, today 100 workers support 35 pensioners in Europe. By 2050, the number will increase more than two-fold: 100 workers will have to support 75 pensioners. If current practices continue, the pension burden on the workers of the future will be enormous.
To address shortcomings in existing pensions systems and the rising deficits in pension liabilities, the approach has been a combination of one or more of the following:
a) Increase pension contribution rates of existing workers
b) Lower pension benefits for retirees
c) Increase the pensionable age
d) Encourage individual savings schemes for retirement
e) Introduce defined contribution schemes to replace or supplement the Pay-As-You Go systems
It is understandable that some of these changes have met with protests and demonstrations in some countries, since pensioners of the future will get less than the pensioners now.
CPF Reforms
In Singapore, we opted for a defined contribution scheme from the start in 1955. Our Central Provident Fund (CPF) system requires both employers and employees to contribute to individual accounts of workers. Each worker then draws on his CPF savings for purchase of housing, medical care and retirement expenses. This system has largely worked well for us. Nevertheless, we had to review and retune CPF for three reasons.
First, we needed to secure jobs for Singaporeans in the face of intense global competition. Coming on the heels of poor growth and economic recession and several years of contraction in the job market, the Economic Review Committee in early 2003 recommended a whole suite of measures including changes to CPF to boost Singapore’s competitiveness. Further reductions to employer contributions were however needed as CPF acts as a wage tax on employers and impedes job creation and the flexibility of companies to respond to downturns. This was done starting from October 2003.
Second, changes were made to the CPF to enhance savings for retirement and healthcare. Many Singaporeans are “asset rich and cash poor” on retirement due to over-investment in housing and premature withdrawal of CPF savings when they reach 55 years. Tighter CPF withdrawal limits to finance the purchase of housing have since been imposed. The CPF Minimum Sum that has to be left in the account for withdrawal as an annuity stream upon reaching retirement age will also be gradually increased to S$120,000 by 2013. Workers also now need to keep a Minimum Required Amount in their CPF Medisave Account for healthcare expenses in old age.
Third, CPF was fine tuned to assist the lowest income groups and older worker to get back to jobs. The CPF phasing-in wage band for the lowest income workers was increased from S$200-S$363 to S$500-S$700. By doing so the take home pay increases and this encourages more of such groups and others to take on jobs at least on part-time basis. For older workers above 50, mandatory CPF contribution rates were reduced to make them more competitive.
Interestingly, Germany has also introduced changes in 2004 to encourage long term unemployed workers to take on the low wage jobs paying 400 Euro or less a month (about S$880) by removing high taxes and social security charges on such jobs. This led to a boom in people signing up for such low pay jobs with 7.6m registering for such “mini-jobs” by June 2004, 1.2m more than a year ago.
Working Beyond Retirement Age
Many countries around the world are grappling with ways to maintain financing for retirement. One solution gaining favour is for people to work longer. In UK for example, the government has announced incentives including lump sum payments for those who put off drawing on state pension until 70.
In Singapore, we too are looking at ways encourage people to work longer. This is needed as most workers may not have enough in CPF to meet beyond their basic needs in retirement. CPF Board has projected that half of Singaporeans who turn 55 in 2013 will not be able to meet the minimum sum ceiling of S$120,000 which will take effect then.
One suggestion is for the retirement age to be raised. This alone would not be enough. The experience with raising the retirement age to 60 in 1990 and 62 in 1999 showed that labour force participation rates for the affected groups only increased marginally. (Our increase in labour force participation rate has been due to more women in all age groups entering the workforce.)
Our labour force participation rate for 60-64 year old workers in Singapore (33.4%) is much less than countries like Japan (54.8%), Korea (52.6%), US (51.1%) and UK (41%). We need a change in the mindsets and attitudes of workers and companies if we want our people to continue working in old age. For example companies can provide flexible work arrangements so that older workers who want a more relaxed pace of life can have the option of working fewer hours. Likewise older workers should be prepared to move to slower paced jobs whether in the company or outside the company after a certain age if it meets their physical and mental needs.
Strengthening social safety nets
Up till 1997, Singapore had stable growth, tight labour markets and full employment. It was taken for granted that jobs created were “permanent” and long term in nature. This situation has since changed fundamentally. Economic growth is more volatile. Economic restructuring is going at a faster pace. Job retrenchments have been at a higher level. Unemployment has increased and structural unemployment is a problem. Workers are changing jobs more frequently, not necessarily by choice as job tenure get shorter and the numbers employed on contract work and part-time work trend upwards.
This new reality has revealed gaps in existing social security arrangements. Our cultural instinct is to promote self reliance and guard against creating dependence on welfare. We must continue to emphasize this as we come out with solutions to meet the needs of a new era.
Healthcare and Portable Medical Benefits
There is a need for a system which will allow workers to take care of their healthcare costs when they are in between jobs. Under the present system, medical benefits are provided by the employer. But with shorter job tenure, a worker is likely to have periods without a job and therefore without medical coverage. If the worker falls ill at such times, he has to pay the full cost of treatment. Worse, if he contracts a chronic illness, employers may not want to hire him.
The NTUC has been advocating portability of medical benefits for some years. This will allow workers to carry with them unused medical benefits as they move jobs. Employers will pay the cash equivalent of medical benefits. Workers can then take care of their medical needs by pooling and buying into an insurance scheme which will cover them when in-between jobs and even when they retire.
A system of portable benefits would also make it easier for atypical workers also to have social security provisions.
The Ministry of Health is now looking to expand the coverage for Medishield insurance (meant for catastrophic illnesses) and making coverage as wide as possible. There will be riders from private insurers for higher level of coverage. This can provide a platform for a portable medical benefits scheme to be developed. The Medishield review will be completed by the middle of the year. Trade unions are active participants in the review. We think that Medishield coverage should be compulsory.
Individual savings account
With a discontinuous employment pattern, there is a greater need for workers to have discretionary savings to tide through periods of unemployment. Trade unions can play a role in building up discretionary savings of workers.
The setting up of individual savings accounts will be in line with our culture of self reliance. Several unions have started such schemes where members contribute regularly to individual accounts, some of which are managed by the NTUC Thrift and Loan Cooperative. Some unions have persuaded employers to also make contributions into such accounts. By putting aside a small amount, unions can help workers build up a few months salary in savings over a number of years.
Individual Learning Account
Training of workers is largely employer-based. The key funding incentive for training is geared towards employer-based training. The Skills Development Fund, a payroll levy on employers employing lower-skilled workers, reimburses employers who train. However, employers would only train workers in skills relevant to their needs. Such training may not be sufficient to create a flexible labour force.
A Workforce Development Agency was set up to establish continuing education and training more holistically. It has at its disposal a Lifelong Learning Fund that now has S$1.5 billion dollars.
But we have to encourage workers to take greater responsibility for acquiring skills that are in demand. The labour movement has for long advocated the setting up of a SkillsSave account for each worker. The individual learning account can be accumulated from contributions of employees, employers and top-ups from government. Workers can then use the money for training of their choice. However progress has been slow.
We have decided it is time to act. In 2005, the labour movement will pilot individual learning accounts for a few thousand employees from our co-operatives and NTUC. Details are being worked out on how this will be done. We are aware that individual learning accounts introduced in UK were suspended because of widespread abuse. Our objective is develop a system that would prevent similar abuse and at the same time encourage workers to take personal responsibility for their life long employability
Jobs for Singaporeans - Job Redesign
Jobs are the best welfare we can give to workers. Every able bodied Singaporean should be given the opportunity to take on a job to support for himself and his family. The vast majority of Singaporeans especially the young should be able to find jobs on their own. But those at the lower end of the skills spectrum will need help as there is a mismatch with the type of jobs brought in by new investments. If nothing is done they will be most at risk of being structurally unemployed.
The labour movement is looking to reclaim lower end jobs in the domestic sectors performed by migrant workers. Several sectors with large numbers of foreign workers have been identified for job redesign. The NTUC is spearheading job redesign efforts working with employers who have the know-how and government agencies which have the resources. The objective is to redesign jobs to increase their productivity, value and ultimately wages so that such jobs are more attractive for Singaporeans.
Changing Mindsets
As we redesign jobs, we must give workers the confidence to take on such jobs. Many manufacturing workers for example may find it difficult switching over to the services sector and work say in a hotel, healthcare, public transport or cleansing sectors. Workers must be prepared to change mindsets and prejudices, and move into new areas.
Training for Enhanced Employability
In a fast changing world, training is critical to ensure a person remains employable. Ideally, we must not wait until a worker is retrenched before he starts training for a new job. Some skills are generic and needed in most work situations, for example basic computer, literacy and numeracy skills. So workers can embark on such programmes even as they are in their present jobs.
Training and skills upgrading must be a life-long pursuit. Trade unions have called on employers to go beyond functional training and provide developmental training to enhance employability of workers. This will be the socially responsible thing to do especially if a company knows that jobs are going to be redundant. In fact, one union, Union of Powr And Gas Employees, has been successful in persuading employers to set aside part of the training budget for union initiated employability training.
NTUC’s Support for Training
On our part, NTUC will continue to support initiatives for workers to take greater responsibility for their own training and career development. Besides being a Surrogate Employer to help jobless workers access government funding for training, the NTUC will continue to provide union members with grants for training. Last year, the NTUC Education Training Fund Scheme gave out S$1.6m to 20,000 union members who undertook various training courses.
NTUC cooperatives
The labour movement’s cooperatives will remain an important part of the social safety net for workers. Each cooperative was set up with certain social objectives in mind. We monitor this through the annual report card of social indicators set out for our cooperatives. NTUC cooperatives have helped our workers stretch their hard earned dollars by providing affordable goods and services. They have also contributed generously to social and community development programmes.
Corporate Social Responsibility in Singapore
Corporate Social Responsibility (CSR) is about being socially responsible in business operations. CSR in essence is not a new concept but has gained prominence from a convergence of business issues coming together. We have seen the troubles at Worldcom (US), Enron (US) and Parmalat (Italy).
CSR is also of concern to Singapore due to our position as a hub for international businesses and the international expansion plans of local companies and government linked companies (GLCs). A lack of knowledge and management expertise in dealing with CSR issues may impede our development.
Efforts from the Labour Movement
A core element of CSR is the observance of labour standards. The labour movement in Singapore has been actively involved in the promotion of CSR initiatives in this area. Through our participation in tripartism and social dialogue, unions have been able to secure substantial improvements in workplace standards. Workers in Singapore have the freedom to join unions. The labour movement together with its tripartite partners, promote good Human Resource (HR) practices such as work-life strategies, workplace safety and health promotion, skills upgrading and flexible wage system to improve workers’ job security and welfare.
Unions in Singapore have continued to play a significant role in pushing for good CSR practices and standards. Recent priorities include the creation of opportunities for employee ownership and profit sharing, and the institution of open performance management practices. The Singapore’s tripartite guidelines on wage restructuring specifically tackles these two aspects whereby unions have been deeply involved in the process.
In addition to wage restructuring, NTUC and unions have also pushed for enhancement to the social safety nets. The labour movement has advocated for the implementation of portable medical benefits, individual savings and learning accounts in improving workers’ employability. The above efforts are in line with the framework of CSR as the labour movement aims to build a better life for workers through helping companies stay viable amidst the volatile business environment.
Social Mission with NTUC Cooperatives
In Singapore, CSR is strongly promoted through the NTUC cooperatives. The setting up of NTUC cooperatives is aimed at improving the social and economic well-being of our workers. Through its nine cooperatives, the NTUC has played an important and direct role in helping workers stretch their hard-earned dollar by moderating the cost of goods and services for basic needs such as food, health and dental care, insurance and childcare.
CSR is embedded into the mission of all the NTUC cooperatives. Many NTUC-affiliated unions also operate worker cooperatives and most provide welfare schemes to union members and their families, such as hardship grants, scholarship and bursaries for children of union members, insurance and death benefits. NTUC cooperatives are committed to their social objectives, maximizing stakeholders’ value and to help workers build a better life for themselves and their families.
The government has promoted good CSR practices by publicly endorsing and rewarding the efforts of socially responsible companies. Such public recognition , like the Singapore Quality Award and the Green Labelling Scheme has encouraged other companies to adopt CSR principles in their day-to-day operations and in the process heightens awareness of CSR by the various stakeholders.
National Tripartite Initiative (NTI) on CSR
The National Tripartite Initiative (NTI) on CSR was officially launched in May 2004, as a national platform initiated by the NTUC with support from the MOM (Ministry of Manpower), Singapore National Employers Federation (SNEF) and SBF (Singapore Business Federation), using the tripartite model as the national body to push for CSR.
The NTI aims to function as a national CSR body to formulate coordinated strategy and bring about synergy among the stakeholders in Singapore. The NTI includes key stakeholders like the National Volunteer and Philanthropy Centre (NVPC), Consumers Association of Singapore (CASE), Singapore National Cooperative Federation (SNCF), Singapore Institute of Directors (SID) and the relevant government ministries/agencies. Comrade Thomas Thomas, NTUC Central Committee Member, is one of the Co-Chairpersons.
All the partners and stakeholders are making active efforts to drive the CSR movement forward
By the end of this month, the NTI will launch the “Singapore Compact for CSR”, to broaden the base for collaboration between stakeholders in developing effective strategies to promote and strengthen existing CSR efforts in Singapore. Members will benefit from its networking events, training and advisory programmes and information services. We will work with unions to bring companies on-board.
The Singapore Compact will play a pivotal role in defining the direction and landscape of CSR in Singapore. The tripartite partners hope to work closely with employers to develop a corporate culture that places value in tackling issues like the observance of core labour standards, accountability in business practices, good corporate governance and protection of the environment. The Singapore Compact will consolidate and strengthen existing efforts in formulating a more coordinated and comprehensive approach towards CSR in Singapore.
CSR is crucial for the achievement of sustainable development and fair economic development. It has to start from the workplace, with unions, employers and government having key roles to play. Tripartite partners in Singapore are key stakeholders and have important roles to play in bringing the CSR movement forward for sustainable and effective implementation.
We hope to learn from each other, what works and what does not while understanding the inherent differences in infrastructure, demographics, etc. We all have one objective in mind, to continually better the lives of our workers.
Conclusion
I have outlined briefly our key concerns, and how we intend to provide workers with a greater sense of security in a volatile and competitive world.
I wish you a successful and fruitful seminar.
