1. We have experienced the most severe downturn in the global economy since the Great Depression.
2. It started in the United States with the sub-prime crisis. It affected what economists call “the real economy” (i.e. the production of goods and services), and swiftly spread across the world.
3. The impact is swift because the economies of the world are more inter-linked than ever before.
4. The Singapore economy has been hit hard because it is more dependent on world trade than any other country. So the contraction of the Singapore economy was sharper than most other countries. Workers have been retrenched. They and their families have faced difficulties and have had to adjust.
5. The story is similar in other countries. Workers all over the world have had to adjust.
6. For example, the unemployment rate in the United States is 9.5%. It is a continental country with many big cities and many small towns and villages. An American who has lost his job in a small town or village has no hope of finding another job where he lives. There are stories of such persons who drive 100 km away to work, sleep in the car, and go back home for the weekend, and then make that long drive back to work again.
7. In Japan, some retrenched workers switched to working in the growing eldercare sector. Not everyone could adjust satisfactorily to the job change.
8. But it is a question of earning some money to pay for living expenses. For retrenched workers, it is not a question of looking for a job that one likes.
9. Retrenched Singapore workers have had the same experiences. Fortunately, Singapore is a small country, so workers can still go home even if they work on the other side of the country.
10. One of the lessons learnt from this downturn is that those who have been flexible have been able to find jobs faster. With an income, they and their families have suffered less. It is a valuable lesson. I hope that all of us will learn this lesson, learn to be flexible, adapt quickly. There will be another downturn after the recovery.
11. Another lesson is that those who have savings have been able to manage better. In a downturn, a new job usually means lower pay. Savings would help us to tide over this period. So, we should inculcate the good habit of saving for a rainy day, little by little. Even a small amount each month adds up.
12. At the national level that is what government has been doing. Because it has saved and invested surplus funds in the past, Singapore has adequate funds to come up with the Resilience Package – SPUR for training workers and Jobs Credit to support for companies in payroll costs. This is why the retrenchments are not as high as would have been. Employers have been able to retain workers. Of course, our productivity figures are very poor, but our companies a better placed to benefit from the recovery.
13. As a country, we should learn these lessons from the downturn. Be flexible. Adapt quickly. Save for a rainy day.
14. Let me now turn to two other important lessons to be learnt from the quick pace of change of the global economy and heightened competition.
15. The first lesson is something I had frequently addressed when I was serving in the NTUC – the dangers of the seniority-based wage system. An established company with many long service employees has a higher wage bill compared to a start-up. This can be compounded by the cost of fringe benefits that are added over time. This is spectacularly demonstrated by the plight of the American automobile manufacturers. It has also been the problem of what the Americans call 'legacy airlines'.
16. New companies compete successfully with the advantage of lower costs. The threat to established companies can be even more lethal if these new companies also operate with a different business model.
17. This is why we have evolved our wage system into a flexible one, with variable bonuses. I am not sure that workers have learnt to manage their finances with a flexible wage system. In this downturn I hear that some workers have had to tighten their belts because they have lost overtime income and received lower variable bonuses. It means they have not learnt to save when variable bonuses were higher. We should not spend all our bonuses. I hope this downturn will help workers to learn this important lesson.
18. The second lesson is that when the economy is changing rapidly and competition is keener, employers build defences. One strategy is to employ workers on contract, or part time.
19. In Japan they call this 'non-regular employment'. 'non-regular' employment has risen in the developed countries. For example, life-long employment was the norm in Japan in the 1980s. By the 1990s, 'non-regular' employment in Japan rose to 20%. It is now 40%. 'non-regular' employees are paid substantially lower wages, and do not enjoy the same social security benefits as regular employees. In a recession, the employers cut wage costs by not renewing the contracts of these 'non-regular' employees. They are the first to go. This has resulted in homeless people who live in blue tents in public areas such as parks.
20. In Korea, one-third of wage earners are contract workers. They too, have been the first to be laid off. In Seoul, the homeless line up at soup kitchens and sleep in paper boxes. Unhappy contract workers have protested. "If you are a 'non-regular' in South Korea, your life is second class." One of the protesters said it more graphically: "They treat us non-regular workers like used toilet paper!"1
21. The use of 'non-regular' may also be caused by rigid terms for permanent employees. In Spain, one-third of workers are 'non-regular' because the permanent workforce is inflexible.2
22. This trend of employing 'non-regular' employees is disturbing. Here in Singapore, the foreign workforce has acted as a buffer protecting Singaporeans in downturns. However, the proportion of Singapore residents on contract terms has been rising. In the 1990s this was well below 10% of the resident workforce. Since Ministry of Manpower began collecting such information systematically, the proportion has risen from 11.6% in 2006 to 12.4% in 2008. So the foreign workforce has not completely shielded Singaporeans from contract work.
| Resident Employees | Term-contracts | % Share | |
| 2006 | 1,478,500 | 172,000 | 11.6 |
| 2007 | 1,482,100 | 180,200 | 12.2 |
| 2008 | 1,528,600 | 189,100 | 12.4 |
(Source: Labour Force Survey Singapore)
23. Since 'non-regular employment' is a global trend, we will have to learn to live with contract work. In other countries unions have been looking after regular employees but not the 'non-regular' ones. If 'non-regular' employees are going to form a substantial proportion of the workforce, I feel that unions should look after their interests. They are mostly lower-paid, with less social security provisions, and thus the most vulnerable group of workers. The reason for setting up unions is to protect workers, the most vulnerable ones. I therefore urge unions – including MIWU – to reach out to contract workers and find ways of helping them. We must also remember that regular employees today can become contract workers in the future, and they too must be prepared to cope with contract work.
24. What can we do for contract workers? Actually we have done some already. It is customary for employers to provide medical benefits for their long-term employees. Contract workers may not get such benefits. However, we have Medisave and Medishield. So, if contract workers get CPF, as they should, they would have Medisave, and be covered at least by Medishield if they did not opt out. So we must make sure that contract workers get CPF.
25. Many low-wage contract workers would not accumulate much in their CPF, not only because their wages are low, but also because the contribution rates are lower. Last year we took a very important step to introduce the Workfare Income Supplement WIS), for workers with monthly wages below $1,500 per month. Part of this Workfare Income Supplement goes into their CPF accounts.
26. What more can we do for contract workers? You need to talk to them, to find out their key concerns. Then you can work on solutions.
27. Finally, let me commend MIWU union leaders in the branches and staff and headquarters for the work they have been doing. The past few years – the last 2 in particular – have been stressful years as you cope with the changing economy. Many MIWU branches are in companies that are SMEs serving larger MNCs. When the MNCs relocate, the branches have been badly hit. You have done a good job, and I hope younger unionists will learn from your experiences.
