Our economic recovery is still uncertain. MTI released the 3rd Quarter flash estimates yesterday. Our GDP grew by 3.7% year-on-year. The pace is slowing down. Quarter-on-quarter, the economy shrank 10.3%.
The manufacturing sector is still healthy, growing 7.8% y-o-y. But the service sector did less well, growing at only 1.8%.
These numbers do not take into account the loss in business due to the lockout of the port workers in the West Coast of USA last week, and further losses from the jam that was created at the ports.
Consumer confidence in the US has been declining for the past 4 months. There will not be a buying boom this coming Christmas season.
Looming on the horizon is the threat of war on Iraq. The price of oil has been rising in anticipation of the war. If a war starts, the price of oil could shoot up further, and raise the cost of production worldwide. The world economy, and our economy, will be hit once again.
Meanwhile, the Japanese government is still unable to revive the economy. The Japanese stock market is at a 19-year low. Loss-making Japanese companies have to consolidate. A number of them are closing their operations in Singapore. They are either pulling back to Japan, or relocating to China and lower cost ASEAN countries.
All these point to a slow and patchy recovery for our economy. Retrenchments continue to occur, at about 4,000 to 5,000 every quarter. While it will not be as bad as last year, the number is still high. My estimate is that we will finish the year with just under 20,000 retrenchments, down from almost 26,000 last year.
Moderate wage expectations
The NWC will reconvene soon. It will discuss the recommendations for wages for the coming year. Our union members can see how well our companies are doing. We can see within the company whether production is increasing, whether the order book is high, and whether the turnover is strong. Some sectors are doing well, eg chemicals, biotechnology and some areas in electronics. Companies making good profits should share the rewards with the workers. But on the whole, the business climate remains difficult. In these circumstances, we must not expect to get huge bonuses and increments from this round of negotiations. We must moderate our expectations.
Dealing with structural unemployment
In the longer term, we have to deal with the bigger problem of structural unemployment. Structural unemployment occurs when technology changes or when a business relocates, causing the workers to become unemployed and remain unemployed even though there are jobs available because they do not have the skills to do those other jobs.
Structural unemployment will grow. Technology keeps changing, faster and faster. Manual work gives way to machines, robots and computers. Workers who cannot catch up with the new processes will be displaced.
Companies that came to Singapore to take advantage of our high skills and low cost find that there are other countries that now offer lower costs but comparable skill levels. As these companies move out to those lower cost countries, they are not likely to come back or be replaced by other companies doing the same lines of work. Workers thus affected will not find a job similar to the ones they lost.
The workers in the textiles and garment industry are particularly vulnerable. 4000 jobs were lost from the industry in the past 5 years. The electrical products industry, making microwave ovens and other home appliances, is also facing a big shift. In the same period, 7200 jobs were lost. The trend will continue. Roughly speaking, about 40% of the jobless are structurally unemployed. In other words, they are not going to get back the same kinds of jobs that they have done in the past. They have to retrain, move on to a different industry, and put aside their hopes of returning to familiar grounds. Those of us who are fortunate enough to remain employed must also be prepared for change. We must upgrade our skills at every opportunity, to keep up with the advances in our companies. But if we think that our industry is likely to face major restructuring, take up courses that will help us get into other areas where jobs are available. Better still, train for the jobs in the new growth areas.
NTUC has helped our affiliated unions to form industry clusters. One of the key activities will be to focus on the outlook for the industries, in particular the outlook on manpower demand.
The clusters will help union members identify areas of growth and decline, and try to give workers a better indication of who needs to prepare for changes, who needs to retrain, and retrain for what. I hope that employers will contribute to the process. When there is restructuring coming, employers should give as much notice to the workers as possible to prepare them for change, keep as many as possible by retraining them and upgrading their skills, and for those who have to leave, help them make a smooth transition.
Workers and employers do recognise the need for retraining. The momentum for retraining is gathering strength. The Skills Redevelopment Programme is on track, and will achieve its target of 100,000 training places within 5 years ahead of schedule. Enrolment for IT training in various institutions continues to grow. Some trainees have even used their new knowledge to set up small businesses, and have become employers themselves, creating jobs for other workers. This augurs well for our workforce.
Executives face disintermediation
Meanwhile, a bigger problem is building up. Structural unemployment hits not only rank-and-file workers, but also executives as well. Their structural unemployment is of a different kind.
In addition to facing technological change and business relocation, executives face disintermediation or de-layering. Disintermediation or de-layering takes place when fewer middle level management staff are needed to run a business even as the business is profitable. In the past, when information processing and communication were slow and expensive, large organisations had to employ many people in the middle layers to collect data, make reports, pass instructions and monitor progress. The workers below them call these people "postboxes". That is a rather unkind term. The "postboxes" were actually performed an important role of processing knowledge of what was happening in the business.
This function is now replaced by IT and computerised knowledge management. In the past, a global supermarket chain would need to employ thousands of executives to check turnover and trends, compile reports by branch, district, country and region one layer at a time, and submit the full reports to the headquarters weeks or months later. Then instructions on what to do would filter down through memos and meetings, again taking a long time and passing through many management levels.
Today, such a supermarket operator can link up every checkout terminal in the world to a central IT system. Top management can know every detail of sales, inventory and orders by branch, district, country and region at any moment without any humans reporting. They can call up charts and statistics in any format they want and get it in minutes. They can pass new instructions by email and reach thousands of outlets directly at very low cost.
Other staff functions are also made redundant. I was told that one petrochemical MNC has centralised all the regional HR functions in Manila, so there are very few staff doing HR work in Singapore. One retail chain has consolidated all the IT work in Malaysia, so the Singapore department was closed down. Another company outsourced its in-house maintenance functions, and the managers and executives in charge were also retrenched.
Executives at the in-between levels are in danger of becoming obsolete. 10 years ago, in 1991, unemployment of this layer was 15% of total unemployment. Last year, the proportion has risen to 28%.
Executives who are disintermediated from staff functions will have greater difficulty getting a new job at their level than rank-and-file workers. For some, training for a different industry will not be enough. This is because disintermediation is happening in all the industries at the same time. Fewer executives will be needed to run the companies in Singapore even as the economy grows. They will have difficulty getting back into roles they are familiar with in any industry.
Government needs to pay closer attention to problem
The Government should pay closer attention to this growing issue of structural unemployment of executives. NTUC too is studying the problem. There are no quick and easy solutions.
But to the executives, I would say that the first thing to do is to broaden their search horizon. Executives will have to acquire more technical, business development and decision-making skills to get into new management jobs in new areas. There will be fewer information processing jobs. The demand will be for executives who can bring with them knowledge, judgment and networks.
More will have to think seriously about accepting overseas postings. There is value in what they possess, but the value may not be realizable within Singapore to the fullest extent.
Right now, there are opportunities in China, India and the ASEAN countries. But we should not limit ourselves to those places only. We should be prepared to venture anywhere in the world where our skill, knowledge and experience commands a premium because they are higher than what is available locally.
I met a Singaporean who gives courses on management and leadership in Fiji. I asked him, why go to Fiji? His reply was, if he were to go to New York, he would face thousands of other people better qualified than him to teach management and leadership. But in Fiji, he has very little competition. So he is making a very good living as a consultant there. Our executives need to take bolder steps forward and out, to help themselves.
That is not to say he is a quitter. A quitter is one who will refuse to help when we face political, economic or security difficulties. A person who chooses to work overseas but will return to fight for our national interests when needed is a stayer, not a quitter.
We will continue to succeed
Our workforce faces short-term and long-term challenges. We have to remain flexible to ride the uncertainties and overcome our problems. We need a strong tripartite understanding of the issues among Government officials, employers and workers, so that we can work out solutions for common benefit. As long as we can work together in harmonious partnership, and make the effort as individuals to seize the opportunities presented to us, we will continue to succeed.
I wish SISEU a happy 21st anniversary.
