Thursday, September 02, 2004

Unemployment and the government 

The Straits Times reported today that the jobless rate for Singapore is expected by the government to stay at 4 percent.

Pressed in Parliament by opposition MP Low Thia Khiang on the projected unemployment rate for Singapore, Manpower Minister Ng Eng Hen said: “All things being equal, if we continue to grow at the rate of 3 to 5 percent for the next five years...unemployment will be around 4 percent.”

Manpower Minister Ng added that “the greater challenge for many Singaporean workers is that they may be left behind because their skills and aptitude may not be quite consistent with the types of jobs being created. Our new economic structure creates jobs that we must retrain and help Singaporeans adapt to. If we can do that and meet the challenge, then unemployment will go down.”

I agree with him. When an economy restructures, there is always a great risk that some workers — often the lower-educated and lower-skilled — will be unable to adapt to the new jobs.

Unfortunately, the government’s plan to reduce headcount in the public sector, also reported in The Straits Times today, may aggravate the unemployment problem. The newspaper did not provide much details, but the target for job cuts appears to be based on the number of heads rather than the total wage cost. This may create a temptation to focus the cuts on the lower-paid, lower-skilled jobs, thus affecting the ones most vulnerable to the economic restructuring.


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