Pssst, Sylvia…here’s a better idea than your unemployment insurance!


Would an unemployment insurance work?

In this session of the Budget debates in Parliament, Worker’s Party chairman Sylvia Lim suggested that an unemployment insurance should be introduced by the government to protect workers whose jobs may become redundant, through no fault of their own.

“One model could involve requiring workers resident in Singapore and their employers, to each contribute a very small percentage of the employee’s monthly salaries towards a fund. The fund should be geared towards helping workers who undergo involuntary unemployment” suggested Lim.

This sounds a little like how our CPF operates. Except that it would be paid to a private insurer and the insurer would be making payouts in the event a staff is made redundant.


“The fund could gear towards giving a 6-month payout at a fraction of the worker’s last drawn salary, subject to a cap, say based on the median wage” said Lim.

The median wage for 2015 in Singapore is $3949 inclusive of CPF. 6 months worth of this is $23,694. To make this feasible for any employee at any wage scale, the staff would either have to be paying a large premium or have been paying for a long period of time without any redundancies.

Highlighting the benefits of such a program, Lim added that “Such redundancy insurance has benefits for both the individual and society. For the individual, he will seamlessly have recourse to this buffer which he contributed to; he may not need to queue up at a social assistance agency and tap on public monies”

Lim’s proposal is highly ambitious and leaves a lot of gaps to be filled in.

Both Canada and the United States have a version of this unemployment insurance, but their programs are backed by deep government funding. The program makes sense to them because it helps alleviate government administration.

We don’t have such a problem in Singapore, because our welfare is administered very differently. Our approach to welfare is unlike the tax intensive, welfare heavy European and Northern American countries.

To entrust the matter into a private organisation would be a difficult task. Although insurance companies do make payouts on disability or incapacity, these are on the conditions that the unfortunate circumstance happens. It mitigates the under writer’s risk in making unsubstantiated claims. By creating unemployment insurance, it would be quite difficult to find a company to want to take this risk.

Then there are also social ills to be concerned about: if I can get 6 months of payout if the company terminates me, why should I resign on my own accord? 

The program also goes against the grain of what Singapore stands for: a fair, not welfare society. Name it whatever you will, this is a form of unemployment benefit. The only reason why Western nations are able to sustain these benefits is through high taxation. How would this work out if it is left in the hands of the private sector?

Here’s a better idea: instead of paying an insurance company to protect you against unemployment, why not save the money in your own bank instead? Then work hard on your deepening/widening your skills so that you can get another job again easily should you ever be actually made redundant. 

Why should you pay for someone else when they get fired?

Oh yes, join a union also…because at least in the event of a retrenchment those guys can help strike a good bargain with your employers.

That’s a much better idea, more realistic and trustworthy than Lim’s unemployment insurance plan isn’t it?



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