INCOME DISPARITY

[Mr Speaker in the Chair]

The following Question Nos. 1 and 2 stood in the name of Mr Yeo Guat Kwang -

1. To ask the Minister for Trade and Industry how his Ministry interprets the 1999 Labour Force Survey which showed an increasing trend in income disparity; and what plans the Government has to help the unskilled, lower-income workers to improve their job prospect.

2. To ask the Minister for Trade and Industry how his Ministry interprets the 1999 Labour Force Survey which showed a rise in income inequality; and what social safety nets are available to help the lowest-income households avoid hardship.

Dr Lily Neo asked the Minister for Trade and Industry whether any further constructive steps have been taken by the Government to render assistance to the bottom 10% of the population whose household income had plummeted.

Mr Tay Beng Chuan asked the Minister for Trade and Industry whether his Ministry will quickly identify the bottom 10% of our population with an average monthly household income of only $133.00 and encourage them to take up the many better-paid unskilled jobs that our small and medium enterprises are desperately trying to fill up to meet the demand in the service, retail and manufacturing sectors.

Dr Jennifer Lee asked the Minister for Trade and Industry whether single-parent families and other family structures not within our "traditional" definition form a disproportionate number of the households in the lowest-income group and, if so, whether the Government will review its policies to help these families bridge the income divide.

Dr Lily Neo (Kreta Ayer-Tanglin): Question No. 1, Sir.

The Minister for Trade and Industry (BG George Yong-Boon Yeo): Mr Speaker, Sir, may I have your permission to take Question Nos. 1 to 5 together, please?

Mr Speaker: Yes.

BG George Yong-Boon Yeo: The Government has always been committed to helping low income families improve their economic prospects and living standard. First, we ensure that their basic needs are met through affordable housing and healthcare. Second, we help equip them with the means to support themselves by providing heavily subsidised education and skills training. Third, we help create ample job opportunities by building a strong and competitive economy.

This approach has worked well for us. Over the years, low income families in Singapore have seen their incomes and living standard rise steadily, in real terms.

Among households in the bottom 20%, 95% own colour TV sets, 90% own telephones, and 77% own washing machines. These ownership rates are better than even the national average of all households in many developing countries.

Our achievement in home ownership is also good. While many of the poor in other countries are homeless, the lowest 20% of households in Singapore are well-housed. 75% of them own their own homes.

We have achieved this without creating dependence or weakening the family, and in a way which gives opportunity and hope for the children of low income families to do better. All segments of our society are thus able to benefit from our economic prosperity, and this is part of the reason for Singapore's political stability.

Given the progress we have made, many people were surprised and disturbed by newspaper headlines claiming that the lowest 10% of our households lived on only $133 a month. In fact, the headlines were misleading and inaccurate.

The Department of Statistics had reported that, in 1999, the average income from work of the bottom 10% of households was $133 per month. This was the statistical average. 75% of these households had members who did not work at all and therefore reported zero income. This pulled down the average income for this group of households to $133 per month.

This statistical average of $133 per month in 1999 was sharply lower than the average of $258 per month in 1998. The main reason was that the proportion of households in the bottom 10% with no working persons went up from 62% in 1998 to 75% in 1999. Put it another way, the proportion of households with persons working fell sharply from more than one-third (38%) to one-quarter.

This was partly because unemployment increased during the regional economic crisis, and also because the number of retiree households had grown. (The proportion of retiree households in the bottom 10% has risen from 27% in 1997 to 32% in 1998 and 35% in 1999*.) [The increase in retiree households can be attributed to (a) the ageing population, and (b) older workers choosing to retire due to the poor job opportunities during the economic crisis.] Dr Jennifer Lee asked whether there is a disproportionate number of the households in the lowest-income group which are single-parent families. Single parent families constituted only 4.2% of households in the bottom 10% in 1999. [*Definied as households with heads who are: (a) single, widowed, divorced/separated; and (b) with children below 16 years of age. The percentage of single parent households in the bottom 10%, although low, is higher than the national average of 1.8%.] This was in fact a slight reduction from the 4.5% in 1998.

To cushion the impact of the crisis on the lower income families, the Government had provided rebates in HDB rental, utilities and service and conservancy charges as part of the cost cutting package. This assistance amounted to about $46 per month for households in HDB 1- and 2-room flats, and $36 per month for those in HDB 3-room flats.

Mr Tay Beng Chuan has suggested that we help the bottom 10% take up the many better-paid unskilled jobs that our small and medium enterprises (SMEs) are trying to fill. The Ministry of Manpower (MOM) provides employment assistance, at no charge, to unemployed Singaporeans who have difficulties finding a job, including those in the bottom 10%. It actively sources for job vacancies, and organises job fairs and outplacement events in partnership with employers, unions, and the Community Development Councils. SMEs seeking workers are encouraged to register their job offers with MOM and participate in its recruitment events.

As the economy recovers and the job market improves, more people in the bottom 10% would be able to find employment and the income growth of working households should resume.

For the bottom 10% of households, their median CPF savings amounted to $20,000 in 1999. Among them, only 25% live in 1- or 2- room HDB flats. 39% live in HDB 3-room flats, 24% in 4-room or larger flats and 11% in private properties. Nearly all of these are owner-occupied.

In other words, many in the bottom 10% have significant wealth, in the form of CPF savings and their homes. They are not an underclass.

I have taken some time to put the Department of Statistics' figures in context, as it is important that we get a right picture of the bottom 10% income households before we discuss how best to help them. There are poor Singaporeans in our midst but the situation is not at all as bad as the headlines portrayed. To help the less well-off, the Government has put in place a range of assistance programmes.

The Ministry of Community Development and Sports (MCDS) has various schemes that target the most disadvantaged in our society. The Public Assistance (PA) Scheme provides long term financial help. PA recipients also receive free medical services and assistance in-kind. The Interim Financial Assistance Scheme caters to those in need of shorter term help, while families in rental flats can seek relief from the Rental and Utilities Assistance Scheme (RUAS). There are also child care and student care fee assistance schemes for low-income families. The Community Development Councils (CDCs) further complement these schemes with other assistance tailored for their needy residents.

For the children of low income families, the Ministry of Education (MOE) renders help for their education. MOE's Financial Assistance Scheme (FAS) provides needy pupils from families receiving social assistance from MCDS a 50% waiver of miscellaneous fees, full waiver of school fees and a textbook grant or an annual bursary. Schools can augment the assistance through the School Advisory Committee or School Management Committee Fund. Children from low-income families who perform well are also awarded Edusave Merit Bursaries. Many charitable foundations and grassroots organisations provide supplementary support.

In the area of healthcare, the Ministry of Health (MOH) ensures that healthcare remains affordable and accessible to all, including the poor. Class C wards are subsidised 80%. Patients facing difficulty in paying their healthcare bills are assisted by the Medifund scheme.

In addition, the Government also funds 90% of the capital expenditure and 50% of the recurrent expenditure of approved projects by social service agencies. This enables community organisations to provide a support system, such as counselling services or simple financial budgeting guidance, for families in need which go beyond just dollars and cents. Together with the National Council of Social Service, MCDS is also encouraging more corporations to sponsor assistance programmes for the less fortunate. This `many helping hands' approach enables us to create a strong basic social safety net for the poor.

Looking ahead, the bigger concern to us is the widening income gap between the bottom and top earners. The average income ratio of the top 20% to the bottom 20% households has increased from 13.6 times in 1997 to 17.9 times in 1999. This was partly because the impact of the recent recession was much harder on the lower income households than on the higher income households. However, it is also likely to indicate a longer-term structural trend.

With globalisation, there is now a global market for labour. At the top, scarce talents command high international wages while, at the bottom, the wages earned by those who are unskilled come under increasing downward pressure from the hundreds of millions in the Third World joining the global market who are prepared to work for a pittance. This is a worldwide trend which our system of foreign worker levies ameliorate only to a point.

In the US, the ratio of average income of the top 20% to bottom 20% increased from 12.2 in 1988 to 13.7 in 1998. According to a recent report in the International Herald Tribune, the income gap in the US is now at its widest since data was collected in 1977*, [Study by the Center on Budget and Policy Priorities was based on after-tax income figures from the Congressional Budget Office. Source: IHT, 6 September 1999.] with the ratio of top executives' to factory workers' pay increased 10-fold from 42 times in 1980, to 419 times in 1998. [By the Institute for Policy Studies and United for a Fair Economy. Source: IHT, 6 September 1999.] Even in Japan, which has long been regarded as one of the world's most egalitarian industrialized nations, the gap between the rich and poor is widening. [*Source: IHT, 5 January 2000.] We can expect the same to happen in Singapore.

What should be our response? First, we must make sure that the incomes of those at the bottom continue to rise. We can only achieve this if our economy continues to grow healthily. For the majority of low-income Singaporeans, especially older and less educated workers, skills upgrading is the key to enhancing employability and income. The Ministry of Manpower has therefore worked with employers and unions to launch the Skills Redevelopment Programme (SRP). Under the SRP, generous grants covering up to 100% of course fees and 85% of absentee payroll are provided for the training of less educated workers aged 40 years and above. The target is to upgrade the skills of some 100,000 workers through this programme by the year 2003.

In addition, the Ministry of Manpower is working with other Government economic agencies and employers to professionalise jobs in domestic-based industries with low productivity such as cleaning, construction and retail. The aim is to upgrade these jobs to achieve higher skill content, and facilitate the training or retraining of workers in these industries. With improved productivity, these industries can then provide more viable job opportunities for local workers, including those displaced as a result of economic restructuring. To support the various manpower development initiatives, the Government has set aside $200 million for the Manpower Development Assistance Scheme to co-fund the projects with industries.

Second, we must continue to ensure that lower income families have the means and opportunities to move up the economic and social ladder. That is to say, we must have as little friction as possible to social mobility and progression. Here, our education system plays a crucial role. We must give every child the best education possible and prepare him for the needs of the New Economy. This is why we have always given the highest emphasis to education. For every cohort, we are targeting 25% to have a university education, 40% to have a polytechnic education and another 25% to have an ITE education. We make sure that the children of poor families are not disadvantaged. MOE, MCDS and the CDCs help them financially so that no child is prevented from being educated to the limit of his potential because his parents are poor, sick or unemployed.

As Prime Minister Goh Chok Tong has pointed out, our basic approach is to level up. The more economic growth we have, the more we will be able to level upwards. The key is a healthy Singapore economy that is globally competitive.

Our social safety net sets a good minimum standard of living for the least well-off Singaporeans. This undergirds our sense of community solidarity. Beyond that, we must always give hope to those at the bottom that even if they themselves cannot do better, their children will be able to. At all times, our system must incentivise effort, family support and self-help.

Dr Lily Neo: May I ask the Minister whether there will be newer incentives, apart from those mentioned earlier, to facilitate low-paid and low-skilled workers to go for further training so that they can earn more wages?

BG George Yong-Boon Yeo: These are on-going programmes. We have allocated funds for them. As and when new needs come up, we will look at how these new needs can be met, and if we have to allocate more funds for such undertakings, we will do so.

Mr Heng Chiang Meng (Cheng San): I would like to ask the Minister to review other aspects of this issue which affects the ability of lower income Singaporeans to improve their financial situation. May I ask that he looks into the various Government policies which, though well-conceived and implemented with good intent, have the unintended effect of disadvantaging the lower income groups' ability to improve themselves. For example, would the Minister review the policy of prohibiting the sale of cooked food prepared in homes? Would the Minister consider reinstating the past policy of allocating hawker stalls and school tuckshop stalls to deserving applicants instead of tendering them to the highest bidders?

Sir, these are some of the traditional ways in which the poor could improve their financial situation but today they are no longer available because of Government policies. Would the Minister also review HDB's policy of not permitting second-time direct purchases from HDB if the second unit is of a lower category from the first even though both purchases could be within HDB's general policy of two direct purchases from HDB? Surely, the removal ---

Mr Speaker: Order. Mr Heng, are you making a speech?

Mr Heng Chiang Meng: No, Sir, I am asking questions. I am asking: whether the Minister could do this or do that. These are all questions.

Mr Speaker: I know that. But you are also punctuating your questions with sentences.

Mr Heng Chiang Meng: I agree. I will remove the sentences.

Mr Speaker: All right.

Mr Heng Chiang Meng: Sir, I would like to ask the Minister whether he could establish an Inter-Ministry Committee to review and amend, if needed, such policies, taking into consideration the effect on the poor and the diminishing number of opportunities for them to upgrade themselves. I would also like to ask the Minister that if he does so, whether feedback from the public would be solicited.

BG George Yong-Boon Yeo: Sir, I thank Mr Heng for his helpful suggestions. Some of the issues are not new issues, like whether we should allow cooked food to be prepared in HDB households. There are, of course, conflicting objectives because there are externalities involved. The smoke may cause annoyance to neighbours and we should strike a proper balance between allowing for flexibility of resource allocation and not causing inconveniences or negative externalities to people around. But these are issues which Ministries should review from time to time so that we are not trapped in old positions, especially with the new challenges posed by changes in the world. His particular suggestions will be forwarded to the various Ministries for their consideration.

Dr Lily Neo: May I ask the Minister whether the widening of income gap in Singapore is definitely getting worse and whether this will jeopardize social cohesion, social stability and other related issues here?

BG George Yong-Boon Yeo: The most common index used by countries to measure inequality of income is the gini coefficient and the higher it is, the greater the inequality. For many years, before the economic crisis, our gini coefficient has improved and then flattened out. During the crisis year of 1998, it went up. So we asked ourselves whether this was just the result of the economic crisis which hit those at the bottom disproportionately or whether it represented a trend break. We have been studying the gini coefficient in advanced countries in the US, the OECD and so on, and we have noted that in these countries, the gini coefficient has tended to worsen. So we ask ourselves: what is the likely tendency in the future? I think we have worsened because of globalisation. The top in our social ladder would command international wages, particularly in growth sectors where talents are scarce. Many of our hotshot dot.com types now command fabulous salaries or incomes because of the recent boom. Of course, the bubble has punctured the boom somewhat but, still, relative to many other sectors, they have done very well.

Then there are those who are unskilled and, increasingly, they are competing with the unskilled in China, Vietnam, Indonesia and India. With the end of the Cold War, these countries are opening up and hundreds of millions of people are entering the workplace. In the past, when they lived in remote villages, they could not compete in the global market. Now, with better communication, transportation, Internet and e-commerce, more and more of them are entering the global market and this has a depressing effect on the wages which unskilled labour in Singapore can command. Of course, in the services sector, they tend to be protected. But even in the services sector, with the globalisation trends, more and more segments in the services sector are being opened up to global competitive pressure and it is in our own interest to open up the services sector to international competition because it lowers the cost of doing business in Singapore and helps make the tradable sector more competitive.

Will the worsening of the gini coefficient continue forever? I think in the end, it will find its own equilibrium. When a new frontier is opened, there are the robber barons, there are those who have struck gold, and there are those who are left penurious, so the coefficient tends to widen. But after a while, stability will resume. Those who are at the bottom will catch up, those who are at the top will find that temporary scarcity is met by growing supply, and so the trend may reverse itself years down the road. But when that will take place, we do not know because the economic changes taking the world today are truly revolutionary.

Mr Low Thia Khiang (Hougang): The Minister mentioned the Government's target to upgrade 100,000 less-educated workers by 2003. I would like to know from the Minister what are the targets of this group of workers specifically and what concrete steps the Government has taken so far to achieve these targets. Also, is the Minister aware of the problems of these low-educated, low-paid workers, many of whom are trapped in low-paid professions? And will the Government consider providing a living allowance to these workers who are prepared to go for training? The other question is: in view of the widening income gap, will the Government review the benchmark for affordability in terms of HDB flats and healthcare services?

BG George Yong-Boon Yeo: The Skills Redevelopment Programme covers a wide range of retraining courses. It is true that among the older workers, some find it hard even to get themselves retrained in these courses. But we have had some very good successes of workers going for retraining and finding good jobs in growth sectors of the economy. Take, for instance, our disk-drive industry which has shed thousands of workers in the last two years. Many of these workers had since been redeployed to other industry sectors. Many of them are still in the electronics sector where we enjoy rapid growth in the components, in the computer, and the communication segments. We do provide salary assistance through Government subsidy of absentee payroll.

As to whether we should, from time to time, review what constitutes a minimum safety net in Singapore, I think we should, because this is what it means to be part of a community, that those at the bottom enjoy a minimum standard which is commensurate with the average living standard in our society as a whole so that the inequalities are not so gross as to cause social discord and disruption. If we look at the bottom 10% in Singapore and compare them to the bottom 10% in any other major city in the world, whether it is London, New York, Berlin, Tokyo or Hong Kong, I do not think we have done too badly. We should not measure a city by how its top 10% live. Because they can live very well; in Hong Kong, they drive Rolls Royces, in New York, it is a lifestyle which many of us can only imagine or fantasize about. But judge a city by how it looks after those at the bottom, its most downtrodden. And if we look around, I think we can be proud of what we have achieved in Singapore.

Mr Low Thia Khiang: Sir, I do not think the Minister has answered my questions. There are basically two focus points. One, what is the specific target and how the Government intends to achieve the target of upgrading 100,000 workers by 2003 who are low-paid and less-educated.

The second question I asked was whether the Government will review the benchmark for affordability in terms of healthcare and HDB flats.

BG George Yong-Boon Yeo: Mr Speaker, Sir, I have answered both questions. If Mr Low wants more details, and he tables another Question, I will get the details and provide them to him.

Under the Skills Redevelopment Programme, we have a whole range of courses for the retraining of workers to fit them into growth sectors in the economy. As to his second question whether we will re-assess what constitutes affordability levels, this is done on a continuing basis because it is always relative to the overall standards in our community.

Mr Chiam See Tong (Potong Pasir): Sir, I am still surprised to learn that in Singapore, people are still earning only $133 per month. I believe this is due to an educational problem. There are many workers in the workforce who are unable to read or write.

Mr Speaker: Mr Chiam, can you ask your question?

Mr Chiam See Tong: I am asking the Government whether it is willing to tackle the problem at its source, ie, to amend or change our education programme because it is too inflexible at the moment and those slow learners will always be left behind and probably will be unable to cope and may give up altogether. They end up by not being even able to read or write and how are we going to train these workers if they cannot even have the basic literacy and numeracy skills? So I am asking the Government whether it wants to tackle the problem at its source by changing the education system to make it more flexible to cater for the slow learners.

BG George Yong-Boon Yeo: Sir, I thank Mr Chiam for his comments. He is right that the root problem is education. If we look at Singaporeans above the age of 40, less than one in two have more than six years of education. When the PAP Government came into power, we introduced mass education and the result has been a sharply increased educational profile of the population. Our educational profile of those above the age of 40 is basically a third-world educational profile and many of them will continue to be with us for a long time to come. We have got to find ways and means to help them, retrain them, upgrade their skills, and so on. Among those who are younger, aged 35 and below, our educational profile is first-class and many of the good things which Mr Chiam talked about are precisely the elements which are built into our educational system of providing for slow learners, or going faster for fast learners, and so on. If you go to our universities, polytechnics and even our ITEs today, the level of equipment, the facilities which are available to students are something unimaginable 10-20 years ago, and this attests to the emphasis this Government has put on education.

The younger ones, we can solve. Those who are coming up, we make sure that from kindergarten onwards, they learn computers. They play games at first, Internet access, by primary five do web pages. They are off. But those who are already in the system who were educated during colonial days and the early years of independence, we should try our best to help them and in the past we had, and we still have, programmes like BEST and WISE, but there is only so much we can do because for many skills, if you do not acquire them when you are young when their minds are plastic and malleable, it is very difficult to acquire them when you are older. I have met workers who have gone through BEST and WISE and watched them struggle with square roots and so on. It is tough. They should try, and the skills should as far as possible be practice-oriented, but that historical legacy will remain with us for many more years to come and we have got to take that into account in all our programmes and policies.

Mr Zulkifli Bin Baharudin (Nominated Member): Other than training and education for this group of people who find difficulty in training, would the Minister consider playing a more direct role in getting these Singaporeans obtain jobs in the region where such jobs are more easily available? You cannot train them, you cannot increase their level of education, can you perhaps help them to get jobs elsewhere outside Singapore?

BG George Yong-Boon Yeo: Sir, I would not say that they cannot be trained or upgraded. They can be trained and upgraded, but what we can achieve will not be the same as what we can achieve with the young lads or lasses, and teenagers.

As to whether we should send our unskilled workers to neighbouring countries to work, I do not think that is right. They enjoy a much higher standard of living in Singapore than what they can ever hope to enjoy, say, in other parts of South East Asia or even beyond. We try to protect the wage levels in Singapore through the workers' levy. Imagine if we had no work permit system in Singapore and no workers' levy, then millions will want to come to Singapore and wages at the bottom will be greatly depressed. This will cause not only social problems but it will also lead to a Singaporean underclass which would be a political problem. So we try to strike a balance between protecting those at the bottom and not allowing this protection to be such a weight on the overall competitiveness of our economy. It is a balance that we have to strike well.

As to the Member's proposal to send our unskilled workers overseas, I think many of us would be against that.

Mr Simon S C Tay (Nominated Member): Sir, if I understand the Minister correctly, the statistical $133 figure is caused by a high percentage of jobless people. Would the Minister be able to tell us if we minus off the jobless people, what is the true figure for the bottom? In that sense, has the actual figure itself gotten worse?

Second, I would like to ask the Minister, if joblessness is the problem, are there ways to relook at policies to keep jobs in Singapore? By this, what I mean is that instead of searching only for higher value high technology investments in Singapore, should we look for reasonable wage companies and industries that will keep the bulk of jobs in Singapore?

BG George Yong-Boon Yeo: Mr Speaker, Sir, on the first question, in 1999, 75% of the bottom 10% of households did not have a working member. Among the households that had at least one income earner, the average household income was $530 per month.

Mr Tay also asked a broader question about our economic strategy, ie, whether we should not deliberately nurture an industry sector to cater to these people. Let us say that we create such a sector. Can we ever bring our costs low enough, say, in disk drives, to compete with Malaysia, the Philippines or China? I think that is an impossible game and a fool's game, because in these countries, there are many more willing to work at even lower wages. So this will result in our economy being constantly pulled down. Our strategy is to move upstream. When we have R&D centres, wafer fabs, pharmaceutical companies and petrochemical works in Singapore, there are people at the top who earn high salaries because their skills are very scarce in the world. But for each of these individuals that we have in our midst, they bring work and opportunities to many other people who service them, who maintain the plants, who do the landscaping, who provide the food, who provide the transportation and personal services. So it is far better for us to move upstream, which is higher value added and for which we have a competitive advantage and use these high points to raise the general level of the tent.

This is a paradox in economics that, sometimes to have greater growth, we must accept a widening of inequality, because without that higher point for the tent, it is more difficult to raise the whole skirt. From the viewpoint of our economic strategy, we are targeting high value added industries for which we have a clear competitive advantage and rely upon these centres of growth to bring employment and advantage to ordinary Singaporeans.

Madam Claire Chiang See Ngoh (Nominated Member): Sir, will the Minister consider setting up a crisis credit facility to help the 10% through these difficult times and allow them to pay back on very low interest terms?

BG George Yong-Boon Yeo: Sir, there are many ways that we can use to redistribute income to those who are less well off. The most important thing is to have welfare without welfarism and to achieve redistribution without it somehow disincentivising effort or self-help. If there are projects which are low risk to justify the low interest rates, I think the market will attend to them. As far as the Government is concerned, we provide direct assistance through affordable HDB mortgages, through subsidies on service and conservancy charges, through MediFund, through subsidy of C class wards and polyclinics, through education facilities which are completely affordable all the way up to ITE and junior college. There are many ways to cause a redistribution. We should choose the ways which encourage effort, which increases the productive capacity and capability of those at the bottom. And we should be careful not to devise ways which lead to dependency and to moral hazard.

Dr Jennifer Lee (Nominated Member): Sir, there are some groups of people who have great difficulty in accessing the skills retraining programmes, eg, working parents who are struggling to earn a living and, at the same time, look for childcare arrangements. Are there any programmes or service assistance that would be available for this grouping so that they could in fact take advantage of skills retraining?

BG George Yong-Boon Yeo: Sir, there are many programmes which are available. If Dr Jennifer Lee knows of specific cases, they can be referred to either MOE, MCDS or to a CDC. All these agencies are aware of the whole array of schemes which are available and which would best meet the needs of particular families. The fact is that if you look around, yes, there are poor people around us but are their children not going to school? Are they not being treated for illnesses because of a lack of financial resources? And the reason why the outcome is not there is because these schemes are available and they are available in different places. If there are individuals who do not know how to access them, these cases can be referred to their MPs, CDCs or to the Ministries involved.

Mr Tay Beng Chuan (Nominated Member): Sir, I wish to supplement what my fellow NMPs said. As a matter of fact, I wish to state that there are sufficient unskilled workers available in Singapore. There are many sectors of industries like servicing, manufacturing, etc, which are in urgent need of unskilled workers. We have this 10% ---

Mr Speaker: Mr Tay, can you ask your question?

Mr Tay Beng Chuan: Sir, will the Government conduct a special recruitment programme in conjunction with the employers' group to persuade this 10% low-income group to work for these unskilled industries? However, if these people are unwilling to do unskilled work, then would the Government reconsider the rigid rules which apply to foreign labour, so that our SMEs will be able to meet their immediate demands and take care of their requirements?

BG George Yong-Boon Yeo: Sir, I thank Mr Tay for raising this point. It is an important point because the feedback from industries is that the labour market is tightening very rapidly with the end of the economic recession. We have, on the one hand, a group of unemployed who cannot seem to find employment and, on the other hand, a great demand for workers including unskilled workers. Part of the reason is because some of those who are unemployed are deterred by having to work third shifts or having to travel further to work. And the fact that they are able to express these preferences is because one way or another, they are able to make do with contributions from family members or from their own savings. If the hardship were very acute, then even third shift work or even work in Tuas would be snapped up.

Mr Tay's other question is one which concerns us more in Singapore. It is the rapidly tightening labour market and how we should adjust our manpower policies in order to feed the growth that is in our economy. I do not think that working the old method is the right way to go, particularly for SMEs. Because of the Internet and e-commerce, middlemen are being weeded out in many industry sectors. So those who require foreign workers to do work the old way may find that a difficult approach to take. Some restructuring is required but, at the same time, we recognise that in the SME sector there is a need for a greater allocation of foreign workers and we review these allocations all the time, and feedback from SMEs, from Mr Tay Beng Chuan and from the various business chambers and associations will be very helpful to the Government Ministries involved.

Dr S. Vasoo (Tanjong Pagar): Sir, I would like to ask the Minister whether we can examine the extent of the problems in future, particularly the problems affecting the older workers who are unskilled and uneducated. With the relocation of the labour intensive industries, is the problem likely to be aggravated? What concrete steps will the Ministry be taking besides retraining to assist these older workers? At the same time, I would like to find out whether there is a mismatch between the manpower that is available, the older workers, and the jobs that are out in the market. If this is the case, could we take a better integrated approach in trying to follow through these workers who are unable to be deployed for employment?

BG George Yong-Boon Yeo: Sir, there is a limit to what we can do to bring down the unemployment rate without causing economic inefficiency to the system as a whole. I believe we are now below 3% again. If not yet, then we are likely to be quite quickly. If we try too hard to lower the natural unemployment rate further, we may end up causing unnecessary inefficiency to other parts of the economy. The Department of Statistics will study the problem in greater detail and if there are practical solutions that we can take, we will. But I do not think we should distort the entire economy just to bring that number down. It was a major problem in 1998, and maybe early 1999. It is no longer a major problem now.

Dr Vasoo: Sir, with the relocation of labour intensive industries, will the problem be likely to be aggravated? If that is the case, are there any proactive steps that we are taking?

BG George Yong-Boon Yeo: Sir, Dr Vasoo raised a point which is very valid, a point which concerns not only MTI but also the other Ministries greatly, ie, given the new trends, the knowledge economy and the fact that at least for some years to come salary ranges will stretch out, and those who are unskilled will find it more and more difficult to find good work in Singapore, how should we best accommodate them without reducing them to subsidy cases in the housing estates. The issue is being reviewed by all Ministries to see how we can bring work closer to them so that they can spend part of their time looking after their grandchildren, part of their time attending to their own household affairs and, maybe when they are free, doing some part-time work. In the old days, we used to separate out industrial estates from housing areas because they were polluting, they needed space and heavy equipment was involved. But in the new economy, there will be many industries which do not require this generous allocation of spaces, and which can be brought closer to housing estates and therefore within easier commuting distances. We are now looking at master planning in Singapore to see how we can better bring work into the housing estates, so that part-time and irregular time work can be more readily available to those who would otherwise be structurally unemployed.

Mr Thomas Thomas (Nominated Member): Sir, can I ask the Minister what steps are being taken to promote social consciousness among the talents and top earners that they have a responsibility towards the massive majority who may not have the talents or the abilities they possess but they were able to exercise those talents and abilities to earn top salaries and incomes, because the majority provides the social opportunities, and part of that social consciousness is to give back to society? And also for employers, when they offer jobs to people, they should take into account not just the market factors of the lowest possible and not to benchmark them with foreign workers but also take the human perspective and offer them jobs which they can have a living wage. Many people may have turned down jobs because their salaries are so low and they do not just cover ---

Mr Speaker: Order. Mr Thomas, are you making a speech?

Mr Thomas Thomas: No. I am just explaining.

Mr Speaker: Can you proceed to your question?

Mr Thomas Thomas: I am just asking whether the Government will promote a living wage as well.

BG George Yong-Boon Yeo: Sir, Mr Thomas has touched on a problem which is very fundamental and which concerns the Government a great deal. When I was in Davos at the WEF Meeting in January this year, they had one session called "The Age of Disloyalty", that with globalisation and with international talents becoming mobile, are we all linked only by money and nothing else? Is there such a thing called "patriotism" or "loyalty" left to corporations, tribes or charities? Because we are a cosmopolitan city and our young are all educated in English, they are internationally mobile. While we tell ourselves that we should be in the game, bring foreign talents to Singapore, we are also in danger of losing our own talents to other countries and even when they are in Singapore, are they loyal to Singapore? This is the question which concerns us a lot because, in a crisis, whether or not we have this sense of solidarity makes a difference between success and failure, between life and death, between victory and defeat. So national service will remain important. Our willingness to look after those who are weak, subnormal or crippled in our midst is very important.

This is one reason why the Government has been very careful to avoid subsidising charities or self-help organisations completely without requiring these organisations to also raise their own money. The widow's mite is very important. Without that fund raising effort, there will be no ownership of schools, hospitals or community organisations. Many of us complain that we are constantly being roped in for fund raising, but all the effort in fund raising is actually a process of social bonding. We help to build that community centre or that church or that mosque, and that creates a sense of ownership and of rootedness in Singapore.

National service requires all Singaporeans, whether those who are at the top or at the bottom, to feel collectively that when it comes to a crisis, we must all work together for the common survival of the state. But this is not a question which can be easily answered by the Government. The Government can do its part. All of us have to do our part as parents, as teachers, as community leaders, that while we adjust to market developments, we do not forget that in the end what holds the community together is not just money, but a sense of solidarity and a sense of common destiny. That we must always have in Singapore. We can have foreigners to help us, we can have foreign talents coming in to supplement various positions, but at the core, we must have a group of people who feel completely Singaporean.

Mdm Claire Chiang See Ngoh: I would like to seek a point of clarification with the Minister. Why does the Minister see the setting up of a credit on-line as a strategy on distribution or welfarism? Because we are not giving to the people, we are lending them money although on extraordinary low interest terms, does he not see that this is also a strategy of growth because we are allowing the 10% to have a sum of money upon which they can start a new venture?

BG George Yong-Boon Yeo: Sir, it is not my intention to reject offhand Mdm Claire Chiang's proposal. What I was saying is that there is an interest subsidy involved and whether an income subsidy should be provided through reduced interest rate is something that we have to look at very carefully to ensure that there is no moral hazard associated with it. I am not saying that it should not be done. What I am saying is that it is not an idea which can be implemented without very careful thinking of the consequences following downstream. Many of the lower income families will not be able to pay back their loans, in which case they may have to be declared bankrupts. Do we want that to happen? Is that a good idea?

Dr Lily Neo: Sir, the Minister earlier did not answer my question on the effect of social cohesion and social stability should the gini coefficient gets worse. May I also ask the Minister whether more incentives could be given to employers to ameliorate their bias on hiring older workers, for example, giving more tax rebates to such employers?

BG George Yong-Boon Yeo: Mr Speaker, Sir, I did spend some time talking about why it is important to provide a sufficient social safety net at the bottom to maintain community solidarity and social cohesion in a society.

As to whether we should subsidise employers to take on older workers, again we have got to ask ourselves whether this is the best way of achieving our objective. It may create distortion and game playing and may be quite difficult to police because some of the older employees should be employed in their own rights. But since there is such a scheme available, they too will apply for subsidies. While we should agree on our objective that we should help those who are at the bottom, we should be very careful about the way in which we achieve that objective because it can create side effects and lead to other problems.

Mr Low Thia Khiang: Can the Minister tell us whether the Skills Redevelopment Programme and other skills training programmes are focused enough to tackle the problems of the bottom 10% unskilled and less educated workers?

BG George Yong-Boon Yeo: The various economic agencies monitor very closely the trends in the labour market, which companies are retrenching, which companies are growing and need workers and we try to achieve the best match between those who are sheding workers and those industries which need workers. The SRP programme offers courses to create as good a match as we can achieve.

Mr Low Thia Khiang: Sir, I am talking about the bottom 10% of the workers. Are the programmes actually focused enough?

BG George Yong-Boon Yeo: It includes the bottom 10% who can be retrained. But as I said earlier, it is sometimes not as easy as it sounds because to go back to school to be retrained requires a certain discipline and a certain willingness to relearn. It is not always easy. For some workers, especially the younger workers, it is not a problem. For others, it is a problem.

Mr Simon Tay: The Minister has spoken of targeting particular assistance to those without jobs right at the bottom. I tend to agree with that. May I ask the Minister how targetted are we right now? Can I assume that each of the jobless in the lowest bottom 10% actually has an individual file with the Ministry or are they actually relatively faceless people?

The second and broader question is that I take the Minister's explanation of globalisation and our current policies of many-helping-hands, etc, to basically say nothing needs to be done at present. What is the trigger point of either the bottom 10% or the gini coefficient that will make this Government move?

BG George Yong-Boon Yeo: Sir, I do not think it is wise for us to open a file on every Singaporean who is unemployed in Singapore. If he needs help, it is for him to ask for help and a file would be opened. But for us to open a file in advance of his asking for help will lead to all kinds of unnecessary problems and it is bad public policy.

Mr Tay is wrong to say that our position is that nothing needs to be done. The whole point of my answer earlier was that a lot of things are already being done and our policies are constantly being reviewed to make sure that the problems are attended to.

Mr Tay Beng Chuan: Further to my earlier question, Sir, I would like to ask the Minister this question. We do have SMEs that need unskilled workers and unskilled jobs are available. If this lower income group of people does not like to take up these jobs and yet, on the other hand, our tight rigid labour policies do not allow us to employ more foreign unskilled workers, can the Minister advise us what we should do?

BG George Yong-Boon Yeo: Sir, Mr Tay has raised a question for which there is no easy answer. Ideally, of course, we should just open the doors and bring in the foreign workers and all SMEs will be happy. But if we bring in foreign workers in unlimited numbers, then the wages of Singaporeans at the bottom will be very depressed. That may be good for those who are high income earners because then they can get many services on the cheap. But is it good for Singapore? We already have, out of a population of four million, one million who are non-citizens. How many more can we accommodate in our midst who are not one of us? So there has got to be a limit. And within this limit, we have got to ask ourselves how we should allocate the numbers between those who work in the high-tech, financial, pharmaceutical, petrochemical and wafer fab sectors and those who work in coffee shops and restaurants. MTI's policy has always been that where we can upgrade we must try to upgrade, mechanise, automate, sub-contract.

In the knowledge economy, more and more middlemen would be bypassed. Should we slow down this process or should we accelerate it? If we do not facilitate this transformation, the difficulties would be more difficult for us further downstream. It is better that we go with the flow. Today, we can order groceries on the Internet and it would be delivered to you the following day, eggs, vegetables, meat, whatever. It comes straight from the factories to your home, bypassing the shop, which means no rental cost, lower manpower cost. Many of the SMEs are unable to make this jump because they are staffed with older people and their children are not interested to take over the parents' businesses. As a result of which they are unable to restructure themselves. Those who restructure themselves, operate franchises, they are able to make the transformation. 1.30 pm

Mr Speaker: Order. End of Question time.

[Pursuant to Standing Order No. 21(3), Written Answer (Cols. 485-6) to Question No. 20 on the Order Paper is reproduced in the Appendix. Question Nos. 6 to 19 and 21 to 25 have been postponed to the sitting of Parliament on 30th June 2000.]