UNEMPLOYMENT RATE

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UNEMPLOYMENT RATE: 2.

Mdm Halimah Yacob asked the Minister for Manpower (a) if he will give an assessment of the labour market situation; and (b) whether the lower

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unemployment rate of 3.4% for the third quarter is an indication that the job market has improved or is this an aberration as has been suggested by some economists.

3.

Dr Wang Kai Yuen asked the Minister for Manpower what are the reasons behind the sharp drop in the unemployment rate while structural unemployment remains a persistent problem.

4.

Dr Amy Khor Lean Suan asked the Minister for Manpower given the recent significant dip in overall unemployment rate (a) if he will give a comparison of the unemployment rate of (i) workers below 45 years of age and those above 45 years of age, as well as (ii) those who possess tertiary education to those who do not; and (b) if he will state the success rate of schemes that have been implemented by his Ministry to help the older and less educated workers to find jobs and what other schemes are being considered to help such workers.

The Minister for Manpower (Dr Ng Eng Hen): Mr Speaker, Sir, may I have your permission to take Question Nos. 2, 3 and 4 together because they are related?

Mr Speaker: Yes, please proceed.

Dr Ng Eng Hen: Mr Speaker, I have also asked the Clerk of Parliament to circulate one Table* to help me illustrate the employment changes.

Members have asked for the reasons for the unemployment rate drop in the third quarter of this year. The labour market typically lags economic performance and this partially explains the improved numbers in the third quarter of 2004. Let me elaborate. Members will easily recall how SARS, starting in April last year, affected all sectors drastically, especially the services sector which accounts for the majority of jobs in Singapore. If you look at the Table, you will note that in the first half of 2003, in

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the midst of SARS, we lost some 30,000 jobs and if you take into account that each year's new labour entrants into our market is about 32,000, we basically lost in that six months a whole year's worth of jobs for new entrants. Yet the overall unemployment rate peaked not in June of last year but a quarter later in September 2003 at 5.5%, again illustrating that the labour market typically lags economic performance.

By September 2003 when the unemployment rate went up to 5.5%, Members would also note that economic recovery was already on its way and net jobs were being created. In fact, from July 2003 to September 2004, about 60,000 jobs were created. The last four quarters were particularly strong ranging from 11,000 jobs to the last quarter where we had the strongest employment creation - 16,600 jobs.

But even with strong job growth from September last year, unemployment figures did not improve as the labour market had to "soak up" many who had earlier given up looking for jobs, but now chose to re-enter the improved job market. This explains why, despite our good economic growth for the first two quarters of this year, our unemployment figures did not improve earlier than the third quarter this year. The number of workers retrenched by private sector establishments also eased to 1,700 in the third quarter, the lowest since 1997. Workers and job seekers have also responded well to new job market demands and have become more realistic and adaptable to take on new jobs. Another factor for the improving unemployment rate is that the combination of policy changes which we have instituted, including CPF cuts and wage restructuring, have helped businesses turn around.

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These factors have led to an improved employment situation, for workers across all education and age groups. As a result, the overall seasonally adjusted unemployment rate fell to 3.4% in September 2004, compared to 5.5% in the same period last year.

Members have asked for figures for those aged 45 and Dr Amy Khor has asked for some figures. Sir, let me give some statistics.

For residents aged 45 and above, the non-seasonally adjusted unemployment rate was 3.2%. This is a substantial improvement from the 5.9% compared a year ago. However, once unemployed, older workers still have greater difficulties finding a job. Older job seekers were unemployed for 16 weeks on average, compared to 8 weeks for their younger counterparts.

For workers without tertiary education, these workers also experienced a higher resident unemployment rate of 3.7% compared with 3.2% for those with tertiary education. Again, there has been a marked improvement for both groups of workers compared to the same period last year. The duration of unemployment was 12 weeks for those without tertiary education, longer than the 8 weeks for the tertiary educated.

Sir, while we are comforted by the improved job situation, we should reiterate the point that the less skilled workers remain more vulnerable to structural unemployment even as our economy improves. MOM, therefore, agrees with Members of this House that we should give more assistance to the less skilled workers, especially the more mature workers. We must help them remain employable or re-enter the job market.

Members of the House have asked for specific figures on how our various

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programmes have worked. Let me name a few. As you would recall, we have the People for Jobs Traineeship Programme (PJTP), which is a scheme specifically for workers above 40 years of age. Nearly 20,000 older workers have benefited from PJTP since it was launched in November 2001. In addition, for Place and Train programmes, 41% were for workers aged 40 and above.

The People for Jobs Traineeship Programme lapses at the end of this year. MOM is working with NTUC and the CDCs to re-focus our energies to help the less skilled workers adapt and remain employable. New programmes will be announced in due course.

Sustained economic growth should lead to further employment growth. However, we still need to be wary of a slowdown in the global economy due to higher oil prices. Even so, unemployment rate is likely to end the year at, or slightly, below 4%.

My Ministry would provide more details in the Third Quarter Labour Market Report to be released on 15th December 2004.

Mr Leong Horn Kee (Bishan-Toa Payoh): Sir, I have two questions to ask the Minister. If I could refer him to the Table that he had just circulated, I would like to ask him that in the fourth quarter of 2003, first quarter of 2004, as well as the second quarter of 2004, there had been positive employment changes in each of these quarters. But I see that the unemployment rate has remained the same - 4.5% for each of the quarter. Could the Minister explain to us why there is no change, whereas in the third quarter of 2004 there was a sharp drop from 4.5% to 3.4%?

My second question is to ask the Minister whether he would foresee that, with continued economic growth, there

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would be a continuing improvement in the unemployment rate?

Dr Ng Eng Hen: Sir, I have explained the changes that Mr Leong had asked for, but let me go back to the Table. The reason is that there is a lag between economic growth and job creation. Even when jobs were created, we have to soak up those who have left the labour market. To understand labour market statistics, you have to understand the denominator, which is the Labour Force Participation Rate. If one chooses not to be looking for work, then he would not be counted in the denominator. When the job market gets better, many people start looking for jobs, and that grows the denominator. So, even if you have more jobs, and you have more people employed, your unemployment rate may not shift and, therefore, you would notice it from the statistics that we have generated.

I have asked my staff to change from focusing on "unemployment" to "employment change", which is a more accurate start. We really want to see whether our economy could add jobs because the denominator shift is based on definition, but in terms of employment growth, the number of jobs in the economy is a discrete number which people could better analyse and see. And, if you look at our labour market statistics for employment change, it is quite encouraging. It tells us that our economic fundamentals and labour market policies had been correct, because in the last quarter, we have now about 2.17 million people who are employed, which is the highest number for the last three years. And the fact that even during SARS, many of our sectors were devastated, our economy bounced back very quickly. Again, it gives us good reasons to be confident of our economic fundamentals and the changes that we undertook during those difficult periods. And these, as Members would remember,

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were the CPF cuts as well as the wage restructuring and other aspects.

Mr Leong also asked how we project further growth. Again, let me reiterate the point that the greatest factor for job creation is good economic growth, not rigidity and protective aspects in the job market. This had been a very striking lesson, even with the ups and downs of our economic performance over the last five years. But let us assume, and you have to assume some figure, that GDP is 3-5%, that would generate enough jobs for each year's new labour entrants. But there is an area of concern. Even if we have enough jobs, as many people have rightly pointed out, there would be some workers, especially those who are less skilled, mature worker who are displaced and who have a skills mismatch in terms of our new economic restructuring, the types of jobs that we are creating, that we now want to focus on in terms of our assistance and training programmes, to help them remain employable or to help them to return to the employment market if they are retrenched. This is a big challenge. I estimate this to be 1-2% of the resident workforce and we would need a combination of measures, as well as the help of all agencies, grassroots agencies and MPs explaining to these vulnerable workers the importance of skill upgrading to remain employable.

Mdm Halimah Yacob (Jurong): I would like to ask the Minister: of this 3.4% unemployment figure, how many percent comprise those who are structurally unemployed and, additionally, what are the programmes that could be put in place to assist them, other than the ones that the Minister had just described?

The second question that I would like to ask is: of the 16,000 jobs created, 57% are jobs created in the services sector and largely in the sectors like IT,

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banking, financial services and so on, what kind of jobs would be available for workers who are lesser skilled, despite all the retraining that they have undergone? There is also a trend where there are now huge increases in jobs of cleaners, but I do not think that is the only job that we want to create for those who are not tertiary educated.

Dr Ng Eng Hen: Mdm Halimah has asked what percentage of the 3.4% of the unemployed would consist of those we term as "structurally unemployed". Once you are structurally unemployed, you fall out of the labour market. So that is not a good proxy. A better proxy in the transit would be "long-term unemployed", which means that someone who has been looking for a job, is still looking for a job, and is unable to find another job for six months.

There are two interesting factors from our labour statistics. Last year, when we had an unemployment rate of 5.5%, the long-term unemployment rate jumped up to about 1.7%. Normally, it is 0.3%, a very small proportion of our resident workforce but this quarter it had dropped back to about 0.8%. So it is halved. So what the figures tell us is that when there is good economic growth and job creation, even though some of the jobs do require skills, our workers can respond and our labour market is able to absorb them. So I think we should continue in our efforts in terms of getting our fundamentals right, making sure that our labour market is flexible and that our businesses have the flexibility to respond, right-size or up-size, when business condition has improved. That is fundamental.

But, for this particular group of workers, yes, we would continue to have programmes. Mdm Halimah has asked for some specifics. We are currently working with NTUC, as well as the CDCs, to see how we could shape and refocus our programmes. Basically, it would be on

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two main fronts. One is to increase the productivity and the premium that these jobs have. The problem is not that they are not available but, as she rightly pointed out, some of these jobs require less skills and with our open labour market policies and globalisation, there is a wage deflation for these jobs. In other words, the wages of a cleaner may have fallen, both in nominal and real terms and, therefore, sometimes our residents do not find them attractive and so we have to add premium to the jobs so that both the worker and company could justify the cost and product of the job.

In line with this, NTUC would also look at certain aspects of job redesign. They are taking the forefront of this and we are looking at a number of sectors that are possible. It is a large undertaking and we will take a sector at a time.

The third element that job counsellors have fed back to us is the mental attitudes of our workers. And this is where I think Members' help is needed to explain to our residents how the labour market has changed, to get them to adapt to the situation, to overcome their lack of confidence and the many barriers that prevent them from re-entering the labour market. We would roll out the programmes, redesign jobs and look at pay-scales. But, ultimately, at the end of it, it is up to the worker to have the right attitude to re-enter the labour market.

Dr Amy Khor Lean Suan (Hong Kah): I would like to ask the Minister what is the retention rate for the People for Jobs Traineeship Programme. For job redesign, I recall an announcement was made some time ago that NTUC, together with MOM, was looking at various sectors for job redesign. How successful has this endeavour been, and what are the hurdles that had been put up against such job redesigns, because most of what we have heard seem to be only in the cleaning industry?

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Dr Ng Eng Hen: Sir, I mentioned that in the People for Jobs Traineeship Programme, about 20,000 residents benefited. The retention rate, if I were to recall from memory, was about 40% at the end of six months. We have looked at the scheme and that is why we allow it to lapse and to refocus it. It was of limited success - quite successful in getting people started. The People for Jobs Traineeship Programme was aimed mainly at the employers, and the lesson that this programme had taught us was that it really needs a multi-pronged effort aimed also at the employees for long term sustainability for them to stay on the job. There are a number of factors why mature and less skilled workers fall out. Sometimes, it is just a loss of confidence. They have to change sectors and they thought that they could not perform. Even though others want them to stay, they feel that they do not add value to the job and so they leave. Sometimes, they really find it is difficult. We have taken all the various reasons why the retentionship is not higher than we would like it to design new programmes. It is a learning curve.

The second aspect about job redesign, how successful this has been and how we should extend it beyond cleaners, I agree. There are a number of sectors that we are now looking at. We have to start from the point of view that it could not be artificially maintained or otherwise it would be unsustainable, either for the company or the economy. It just means higher taxes for subsidised jobs. And I think we should take things in perspective - 97-99% of workers earn a decent day's wages by giving good value to the job and we should not distort our labour market or our economic practices in trying to help this minority. So, the starting point is that the jobs could be redesigned, given higher productivity and better premium to justify the wages. This is a process. There is no magic bullet. It would not be a systemic quick sweep across our economy, but it would have to be taken

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sector by sector, group by group, occupation by occupation.

But I am confident, given the positive results of our efforts so far, there is no reason why we cannot continue to have better results.

Let me also make one observation. No developed economy in the world has managed to solve fully its structurally unemployed, and that is a fact. But we will do our very best to mitigate the problem to reduce it to manageable numbers.

Mdm Ho Geok Choo: Sir, I would like to ask the Minister how many of the new found jobs had actually gone to the PMETs - the professionals, managers, executives and technicians. Is there any specific programme or assistance that will be targeted at this group of people as well other than the low-skilled workers?

Dr Ng Eng Hen: Mr Speaker, Sir, I must apologise to Mdm Ho. I do not have the specific figures as this is a specific query. But let me use a proxy and take the tertiary educated as a rough indicator of jobs for what she called PMETs - professionals, managers, executives and technicians. As I said, the unemployment rate has fallen for all age groups and occupations compared to a year ago. In fact, for the tertiary educated, it fell from 4.7% in September 2003 to 3.2%, a drop of 1.5%, which means that when our economy recovers, it recovers across all sectors. It tells us, indeed, as we have been rated if not the most flexible labour market, that our fundamentals are right.

Will there be groups within the PMETs who are also what we term "vulnerable" to structural unemployment? It is a matter of definition, not so much that they cannot find jobs, they are well trained, but compared to their last jobs, where the grade of the job was higher, the responsibilities and the pay they were

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getting, they may not be amenable to the new jobs. So I think we have to create more pathways - (1) entrepreneurship; (2) being self-employed; (3) we will have certain courses that are targeted for them. One of them which has been very successful, as I have mentioned in this House, is the Strategic Manpower Conversion Programme which allows mature workers/professionals to change and this particular programme is nursing. It has gone on very well. Hospitals are very happy to receive mature workers. Some of them have been architects and bank officers. They say that because they are more mature and have working experience, they come out being excellent nurses with a lot of empathy and they know more about life, as it were. Another area is teachers whom we have absorbed. I think there are other opportunities and we will see where we can create some more.

Dr Lily Neo (Jalan Besar): Sir, may I ask the Minister, in view of the fact that 75% of Singaporeans do not have enough savings to maintain their lifestyles at retirement age of 62, is it not urgent to address their predicament? When will his Ministry raise the retirement age beyond the age of 62? Will he incentivise measures to make them more employable? What does he plan to do with regard to employers' mindsets on older workers?

Dr Ng Eng Hen: Sir, if I may, let me congratulate the Member for introducing questions by the side door and every other direction that she can! I would appeal to her to file specific questions because these are weighty matters that I should not address offhand, and I will do my best if she does file a question.

I will just take one component of her many questions in terms of mature workers. The Member is absolutely right. Mature workers add considerable depth and give enhanced value, and many employers know that. Many companies that

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have employed mature workers have found it to their benefit, and some have done it counter cyclically and, in fact, employed mature workers when the job market was difficult.

Let me also state one fundamental aspect. The best protection for a worker is a tight labour market. Members would have read in the newspapers that wages are going up and there is a scramble for workers. So, once we get our economic fundamentals correct, once we get our policies correct, then we could address small select groups. And to me, if you look at our data, that is what the recurring lesson is - that the best protection for anyone who wants to work is good economic performance and a tight labour market. It becomes an employees' market. But when the economy is down, then, of course, it is an employers' market.

Dr Wang Kai Yuen (Bukit Timah): Sir, the Minister provided a table with the numbers of employment changes. I would like to ask the Minister whether these new jobs are occupied 100% by resident Singapore workforce or the non-resident workforce is also involved. If non-resident workforce is involved, what is the percentage of the non-resident workforce?

Dr Ng Eng Hen: Sir, I do not have the exact data with me. But let me give some rough numbers to indicate what the Member is asking for. The final measure would have to be employment change for the total workforce - whether it is local or foreign. For our local resident workforce, it has grown. In other words, the majority of these jobs did benefit the locals. The figures that I have stated in terms of the resident unemployment rate for September 2004 was 3.5%. So the resident unemployment rate has also fallen.

Let me make a point in terms of labour market flexibility. Over the last five years,

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foreigners have lost more jobs than locals proportionately. And this tells us that our foreign worker policy has been, in a sense, correct. Because when employers need to retrench, foreign workers have taken the brunt of the retrenchments. If there was not that flexibility to do so, I would have expected that more locals would have lost jobs. And when the economy turns around and businesses need to ramp up and if our employers did not have access to foreign workers who are readily skilled, they would not have that responsiveness to turn their businesses around. If I may use a medical analogy, it is just like a treadmill. You do not really know how your heart is until you are stressed up and down. And the fact that our economy was stressed by difficult circumstances gives us confidence that our policies are well placed and that our fundamentals are correct.

Mr Speaker: One last question. Mr Leong.

Mr Leong Horn Kee: Sir, the Minister said earlier that in contrast to the unemployment rate, a better figure to look at would be the growth in the total employment figure. Could his Ministry perhaps publish these figures? If he has the figures right now, could he let us know what is the growth in the total employment figure?

The Minister also mentioned that it is very difficult to solve structural unemployment. Could he also give us, in labour statistics terms, the frictional unemployment rate as well as the structural unemployment rate? And if you add the two rates together, it actually implies a medium and long-term unemployment rate for Singapore.

Dr Ng Eng Hen: Sir, I do not propose to go into technicalities. Mr Leong has asked for certain numbers in terms of employment change. As I have said, our total employment numbers are the highest

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in the last three years. So that tells us that the economy has created jobs.

Let me give Members a sense of this. Mr Leong has asked for these numbers to be published. I will tell him that, yes, we do publish them routinely but he has to look at the right column. In terms of employment change, in the year 2000, for the total workforce, we created about 100,000 jobs. In 2001, we did not create any jobs for the whole year - no net growth. In 2002, the economy lost 23,000 jobs. In 2003, last year, we lost 13,000 jobs. And as I have mentioned to Members, in the last five quarters, we created 60,000 jobs. So that is the right number to look at.

Mr Leong has also asked for the sectional unemployment rate plus structural unemployment rate. Let me just say that even as our economy grows, and assuming that we have 3-5% GDP growth per year, as we said, there will be a group that will have difficulty finding new jobs because of the skills mismatch. How large that number is, we estimate to be one, possibly two, percent of our resident workforce. And broken down to constituencies, that is about 200-300 residents in each constituency. It is not an unmanageable number. It is a number that, with concerted effort from various Government as well as non-Government agencies, we will be able to alleviate. So I think it is a manageable problem. If Members want more figures, I will be happy to provide them when they ask for specific queries.