Low Unemployment in Singapore

MACROECONOMICS OBJECTIVES IN SINGAPORE

Low Unemployment Unemployment in Singapore An nemployment rate o! "#$% i& 'on&i(ere( a& !ll employment in e'onomi'&) It i& important to a'*ie+e !ll employment to en&re !ll tili&ation o! t*e 'ontry,& re&or'e&) It al&o mean& t*at t*e 'ontry i& a-le to attain it& potential) In an e'onomy wit* limite( natral re&or'e&. it i& e+en more important to en&re t*at ea'* wor/er i& gain!lly employe() T*ere are 'o&t& o! nemployment to a 'ontry0 'ontry0 lo&& o! potential otpt. 'o&t& to t*e go+ernment go+ernment to *elp t*e nemploye(. lo&& o! ta1 re+ene& an( in'rea&e in &o'ial pro-lem&) 2ig* nemployment i& a pro-lem !or t*e Singapore go+ernment go+ernment a& la-or re&or'e& are n(ertili&e(. lea(ing to t*e e'onomy pro('ing -elow it& 'apa'ity) 'apa'ity) A& &'*. t*e Singapore go+ernment &*ol( !o'& on a'*ie+ing low nemployment &ing a myria( o! &trategie& &'* a& &pply#&i(e poli'ie& an( (eman(#&i(e poli'ie& )3*ile &pply#&i(e poli'ie& are appropriate in re('ing &tr'tral nemployment. t*e go+ernment nee(& to a(opt a 'om-ination o! -ot* (eman(#&i(e poli'ie& an( &pply#&i(e poli'ie& to *elp re('e 'y'li'al nemployment) 2en'e. t*e go+ernment &*ol( not &e primarily &pply#&i(e poli'ie& to a'*ie+e low nemployment in Singapore -t a 'om-ination o! -ot* type& o! poli'ie& to &ol+e t*e pro-lem)

Type& Type& o! Unemployment Unemployment 4ri'tional nemployment Rea'tionary Rea'tionary nemployment i& tran&itional nemployment (e to people mo+ing -etween 5o-&) 4or e1ample. newly re(n(ant wor/er& or wor/er& entering t*e la-or mar/et &'* a& ni+er&ity gra(ate& may ta/e time to 6n( appropriate 5o-& in t*e wage rate& t*ey are prepare( prepare( to a''ept) Many are nemploye( !or &*ort time w*ile in+ol+e( in 5o- &ear'*) Imper!e't in!ormation in t*e la-or mar/et mar/et may ma/e !ri'tional nemployment wor&e i! t*e 5o-le&& are naware o! a+aila-le employment opportnitie&) T*i& type o! nemployment i& 'ommon in all 'ontrie&. in'l(ing Singapore)

Cy'li'al Unemployment Unemployment Cy'li'al nemployment i& in+olntary employment employment (e to a la'/ o! aggregate (eman( !or goo(& an( &er+i'e&) T*i& i& al&o /nown a& 7eyne&ian 7eyne&ian 8(eman( (e6'ient, nemployment an( i& a&&o'iate( wit* t*e tran&ition o! t*e e'onomy t*rog* t*e -&ine&& 'y'le) 3*en t*ere i& an e'onomi' re'e&&ion we e1pe't to &ee nemployment ri&ing -e'a&e o! plant 'lo&re& an( wor/er lay#o9&) lay#o9&) T*i& i& (e to a !all in (eman( lea(ing to a 'ontra'tion in otpt a'ro&& many in(&trie&)


Sor'e& o! 'y'li'al nemployment0 Re'e&&ion o! Tra(ing Tra(ing partner Singapore i& a &mall an( open e'onomy an( *ig*ly (epen(ent on tra(e0 tra(e :; time& it& G?P) Singapore i& a9e'te( &igni6'antly -y e1ternal e1ternal (eman( e&pe'ially !rom US an( t*e EU @ rat*er t*an -y (ome&ti' (eman( a& t*e (ome&ti' mar/et i& &mall) Singapore. -eing tra(e (epen(ent. e1perien'e( ri&ing 'y'li'al nemployment (ring t*e glo-al e'onomi' 'ri&i& o! " a& well a& in ". w*en it& ma5or tra(ing partner. USA !a'e( terrori&m atta'/&) T*i& re('e( tra(e wit* Singapore (e to 'ontra'tion o! t*e US e'onomy) e'onomy) T*i& !all in e1port& :Singapore,& e1port& 'on&i&t& o! e1port o! tori&m &er+i'e&. e1port o! -iome(i'al &er+i'e&. e('ation an( &emi'on('tor&. among ot*er&= re&lte( in a !all in Singapore,& aggregate (eman( an( *en'e t*e national otpt. lea(ing to a ri&e in nemployment)

Str'tral nemployment nemployment Str'tral nemployment o''r& (e to &tr'tral '*ange& wit*in an e'onomy) T*i& type o! nemployment o''r& w*en t*ere i& a mi&mat'* o! &/ill& (e to t*e '*anging &tr'tre o! t*e e'onomy) e'onomy) In "D. *ar(#(i&/ man!a'trer Seagate annon'e( t*at it wol( -e laying o9 ". wor/er& an( relo'ate it& Ang Mo 7io *ar( (i&/ plant ot o! Singapore in or(er to 't 'o&t&) Singapore,& e1port oriente( e'onomy *a& -een attra'ting mltinational 'orporation& :MNC&= &in'e it& e'onomy pi'/e( p in t*e pa&t (e'a(e) 2owe+er. w*ile MNC& *a+e 'ome to Singapore. many *a+e al&o le!t Singapore,& man!a'tring in(&trie&) By lea+ing Singapore. t*e&e MNC& *a+e (i&pla'e( 'ontle&& o! in(&try wor/er&) Mo&t o! &'* wor/er& wor/er& (i( not *a+e t*e rele+ant &/ill& to tran&it into anot*er in(&try an( *a& le!t t*em e'onomi'ally (i&pla'e()

Sor'e& Sor'e& o! &tr'tral nemployment Atomation Atomation 'an 'a&e &tr'tral nemployment w*en people are ma(e nemploye( t*rog* 'apital#la-or &-&tittion :w*i'* re('e& t*e (eman( !or la-or=) Many o! t*e nemployment !rom low#&/ill in(&trie& *a+e !on( it (i'lt to gain re#employment re#employment wit*ot an in+e&tment in re#training) T*i& pro-lem i& one o! o''pational immo-ility)

Lo&& in 'ompetiti+ene&& 'ompetiti+ene&&


Singapore,& lo&& in 'ompetiti+ene&& 'ompetiti+ene&& in 'ompetiti+ene&& 'ompetiti+ene&& in t*e man!a'tring in(&trie& (e to 'ompetition !rom low#'o&t emerging 'ontrie& t*at *a+e entere( worl( mar/et mar/et !or in+e&tment& an( tra(e *a& '*ange( t*e 'ontry,& e'onomi' &tr'tre permanently) Ot*er 'ontrie&. &'* a& '*ina !or man!a'tring an( In(ian !or IT &o!tware. *a+e gaine( t*eir 'omparati+e a(+antage :CA=) T*i& *a& permanently permanently re('e( t*e (eman( !or Singapore,& man!a'tring e1port& an( *en'e 'a&e( &tr'tral nemployment)

Ot&or'ing Ot&or'ing o! 5o-& to (e+eloping 'ontrie& &'* a& C*ina. In(ia an( Vietnam *a+e re&lte( in nemployment among t*e n&/ille(. ol(er an( low#e('ate( wor/er&) wor/er&) T*i& i& -e'a&e Singapore Singapore i& not 'on&i(ere( to to -e low#'o&t an( 6rm&. in t*eir e9ort& to gain more pro6t&. 't 'o&t -y &*i!ting t*eir operation& to a lo'ation t*at pro+i(e& t*em wit* t*e lower 'o&t t*ey &ee/)

Poli'ie& to Com-at Cy'li'al Unemployment E1pan&ionary 6&'al poli'y E1pan&ionary 4i&'al 4i&'al poli'y i& a !orm o! (eman(#management poli'y t*at in+ol+e& t*e (eli-erate in'rea&e in go+ernment &pen(ing :G= or a re('tion in ta1 rate& in or(er to inFen'e aggregate (eman( pwar(&) T*e ri&e in pro('tion to meet t*e *ig*er (eman( 'reate( may lea( to more la-or (eman(e() 2owe+er. t*e &e o! e1pan&ionary 6&'al poli'y in Singapore i& limite( (e to time lag& :time i& nee(e( to re'ogni&e t*e nee( to &pen( an( a((itional time i& nee(e( i& nee(e( to get appro+al !rom Parliament=. Parliament=. 'row(ing#ot e9e't :p*y&i'al (e to limite( !a'tor& o! pro('tion p ro('tion &'* a& lan(= an(. mo&t importantly. it& &mall mltiplier (e to *ig* lea/age& in t*e 'ir'lar Fow o! in'ome :*ig* &a+ing& rate an( *ig* import&=) In a((ition. t*e root o! t*e pro-lem i& not a((re&&e( &in'e 'y'li'al nemployment i& (e to an e1ternal e'onomi' (owntrn) 4i&'al poli'y in Singapore !o'&e& on &pply#&i(e & pply#&i(e e9e't&) 2en'e. it 'an al&o -e &e( to 'r- &tr'tral nemployment) 4or e1ample. t*e go+ernment pro+i(e& ta1 in'enti+e& :e)g) ta1 re-ate& or re('tion in 'orporate ta1e&= an( &-&i(ie& to en'orage 6rm& to &en( t*eir wor/er& !or !rt*er e('ation an( re#training re#training an( to meet t*e new 5o- reirement&) T*e go+ernment i& al&o wor/ing in partner&*ip wit* t*e nion& an( t*e pri+ate &e'tor to a((re&& t*e li!elong learning nee(& o! it& wor/!or'e an( en&re it& 'ontine( employa-ility)

E1pan&ionary monetary poli'y wit* an e1'*ange rate& !o'&


An e1'*ange rate poli'y i& a more +ia-le poli'y gi+en Singapore,& (epen(en'e on e1port& an( t*e !a't t*at 'y'li'al nemployment in Singapore i& pro-a-ly (e to t*e e1ternal e'onomi' (owntrn) Allowing t*e Singapore (ollar to (epre'iate again&t t*e 'rren'ie& 'rren'ie& o! Singapore,& Singa pore,& ma5or tra(ing partner& will ma/e ma/e it& e1port& e1port& more pri'e pri'e 'ompetiti+e) 'ompetiti+e) T*i& i& -e'a&e Singapore,& e1port& are ma(e '*eaper in term& o! t*e !oreign 'ontrie& t*at import it& goo(& an( w*ile import& are more e1pen&i+e e1pen&i+e in term& o! lo'al 'rren'y) 2owe+er. -eing (epen(ent& *ea+ily on importe( goo(& !or it& 'on&mption. pro('tion a& well a& e1port&. allowing !or (epre'iation may ring a-ot importe( inFation in t*e long rn)

Spply#&i(e poli'ie& Singapore *a& al&o trne( to &*ort#term &pply#&i(e &oltion& to re('e 'y'li'al nemployment. nemployment. -y &ing it& CP4 &y&tem. a 'ompl&ory &a+ing& plan t*at reire& -ot* employee& a& well a& a & employer& to ma/e mont*ly 'ontri-tion& to ea'* employee,& CP4 a''ont) ?ring an e'onomi' re'e&&ion. t*e t*e employer,& employer,& 'ontri-tion rate& may may -e re('e() re('e() T*i& e9e'ti+ely lower& la-or 'o&t& o! all 6rm& wit*ot *rting employee&, ta/e# *ome pay. w*i'* in trn *elp& to trim 'o&t& o! pro('tion &igni6'antly an( allow many 6rm& to retain a large 'ontri-tion rate 'an -e re('e( too) T*i& gi+e& t*e general poplation a large (i&po&a-le in'ome. t*ere-y -ol&tering (ome&ti' (eman() 4or e1ample. (ring t*e DH re'e&&ion. t*e go+ernment go+ernment re('e( -ot* t*e employer,& CP4 'ontri-tion !rom "H% to "%) A!ter t*e A&ian E'onomi' Cri&i& in DDD. t*e go+ernment re('e( t*e employer,& CP4 'ontri-tion rate !rt*er @ to % # to lower la-or 'o&t& an( *en'e pro('tion 'o&t&) T*&. t*i& '&*ione( t*e e9e't& o! a !alling aggregate (eman( on 'y'li'al nemployment) A Fe1i-le wage &y&tem wa& intro('e( in DH to repla'e t*e nee( !or t*e go+ernment go+ernment to initiate wage 't& or wage !reee& ne'e&&ary to 'onter 'y'li'al nemployment) T*e&e Fe1i-ility *a& allowe( 6rm& to a(5&t t*eir la-or 'o&t -y a(5&ting wage& &o t*at t*ey 'an a+oi( *a+ing to retren'* wor/er& wor/er& a& &'* a& po&&i-le (ring e'onomi' (owntrn&)

Poli'ie& to Com-at 4ri'tional Unemployment Poli'ie& Poli'ie& &e( to (eal wit* !ri'tional nemployment &*ol( !o'& on impro+ing t*e la-or mar/et in!ormation &o a& to impro+e e'ien'y in t*e la-or mar/et) 4or 4or e1ample. 5o- !air& are organi&e( -y t*e go+ernment to -ring toget*er employer& o! t*e &ame in(&trie& to *ol( ma&& re'ritment&) re'ritment&) Employment agen'ie& an( 5o-#mat'*ing we-&ite& are &et p to 'ollate (etail&


o! potential employee& an( mat'* t*em to t*e nee(& o! pro&pe'ti+e re'ritment e1er'i&e& w*ere wor/er& 'an &ee/ ot t*eir mo&t &ita-le 5o-&)

Poli'ie& to 'om-at &tr'tral nemployment Spply#&i(e poli'ie& T*e go+ernment go+ernment *a& al&o 'on&tantly pgra(e( t*e &/ill& o! wor/er& wor/er& to *elp t*em a+oi( ri&ing &tr'tral nemployment an( narrow t*e wi(ening in'ome gap) To minimi&e t*e e'onomi' pro-lem& (e to greater +olatility. Singapore *a& al&o pt p more &o'ial &a!ety net& to *elp wor/er& w*o are a9e'te( -y &tr'tral '*ange& an( e'onomi' F'tation&) T*&. we *a+e poli'ie& &'* a& t*e 3or/!are Pa'/age. w*i'* i& (e&igne( to *elp in'rea&e t*e in'ome o! lower#in'ome lower#in'ome wor/er&. an( t*e Jo- Cre(it S'*eme. w*i'* i& aime( to en'orage 6rm& to &en( t*eir wor/er& !or training rat*er t*an to retren'* t*em (ring an e'onomi' re'e&&ion) Attempt& Attempt& to e&ta-li&* a ro-&t &e'rity &y&tem t*at a((re&&e& t*e longe+ity i&&e *a& alrea(y -egn wit* t*e intro('tion o! t*e CP4 Li!e &'*eme) T*e 3or/!are In'ome Spplement :3IS= al&o play& it& part in a((re&&ing in'ome ineality in t*e low#wage &egment) In general. all t*e&e &'*eme& an( &-&i(ie& &er+e to in'rea&e t*e in'ome o! t*e lower#in'ome lower#in'ome grop an( impro+e t*eir li+ing &tan(ar(&) &tan(a r(&) T*e&e poli'ie&. &pporte( -y a mlti#tier &o'ial &e'rity &y&tem. are pt in pla'e to *elp trn t*e ti(e on ineality an( en&re t*at gain& !rom e'onomi' growt* are more more e+enly &*are() 2owe+er. 2owe+er. it m&t -e note( t*an an opportnity 'o&t i& in'rre( in'rre( w*en t*e go+ernment &e& !n(& !or &'* prpo&e& -e'a&e le&& !n(& will t*en -e a+aila-le a +aila-le !or ot*er &e'tor& li/e *ealt*'are an( national (e!en'e) Con+er&ely. i! t*e&e !n(& 'ome mainly !rom ta1ing t*e ri'*. t*e in'ome ineality &itation 'an -e impro+e()

La-or poli'ie& T*e Singapore go+ernment go+ernment aim& to rai&e la-or pro('ti+ity pro('ti+ity t*rog* t*rog* promoting inno+ation. in+e&ting in people an( in'rea&ing !oreign wor/er le+y) Inno+ation ena-le& 6rm& to 6n( more e'ient met*o(& o! pro('tion) T*e Singapore go+ernment go+ernment *a& al&o in+e&te( in *man 'apital to eip t*em wit* rele+ant &/ill&) T*e !oreign wor/er wor/er le+y *a& -een rai&e( &o & o a& to !or'e 6rm& to re('e it& relian'e on '*eap !oreign wor/er& wor/er& an( to inno+ate) T*e&e mea&re& *a+e *elpe( to rai&e la-or pro('ti+ity) 3*en la-or pro('ti+ity i& rai&e(. t*en t*e le+el o! aggregate &pply an( aggregate (eman( will ri&e in t*e long rn) Rai&ing la-or pro('ti+ity al&o ena-le& greater otpt to -e pro('e( wit* t*e &ame amont o! la-or re&or'e&. re&or'e&. *en'e in'rea&ing t*e 'ontry,& pro('ti+e 'apa'ity) 'apa'ity) T*i& 'a&e& Singapore,& aggregate &pply 'r+e to &*i!t


rig*twar(&) At t*e &ame time. *ig*er la-or pro('ti+ity in t*e long rn *elp& to attra't more !oreign in+e&tment to Singapore. a& 6rm& are a-le to en5oy a *ig*er e1pe'te( rate o! retrn& !or t*eir in+e&tment) T*i& ena-le& t*e aggregate (eman( :A?= 'r+e to &*i!t rig*twar(& a& well) 3it* a &imltaneo& &*i!t o! -ot* t*e A? an( AS 'r+e. a *ig*er potential otpt an( employment i& a'*ie+e() 2owe+er. in t*e &*ort rn. rai&ing la-or pro('ti+ity *a& it& limit& in a'*ie+ing &&taine( e'onomi' growt* an( !ll employment. gi+en t*e '*ange& in aggregate (eman( in t*e &*ort rn (e to e1ternal in&ta-ility) 4or e1ample. !alling worl( national in'ome& (e to t*e glo-al e'onomi' 'ri&i& may 'a&e a (e'line in tra(e an( in Singapore,& e1port&. re('ing aggregate (eman( an( national in'ome in Singapore. &tiFing e'onomi' growt* an( employment in t*e &*ort rn) 2en'e &*ort term mea&re& mea&re& &'* a& e1'*ange rate an( 6&'al poli'ie& are nee(e( to ena-le Singapore to a'*ie+e t*e&e two ma'roe'onomi' ma'roe'onomi' aim&) Rai&ing pro('ti+ity 'an a'*ie+e &&taine( e'onomi' growt* an( !ll employment al&o (epen(& on t*e e9e'ti+ene&& o! t*e mea&re& to rai&e la-or pro('ti+ity an( i& ninten(e( 'on&een'e& &'* a& time lag. 'o&t an( n'ertainty)

Con'l&ion In 'on'l&ion. rai&ing la-or pro('ti+ity alone i& not a(eate) T*i& *a& to -e 'omplemente( wit* (eman( poli'ie& a& well to manage &*ort#term ma'roe'onomi' ma'roe'onomi' F'tation&) T*e Singapore go+ernment go+ernment &*ol( al&o ta/e into 'on&i(eration t*e limitation& o! &pply#&i(e poli'ie&) ?i9erent poli'ie& are &e( to re('e (i9erent type& o! o ! nemployment) 4i&'al poli'ie&. i! &e( a& a (eman(#management tool. *a+e limite( e9e't& on aggregate (eman() 2owe+er. gi+en t*at 6&'al poli'y !o'&e& on &pply#&i(e e9e't&. it 'an -e &e( to re('e -ot* 'y'li'al an( &tr'tral nemployment in Singapore)

Low Unemployment in Singapore

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