SINGAPORE (Apr 30): Layoffs and unemployment are expected to mount in Singapore this year despite fiscal measures such as the Jobs Support Scheme (JSS) which provides a blanket wage subsidy for all Singaporean workers from April till the end of the year.
“Notwithstanding the government’s support measures, some firms affected by the fallout from Covid-19 may still have to undertake labour cost adjustment measures such as putting workers on shorter work weeks or no-pay leave,” says MAS, which notes that employees in retail trade, F&B and recreation services are “the most vulnerable to being laid off”. This is because the labour market was already soft in end-2019, before the Covid-19 pandemic struck.
Preliminary numbers released by the Ministry of Manpower (MOM) on April 29 showed Singapore’s unemployment inched up to 2.4% in 1Q2020, from 2.3% the preceding quarter. Meanwhile, retrenchments for the quarter hit 3,000, compared to the 2,670 shed in 4Q19.
Economists are now looking at record high levels of unemployment — with DBS Bank’s senior economist Irvin Seah estimating the overall level to rise to 3.6%. He is also looking at retrenchments hitting some 45,600 this year — nearly double his initial estimation of 24,500 a month ago. Of this, he says nearly 60% will likely be foreigners. Meanwhile, Chua Hak Bin, senior economist at Maybank Kim Eng, has posted a gloomier projection. Drawing reference to the unemployment levels of 3.3% during the peak of the AFC and GFC, Chua cautions that Singapore’s resident unemployment rate will climb to around 5%. Job losses, he adds, could spike as high 200,000 this year — “greater than even the magnitudes seen during the AFC or GFC”. At the height of the crises, layoffs here hit 28,300 in 1998 and 23,430 in 2009.
Besides job losses, MAS expects a decline in resident’s monthly wages, especially among firms in sectors that have been hit the most by the health and economic crisis. For instance, the drop in wages in the transport and storage industry is estimated to “occur swiftly and sharply” while the financial services sector is said to follow suit. Others such as the accommodation and food services industry is likely to see a decline in the number of working hours.
To be sure, Singaporeans are already mentally prepared for such a turn, with one-tenth of respondents expecting a pay cut of at least 10%. This was revealed in the responses to a joint poll by the Singapore Management University’s Sim Boon Kee Institute for Financial Economics and DBS Group Research in end March.
However, MAS estimates the fiscal support measures will help forestall a large spike in unemployment in the short-term. Collectively, wage subsidies levied thus far stand at 16.7% — larger than the 6.4% effective subsidy disbursed through cash grants for resident wages during the GFC. This translates into a 0.7% reduction in unemployment levels, the MAS notes.
In the longer term, MAS says the targeted approach will prevent spare capacity from emerging while reducing the possibility of a more lasting damage to the economy.
