Ministry of Manpower Deal with the labor crunch
There is a labor crunch in Singapore. Some businesses are not able to find workers for certain jobs, while many older workers are unemployed.

The manpower minister Josephine Teo and her predecessors are not able to find a solution to this imbalance in the labor market. The situation has got worse over the years. 

The solution is, in my view, higher wages. The businesses should pay higher wages to attract the workers for the jobs that are shunned.

Why can't the older unemployed workers take up these jobs?

Most of these jobs probably require younger workers who are fit and active. Many of the younger workers are graduates who prefer to work in the office. The pay for the office jobs is better, and the job is more comfortable and prestigious. Some of them are even willing to sell credit cards, life insurance and other products on commission.

If the wages for the shunned jobs are raised to a sufficient level, some of the younger workers will be attracted to do these work. Many of these shunned jobs are in retail, F&B, care services and customer service.  Young people can do these jobs quite easily.

I am not talking about construction jobs that have to be handled separately.

In the past, these businesses relied on foreign workers who were willing to work long hours for lower wages. But this source is now controlled by the govt. It was never a sustainable solution.

Many businesses probably cannot afford the higher wages, as they are not profitable. They now have to pay for the high cost of rent, utilities and govt charges. 

A short term solution is for the govt to provide a subsidy to cover the higher wages. I suggest a subsidy of 30% of the wages, subject to a cap for each worker and for the business.

If businesses can increase the wages and are able to attract the younger workers, the jobs that are vacated become available for the older unemployed workers.

Some of these jobs require skills that the older workers do not have. The skills can be learned by on-the-job training or by skills upgrading courses. These courses can be subsidized by the govt, when the workers are sponsored by the employers. The wage subsidy can be extended to the employer who hire these older workers.

What is the long term solution?

We have to help businesses to reduce their operating costs, such as  rentals, utilities and govt charges. This will allow them to pay higher wages to workers, without relying on the govt subsidy.

We have to implement some form of rent control to stop the escalation of rentals. The escalation is caused mainly by the REITS (real estate investment trusts). The REIT managers have been effective in pushing rentals in recent years. The rental has now reached an unsustainable level. Many tenants have to cease operation due to high cost, but they are being replaced by other tenants.

The rent control can be market based. In some countries, the rental on renewal of the lease is subject to a cap that is linked to inflation. This has been effective in controlling the escalation in rentals.

Over the longer term, we need to have a proper balance between rents, wages and other cost of doing business. The current distribution is lopsided, with wages taking a smaller share (compared to other countries). 

To deal with the labor crunch, we need:

a) Businesses to increase wages for the jobs that are now facing the crunch.
b) A wage subsidy to allow these businesses to afford the higher wage cost
c) Market based rent control

I hope that the govt will now consider a new approach. Their old method did not seem to work.

Tan Kin Lian

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