Tan Kin Lian - Perspectives
Loan for retrenched workers
Many big tech companies were laying off a part of their workforce in 2023 and will continue the layoff in 2024. Other companies are also reducing their workforce due to the slowdown in the global economy. Singapore is also impacted.
How will the retrenched workers in Singapore cope with the loss of income? In most advanced countries, there is an unemployment income scheme run by the government. It provides an income for the workers who lost their jobs. The benefit is usually based on a percentage of the lost income and is paid for a certain period, say 12 to 18 months.
There is no such scheme in Singapore. How do these retrenched workers cope?
They will search actively for a good paying job that uses their experience and skills. Some will succeed. Other will spend several months or years and give up.
Many will be take up a self employed job as a private hire driver or delivery rider.
Those who have personal savings will use them to meet their essential expenses, until the savings run out. They have to borrow from relatives and friends. Some resort to borrowing from loan sharks, which will compound their financial woes.
Here is my suggestion.
In the absence of unemployment benefits, the government should provide a monthly loan to retrenched workers. This loan is fixed at a percentage of their regular income, and will carry interest at a modest rate and will be subject to a cap, for example, $50,000. The loan will have to be repaid eventually.
Any unpaid loan will eventually be setoff against the CPF savings of the borrower. This setoff should not hamper the ability of the member to get a monthly income, after retirement, to meet the living needs.
To prevent abuse, the unemployment loan will be subject to eligibility conditions, similar to how unemployment benefits are processed in other countries.
Eventually, part of the unemployment loan will have to be written off. This will be treated as an expense of the government, similar to other types of welfare spending.
I hope that the government will introduce this retrenchment loan scheme as a scheme of last resort to the retrenched workers. It helps them and their families from the crutches of loan sharks.
Tan Kin Lian
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A practical and workable solution.
leechiusan@gmail.com 07 Mar 2024