NEWS ANALYSIS

Upcoming fiscal support may be more targeted

Singapore

MORE fiscal stimulus may be on the way, though measures may not remain as broad-based as before. With retrenchments rising even before the Jobs Support Scheme (JSS) wage subsidy ends, it might be time to assess which jobs should still be supported.

Asked at a Tuesday press conference if Singapore might see "another round of large-scale Budget measures", Minister for Trade and Industry Chan Chun Sing said he would leave Deputy Prime Minister and Finance Minister Heng Swee Keat to make such comments "in due course".

Similarly, asked if the JSS would be extended to cover wages beyond August, Manpower Minister Josephine Teo said that the government is "looking actively at whether broad-based support continues to be needed" and that Mr Heng will address that question "quite soon".

Economists are cautious about expecting another bumper package. Further fiscal support should not be seen in the context of dismal second-quarter growth, but in light of the expected road ahead, which would justify a targeted response, said Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore.

Besides extending schemes, a recovery-focused response could see more extensive measures to help industries and workers adapt, he said.

"Existing fiscal support schemes may be extended, but will likely be scaled down and more targeted at the worst-hit sectors," said Maybank Kim Eng senior economist Chua Hak Bin.

Better-performing sectors such as financial services could be excluded from such help, for instance. "Extending an indefinite lifeline is costly, depletes fiscal reserves and underutilises manpower resources," he said.

UOB economist Barnabas Gan does not expect another supplementary budget, but does see an extension of the JSS as helpful. Other measures could include a reduction in employers' Central Provident Fund contribution, similar to the 10 percentage-point cut in 1998; and guidelines for employers on wage freezes or wage cuts to save jobs, he suggested.

As for whether the government might need to dip into the reserves, OCBC Bank chief economist Selena Ling noted that with S$13 billion set aside in the Contingencies Funds, there is existing financial leeway.

According to a feature article in the Economic Survey of Singapore for the second quarter, released on Tuesday, this year's four Budgets may help reduce the full-year rise in the resident unemployment rate by 1.7 percentage points. The JSS alone is estimated to contribute an expected 0.9 percentage point reduction.

But in the long term, it may not make sense to preserve all jobs in their current form. Mr Chan noted that some firms are in industries "that have permanently changed" due to Covid-19 and will have to pivot to new markets and products, including mass-market tourism, MICE (meetings, incentives, conferences, and exhibitions) and social entertainment.

Rather than artificially maintaining obsolete jobs on life support, the focus needs to be on getting workers into new jobs in promising new areas.

Such transitions are hard but necessary. The government is already enabling this, with schemes for mid-career workers. A more targeted jobs support policy would further drive home the point that for some industries and jobs, there can be no return to the pre-Covid-19 days.

This might not have to mean an outright removal of support. Rather, wage subsidies could be provided on the condition that workers are helped to move into new roles, for instance.

As Dr Chua put it, additional fiscal support should allow for the redeployment and reskilling of workers to move into growing sectors. The government could consider a temporary subsistence income support scheme for retrenched workers, for three to six months, he added. "This will be less costly and more targeted, as such a scheme will cover only 50,000 to 100,000 workers, as compared to the blanket wage subsidy scheme which covers around two million workers," he said, by Maybank's estimates.