On 8 May 2017, Daniel Goh from the Worker’s Party resurfaced their plans for redundancy insurance. It is an unsound and dangerous proposal. WP’s plans for redundancy or unemployment insurance are:
– monthly contributions of 0.1 per cent of monthly salary shared between employers and employees
– cost: S$3.80 per worker
– S$1,200 payout monthly for 6 months
Why is the proposal unsound?
The maths is wrong. 0.1 per cent figure sounds too good to be true. South Korea paid a 1.35 per cent premium in 2013 and that the figure stands at 2.2 per cent today. If Singapore takes up the proposal, employers will face an increase in cost.
Worker psychology will change
Redundancy insurance can lead to long-term unemployment. Workers will prefer to wait for their pay outs to be given before looking for a job, which means they will be out of job for at least 6 months.
What if workers repeatedly opt for unemployment insurance. How many times are workers allowed to receive payouts?
Goodbye retrenchment benefits
The next question: would companies remove retrenchment benefits? If there is unemployment insurance, why would any companies still give retrenchment benefits or provide a better retrenchment package?
Redundancy insurance is a unsound and dangerous proposal. It may be pleasing to the unemployed but we do not know what repercussions it may have. Why not focus on retraining and gaining employment in new markets?