Mr Heng Chee How

Deputy Secretary General, NTUC

& Chairman, SRP Steering Committee

Distinguished Guests,

Ladies and Gentlemen

Good afternoon. Thank you for joining us at this Multi-Industry Launch for the Skills Redevelopment Programme.

We are facing a very severe economic storm. Both our major markets and investment sources, the US and Japan, are headed for a recession. The recession in these big players will have a severe impact on us. We will suffer higher unemployment and more workers will be retrenched. Management of business cost and viability has become a critical issue for most employers. What should companies do? Downsizing and laying off workers seemed to be the common strategy. But is this the best for the longer term? It may not be so for some companies. Retrenchment is not the only option to cutting cost and managing excess manpower. Employers should also consider other alternatives before resorting to retrenchments. What are some of these alternatives?

First, shorter workweeks. By keeping their factories and offices closed for part of the week or month, employers can reduce operating cost. Some companies in the manufacturing sector have already implemented this tactic as an interim solution.

Second, companies could try wage freeze or wage cut. With the rapidly deteriorating business conditions, a number of local organisations have recently announced wage cuts. This will reduce cost and help companies to survive the tough business challenges. If a reduction in manpower cost becomes inevitable for an organisation, implementing a wage cut should be the first option rather than laying off workers. I believe it is much better for all employees to have a job at lower pay than for 10% or 20% of their colleagues to be thrown out of their jobs. 80% pay is certainly better than no pay. Such wage cuts should be spread out through all sectors of a company’s workforce. Senior management and executives must also bear their share of the burden to minimise the cut and hardship faced by their lower-salaried colleagues.

Accepting such adjustments is a realistic and pragmatic approach. In response to the deteriorating economic conditions, the NWC has also been reconvened to review its May 2001 wage guidelines. These were formulated under a different and much more favourable economic environment. Since then, the economy has worsened rapidly and significantly. Instead of a small growth, our GDP will actually shrink by -3%. Furthermore, the prospects of a quick recovery are unlikely. We must tighten our belts and prepare for a longer downturn. Companies must plan for a longer period of poor demand and loss of market share. We must reduce business cost, including wage cost. The NWC will consider whether fresh wage guidelines are needed to help companies preserve jobs and minimise retrenchments where it is unavoidable.

Last and certainly not least, why not make use of the lull to improve the skills of the workforce? Better skilled workers will help increase the company’s productivity and contribute to cost control. Training can also facilitate the redeployment of employees to job functions requiring different capabilities. With a better skilled workforce, companies will be in a much better position to take advantage of business opportunities when the economy recovers from the downturn.

Sending workers for training during the downturn not only pays off for the company in the longer term. It can also pay off immediately. Under the Skills Re-development Programme, employers receive generous course fee support and absentee payroll for workers placed on training. During the training period, the Government bears the bulk of the training expenses and workers’ wages. Therefore, instead of adding to business cost, SRP training can in fact help lower a company’s wage cost.

This is what many companies have discovered after signing up for the SRP. For example, Murata Electronics Singapore (Pte) Ltd, a company that manufactures ceramic capacitors, had benefitted from the SRP. When production orders fell as a result of the downturn, the workload of some workers dropped significantly. Instead of retrenching these workers, Murata enrolled 208 workers in full-time SRP courses at the Bukit Merah Skills Development Centre.

Both company and workers are happy with this mutually beneficial arrangement. The workers were happy that they were learning a new skill while continuing to receive their pay. The company is confident that they will have better skilled workers and many more options in deploying them to different job functions. I am told that Murata plans to send another 176 workers for the SRP over the next 12 months.

To encourage even more employers to follow Murata’s example, we have enhanced the SRP incentives since 1 November. This is the second time we are doing so this year, the first being in July. For workers below 40 years of age, the course fee support has been increased from 80% to 90%. For workers 40 years old and above, course fees support will be 100%. In addition, the absentee payroll support for employers has also been increased to $6.10 per trainee-hour for workers below 40 years of age, and $6.90 for workers 40 years old and above. These enhancements will provide further financial incentives for employers to send their workers for training under the SRP in these difficult times.

At the same time, we have increased the number and range of courses under the SRP. Employers and workers can now select a suitable course from the list of 700 SRP courses from different industries. This is three-and-a half times more than the 200 SRP courses previously available.

Up to now, about 1,100 companies and 60,000 workers have benefited from SRP training. Today, we are extending SRP to companies in 6 new sectors, namely aerospace, cleaning, logistics, power, public bus transport and security industries. In particular, I note that the companies in aerospace, cleaning and public bus transport have already enrolled 1,900 workers for training under the programme. This is a good start and more companies should follow such forward-looking role models.

We are all facing very challenging times. To help businesses and Singaporeans tide over the downturn, the Government had announced a $11.3 billion off-budget package. This will help to reduce business costs. But retrenchments and higher unemployment cannot be completely avoided. What we can do is to cushion workers from the full impact.

I would like to take this opportunity to urge employers to work with the unions and workers to examine all options to reduce business and wage costs before resorting to retrenchments. In particular, they should make full use of the enhanced incentives provided under the SRP to improve the skills of their workers, while at the same time reduce wage costs. Similarly, I would encourage workers to be open to measures, such as shorter workweeks, wage restraint and wage cuts, if such measures are necessary in order to save jobs. They should also respond positively to training opportunities, such as the SRP. More relevant and better skills can enhance their employability.

Ladies and gentlemen, this economic downturn is a major test for Singapore. But we must not lose our confidence nor should we panic. The Government will work with employers and workers to steer the economy back to calmer waters and new business opportunities. I am confident that we will pass this test to enjoy a brighter future for all Singaporeans.