SEPT 20, 2002

Several merits in having a benefits scheme

I NOTED with interest the current discussion on whether Singapore should set up an unemployment insurance scheme.

I refer especially to the letter, 'Best safety net: job skills, not benefits' (ST, Sept 19), from the executive director of the Singapore National Employers Federation, Mr Koh Juan Kiat.

We should recognise that, ultimately, an unemployment insurance scheme is not very different from other insurance schemes.

I think it would help clarify costs and benefits if we compare such a scheme with, for example, car accident insurance.

Why do traffic accidents occur?

They may occur due to our negligence, such as reckless driving, or they may bedue to other people's negligence.

In the former case, yes, having insurance is bad because it may encourage us to drive recklessly.

In the latter, as it can happen to anybody, having insurance allows manydrivers to pool together the risk.

This achieves the usual efficiency gains from insurance.

Similarly, a person may find himself unemployed for many reasons.

He may be unemployed because of his incompetence.

If so, allowing him to receive unemployment benefits may encourage him to remain unemployed, leading to costs like tax evasion, that were stated by Mr Koh.

However, he may also find himself unemployed because of a global recession.

Singapore is very dependent on trade with the rest of the world.

Not having unemployment insurance will expose him to a global risk that is of no fault of his own.

I find that most of the current arguments against setting up an unemployment insurance scheme in Singapore fail to recognise that, even without such a nationwide scheme, Singaporeans may already be pursuing their own version of unemployment insurance.

This comes in the form of working in 'safer' jobs.

Jobs in the civil service are commonly referred to as jobs 'with an iron rice bowl'.

This means these jobs have a lower risk of retrenchment.

I would argue that one of the reasons why such jobs are attractive is thatSingapore does not have a comprehensive unemployment insurance scheme presently.

As we are considering how we might best encourage Singaporeans to be more entrepreneurial, setting up an unemployment insurance scheme may help in this aspect.

If both civil servants and potential entrepreneurs take part in a national unemployment insurance scheme, it will help to pool the risk of unemployment from these two diverse groups together.

The result might be that more Singaporeans would be encouraged to take the riskier route of becoming entrepreneurs.

Is this not what the Government is encouraging us to do?

KELVIN TAN TUAN WEI

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