Can the Jobs Credit Scheme be abused? Is there any way to prevent abuse of the Jobs Credit Scheme which is being used by the Singapore government that apparently helps businesses and saves jobs, which in essence does not appear to be any different from the way the US government came up with schemes like TARP and what not to bail out the big banks, insurance companies and other businesses that should otherwise have been allowed to fail?
The replies given by Lim Hwee Hua, Minister in the Prime Minister’s Office and Second Minister for Finance and Transport on Sunday during a walkabout in Bishan appears to imply that it might be impossible to track how our funds are being used, just like how it is difficult to prove how the Jobs Credit Scheme does save jobs, apart from saying that it does and it has.
Mrs Lim said retrenchments may not indicate abuse of the system. She added that abuse was also hard to define, as the subsidies go into the company’s cash flow. And it is up to the company to decide how it wants to use the government wage subsidy. Speaking to reporters later, Mrs Lim added that it is “technically difficult” to define what counts as abuse, as the scheme is a “blunt instrument” where the firm can decide how it wants to use the government wage subsidy. She explained: “Because it is basically cash to companies, it is technically difficult to define what is abuse, because it goes into cash flow. You also cannot judge that once a company has retrenched workers, it must be abusing the system, because some of them might just need to be restructured. “So I think it would be difficult to judge it quite quickly. But I think there is enough peer pressure out there for companies to feel like, if they had retrenched at the word go, they would feel quite bad about it. But if it is because of business circumstances, regardless of how hard they have tried, they still needed to retrench, then I think we would have to let market forces work its way.”
So even though the money belongs to the people, and also because it is given to companies -technically- as a “cashflow”, it is not possible to tell the companies how to use the money. It comes to the beginning where handing out the money was a moral hazard since there was no way proper resources could have been assigned to make sure the money was used responsibly instead. Would there then be instances like how the money given by the Obama administration to bail out the banks was in turn used to pay out obscene bonuses to bankers and insurance agents? We would not know because the Jobs Credit Scheme is essentially turned into a ‘cashflow’ for the companies and it is ‘technically difficult to define what is abuse’, because it goes into… cash flow.
So what can be done about this to protect proper and responsible use of the people’s money? Apparently, in the end we will need to rely solely on peer pressure on the companies and believe that they will act on good faith and not retrench employees after receiving money from the Jobs Credit Scheme, because they might feel bad about it. Even though it is basically what the ‘credits’ are supposed to be used for – to help save jobs by not having the companies retrench their workers.
The government has dug a hole for itself by copying the bailouts enacted by the Obama administration. The Jobs Credit Scheme should never have been created because it can be abused in more ways than one. Due to technicalities, they cannot seem to ensure its integrity either. And now if companies do see the need to retrench, the government is happy to let market forces work its way, even though it would have been the right thing to do that from the start – it might have been more painful in the short term to have businesses fail and people losing their jobs, but in the long term it would have created more efficient and productive environments. Instead, we have a fall back for the companies to exploit if they do not wish to do anything to save their own bottomlines. But the budget shortfall used to fund the scheme would surely then have to made up by putting a bill on the people like you and me. The Jobs Credit Scheme should be stopped instead of being extended.