Singapore — Budget 2020, while touted “as nothing less than a ‘strategic financial plan’ for Singapore’s future — falls short in meeting its own goal of promoting long-term economic transformation”, according to a report in Academia SG, a website maintained by a group of Singaporean academics.
In the report, Prof Linda Lim, Professor Emerita at the Stephen M. Ross School of Business, writes that Deputy Prime Minister and Finance Minister Heng Swee Keat’s Budget “still clings to the standard Singapore template of state-directed corporate subsidies”. She explains that, while these have attracted foreign investment, they have led to “economic malaise”.
“In fact, some of these policies may restrain rather than promote the required transformation,” she adds.
Prof Lim writes that wage subsidies like the Wage Credit and Jobs Support Schemes have several limitations. As they come with many restrictions and are not universal, they may merely substitute for funding that employers would have provided anyway, and they may discourage employers from shedding labour they no longer need which limits structural transformation, productivity growth, reskilling and job mobility.
“A more rational policy would seek to ‘preserve employment’ and ‘preserve income’ for individuals,” she says. But this requires sacrificing some “sacred cows”.
“One of these is the aversion to unemployment compensation. Singapore is the only advanced economy without a system of income compensation for workers who lose their jobs,” she writes. Prof Lim adds that a complementary wage insurance policy would also temporarily protect workers who change jobs from lower income in their new occupations.
Lastly, Prof Lim says that it is both politically and economically desirable for social subsidies to be factored into the Budget as universal entitlements and “automatic stabilizers”, with unemployment compensation and social welfare payments increasing automatically as the economy, employment and income decline.
In conclusion, she writes that “while well-meaning, Budget 2020 does not make the best use of the resources at the government’s disposal to both stimulate the economy in the short run, and equip business and society for the long-term deep economic transformation”. /TISG