How bad is the retrenchment situation in Singapore, and how much worse it will get

Even as retrenchment figures rise, the official numbers may still not capture the full picture since they do not include firms with fewer than 25 employees or affected workers in the gig economy, economists told TODAY. — TODAY pic
Even as retrenchment figures rise, the official numbers may still not capture the full picture since they do not include firms with fewer than 25 employees or affected workers in the gig economy, economists told TODAY. — TODAY pic

SINGAPORE, Aug 15 — In May, Nicholas (not his real name), 27, received an email from the food and beverage (F&B) company where he was employed as a quality control officer. It was during the circuit breaker measures which saw many businesses stop operations, and he and his colleagues had gone on no-pay leave.

The email from the human resources department said the firm was closing down, and he was retrenched with immediate effect.

“The CEO did not even leave a word via WhatsApp,” said Nicholas. “Naturally, many outlet staff were quite upset, as they were already on no-pay leave, and were waiting for the circuit breaker to end so that they could resume working.”

As Nicholas had worked with the company for only one and a half years, he did not receive any benefits, which were granted only to those who had worked two years or longer.

Amid the current economic slump brought on by the Covid-19 pandemic, many workers are being let go abruptly and for some like Nicholas, in a seemingly insensitive manner.

As Covid-19 continues to wreak havoc on economies around the world, including Singapore’s, unemployment and retrenchments on the island continued to rise in the second quarter of this year, especially in sectors hard-hit by the pandemic, such as aviation, hospitality, and food and beverage (F&B).

Retrenchments rose by 108 per cent to 6,700 between April and June, compared with 3,220 in the first three months of the year, according to advance estimates from the Ministry of Manpower (MOM) in July.

On Monday, Deputy Prime Minister Heng Swee Keat is slated to make a ministerial statement to provide details on how the Singapore government will continue to support workers and businesses.

Writing on Facebook earlier this week, Heng gave the assurance that the Singapore government will continue to provide targeted support to sectors that are hardest hit, including helping them “pivot to new opportunities” in growth areas.

He added: “But we are not able to sustain the same level of support indefinitely. As more sectors re-open gradually, we will have to evolve and taper the support provided.”

How high will retrenchment numbers rise?

The MOM’s advance estimates for the second quarter of this year showed that both manufacturing and services sectors registered a sharp increase in retrenchments.

While manufacturing saw an increase from 720 retrenchments in the first quarter to 1,600 in the second, services saw a corresponding increase from 2,360 to 4,600.

The services sector includes industries such as retail, F&B, hotels, transport services, and recreation.

While there was relatively little news of major retrenchment exercises in Singapore in the first few months of the pandemic, the end of the circuit breaker period saw several companies — mostly from the badly impacted services sector — making headlines with their layoff announcements.

While more layoffs could be expected, especially from the hard-hit industries, the number may be lower than what some experts had earlier expected.

DBS Bank senior economist Irvin Seah, who forecasted in April that there might be 45,600 retrenchments by the end of the year, said that the retrenchments figures are likely to be mitigated by the Singapore government’s job support measures.

They include the Job Support Scheme (JSS), which has helped to subsidise wages, thus enabling companies to retain their workers despite challenging business conditions.

But Seah said it is hard to come up with an exact figure now “as the entire crisis is still continuing”.

Agreeing, OCBC bank economist Selena Ling — who had also predicted four months ago that retrenchments this year could hit 65,000 — said that aside from support such as the JSS, there have also been other “soft” measures in place that could help reduce layoffs, though it would be difficult to estimate a figure.

“There has also been a lot of moral suasion (by the authorities) that if companies really do need to lay off (workers), they should protect the Singaporean core,” she said.

Under the JSS, which is scheduled to cease this month barring any extension, the Singapore government will co-fund between 25 per cent and 75 per cent of the first S$4,600 (RM14,071.07) of an employee’s gross monthly wages, with three main payouts in April, July and October.

“We should extend the JSS, but take a more targeted approach where the extension is only for certain industries that are worst hit,” Seah said.

Ling noted: “After August, the question is if the businesses foresee that the demand is not going to pick up significantly... Then you may get many who will throw in the towel.”

“I think (retrenchments) are likely to increase and whether we get a surge depends on whether policymakers extend or enhance some of the current policy support,” she said.

If the measures are extended, the retrenchment numbers for the year “may be a bit lower” than her initial prediction of 65,000, she added.

The Asian Financial Crisis in 1997 and 1998 saw around 30,000 retrenchments, while the Global Financial Crisis in 2008 and 2009 claimed around 40,000 jobs.

In the first two quarters of this year, there have already been almost 10,000 retrenchments.

Even as retrenchment figures rise, the official numbers may still not capture the full picture since they do not include firms with fewer than 25 employees or affected workers in the gig economy, economists told TODAY.

According to MOM’s Labour Force Reports, in 2016 there were 200,100 residents who were “own account” workers.

In 2019, this had grown marginally to 211,000, making up 8.8 per cent of the country’s labour force. Among this group, more than 80 per cent did gigs or contract work as their primary job.

However, the pandemic has dealt a fresh blow to the gig economy, said the economists. Many gig workers such as freelance performers, artists, tour guides, and private-hire drivers, have seen a drastic drop in their incomes or job opportunities drying up.

Maybank Kim Eng economist Chua Hak Bin noted that some gig economy workers, however, could still thrive during this time, such as those working in food delivery and those who can bring their expertise online, such as tuition teachers. 

A deeper and wider recession

The expectation that retrenchments are likely to increase stems from the severe depth of the current recession, which is set to be longer than the ones which Singapore experienced during the Asian Financial Crisis and the Global Financial Crisis.

The Ministry of Trade and Industry (MTI) on Aug 11 said that the Singapore economy shrunk 13.2 per cent in the second quarter of the year compared with the same period last year, as the country enters its worst recession since independence.

From an initial projection that the GDP will shrink between 4 and 7 per cent, MTI downgraded its forecast to a contraction of between 5 and 7 per cent this year.

Seah said: “We think that growth will only return back to positive levels from the second quarter of next year.”

He added: “Real GDP (gross domestic product) will only return to pre-Covid levels earliest by end of next year.”

This means the current economic crisis is expected to last 24 months, said Seah. In comparison, the Asian Financial Crisis and the Global Financial Crisis both lasted about 18 to 19 months.

The severity of the crisis also means that sectors which are seeing a temporary rebound — after Singapore and other countries reopened their economies — are by no means immune to layoffs.

For instance, the recent increase in demand in retail, F&B and entertainment sectors may not last if the economy continues to dive further, and people begin to tighten their belts again.

“If employment prospects continue to deteriorate, then it will have a second-order impact on domestic consumption and henceforth segments such as the F&B and retail sector,” said Seah.

He noted that any sector that depends on discretionary spending could see more retrenchments in the coming months. They include entertainment and recreational services, as well as industries dealing with big-ticket items such as cars and real estate.

Some sectors which could be safe

While the overall outlook remains bleak, economists have identified several industries that would be safe amid the pandemic. These are the biomedical and pharmaceutical industries that have seen an increase in demand in healthcare supplies, the e-commerce industry which has benefitted from safe-distancing measures, and some segments of the tech industry, as more people take their businesses and everyday activities online.

However, other industries will need to grow and adapt to the uncertainties ahead rather than wait for government support, the economists cautioned.

“Ultimately it is the survival of the fittest, and the fittest are the ones who are able to adapt and grow,” Seah said.

Having lost their jobs, some are just getting by 

Almost all the retrenched workers whom TODAY interviewed have yet to find full-time employment, with some working part-time to get by.

After being retrenched from a corporate role at a hotel in June, Alyssa (not her real name) has been applying “aggressively” for jobs.

The 29-year-old has gone for 10 interviews so far but has yet to be offered a job. She has applied for roles in the technology and healthcare sectors, but feels like she is “just applying for jobs which I think I am qualified to do, with no real sense of direction”.

She is currently working part-time in sales planning at a small local trading company earning S$120 a week —  some 90 per cent lower than what she was earning from her previous job.

“I don’t think S$120 a week is enough to get by, (but) I have savings to fall back on,” she said.

Daniel (not his real name), a 26-year-old who was retrenched in February from an online travel agency, has also been working part time at security firm Certis, where he helps to call persons under quarantine to check on their details.

He clocks in four 12-hour days a week, fetching about 80 to 90 per cent of his previous salary.

However, he knows that the role is not permanent and is looking for full-time employment.

“As long as it’s something that I think I can do and have the experience they are looking for, I just apply,” he said.

While most of the retrenched workers interviewed started looking for jobs only after they received the pink slip, Frederick (not his real name), a senior technician from the aerospace industry, said that he began looking for alternative employment as early as March, before he was eventually retrenched in July.

Seeing the writing on the wall for his industry, he applied for various companies outside of the aerospace sector, such as in the biomedical and semiconductor fields.

In July, the 34-year-old secured a job at a local infocomm technology firm as an associate engineer, matching his previous salary.

“One of the reasons I looked for a job so early is because I don’t want to place my bets on finding a job while living on the money from the retrenchment package,” said Frederick, who has a two-year-old son.

 Looking for a fresh start? Here’s some help:

For workers who have been retrenched, there are several government grants and initiatives to help tide them over this period and find jobs.

Grants and funds

Programmes and initiatives

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