The case for retrenchment entitlement

June 3, 2010
Singapore Democrats

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John Tan

This story was related to me by someone whom I recently met in court: Mohammed (not his real name) was retrenched in 2009. Within two months, he had used up his savings and was in desperate need for money to feed his family and pay the bills.

The $200 a month he received from the Community Development Council was nowhere enough to pay for his bills which, unlike one’s income, don’t stop piling up when one is retrenched. In desperation he called a friend for help who introduced him to a loan shark.

Mohammed borrowed $500 and agreed to return $100 for 6 months – an arrangement he thought would be easy to handle as he was confident he would land a job during the period. Mohammed is in his mid-40s and has little education.

That job did not materialize and he quickly felt the brunt of the non-payment of his ill-considered loan.

After the usual splashing of his flat’s door with paint, the loan shark offered Mohammed a five-month extension to pay his debt in return for a simple favor – allow the creditor to use his empty bank account.

He didn’t know what they were going to do with his account, and to this day still doesn’t. He saw no harm in the arrangement. Besides, he feared for his family’s safety and badly needed the time to get a job.

The law caught up with the loan shark and traced the account to Mohammed who was arrested and hauled to court. He could not afford a lawyer and so went through the trial without one. The judge found him guilty and sentenced him to one-month imprisonment and a fine of $20,000 – a sum he could only see in his wildest dreams.

He did not appeal the conviction because he had been warned that, if he lost, he might get his sentence increased.

Even as he was about to serve his prison term, Mohammed is still puzzled as to what crime he had committed. With tears swelling in his eyes and his voice cracking, he asked me, “Tell me, is it a crime to let someone use your bank account?”

This is one of those stories that makes us stop and ask: Are we making criminals out of people facing financial hardship? Mohammed was one of those people who worked hard for a living, played by the rules and fended for his family.

Then through no fault of his, he was issued the pink slip and found himself out of a job and no income. As any father and bread-winner will testify, the hardest thing is to not be able to put food on the table for your children.

Often in ignorance, such folks turn to loan sharks. It’s easy for us to moralise and say that Mohammed was silly to borrow from a loan shark. That’s because we are not faced with desperation.

But this is where the government can help. By paying retrenchment benefits, we can alleviate hardship for our workers. The state would have spent a little more than $10,000 to help Mohammed tide through the difficult period. But being penny wise and pound foolish, the Government now finds itself having to pay for Mohammed’s prison upkeep.

In the meantime, how does his family survive? They would probably depend on social welfare which is added cost on the state. When Mohammed is released, he will have a criminal record which makes it harder for him to find a job. Will he return to crime and end up in prison to be supported by the state again?

This is where enlightened policy-making comes in. Introducing a retrenchment benefits programme may be a lot more pragmatic than people think. By keeping retrenched workers afloat during hard times, we may save by keeping them from criminal activity.

Besides, did we not just blow $140 billion in crazy investments in Western banks by Temasek and GIC? 

Of course we not only are able to afford retrenchment entitlements, our economy will also benefit from such a policy. Briefly, this is what the Singapore Democrats propose in our programme:

  • The state will pay retrenched workers not covered by their employers 75 percent of their salary for the first six months. This amount will be reduced to 50 percent during the following six months, and 25 percent in the third six months.
  • The payments will stop once the individual is re-employed. They will also cease 18 months after one’s retrenchment if the individual is still not employed by then. This will prevent a culture of welfare dependence from taking root. A cap will also be placed on the amount that any retrenched worker is paid.
  • Each worker will be allowed to reject only up to three job offers. (For a more detailed account of this proposal, click here.)

Such a people-first policy contrasts with the PAP ministers’ take-care-of-themselves-first approach. We desperately need balance in our economic system and the only way we are going to achieve that is for the Singapore Democrats to get into Parliament and push for such a policy.   

John Tan is Assistant Secretary-General of the SDP.