Coping with the economic downturn

What can the government do to help households and businesses to cope with the economic downturn?

Here are my suggestions.

Protect jobs
The businesses that are badly affected by the economic downturn have to cut down their wage cost to match the decline in their revenue.

Most of them have to retrench their workers.

The retrenched workers will not be able to find alternative jobs in a depressed economy.

I suggest that the businesses be encouraged to adopt a different approach.

Instead of laying-off some workers, they should put ask the workers to take no pay leave.

For example, if they have to cut their wage cost by 30%, they should ask all the workers to take no pay leave for 30% of the work week.

To help these workers to meet their monthly expenses, the government can provide a monthly loan to the affected workers to cover the loss of income.

These loans can be administered by the Central Provident Fund and is based on the loss of income as declared by the employer.

Some workers have savings and may not need to avail themselves of this loan. Others may not take the full amount of the loan, as they can reduce the expenses.

The loans will carry an interest rate of 2% per annum and can be repaid in the future, when the economy recovers.

If they are not repaid, the loans can be set-off against the CPF savings at the time of withdrawal or on the sale of a property covered by CPF.

The workers on no-pay leave can use the free time to take up a training course (for which they may receive an allowance), take up part time work, or just take a break. They do not need to worry about the financial impact.

For self employed workers such as taxi drivers, the loan can be set at a certain percent of the average monthly income in normal times.

These measures give the workers a reason to remain confident about the future, as the economic downturn will be short lived. The mood of consumer confidence will be good for the economy.

Reduce rental
Apart from wages, rental represents another important component of the operating expenses of a business.

The government can encourage by landlords to reduce the rental of the business premises to help the tenants to tide over this difficult period. This encouragement can take the form of a cash subsidy for 50% of the reduced rental.

The landlords will be happy to do their part to help their tenants to get over the difficult period, as half of the cost is shared by the government.  It is better than having no rental from tenants that have closed their business.
This 50% subsidy can also be given to stall holders and taxi drivers who have to pay a rental for their taxis.

Providing cash flow
Many businesses may need assistance on their cash flow.

The government can help them to get the financing from the banks by guaranteeing the loans that they have to take during this period.

The loans will be capped at the amount of the monthly rental and the wage bill. It does not cover the other financial needs of the company.

The banks will be willing to grant the loans at competitive rates, as they do not have to face the credit risk.

How much will these measures cost?
The measures that I have suggested are for the duration of the economic downturn.

They can start now and continue for a year or two, until the economy recovers.

The actual cost to the government is the rental subsidy and the future write-offs of the loans from workers and businesses that are not repaid. This is a sum that the government can afford. After all, we have already kept more than $1 trillion in reserves.

My suggested schemes also have some self control mechanisms to prevent abuse.

The government will need to engage auditors to check on these loans and subsidies, but the abuse is likely to be small.

 

Tan Kin Lian

 

 

 

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7 Responses to “Coping with the economic downturn”

  • Angelar Loh down biatch:

    Knowing rmployers and businesses, they’ll never do it.

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  • NotMyProblem:

    I suggest cut MPs’ and Ministers’ by 50% for as long as Conid-19 exists. Their reinstatement only when DORSCON green.

    This would pressure COVID-19 task force to be more active, instead of waiting for something to happen first. We already 200 infections, that’s not “under control”.

    Macau has zero!

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  • Educating Singaporeans:

    Dear TKL,
    The best way to cope with economic downturn is to live within your means.

    Many Singaporeans thought they are smart and overspent their money on housing, iphone, 65 inch LED TV etc etc.

    Then when they were laid off, they kpkb that we, the millionaire PAP did not help them.

    In the first place, why Singaporeans overspent when they are merely getting by only?

    Why don’t they live within their means ?

    It is Singaporeans fault that they try to keep up with the Joneses.
    打腫脸皮充胖子

    These group of Singaporeans does not deserve any empathy from us PAP or anyone.

    They create the problem themselves. Period.

    Maybe CARROT HEAD Gilbert Goh can start a donation drive and get Oxygen,
    Roy, Dr Chee, Bapak to donate to these keeping up with the Joneses Singaporeans to continue living the high social lives.

    PAP.GUARANTEED.WIN.GE2020
    Vote PAP, Vote for 9% GST to give PAP 9 months bonus.
    PAP Huat, Huat, Huat arh

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  • Reduce Minister Pay Now:

    This is the best time to reduce Minister and MP salary. Show that you are together with the people.

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  • tah ah tan, why so cock?:

    if pap really means it for sheep, and if employers are truly for sheep, then, just let go those non citizen aliens especially the Msia PR parasites.

    in a stroke of the action, 3.9m or over half the number of mouths in Singapore, are no longer a liability.

    there are other benefits in the action.

    1, less crowding. with 3.9m gone, Singapore now is again paradise. probably sheep can even buy a car in such a less crowded island.

    2, chance for Wuhan virus contagion is much reduced. because less mouths less chance for virus spread.

    3, most things become cheaper. because with less mouths, there is less demand so much so even high profit items such as Mercedes benz shall be now, finally, priced more correctly.

    remember. the source of problem is crowding in a very, very, small piece of land. 3m citizens and 3.9m aliens ain’t the way to go even without Wuhan virus.

    In This Regard, tan kin lian, as usual, is off target.

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  • TruBlu:

    Time to give FREE RATIONS N PROVIDE FREE UTILITIES TO OUR PEOPLE especially utilities for our needy sgs.

    Pls DONT DIP INTO OUR CPF,er,REAERVES,just to SUBSIDISE BU$$INESSMEN?

    THE NEEDY SGS NEED MORE HELP.

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  • help please:

    The government should help to protect jobs. Help the employer who has a problem to keep their business going.
    For those that lose their jobs, help should be given to them.
    Either a subsidy or cheap loans to tide over this period.

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