SPEECH BY MR LEE HSIEN LOONG,PRIME MINISTER AND MINISTER FOR FINANCE, AT MAY DAY RALLY, 1 MAY 2005, 5.30 PM AT NTUC CENTRE, ONE MARINA BOULEVARD

MAY DAY RALLY BY PRIME MINISTER LEE HSIEN LOONG ON 1 MAY 2005, 5.30PM, NTUC CENTRE

Introduction

1.            Happy to join you today at this May Day gathering.

2.            We are living through an eventful period.  There are two significant changes taking place. 

a.            We have a new leadership team

b.            Our economy is at a turning point.   We are restructuring to adapt to new circumstances, especially driven by the rise of China and India.  What we do in the next few years will profoundly affect Singapore’s relevance to this new world.

3.            Today I will address the questions

a.            Moving forward, with new leaders and a new generation of Singaporeans, how will it affect labour relations in Singapore?

b.            How are we going to respond to the challenges that workers face?

Change in Leadership Will not Affect Labour Relations

4.            We have maintained good tripartite relations for many years

a.            Workers, employers and Government worked closely together

b.            Shared the fruits of success as our economy grew and prospered

i.              Wages increase as companies grow and GDP goes up

ii.            Bigger bonuses in good years

iii.          With growth, Government invest our resources back in workers, in education, training, healthcare, housing, issuing ERS and NSS etc

c.            At the same time, gone through difficulties together

i.              Sacrificed together to weather storms like Financial Crisis and SARS

ii.            Adopted a frank and sincere approach to solving national problems

iii.          Worked together to tackle difficult problems, e.g. CPF reforms, company restructuring

iv.           Developed trust in one another, so that each time we manage a crisis successfully, we emerge stronger and our partnership becomes closer

d.            Ours is a win-win-win relationship

5.            I and my team will not change this approach of maintaining constructive and harmonious tripartite relationships

a.            Tripartite co-operation is fundamental to our economic survival and ability to create jobs for Singaporeans

b.            My Ministers understand its importance fully

i.              Especially Secretary General Lim Boon Heng, who is an experienced and key member of my team.  He is also the PAP Party Chairman

ii.            Mr Lim Swee Say too, with his previous experiences

(1)         In EDB, where he learnt what investors look for when deciding to put in their money

(2)         In several ministries, learning how the government works

(3)         In NTUC for many years, helping to improve the welfare of workers

c.            Also we have MPs serving in the NTUC Central Committee, and many more Party members serving on the ground as union leaders

6.            My team is therefore committed to work to improve the lives of Singaporeans

a.            Workers are a big segment of Singaporeans

b.            Hence one of our top priorities will always be the interest of workers

c.            Unions will remain a key partner of my Government. 

i.              Understand the concerns of workers, and work with the unions to address them

ii.            Involve unions when drawing up plans for the future and making major decisions affecting workers

iii.          Co-opt the unions to grow our economy and create more jobs

Responding to Challenges

7.            In my May Day Message, I mentioned three long term challenges

a.            Staying head in a New Asia

b.            Managing an ageing population

c.            Tackling structural unemployment

8.            Today, I will like to outline our strategies to deal with these challenges

Restructure to Grow the Economy and Create Jobs

9.            China, India, and our Southeast Asian neighbours will continue to grow and compete with us.  

a.        We cannot stand still; we have to restructure, upgrade, and adapt to the new landscape

10.        This strategy is working

a.            e.g. PSA has successfully restructured and is doing well.  It overtook Hong Kong as number one port in the world in first quarter of 2005

b.            CAAS and SIA too are making good progress

c.            Many investments coming in for both manufacturing and services.  The IRs will be another big plus for our economy

d.            As a result

i.              Unemployment has fallen below 4%

ii.            Retrenchment in 2004 was 10,000, the lowest since the Asian Financial Crisis

iii.          Overall, we have net creation of 71,000 jobs in 2004, of which 70% went to locals

11.        Hence in May Day message I said that overall the outlook is positive

a.            Straits Times headline: “Don't worry, the outlook is good, says PM Lee”

b.            But we must always worry!

c.            Better headline would have been: “Outlook good, but be careful and work hard, says PM Lee”

12.        I know that workers are still worried about job security

a.            They know how strong the competition is

b.            They see that despite growth, there will continue to be retrenchments – e.g. Maxtor

13.        It is tough to go through retrenchment, and have to re-skill and get re-employed. But it is unavoidable. To grow our economy and create more jobs, we have to become leaner, more efficient and competitive, i.e. we have to allow restructuring to take place. This means turnover and sometimes retrenchment. If we try to delay the restructuring in order to protect existing jobs, the result will be worse.

14.        Big countries often try to protect jobs by shutting out imports, so that domestic industries will survive and continue to employ workers.  But this does not work even for the big countries, e.g. textiles in America

a.            For decades the US tried to protect textiles jobs by setting quotas for imported textiles

b.            American consumers were forced to pay billions of dollars more for their clothes

c.            But the US textiles industry still shrank, because the cost difference between American and foreign textiles was too great. American producers were simply uncompetitive in world markets. And even in the US, the retailers found ways to get around the quotas

d.            Because the US resisted change, its textiles industry did not really upgrade and become competitive. Neither did the government do enough to prepare textiles workers for other jobs. Now the textile quotas have ended, imports have surged, particularly from China. The industry cannot cope with the competition, and is clamouring for protection again

e.            The same story is happening in Europe

15.        Other countries try to shut out foreign workers, to protect jobs for locals

a.            e.g. Germany is facing an influx of East European workers.  e.g. The brick layers are mostly from Poland.  The German government is now proposing a law to require foreign companies doing business in Germany to pay their workers full German salaries

b.            But this will only drive up cost of doing business in Germany and encourage German companies to invest elsewhere, as they are doing in Poland, in the Czech Republic, or in Asia

16.        Singa­pore cannot do this

a.            Our plants produce goods to export to the whole world. 

i.              e.g. we produce 90 million disk drives a year, one-third of the world supply

ii.            We cannot help the disk drive industry by protecting the local market. How many disk drives does each Singa­porean need per year?

iii.          We also cannot force disk drive makers to hire only Singaporeans, or make it difficult for them to restructure and shed workers when they need to. If we did, would they stay and continue to invest here, or would they just relocate to China or Vietnam? 

17.        A better approach is to allow in a controlled number of foreign workers,

a.            Hence the levy, as well a cap on the proportion of foreign workers a company can hire

b.            That way, the foreign workers can complement Singapore workers to create more jobs for Singaporeans

Helping the Troubled Segments

18.        Restructuring has to continue. It is better for us to endure some short term pain, so that in the long term, we stay competitive, and can continue to create more jobs.  But we must pay special attention to workers who have the biggest problem adjusting.  There are three groups

19.        Older workers

a.            More difficult to adapt to changes in economy

b.            More concerned about old age expenses, and medical expenses, especially given that Singaporeans are living longer

c.            Best solution is for Singaporeans to work longer, and retire later.

d.            Then they can continue to support their families, and save more for their old age

e.            But this is no easy to do.  We have to tackle the problem on many fronts

i.              Make sure that our labour market is flexible

(1)         Particularly, seniority wage system is not sustainable and has to be changed

(2)         For many workers, prime of career is in the 40’s or early 50’s. Therefore, wages and benefits systems will need to be adjusted so that it is still attractive to hire older workers. 

ii.            Employers have to restructure or redesign operations to prepare themselves for more older workers

(1)         Reallocate responsibilities so that older workers can do something less physically demanding, and which they are good at.  For example, older workers are more reliable, more punctual, more patient, and friendlier.  Companies should make full use of this

iii.          We also need to change the negative mindsets against older workers

(1)         Workers to continue to believe in themselves, that they can learn and pick up new skills

(2)         Customers be more understanding, and do not always expect everything to done in the quickest time

(3)         Employers to keep their doors open to older workers – do not reject a job applicant just because he is above 40

f.              The current situation will become increasingly untenable. Older workers still have much to contribute.  We need to get companies to be more ready to employ older workers without undermining their commercial viability

g.            A Tripartite Committee is currently studying these issues in depth, and will submit its recommendations to the Government in the coming months.

20.        Lower-skilled workers

a.        Face considerable difficulties.  They cannot keep up with the rapid changes, and risk being left behind as the economy progresses. 

b.            Continue to emphasise life long learning, training and upgrading, to provide Singaporeans with new and relevant skills. 

i.              Fit them into industries which still require workers, e.g.

(1)         In services – healthcare, education, security, public transport, childcare, retail and hotels

(2)         In manufacturing – shipbuilding, construction, electronics and textiles.

ii.            But they must make an effort to adjust and not shun these jobs, which will otherwise go to foreigners

iii.          Mindset is changing

(1)         Singaporeans used to shun jobs such as healthcare assistants in hospitals. Now they queue up for the jobs, and retention rate is high

(2)         Singaporeans used to shy about becoming waiters.  They asked ‘What if I have to serve a relative or a friend that comes into the restaurant?’  But they are gradually accepting the idea. 

c.        At the same time, will ‘recreate’ some existing jobs to make them more suitable and attractive for local workers

i.     In sectors such as cleaning, construction, landscaping, electronics, precision engineering and shipbuilding, factors such as low pay and challenging working environment may have deterred Singaporeans from taking up these jobs.

ii.   We can redesign these jobs, raise productivity, increase pay, and make working conditions more pleasant

iii. Targeting for 10,000 vulnerable workers to take up meaningful employment over the next 12 to 18 months through the Job Recreation Programme  

d.            Mr Lim Swee Say is personally overseeing this

21.        PMETs (Professionals, Managers, Executives, Technicians)

a.            Because of outsourcing and company restructuring, organisation structures are flattening 

b.            Many middle level jobs which they used to do no longer exists 

c.            They are not qualified to get the new jobs that remain at the top, and do not want to take up the jobs at the bottom (sometimes the employers do not want over qualified workers either)

d.            Have to find ways to help them

i.              Many of them have the skills which companies can make use of, especially the SMEs who need professional expertise.  We can match them to these jobs.

ii.            Retrain them and fit them into new industries and activities that can use their expertise – in healthcare as technical operators and nurses, in schools as teacher and library assistants, in the security industry as specialists and supervisors, in the hospitality industries, or even financial services.

iii.          Or have them start their own small businesses to provide personalised services, such as tour guides, personal chefs, butlers that help people get their lives organised

Conclusion

22.        We will do our utmost to help workers cope with restructuring. But one solution we must avoid is welfarism

a.            Govern­ment welfare is not the answer to our problems. Many countries have tried welfare

i.              Unemployment benefits

ii.            Grants and subsidies

iii.          Government as employer of last resort

b.            Ultimately, these do not work

i.              Experience in France, Germany, Scandinavia, UK, US

ii.            In the end someone i.e. the people themselves, has to pay for benefits through higher taxes

iii.          Worse, in the long term welfarism will kill the drive to work and achieve, chase away talent and investments, and do us great harm

iv.           Burden ultimately goes back to the people, except now its many times heavier

23.        We should not flinch from our approach, because we are on the right track

a.            Tackling problems squarely

b.            Adapting rather than resisting inevitable changes

c.        At the same time, will help people in a way that does not discourage them to work

i.              For those who need extra help – ComCare Fund, pay as you use electric meters,

ii.            For general public – ERS, U-Save Scheme, CPF and Medisave top-ups

24.        Our approach is working

a.            Economy is growing

b.            We are equipping Singaporeans with relevant skills

i.              BERI has again rated Singa­porean workers No 1 in the world

c.            We are creating opportunities for more jobs. 

i.              Creating new jobs, re-creating old jobs

ii.            Nurturing new industry clusters, upgrading old clusters

iii.          Pursuing new service standards 

25.        This is the Government’s responsibility.  But workers too must do your part.

a.            We will give you the best chance to be employed and to improve their lives. 

b.            But Singaporeans must adapt and seize the opportunities we create. 

26.        Our tripartite relationship is Uniquely Singa­pore – built up over many years, not easy for others to copy, a tremendous plus for us in dealing with this challenge. So let’s continue to strengthen it, tackle our challenges together, and make Singa­pore a small but special country for many more years.