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Nov 15, 2008, The Straits Times
Surge in layoffs expected
By Sue-Ann Chia
LAYOFFS in Singapore are expected to surge next year, and the numbers are very likely to jump beyond the peak suffered during the 1998 Asian financial crisis. About 30,000 jobs were lost then. But it could be worse this time because the economic crisis is global, with most signs pointing to its effects slowing Singapore's economy for a longer period.
This gloom expressed by most economists and analysts interviewed yesterday was, however, not totally shared by labour chief Lim Swee Say, who is also a Minister in the Prime Minister's Office.
He believes there is 'some hope' that Singapore can stave off a higher retrenchment peak next year if companies hold off job cuts till the last minute.
But, he added, 'we are bracing ourselves for more retrenchments and rising unemployment'.
For this year, Mr Lim foresees the possibility of a retrenchment level of 'around 10,000 or less, and an overall unemployment rate of below 3 per cent'.
But this is conditional on companies being 'socially responsible' and not taking the short cut of axing jobs before implementing other cost-cutting options, he added.
In the first nine months of this year, about 6,000 jobs were lost while more than 200,000 jobs were created. Next year, jobs lost will likely outnumber jobs created.
Economists like Mr Leong Wai Ho, of investment bank Barclays Capital, pointed out that in 1998, 'we were fortunate to be able to export our way out of the slowdown'.
This time, the turmoil is worldwide, not confined to Asia. 'This suggests we are headed into rougher seas, and the voyage could be a longer one,' he said.
'The longer it lasts, the greater the pressure on corporate margins, the larger the likelihood that retrenchments could exceed what we saw in 1998.'
The treasury research head at United Overseas Bank, Mr Jimmy Koh, noted that in 1998, the countries affected accounted for only 10 per cent of global gross domestic product.
'Now, the countries affected account for 50 per cent of global GDP.'
Like most economists interviewed, he finds it difficult to predict how long it will take for the crisis to blow over.
Most economists are concerned about whether companies will move too swiftly and trim the excess workers accumulated in the last three years.
During this period, companies had been hiring aggressively in the face of strong economic growth.
Now, they may decide to downsize, said Citigroup economist Kit Wei Zheng.
But he cautioned against cutting jobs too fast as 'Asia is still the growth area'.
Like Mr Kit, Mr Kevin Ong, consulting leader for human resource consultancy Towers Perrin Singapore, does not foresee companies laying off workers at the first sign of trouble.
'Companies have learnt their lessons from previous downturns not to do so,' he added.
A survey his firm did last month shows reducing headcount is the least favoured cost-cutting tool of companies.
Most prefer to freeze hiring, cut travel and entertainment spending, and give lower pay increments.
'Companies will try to hold on to their staff and adjust the variable pay portion, such as bonuses and the monthly variable component first,' he said.
Surge in layoffs expected
By Sue-Ann Chia
LAYOFFS in Singapore are expected to surge next year, and the numbers are very likely to jump beyond the peak suffered during the 1998 Asian financial crisis. About 30,000 jobs were lost then. But it could be worse this time because the economic crisis is global, with most signs pointing to its effects slowing Singapore's economy for a longer period.
This gloom expressed by most economists and analysts interviewed yesterday was, however, not totally shared by labour chief Lim Swee Say, who is also a Minister in the Prime Minister's Office.
He believes there is 'some hope' that Singapore can stave off a higher retrenchment peak next year if companies hold off job cuts till the last minute.
But, he added, 'we are bracing ourselves for more retrenchments and rising unemployment'.
For this year, Mr Lim foresees the possibility of a retrenchment level of 'around 10,000 or less, and an overall unemployment rate of below 3 per cent'.
But this is conditional on companies being 'socially responsible' and not taking the short cut of axing jobs before implementing other cost-cutting options, he added.
In the first nine months of this year, about 6,000 jobs were lost while more than 200,000 jobs were created. Next year, jobs lost will likely outnumber jobs created.
Economists like Mr Leong Wai Ho, of investment bank Barclays Capital, pointed out that in 1998, 'we were fortunate to be able to export our way out of the slowdown'.
This time, the turmoil is worldwide, not confined to Asia. 'This suggests we are headed into rougher seas, and the voyage could be a longer one,' he said.
'The longer it lasts, the greater the pressure on corporate margins, the larger the likelihood that retrenchments could exceed what we saw in 1998.'
The treasury research head at United Overseas Bank, Mr Jimmy Koh, noted that in 1998, the countries affected accounted for only 10 per cent of global gross domestic product.
'Now, the countries affected account for 50 per cent of global GDP.'
Like most economists interviewed, he finds it difficult to predict how long it will take for the crisis to blow over.
Most economists are concerned about whether companies will move too swiftly and trim the excess workers accumulated in the last three years.
During this period, companies had been hiring aggressively in the face of strong economic growth.
Now, they may decide to downsize, said Citigroup economist Kit Wei Zheng.
But he cautioned against cutting jobs too fast as 'Asia is still the growth area'.
Like Mr Kit, Mr Kevin Ong, consulting leader for human resource consultancy Towers Perrin Singapore, does not foresee companies laying off workers at the first sign of trouble.
'Companies have learnt their lessons from previous downturns not to do so,' he added.
A survey his firm did last month shows reducing headcount is the least favoured cost-cutting tool of companies.
Most prefer to freeze hiring, cut travel and entertainment spending, and give lower pay increments.
'Companies will try to hold on to their staff and adjust the variable pay portion, such as bonuses and the monthly variable component first,' he said.