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With elections over, it’s “jobs jobs jobs” for the PAP

Ng Qi Siang
Ng Qi Siang • 4 min read
With elections over, it’s “jobs jobs jobs” for the PAP
Now that elections are over, the government will refocus efforts on job creation amid the Covid-19 recession.
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SINGAPORE (July 16): Singapore’s ruling People’s Action Party (PAP) was duly returned with a supermajority following general elections on 10 July 2020. Yet there was some cause for disappointment as it suffered an 8.7 ppt loss in vote share since 2015 to capture just 61.24% of the votes -- it’s second-lowest in its history. Still, with the Covid-19 pandemic deepening traditional economic concerns about labour market conditions and cost of living, Singapore’s next government will be looking to deliver on its election promise of providing “jobs, jobs, jobs”.

Oxford Economics analyst Sung Eun Jung observes that the PAP’s vote share has trended downwards since 2001. While 2015 saw it gain a crushing victory with 69.9% of the valid votes, that election was widely regarded to be an exceptional one following the celebrations of Singapore’s 50th year of independence celebrations and the death of its first Prime Minister, Lee Kuan Yew. GE2020 was perhaps the natural continuation of this prevailing trend.

Despite gunning for every one of Singapore’s 93 parliamentary seats, the PAP lost three political office holders in a four-member Group Representative Constituency to the opposition Worker’s Party. This is only the second time since independence that an opposition party has managed to win one of these “super-constituencies” and sees the greatest amount of opposition representation in parliament since independence with 10 elected Worker’s Party (WP) MPs and two appointed non-constituency MPs (NCMPs) from the Progress Singapore Party (PSP). Nevertheless, retaining a supermajority means that the PAP’s mandate to govern remains relatively stable.

With Covid-19 still ravaging the global economy, however, Sung observes that the PAP will be eager to deliver on its election promise of “jobs, jobs, jobs” to a population anxious about their employment prospects and living costs as the country enters a technical recession. As an open globalised economy that relies heavily on foreign labour, she adds, discussions about immigration have become increasingly salient to discussions on protecting local jobs. Job creation has been a key thrust in the political platforms of both PAP and the opposition.

Before the election, the PAP introduced four budgets that included measures such as wage subsidies, income relief and job creation measures. It has promised to continue policies in a similar vein going into its next term in power. Meanwhile, WP -- Singapore’s most viable opposition outfit -- has also suggested a minimum wage for local workers and providing redundancy insurance for the unemployed.

In response to concerns about competition from foreign labour among the electorate, opposition parties have also proposed controlling employment pass approvals to protect local jobs. Such concerns have been a prominent election issue since the watershed 2011 general elections, which saw the PAP win its lowest ever vote share since independence. Subsequent PAP governments have already acted to tighten foreign labour inflows at every skill tier, resulting in a bottoming out of resident labour force share and a slight pick in recent years.

“We have highlighted for some time that additional restrictions on foreign workers is a risk given Singapore’s heavy dependence on foreign labour. It could lead to firms suffering from labour shortages and increased labour costs as a result,” Sung warns. She also worries that long-term growth could be negatively affected if productivity gains are unable to offset losses from ageing demographics and tighter immigration. Still, she anticipates that the government will keep resident labour share relatively stable for the foreseeable future.

Plans by the PAP to increase goods and services tax (GST) from 7% to 9% some time around 2022-2025 could prove unpopular in light of weak economic conditions and high living costs. The WP has opposed a GST hike and proposes instead to raise the extra revenue by using an extra portion of the proceeds of government land sales -- which typically accrues completely to the national reserves -- for current expenditure. The PAP’s strong emphasis on fiscal discipline, says Sung, suggests that rules regarding the reserves are unlikely to change any time soon.

While Sung’s baseline forecast assumes that GST will rise in 2022, she notes that this could be postponed based on the speed of the economic recovery. “While we don’t think the government will shy away from tapping into fiscal reserves to ramp up fiscal stimulus amid a global recession, we expect the reserves to be replenished once the economy rebounds to secure ample fiscal space,” she concludes.

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