logos consultancy - frost & sullivan case challenge 2014
TRANSCRIPT
Logos Consultancy Benjamin Tee | Marcus Leong | Seumas Yeo
FROST & SULLIVAN CASE CHALLENGE SINGAPORE 2014 – PRELIMINARY SUBMISSION
Solving the Human Conundrum in Nairu Vision 2024: Toward a resilient labor force that fuels a dynamic economy
Current State Analysis
Labor market inefficiencies are primarily responsible for NAIRU’s deepening economic stagflation
ü Strong industrial growth and consumer demand
ü Growing skilled labor demand ü Strong political mandate
Deepening Economic Stagflation
Labor Market Inefficiencies
× Poor informational efficiency × Free mobility of labor in EU
§ Negative real GDP growth § High unemployment (9.7%)
RESULT IN HOWEVER
Labor Infrastructure Labor Supply Labor Demand
Systemic Imbalance
Refer to excel model for detailed assumptions and estimates used in deriving the desired outcomes (KPIs) 1. By increasing the rate of growth of new labor supply with respect to labor demand 2. To ensure rising standard of living assuming GDP growth is maintained at 6%
Notes:
Fac
tors
C
urre
nt
Situ
atio
n D
esire
d O
utco
me
§ Education & Retraining § Immigration rate § Participation rate
§ Regulation & hiring requirements § Job & skills matching § Automatic Stabilizers
§ Wages § Structure of the Economy
§ Loss of local talent; 40,000 annually
§ Low female participation rate
§ Proliferation of illegal foreign workers; 800,000
§ Skills mismatch among local grads
§ Wage-push inflation; foreigners favored
§ Strong competition for labor between public & private sector
§ Reduce brain drain by 10% annually
§ Increase female participation to approx. 47.5% in 10 years
§ Zero illegal foreign workers in 5 years § Raise graduate employability to 55%
in 3 years, 75% in 5 years § Reduce supply-demand imbalance1,
hence unemployment
§ Maintain wage inflation of 7-8%2 § Reduce dependency on skilled
foreign labour by 1% annually § Balance competing demands for
labour
Optimistic Economic Conditions
2
Solution Mechanics & Justification
Vision 2024: Toward a resilient labor force that fuels the development of a dynamic 21st century economy
Enhance
Encourage Enable
• Independent think-tank analyzing policy impacts on labor market which provides recommendations to the civil service
• Established to analyze data on structural unemployment provided by WERC@Nairu platform
• Self-sufficient as it will leverage on grown capabilities to embark on income-generating external consulting projects
Institute of Labor Market Studies (ILMS) Workforce Enhancement & Retraining of Capabilities (WERC@Nairu)1
• Tripartite Agreement (Employers, Employees & Government)
• To encourage worker retention during recession • Creation of mandatory, individualized notional
‘working time’ accounts3 where overtime pay is deposited during non-recession years
• Individual account is debited during recession years to keep worker employed as wages become subsidized
• Finance ministry will manage a low-risk and liquid mutual fund sustained by account contributions; returns on investment will aid government subsidy of wages during recession
• Excess will be allocated as pension payouts
Employment Stability Scheme (ESS)3
• Collaboration with industry partners, universities and professional qualification bodies
• To increase the productivity of skilled local labor by providing subsidized training for in-demand skills, in accordance with economic direction
• Enhances employability of skilled professionals and reduces brain drain
Professional Training Scheme (PTS)
• To increase female participation in the workforce through shared parental childcare leave
• 240 days fully paid shared parental leave for each new-born
• Encourages shared burden of childcare which reduces opportunity cost of female participation in workforce
• Research2 shows that paid parental leave incentivizes women to join the workforce and increases re-entry after childbirth
Women @ Work2
• To encourage private sector to hire local undergraduates as interns through tax subsidies
• Aims to bridge the gap between industry requirements and academic curricula
• Increases the employability and relevance of local graduates
Graduate Employability Scheme (GES) 3E Committee
• Chaired by Minister of Manpower • Sets strategic direction for Vision 2024 and
reviews labor policy initiatives periodically • Establishes and maintains relationships
with key stakeholders
• Partnership between manpower ministry and private agency • To establish online labor registry of local and foreign workers
to facilitate regulation of foreign workers and enhance job matching opportunities for locals
• To establish nationwide training centers catering to retraining of unskilled local workers
Refer to excel model for detailed assumptions and policy mechanics 1. Flagship policy proposal inspired by EURES jobs portal and Germany’s Hartz reforms (2002-2005) 2. Modeled after Sweden and Finland’s childcare and parental welfare schemes; based on OECD research (DOI :10.1787/1815199x) 3. Modeled after Germany’s Hartz reforms (2002-2005); inspired by the Swedish pension system’s defined contribution framework
Notes:
Efficient Information Flow & Matching
Greater W
orkforce Participation
Loca
l Em
ploy
men
t & T
rain
ing
3E framework led by:
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Greater Workforce
Participation
Solution Framework
Vision 2024 seeks to achieve its goals via a progressive funding model and partnership with stakeholders
Policy Initiatives & Objectives
Local Workers
Foreign Workers
3E Committee
Key Industries
Professional Training Scheme
Women @ Work
Employment Stability Scheme
Graduate Employability
Scheme
WERC @ NAIRU
Institute of Labor Market
Studies
Providing an adequate supply of relevant skilled
local labor (Supply-Side )
Funding Stakeholders
Local Employment &
Training
ENCOURAGE
Market infrastructure reduces market frictions
(Market Infrastructure)
Partnership with key industries to train &
retain locals (Demand-Side )
Labor force that fuels development of a dynamic 21st century economy
Efficient Information
Flow & Matching
ENHANCE ENABLE
1. Policy initiatives will be self-sustainable due to increased tax base as a result of increased employment; refer to excel model Notes:
No required increase in
marginal tax rate1
Private Investment via Equity Ownership
Government-linked commercial
initiatives
Inter-Ministry Task Force
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§ Acts on and manages proposed policy initiatives
§ Management of WERC@NAIRU initiative
§ Strategic direction & review of initiatives
§ Manages relationship with private agency
§ Houses the Institute of Labor Market Studies
§ Responsible for labor data collection & analysis
Institutional Framework
§ Leads Inter-ministry Taskforce
§ Supervision of 3E committee
§ Outlines labor policy objectives
§ Curriculum matching
§ Manages university network
§ Manages industry partners
§ Facilitate industry collaboration
§ Monitors public sentiment
§ Integration of foreign workers
§ Supervises ESS initiative
§ Implements tax subsidies
NAIRU Federal Government
A coordinated inter-ministerial approach toward implementation of proposed labor policy initiatives
University Network
§ Implementation & escalation of policy initiatives
§ Coordination & contact
3E Committee
Minister of Manpower
Minister for Social Affairs
Minister of Trade & Industry
Minister of Finance
Minister of Education
Inter-Ministry Task Force
Institute of Labor Market Studies WERC@Nairu
Professional Training Scheme (PTS)
Women @ Work Employment Stability
Scheme (ESS)
Graduate Employability Scheme (GES)
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Other Key Stakeholders Private Agency
Action Plan & Key Performance Indicators
Implementation timeline & guiding milestones for policy success
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Key
Per
form
ance
Indi
cato
rs
Mile
ston
es
Pro
ject
Wor
kflo
ws1
0% illegal foreign workers
Brain drain below 20,000
Foreign skilled labor force at 18% of total skilled
New labor supply growth rate of 9%
43.5% Female participation in workforce
Brain drain minimized to 11,000
47.5% female participation in workforce
New labor supply growth steady at 4%
55% graduate employability
Foreign skilled labor <15% of total skilled
Foreign unskilled labor <25% of total unskilled
WERC @ Nairu (P1)
GES (P1)
WERC @ Nairu (P2) Fully operational online infrastructure and 50% of all training centers
Industry-wide compliance with mandatory foreign labor registrations and data harnessing
Establish industry partnerships GES (P2) Extension of industry partnerships, revised university curricula
PTS (P1)
1. Workflows arranged in order of decreasing priority. Prioritization determined by degree of short-term observable impact and 10-year Economic Value Added (EVA) Notes:
Establish partnerships with industry, universities & professional qualification bodies PTS (P2) Refine partnerships, decrease reliance on public funding for initiatives
Women @ Work (P1) Roll out of new childcare policy initiatives Women @ Work (P2) Review of childcare policy initiatives
ESS (P1) Stakeholder consultation & policy refinement ESS (P2) Rollout of policy initiatives & subsequent review
ILMS (P1) Establishing institutional framework & research facility ILMS (P2) Commencement of labor research studies & undertaking of external consulting projects
75% graduate employability
2015: Officiate industry partnerships
2016: Full adoption of WERC @Nairu online platform
2016: All Phase 1 executions completed
2019: WERC@Nairu training centers nationwide
2014: Establishment of 3E Committee
2017: Fully functional ILMS research facility
2018: Fully functional ESS system
2021: Mid-term policy review & assessment
2024: 10-Yr strategic review & planning
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Resource Requirements & Funding Mechanisms
3E framework initiatives are based on a self-sustaining and progressive labor policy model
Proposed Initiative Management
Model Source(s) of Funding Gov’t Revenue Streams1 Gov’t Revenue
Generated (€ billion)
Overall Impact on Gov’t Budget
WERC@Nairu PPP • Government Budget • Private Investment
• Subscription fees (50% stake) • Tax revenue attributed to increased
local employment 9.31 (+)
Employment Stability Scheme
PPP • Indv. contribution to notional
account • Government budget (buffer)
• Tax revenue attributed to worker retention
• Investment returns 6.61 (+)
Institute of Labor Market Studies
PPP • Government Budget • External consulting projects
• External consulting projects • Tax revenue attributed to reduced
structural unemployment 10.75 (+)
Professional Training Scheme
PPP • Government Budget • Tax revenue attributed to productivity
gains 2.29 (−)
Women@Work Public • Government Budget • Tax revenue attributed to increased
female participation 5.29 (−)
Graduate Employability Scheme
Public • Tax subsidies • Tax revenue attributed to increased
graduate employability 5.82 (+)
Refer to excel model of detailed breakdown of assumptions and calculations 1. 50% of proposed initiatives are partially self-sustainable due to government-linked commercial initiatives as an alternative source of funding 2. Proposed figure is based on a 10-year time frame, at current prices. Annual equivalent is assumed to be the amortized amount over a similar period
Notes:
8% 5%
16%
69%
2%
Required Capital Input2
ILMS will require 0.03% of proposed budget
€52.8 billion
Women@Work
Professional Training Scheme
Employment Stability Scheme
WERC@Nairu
Graduate Employability Scheme
Institute of Labor Market Studies
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Impact Assessment
Impact assessment of proposals by 3E labor policy framework
€1.27 Billion Annual Impact on
Government Budget
0.50% Contribution to Budget Deficit1
€62.3 Billion 10-year Economic
Value Added (EVA)
4.9x
Multiplier Effect
Based on Average scenario. Refer to excel model for detailed assumptions, alternative scenarios, and assessment methodology 1. Derived % reflects the scenario where there is no assumed increase in marginal tax rate
Notes:
Economic Impact of Labor Policy Initiatives
• Annual EVA of €6.23 billion over a period of 10 years • Structural and cyclical unemployment will fall due to reduced informational asymmetry,
incentives, and automatic stabilizers • PTS & WERC@Nairu will increase local workforce productivity which translates into
increased standard of living through higher wages
Social Impact of Labor Policy Initiatives
• Women@Work will reduce the opportunity cost of female participation in the workforce. Increased empowerment of women will lead to greater gender equality
• Training programmes under PTS and WERC@Nairu will reduce the degree of income disparity resulting from skewed differentials in productivity gains
Impact on Industry & Businesses
• WERC@Nairu will reduce employee screening costs for businesses during recruitment due to greater informational efficiency
• ESS will help businesses better manage labour demands and normalize market cyclicality
Impact on Labor Market Function
• ILMS will serve as an independent feedback mechanism, improving the efficacy of labour policies
• WERC@Nairu will reduce informational asymmetry and the supply-demand imbalance • GES will significantly improve graduate employability and better integrate graduates into the
workforce
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Risk Management Strategies
Spearheaded by the 3E Committee to ensure policy oversight and actionable outcomes
Implementation Risks
Liquidity Risks
Political Risks
Market Risks
• Mismatch between policy goals and actual policy adoption
• Unpredictable or poor management of initiatives
• Clear and continual communication to facilitate compliance
• Regular policy review and renewal in accordance with strategic direction
• Sharing of managerial risks via PPP framework
Identified Issues
Mitigation Strategies
• Business cyclicality negates the positive impact of proposed initiatives
• Stress testing of labor market model • Follow-up on policy recommendations
by independent think tank
Identified Issues
Mitigation Strategies
• Additional strain on government budget
• Lack of funding mechanisms for long term policy maintenance
• Sharing of financial risks via PPP framework
• Progressive funding model driven by government-linked commercial initiatives
Identified Issues
Mitigation Strategies
• Political resistance when trying to escalate proposed initiatives
• Poor or no follow through of policies in subsequent political term
• Early-stage stakeholder consultations to garner feedback and increase policy receptiveness
• Establish sustainable and binding partnerships that ensure industry buy-in
Identified Issues
Mitigation Strategies
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Logos Consultancy
Leong Yong Yi Marcus Singapore Management University Bachelor of Science (Economics)
Key Achievements: • Former semi-professional cyclist • University Scholars Programme (SMU) • Semi-finalist, Singapore Public Policy Challenge 2013
Singapore Management University Bachelor of Science (Economics), Master of Science (Applied Finance)
Key Achievements: • Treasurer, Team Singapura Everest 2015 • University Scholars Programme (SMU) • Semi-finalist, Singapore Public Policy Challenge 2013
Yeo Jian Wen Seumas
Tee Chin Min Benjamin Singapore Management University Bachelor of Business Management
Key Achievements: • Semi-finalist Singapore Public Policy Challenge 2013 • Arisaig Partners Foundation Award 2013 • Ultimate Frisbee Player & Tech Enthusiast
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