Deep changes in social spending

Social mobility, ageing are Singapore's big challenges: Tharman

One in four Singaporeans will be aged 65 and above by 2030, a dramatic shift from today's figure of about one in eight. This is already propelling healthcare spending upwards, said DPM Tharman Shanmugaratnam. Highlighting some key milestones in Singa
One in four Singaporeans will be aged 65 and above by 2030, a dramatic shift from today's figure of about one in eight. This is already propelling healthcare spending upwards, said DPM Tharman Shanmugaratnam.ST FILE PHOTO
One in four Singaporeans will be aged 65 and above by 2030, a dramatic shift from today's figure of about one in eight. This is already propelling healthcare spending upwards, said DPM Tharman Shanmugaratnam. Highlighting some key milestones in Singa
Highlighting some key milestones in Singapore's policymaking, Mr Tharman noted: "It's in the last decade that you see a decisive shift, a deliberate tilt, towards tempering the inequalities of life."ST PHOTO: JAMIE KOH

Over the past decade, government spending more than doubled from $33 billion to $71 billion - and is set to increase further. Ahead of Budget Day on Feb 19, Insight looks at where spending demands are greatest: healthcare, infrastructure and jobs. The first of a three-part series, this week's feature examines Singapore's social policies, and pressing issues in healthcare.

Shaping policy in response to social needs is an ever-challenging - and changing - process. Just ask Deputy Prime Minister Tharman Shanmugaratnam.

Back in the mid-1990s when the Internet age was starting, many families were worried that their children would lose out because they could not afford computers.

The Government's solution: it would "socialise" computer use.

Public computers would be installed in schools and community centres, announced the Education Ministry's deputy secretary (policy) - Mr Tharman. There would be no subsidies for low-income families, he said then.

But as the Internet took off, this stance later changed. Government initiatives expanded to include subsidies for needy students to buy new computers and to subscribe to Internet broadband.

This flexibility to adapt to changing needs can be seen nowadays in the move to increase social spending for an inclusive society that gives the needy a leg-up. It stands in contrast to earlier years of nation-building, where the emphasis in social policy was self-reliance.

VIBRANT ECONOMY IS KEY

The most important way we can provide for social well-being across the full span of the population is to have a vibrant economy.

MR THARMAN

In an interview with Insight, Mr Tharman,who has been the Coordinating Minister for Economic and Social Policies since 2015, says:

"It's in the last decade that you see a decisive shift, a deliberate tilt, towards tempering the inequalities of life and ensuring the lower-income group keeps pace with the whole society as it moves up."

He outlines some of the key milestones: Workfare in 2007, which supports older low-wage Singaporeans who continue working and training; the Progressive Wage Model in 2012, which sets wage floors for workers' skill levels; SkillsFuture in 2015, which encourages lifelong learning; and MediShield Life, also in 2015, a health insurance plan helping to pay for costly hospital bills and treatments.

With such moves, social expenditure - which covers healthcare, education and social and family development, among others - ballooned to about $34 billion in 2016, from $12.7 billion a decade earlier. Last year, it comprised $37.8 billion - half of total government spending.

Experts agree there has been a shift to the left in Singapore's social policies - in terms of wealth redistribution - although they disagree as to the extent.

In the past, social support tended towards short-term aid for the unemployed, the ill, those with disabilities and the needy old, says National University of Singapore (NUS) economist Chia Ngee Choon, noting: "There was an aversion towards welfarism as it was feared that this may lead to a 'crutch mentality'."

But there was a growing acknowledgement that not everyone was benefiting from Singapore's economic growth. Some were falling way behind.

The 2005 Household Expenditure Survey showed that while average income for households rose 1.1 per cent annually from 1998 to 2003, those in the bottom 20 per cent saw their incomes fall 3.2 per cent a year in the same period.

By contrast, the Household Expenditure Survey in 2014 found that the income of those in the bottom 20 per cent rose at the highest rate of 6.6 per cent annually from 2008 to 2013, even as average monthly household income increased by 5.3 per cent annually.

AN AGEING, STRATIFYING NATION

The work is far from done, says Mr Tharman.

The big challenges that Singapore faces are slowing social mobility and ageing, he says.

"They will be with us for a long while. They are not one-off challenges, not challenges for 10 or 15 years. They are challenges for decades to come."

His comments come amid sobering data.

One in four Singaporeans will be aged 65 and above in 12 years' time - by 2030. The figure today is about one in eight.

This dramatic shift in the population make-up is already propelling healthcare spending upwards, says Mr Tharman.

"Healthcare is the biggest challenge for the future of social spending. It's the fundamental reason why we need to raise more revenues, and why we have to spend effectively," he adds.

Other data also makes for grim reading. While Singapore's Gini coefficient - a measure of income inequality - fell to its lowest level in a decade in 2016, at 0.458, it remains one of the most unequal among developed societies. A lower coefficient suggests a more equal distribution of incomes.

Another set of statistics underscores the same trend.

The average monthly household income from work per household member for the top 10 per cent was $12,773 in 2016, over 23 times the $543 earned by those in the bottom 10 per cent of households.

In the year 2000, the corresponding figure for the top 10 per cent was $5,801, 18 times that of the $315 of those in the bottom 10 per cent.

As societies become more settled and class divisions firm up, one's starting advantage becomes a lasting advantage, says Mr Tharman. "It's true in every mature society, and the same can happen to us."

The Singaporean identity rests on the fact that everyone has a fair chance to move up the rungs of society, he notes, but it will take harder work to sustain this.

IS A TRAMPOLINE ENOUGH?

Asked by a BBC journalist at a gathering in Switzerland three years ago if Singapore believed in the notion of a safety net for those who fall between the cracks of a successful economy, Mr Tharman bounced back with a rejoinder that had the audience laughing, then applauding: "I believe in the notion of a trampoline."

During the interview, he elaborates. It is about helping people "with a difficult start" discover their own strengths - whether it is by helping them stay in work with Workfare, building their skills or helping them own their homes.

"This strengthens personal responsibility, and strengthens the sense of pride people get from contributing to their own lives and to society," he says. "That, I think, is the crucial social ethic that we've got to maintain. That is the Singapore approach, it can be done, and we've got to make sure that we sustain that into the future."

 

However, observers have also made the point that people at times make poor choices due to poor options.

Nanyang Technological University's (NTU) head of sociology Teo You Yenn notes in her new book This Is What Inequality Looks Like that a single mother, for instance, may find it tough to stay in her job due to a lack of childcare options.

Insight puts it to Mr Tharman that in such cases, people may be trying their hardest to bounce up on the metaphorical trampoline but are being hobbled by a broken ankle.

The Deputy Prime Minister responds that he does not mean that people have equal options.

Instead, a trampoline refers also to support from community networks: teachers, parents' support groups, friends and peers who help galvanise people with "a spirit of aspiration".

This, together with government help - Mr Tharman hints that KidStart, a pilot programme to give targeted attention to low-income pre-school children, will become "a major intervention" - will help people take "personal responsibility".

He warns: "If we do not sustain a culture of personal responsibility, you will get over time what we see now in several mature societies, which is a hardening of attitudes towards the poor."

For example, United States President Donald Trump last year sought to balance the federal budget with unprecedented cuts to programmes for poor and working-class families.

Yet, how much community support do the disadvantaged get, given that studies have shown a divide in social networks. A recent Institute of Policy Studies (IPS) survey found that someone who attended a non-elite school has ties to just 0.4 people who went to an elite school.

For Mr Tharman, what is key is avoiding "a culture of elitism". He exhorts: "Everyone must take a real interest in others in different stations of life from them. That's critical."

On whether that is happening enough in Singapore, he notes: "There is a risk that it will get eroded over time, and we have to work harder at it."

Can the Government also do more to enforce social mixing in its policies, for instance, in re-siting schools from the exclusive Bukit Timah enclave or in scrapping admission policies that entrench advantages across generations?

What is more important, responds Mr Tharman, is that schools around the island must offer quality: "Just assigning brand-name schools around the island doesn't itself do it."

CAN MORE BE DONE?

While observers welcome what has been achieved over the past decade, more can be done, they say.

What is needed, argues Associate Professor Donald Low at NUS' Lee Kuan Yew School of Public Policy, are universal schemes that better protect all workers - and not just low-income ones - from the pain of restructuring.

"Increasingly, we're going to find that people are moving a few times over the course of their careers, often into entirely new areas, because of the pace of technological and business model disruptions," says Dr Low.

Mr Tharman says that a critical policy on this front is SkillsFuture, which helps people reskill throughout their lives.

"It serves the needs of an innovative economy, but it is fundamentally a social strategy, too," he says, adding that this will go some way to help with social mobility.

"It is about becoming a meritocracy of skills, not one based on grades you earn early in life."

But re-training should not be the only measure for this affected group, say academics.

Dr Low and IPS sociologist Mathew Mathews want a form of unemployment insurance to help workers tide over periods of job loss. Workers get payouts when they are rehired, giving them a greater incentive to take on new jobs.

As Singaporeans age, there are also growing calls for more of their healthcare needs to be taken care of - for instance, by putting in place a comprehensive insurance system for all ailments.

There is a particular need to help those who may have retired without enough savings - having spent their working years at a time where incomes and the cost of living were lower, says governance expert Neo Boon Siong of NTU.

"Today, the cost of living is high relative to the amount of savings they have," he notes. "How do you address the issue of equity?"

WHO PAYS?

As Singaporeans age, more will be done to care for them, says Mr Tharman. Money will then have to be raised. He puts it starkly thus: "There is no such thing as free healthcare in the world", as the bill is ultimately paid via taxes and insurance premiums.

Currently, the Government pays 70 per cent of the costs in the subsidised healthcare system. On whether the Government has ascertained that as the optimal level, he says that there is "no precise figure that we will claim to be optimal".

What is key is striking the right balance of individual spending, insurance and government subsidy collected through taxes, he says.

 

"If you rely too much on people paying for themselves, it will be inequitable. The poor will suffer.

"If you rely too much on insurance, where insurance is not just for big hospital bills like in MediShield Life but is much more comprehensive, then you get a problem of doctors overprescribing or the system gets overused."

With the Japanese universal health insurance system, for example, people visit physicians thrice as often as in other advanced countries and stay in hospitals two or three times longer, he says.

"We will continue tweaking it," Mr Tharman says of the balance.

Another issue Singapore stands firm on is the idea that subsidies and benefits must be targeted. "If everyone rich or poor gets the benefit of free healthcare, as your society ages, it becomes unaffordable," he says.

Finland, for instance, has a universal system where rich and poor get benefits. And it is getting harder to afford as the population ages, he says. This has led to cutbacks in other areas such as higher education, with young people leaving the country.

NOTHING IS SACROSANCT

Ask Mr Tharman what scope there is for the Government to review its thinking on "sacred cows" - and he maintains that there are none.

There have long been robust calls for policies such as a minimum wage - which have just been as vigorously dismissed. Economist Lim Chong Yah, founding chairman of the National Wages Council, has advocated for a legislated minimum wage, arguing that Singapore had swung too much towards growth at the expense of equity in the last decade or so.

Asked whether the Government's stance could shift, Mr Tharman says: "If we come to a point where our current approach no longer leads to broad-based income growth, and that you find that year after year, the bottom 10 per cent, bottom 20 per cent, is slipping further away from the rest of the population, then we may need new approaches."

 

But so far, these lower-income groups have had "as fast or faster income growth" as the rest of the workforce, he points out.

"The most important way we can provide for social well-being across the full span of the population is to have a vibrant economy," says Mr Tharman.

In a Cabinet which devotes long hours to debating issues, "nothing is sacrosanct", states the minister.

He cites the Progressive Wage Model - which sets the minimum wages of low-wage workers in certain jobs - which he says would not have been introduced 20 years ago. "But we did it, because even with jobs being available for all, even with a relatively healthy economy, we found that some workers were not being fairly treated - particularly in industries where there was a lot of outsourcing."

Asked if the idea that nothing is sacrosanct is a thinking that permeates throughout the Cabinet, he replies: "I would say so.

"We take a practical approach towards social and economic policy, not embedded in ideology."

With Singapore caught up in the issue of leadership succession, Insight asks: Is it an approach that the next generation of leaders have as well?

Mr Tharman bounces back with: "Very much so. They have open minds."

A version of this article appeared in the print edition of The Sunday Times on January 28, 2018, with the headline ''Social mobility, ageing are S'pore's big challenges''. Print Edition | Subscribe