Policies and Considerations for Managing Demographic Changes in Singapore.

By: Shawn Tenh

Research Head: Shawn Tenh

Editor: Praharsh Mehrohtra

Illustration by Chen Hsuan Ju Abstract

Given the wide ramifications of demographic changes, it would be sensible for the Singapore government to start early and to take active responsibility in preparing for the future challenges. There are 4 main areas channels through which government policies can cost- effectively shape behaviour and interactions to deliver positive outcomes for the society. Implicit in the policy solutions is the ability to change mindset, alter behaviour and adapt to changes. These are difficult issues which will test the unity and resolve of Singaporeans.

1. Capital

The Singaporean government had exhausted the low hanging fruits (imposing minimum sum for CPF, raising retirement age and CPF rates) (Seow, 2019). They had even monetised the residual lease of HDB flats through lease buyback schemes (HDB, n.d.). Other than raising private fund available for retirement, these policies also increase labour force participation (LFP), recycle land and redirect money from illiquid assets to consumption or other more productive investments. However, the government must continue to widen the revenue stream to safeguard against future increase inpublic expenses (increased healthcare spending, elderly-proof infrastructure investments etc.). The government can also consider increasing net investment returns contributions (NIRC) to finance recurring expenses. While the incumbent government should exercise prudence in budgeting, there is no ethically justifiable reasons to perpetually accumulate surpluses especially when there are gaps in provision of public goods. Lastly, while broad-based consumption GST is effective in raising tax revenue, this form of taxation is regressive and disproportionally hurt the quality of life for the lower income workers (Chernick, H &Reschovsky, 2000). Where such measure is absolute necessary, the government shall do its utmost to safeguard the basic living conditions and minimize inequitable outcomes. 2. Labour To tackle labour market shortages, a combination of short-term and long-term solution is necessary. In the short-term, Singapore can continue to rely on the growing foreign labour force to address the gap in talent and labour supply. However, this employment/residence status should be temporal to maintain the proportion of indigenous people within the population. This presents 2 main benefits; (1) prevent erosion of national identity/values (Hodal, 2013) and (2) reduce competition for public goods provision(Smith, 2018).

To address the problem in the long term, Singapore must raise TFR (covered under Marriage and Child-bearing). 3. Land To cater for the changes in demographics (ageing population and increase in foreign labour) the government will need to build new infrastructure for healthcare, transportation and accommodations. There will be additional demands for green and leisure spaces as the economy grows in affluence. After recognising the absolute upper limit in land supply, minimum requirements in land usage (water catchment, military bases and training grounds etc.) and the additional land demand arising from the changing demographics, it becomes apparent and critical to plan for matters concerning land utilisation. Conventionally, the intensification of land usage (taller buildings, smaller units) has managed to deliver good results. Between 1960s to 2014, gross population density has tripled from 2645 to 8240 person/sq-km (World Population Review, n.d.). However, the increased density is accompanied with added congestion and new demand for supporting infrastructure. To put the problem into perspective, imagine snaking queues during lunch hours or the sardine like conditions on trains when office workers knock off at the CBD. To alleviate congestion, the 2 solutions have been adopted – increasing “land” supply and “decentralizing concentration”.

Firstly, Singapore can exploit alternative “spaces”. Singapore can utilize surrounding seas or underground space for storage – storing water in underground caverns to free up land that is used for reservoirs. Another way for Singapore to alleviate congestion is to “decentralize concentration”. This involves the (re)distribution of economic activity around the island. This can be cost-effectively achieved through zone designation and city planning over long horizons of time. Planners can simulate carrying capacity of mass transport systems within each area and intensify usage in relatively underdeveloped areas which evens out concentration of economic activity. For example, there are talks about making Jurong East the second CBD in Singapore following the construction of the Singapore-Kuala Lumpur High-Speed Rail terminus (Au-yong, 2017). 4. Marriage and Child-bearing In recognising the long-term importance of raising TFR, the government has introduced a suite of measures to lower the cost of parenthood. Such measures, like the Marriage and Parenthood packages, provides superficial help while missing the root causes (Gee et. al., 2015). Given the complexity and benefits of raising TFR, a committee, which reports directly to the Prime Minister,should be commissioned to design policies and coordinate issues related to child-bearing. The empowerment of this specific committee will provide a comprehensive solution that will hopefully raise TFR. Among others, changes in these cultural norms will hopefully alleviate marriage and child-bearing pressures:

5. Conclusion The government has great oversight on the immediate and future challenges of demographic change. They also possess substantial financial & social capital at their disposal. Then, it is in the interest of the government to plan ahead and to invest said resources in cost-effective solutions. However, the effectiveness of policies is ultimately limited by the receptiveness and adaptability of the population. Ultimately, Singaporeans must recognise the perils of the current trajectory and actively make difficult choices that will bring about greater collective good in the long run.

Citations:

1.Au-Yong, R. (2017, December 18). The story of Jurong Lake District: From the boondocks to boom town - and beyond. Retrieved from https://www.straitstimes.com/singapore/from- the-boondocks-to-boom-town-and-beyond

2.Chernick, H., &Reschovsky, A. (2000). Yes! Consumption Taxes Are Regressive. Challenge, 43(5), 60–91. doi: 10.1080/05775132.2000.11472171

3.Gee, C., Low, S. H., & Yap, M. T. (2015). Perception of Policies in Singapore Survey (Pops) (7): Perceptions of the Marriage & Parenthood Package. Institute of Policy Studies.

4.HDB. (n.d.). Lease Buyback Scheme. Retrieved March 19, 2020, from https://www.hdb.gov.sg/cs/infoweb/residential/living-in-an-hdb-flat/for-our-seniors/lease- buyback-scheme

5.Hodal, K. (2013, February 15). Singapore protest: 'Unfamiliar faces are crowding our land'. Retrieved from https://www.theguardian.com/world/2013/feb/15/singapore-crisis- immigration-financial-crisis

6.Seow, J. (2019, August 22). National Day Rally 2019: Retirement age to go up to 65, older workers' CPF rates to be raised. Retrieved from https://www.straitstimes.com/politics/national-day-rally-2019-retirement-age-to-go-up-to-65- older-workers-cpf-rates-to-be-raised

7.World Population Review. (n.d.). Singapore Population 2020. Retrieved from https://worldpopulationreview.com/countries/singapore-population/

8.Smith, J. P. (2018, October 30). Taxpayer effects of immigration. Retrieved from https://wol.iza.org/articles/taxpayer-effects-of-immigration/long