- Joined
- Dec 30, 2010
- Messages
- 12,730
- Points
- 113
Rethinking our social policies
Fourthly, I think we need a fundamental rethink of our social policies, particularly our social safety nets. The Government’s reflex reaction is that strong safety nets erode economic incentives, undermine competitiveness, are unsustainable and increase moral hazard.
There is of course truth in that. We know that it is a matter of balance, and I acknowledge the Government’s efforts and PM’s reassurance that the Government will redress the situation. But I think we need a more radical review, and not merely build on current policies and programmes. We need to find a new social contract that achieves a better balance between growth and equity, and between individual responsibility and social insurance.
The realities today are different. Economically, there is much more uncertainty. In our first 30 years we had one recession; in the last 15 years we had three. The Gini coefficient continues its relentless climb, and it doesn’t even take into account of the wealth gap. The sandwiched class and generation are more stressed. Inadequacy in old age savings is showing its cracks now. Social mobility has fallen. Inflation is persistently high.
So, for example, I believe the balance between self insurance and pooled insurance is skewed in healthcare, with the Government constantly forcing more into Medisave, a form of self-insurance. Singaporeans are not pooling their healthcare risks enough. Some 55% of healthcare spending is financed directly by patients; much higher than the case in other developed countries in Asia. It is economically inefficient to have such high precautionary savings, much of which may never be used, except to be passed on to their kids.
Likewise, we have used housing as a key way to store up retirement savings. We are now a victim of that success and can’t seem to unlock its value. Even with the Silver Housing Bonus, most would still use their existing flat as catastrophic insurance, downgrading or leasing back only when desperate. It would have been much better if we had controlled housing asset inflation, kept the first home much more affordable, at around three times the buyer’s annual income, and allowed much less of the CPF be used for housing.
I am also very concerned about the plight of people facing insufficient or declining incomes, as well as income inequality. Unfortunately, Education, the great potential leveller, has increasingly become a positional good that only the well-to-do can
afford. We also need better schemes to protect the vulnerable from the risks of unemployment and income loss, while avoiding moral hazard. Singapore Perspectives 2012, organised by the Institute of Policy Studies, threw up many
suggestions worth considering.
Another major area of concern is that inflation has risen so fast. We need new strategies to keeping costs down, beyond appreciating the currency, so that people can get by and young couples find it less challenging to get married and start a family. Let it not be said that Singapore is only a good place to live in only if you are rich.
A quick note on financing increased social spending for the future. If it is part of a shared vision to strengthen social cohesion, I am sure the more well-to-do Singaporeans can be convinced to finance this with higher income taxes, instead of needing to increase GST again. The era of racing to the bottom in global tax competition is over. But first, I am sure people would need to be convinced that we are exhausting other options, like reallocating budgets across ministries and maximising the Net Investment Return Contribution, which I believe has headroom to grow while preserving the real value of our reserves.
Improving diagnosis of social realities
My last point, which needs to be a short one, is that we need to have better data, information and knowledge of social realities, and evaluation of past and current programmes.
One major complaint from academics, private sector analysts and people working in the non-profit field is that there is a dearth of data that will help give us greater insights. Sometimes, it’s because government has them and releases very little. PM promised last October that more information would be released, but I think the pace is not fast enough. May I suggest that Government adopts a negative list approach to information? Just decide what cannot be released, and make a commitment to release everything else.
Another major problem that I have with our Budget statements in general, not just Budget 2012, is that there is little evaluation of past policies and programmes. What is the effectiveness of redistributive programmes like Workfare or GST transfers? There is a lack of detailed research on how families are coping on the ground. For this, we need longitudinal studies to track people over time because cross sectional data that the Government releases gives an incomplete picture of reality.
Likewise, there is also very little evaluation of incentive programmes. Have they worked well? What is the deadweight loss? There is sometimes a perverse effect in providing incentives. Studies have shown that people who are rewarded for altruism become less altruistic. Sometimes incentives mark the thing you want to sell as a bad deal, and make it even harder to sell.
Conclusion
In conclusion, I am making these fundamental proposals for a major social review out of optimism, not despair. Optimism because we are here today working from aposition of strength; including, quite importantly, fiscal strength. Optimistic also because I think the majority of Singaporeans would embrace the language of inclusion. Our young have impressed me with their high sense of social consciousness. Also, our social recession, is nowhere a social depression; and indeed, on many indicators, we fare much better than many other countries. But the world is changing fast in a way that we cannot ignore. In particular, there is an imperative to deal with the income divide and wealth gap, which has clearly manifested in growing political problems – the Occupy movements, the Arab Spring uprising, and increasing labour and political instability in many countries. We are changing domestically and politically as well, as outlined by many members in this house. It is my firm belief that we need a different type of leadership, an adaptive leadership.
This is not a straightforward kind of leadership. But if we succeed, we will find each person, individually or in groups, having something unique to offer to the community, because, not in spite of, their differences. And when each of us starts contributing meaningfully to the communities that we live in, we will feel more fully citizens of this country. This is when a place to stay becomes a home. And maybe then, we can rely less on incentives to induce the right behaviours. And maybe then the Minister of Finance may never need to have to decide whether to raise GST or to raise income taxes.
- http://theonlinecitizen.com/2012/03/nmp-laurence-lien-calls-for-major-social-review/
Fourthly, I think we need a fundamental rethink of our social policies, particularly our social safety nets. The Government’s reflex reaction is that strong safety nets erode economic incentives, undermine competitiveness, are unsustainable and increase moral hazard.
There is of course truth in that. We know that it is a matter of balance, and I acknowledge the Government’s efforts and PM’s reassurance that the Government will redress the situation. But I think we need a more radical review, and not merely build on current policies and programmes. We need to find a new social contract that achieves a better balance between growth and equity, and between individual responsibility and social insurance.
The realities today are different. Economically, there is much more uncertainty. In our first 30 years we had one recession; in the last 15 years we had three. The Gini coefficient continues its relentless climb, and it doesn’t even take into account of the wealth gap. The sandwiched class and generation are more stressed. Inadequacy in old age savings is showing its cracks now. Social mobility has fallen. Inflation is persistently high.
So, for example, I believe the balance between self insurance and pooled insurance is skewed in healthcare, with the Government constantly forcing more into Medisave, a form of self-insurance. Singaporeans are not pooling their healthcare risks enough. Some 55% of healthcare spending is financed directly by patients; much higher than the case in other developed countries in Asia. It is economically inefficient to have such high precautionary savings, much of which may never be used, except to be passed on to their kids.
Likewise, we have used housing as a key way to store up retirement savings. We are now a victim of that success and can’t seem to unlock its value. Even with the Silver Housing Bonus, most would still use their existing flat as catastrophic insurance, downgrading or leasing back only when desperate. It would have been much better if we had controlled housing asset inflation, kept the first home much more affordable, at around three times the buyer’s annual income, and allowed much less of the CPF be used for housing.
I am also very concerned about the plight of people facing insufficient or declining incomes, as well as income inequality. Unfortunately, Education, the great potential leveller, has increasingly become a positional good that only the well-to-do can
afford. We also need better schemes to protect the vulnerable from the risks of unemployment and income loss, while avoiding moral hazard. Singapore Perspectives 2012, organised by the Institute of Policy Studies, threw up many
suggestions worth considering.
Another major area of concern is that inflation has risen so fast. We need new strategies to keeping costs down, beyond appreciating the currency, so that people can get by and young couples find it less challenging to get married and start a family. Let it not be said that Singapore is only a good place to live in only if you are rich.
A quick note on financing increased social spending for the future. If it is part of a shared vision to strengthen social cohesion, I am sure the more well-to-do Singaporeans can be convinced to finance this with higher income taxes, instead of needing to increase GST again. The era of racing to the bottom in global tax competition is over. But first, I am sure people would need to be convinced that we are exhausting other options, like reallocating budgets across ministries and maximising the Net Investment Return Contribution, which I believe has headroom to grow while preserving the real value of our reserves.
Improving diagnosis of social realities
My last point, which needs to be a short one, is that we need to have better data, information and knowledge of social realities, and evaluation of past and current programmes.
One major complaint from academics, private sector analysts and people working in the non-profit field is that there is a dearth of data that will help give us greater insights. Sometimes, it’s because government has them and releases very little. PM promised last October that more information would be released, but I think the pace is not fast enough. May I suggest that Government adopts a negative list approach to information? Just decide what cannot be released, and make a commitment to release everything else.
Another major problem that I have with our Budget statements in general, not just Budget 2012, is that there is little evaluation of past policies and programmes. What is the effectiveness of redistributive programmes like Workfare or GST transfers? There is a lack of detailed research on how families are coping on the ground. For this, we need longitudinal studies to track people over time because cross sectional data that the Government releases gives an incomplete picture of reality.
Likewise, there is also very little evaluation of incentive programmes. Have they worked well? What is the deadweight loss? There is sometimes a perverse effect in providing incentives. Studies have shown that people who are rewarded for altruism become less altruistic. Sometimes incentives mark the thing you want to sell as a bad deal, and make it even harder to sell.
Conclusion
In conclusion, I am making these fundamental proposals for a major social review out of optimism, not despair. Optimism because we are here today working from aposition of strength; including, quite importantly, fiscal strength. Optimistic also because I think the majority of Singaporeans would embrace the language of inclusion. Our young have impressed me with their high sense of social consciousness. Also, our social recession, is nowhere a social depression; and indeed, on many indicators, we fare much better than many other countries. But the world is changing fast in a way that we cannot ignore. In particular, there is an imperative to deal with the income divide and wealth gap, which has clearly manifested in growing political problems – the Occupy movements, the Arab Spring uprising, and increasing labour and political instability in many countries. We are changing domestically and politically as well, as outlined by many members in this house. It is my firm belief that we need a different type of leadership, an adaptive leadership.
This is not a straightforward kind of leadership. But if we succeed, we will find each person, individually or in groups, having something unique to offer to the community, because, not in spite of, their differences. And when each of us starts contributing meaningfully to the communities that we live in, we will feel more fully citizens of this country. This is when a place to stay becomes a home. And maybe then, we can rely less on incentives to induce the right behaviours. And maybe then the Minister of Finance may never need to have to decide whether to raise GST or to raise income taxes.
- http://theonlinecitizen.com/2012/03/nmp-laurence-lien-calls-for-major-social-review/
