Balancing social inclusion, individual responsibility, and sustainability: Singapores welfare approach

Tan Ern Ser Department of Sociology National University of Singapore

Abstract Singapore is not known to be a welfare state along the same line as that of Western Europe. However, it does have a sharing success or leveling up approach towards supporting such fundamental aspects as housing, education, and, to a lesser extent, health care. Specifically, its welfare philosophy aims at creating a vibrant economy and equipping citizens to be productive and self-reliant, rather than redistributing income or wealth. Its key social security instrument is the Central Provident Fund (CPF). This operates on a system of compulsory savings, with defined contributions by both employees and their employers. Broadly speaking, the welfare approach in Singapore is inclusive, covering all employed persons, and comprehensive, covering the fundamentals, but it hinges tremendously on individual responsibility, rather than social solidarity and shared risks. This makes it a sustainable model, not susceptible to bankruptcy, but a somewhat inadequate social safety net at the individual level in the event of long-term unemployment. The paper highlights problems relating to an ageing population with longer life expectancy, and a significant proportion of current seniors without retirement savings and health insurance. It also argues that while welfare system tends to focus on the poor or low-income, there are good reasons to support the middle class in a society which emphasizes meritocracy and social mobility.

Starting with the bottom-line In an ideal world, there is no lack or scarcity, and people can be fully protected against the risks of unemployment, health problems, disabilities, as well as given adequate support for childcare, child-rearing, and care-giving. Unfortunately, we do not live in such a society. The reality is that there are limited resources, regardless of how wealthy a society is. Understandably, a wealthy society has greater capacity to offer greater protection than a poorer one, if it opts to do so. However, the fact remains that someone or entity needs to pay for welfare benefits. The issue usually boils down to determining the extent to which individual citizens should be responsible for their own welfare; and the state, for welfare provisions. In a capitalist, market society, individuals are expected to be largely self-reliant. The underlying rationale is that, in a market system, individuals would be incentivized to produce more wealth, thereby building up greater capacity for enhancing economic well-being; while a welfare state would act as a dampener on work incentive, and in turn wealth creation. However, while markets have all the dynamic merits that make them the most expedient way of organizing economic life, they sometimes want to go where they should not, having an intrinsic and irresponsible blindness to the outcomes of their operation (Wright, 1996:139). This inherent blindness explains in part why socialism has not gone out of fashion, and that its principles became the foundation upon which societies, whether consciously or not, are everywhere being reconstituted (Wright, 1996:137; quoting Leon Blum).
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In the twentieth century, many of the reconstituted societies in Europe, which sought to balance capitalism and socialism, emerged in the form of a welfare state. In the Singapore case, the PAP government chose neither a socialist model, nor a welfare state model, but a third model: productivist welfare capitalism, defined as one in which social policy is strictly subordinate to the overriding policy objective of economic growth (Holliday, 2000:708).

The Singapore welfare model The Singapore welfare model is driven by an interventionist state, led by the ruling Peoples Action Party (PAP) since it attained political independence in 1959. Ironically, the term welfarism does not sit very comfortably with the PAP government, even though it actively formulates policies and implements programs aimed at enhancing welfare provisions, to the extent that they do not undermine economic incentives, productivity, and self-reliance. The Singapore welfare model is predicated on fairness, in terms of opportunity, rather than welfarism. It has an aversion to redistribution and egalitarianism. Instead, it emphasizes sharing success and leveling up (MITA, 2001). The use of such terms in its welfare vocabulary suggests a strong emphasis on wealth creation and a preference for facilitating and encouraging weaker ones to contribute to the process of wealth creation. The notion of a fair society is premised upon the equalization of opportunities, not rewards or outcomes. Indeed, competition, even though it results in inequality, is actively promoted in Singapore. The rationale being that it would provide the incentives for people to give their best performance, therefore producing a vibrant economy capable of generating wealth and a high standard of living. The Singapore model is also mindful that, while inequality is inevitable, it must not be allowed to generate social tensions. This entails the need to redistribute the national income through subsidies on things that improve the earning power of citizens, such as through education (Lee, 2000:116). The principle here is to enhance the earning capacity of individuals, rather than to subsidize consumption, including providing unemployment benefits, reflecting the PAP governments fear of welfare measures that could dampen self-reliance and work incentive, thereby encouraging a handout or clutch mentality (Tan, 2004:127). The Singapore model hinges upon people having paid jobs, thereby possessing the means to support themselves and their dependents. This involves providing citizens with the opportunities to train for skills and credentials, thereby improving both productivity and wages. At the same time, the Singapore welfare model also entails generating sufficient well-paying jobs capable of absorbing labor market participants equipped with value-add skills and knowledge. With intense global economic competition and rapid technological advancements, this welfare model requires citizens to engage in life-long learning, skills acquisition, upgrading, or retraining, and the government to constantly keep a lookout for investment possibilities
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capable of creating high value-add jobs. The expected happy outcome is one in which highly skilled people secure well-paying jobs, and thereby be in a robust position to look after their own welfare and that of their dependents, while setting aside sufficient savings for meeting retirement and future health care needs. As long as the economy is able to keep producing this happy outcome, the Singapore welfare model does look like a viable arrangement. Unfortunately, the global economy is subject to fluctuations, some more severe or of longer duration than others. The threat of recession, job losses, and high unemployment is never very far from the horizon. In the Singapore case, wealth accumulated from periods of prosperity, together with belt-tightening measures, has thus far done reasonably well in helping to mitigate the ill-effects of recession, and preventing severe job losses and unemployment. The Singapore welfare model also involves a broad-based, self-financing compulsory savings scheme managed by the Central Provident Fund (CPF) Board. Unlike the social security schemes, such as those found in Western Europe, the CPF scheme uses the defined contributions from both employees and employers approach. The contribution rates do not remain static. They could be adjusted downwards as part of belt-tightening, counterrecession measures to reduce wage costs. In times of prosperity, they could be raised to help increase savings for rainy days. At its peak, the combined contribution rate of employees and employers was as high as 50% of employee salaries (subject to a certain income ceiling, which could also be raised or lowered). The CPF Scheme, which was originally intended solely as retirement preparation, has over the years been put to many uses: facilitating home-ownership, supporting childrens education, paying for the health care needs of individual citizens and his or her dependent children or elderly persons. Being self-financing, with no defined benefits, it cannot go bust, given that members can only use what they have in their CPF accounts, and therefore, there is no danger of benefits exceeding contributions. By and large, the Singapore welfare model is a financially sound one. It aims at supporting the principle of self-reliance, and its CPF Scheme does not dispense more benefits than it has funds for. It also does not necessitate imposing high tax rates, usually on the middle class, nor does it involve borrowing from future generations. However, it is not entirely foolproof. It hinges almost entirely on having a vibrant economy. This makes economic sense, but individual citizens, while equipped with the means to fish, would have to handle much of the risks related to unemployment and income insecurity on their own, should there be no fishes in the sea not of their own doing. While there are no welfare entitlements, in the Western European sense, it does not mean the absence of a social safety net in Singapore. It is just that the safety net is kept rather low, such that one has to fall a great distance to benefit from the social safety net. I reckon that for this
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reason most middle class families do not have a strong desire to benefit from the social safety net.

A comparison and assessment There is clearly a Catch-22 situation here. The Singapore model does not provide much protection against risks, though it tries to keep people from falling by helping them to help themselves, such as through job training or retraining and skills upgrading. The welfare state model aims to provide a good buffer against risks, but its entitlement system is vulnerable to the risk of bankruptcy. The bottom-line for both models is a vibrant economy, which is increasingly hard to come by given what we know of global capitalism. Of the two models, the Singapore one is relatively more sustainable. While no welfare models can be expected to deliver full protection and zero risks, I would argue that the Singapore model can do more to find an optimal balance between providing a social safety net (high benefits and low risks, even for middle class families), while ensuring that individual citizens continue to be motivated to do what they can and ought to for themselves and their families. The objective should be to develop a viable welfare model, defined as one in which the optimal position is where the middle class have access to a fairly secure and comfortable life, without bankrupting the countrys budget and reserves.

Issues and problems Having discussed what is positive about the Singapore welfare model, I shall now deal with some of the problem areas. Broadly speaking, the Singapore welfare model is inclusive and comprehensive, but with a low social safety net. It prefers to support investment, including building individual capacity. It covers all categories of citizens in terms of age, employment status, and class. It is focused on facilitating social mobility and developing a middle class society via its welfare as investment measures, such as subsidies for education and housing. Many of its consumption-type welfare measures, income transfers and health care subsidies, are targeted at the poor or low-income citizens. However, the Singapore welfare model, narrowly defined, does not provide much protection for senior citizensmostly females--with no retirement savings or insurance coverage, unless one includes the family as a key welfare provider. This is not surprising, given the cultural context of Singapore. Most families are socialized to feel a cultural obligationknown as filial piety--to take care of their own elderly persons. However, the welfare burden on the middle class person belonging to the sandwiched generation can be rather overwhelming, if he or she is subjected to means-testing, yet expected to provide financial and care-giving support to an elderly person who has no savings and medical insurance. While the state often retreats from welfare provisions with the excuse than it cannot afford to do so, it ironically expects the middle class person trapped in the sandwiched generation to do what itself cannot do, with far
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more resources. Invoking the cultural value of filial piety may generate guilt and resentment, but would do little to help the middle class person without the capacity to fulfill his or her filial obligation. I have elsewhere suggested that the state ought to provide a one-off universal health insurance coverage for the current cohort of senior citizens who were unable to save enough for their twilight years, while educating and helping future elderly be adequately prepared for their retirement years.

Concluding remarks 1. While a welfare system should be inclusive, it needs to be viable or sustainable. 2. It is not possible to maximize benefits, but it should aim to find an optimal position which supports social justice, without dampening work incentive. 3. This optimal position may call for taxing the very rich, for reducing wastage, and for organizations to be more socially responsible (Etzioni, 2011). 4. It also entails creating a more secure and comfortable middle class in a society which emphasizes meritocracy and social mobility. 5. In a society with a rapidly ageing population, it makes sense to grant a general amnesty to current seniors who were not adequately prepared for retirement. This will help to reduce the burden on future generations.

References Etzioni, Amitai (2011) The Unwarranted Attack on Social Safety Nets Challenge, vol. 54, no. 4, July/August 2011, pp. 108115. Holliday, Ian (2000) Productivist Welfare Capitalism: Social Policy in East Asia Political Studies, 48:4, pp 706-723. Lee, Kuan Yew (2000) From Third World to First: The Singapore Story 1965-2000. Singapore: Times Edition. Ministry of Information and the Arts (MITA) (2001) Singapore: The last 10 years (supplement to Prime Minister Goh Chok Tongs National Day Rally Speech 2001). Singapore: MITA. Tan, Ern Ser (2004) Balancing State Welfarism and Individual Responsibility: Singapores CPF Model in Catherine J. Finer and Paul Smyth, eds. (2004) Social Policy and the Commonwealth: prospects for Social Inclusion. Basingstoke: Palgrave Macmillan. Wright, Tony (1996) Socialisms: old and new. London: Routledge.