Security with Self Reliance: The Argument for the Singapore Model

ETHOS Issue 03, Oct 2007

While the concept of social insurance is never used to describe Singapore’s social safety net, it is often used to describe those of welfare states. The term “insurance” is evocative. Insurance is typically taken out against high impact, low probability events over which the individual has relatively little control. Hence, there is no insurance against suicide, but there is insurance against falling ill.

In a welfare state, it is often taken for granted that no one would choose to do anything that they knew would lead them to become destitute. Hence, anyone in that situation must have come to be so due to forces beyond his control or knowledge and, in a compassionate society, would be entitled to a relatively good standard of living, supported by the more fortunate members of society.

However, just as there are certainly things we can do to make it much more likely that we will fall ill (such as smoking or not exercising), so the Singapore model is based on the premise that people can often take steps to avoid the need for public assistance, for instance by saving in their earlier years, or relying on family and community support.

PRINCIPLES OF THE SINGAPORE MODEL OF SOCIAL ASSISTANCE

It is because we believe incentives towards self-reliance matter that Singapore’s social assistance policies require people to exhaust their own resources, those of their families, and those of the community, before turning to the Government for help. This belief is often presented as the three principles of our social safety net, namely:

• Self-reliance: Assistance, not welfare; mutual obligation, not entitlement
• Family as the first line of support
• Many helping hands

Put together, these three principles are actually part of a single over-arching principle—that government help must be the last resort.

If we do not uphold this principle, we believe that people will modify their behaviour to become more reliant on the state than would otherwise be the case. This would reduce the incentive for the low-income group to provide for themselves and improve their lot.

Hence, Singapore’s Public Assistance Scheme,¹ which can be seen as social insurance against becoming destitute, has eligibility criteria more stringent than those of most welfare states, and gives a lower amount of benefits.

KEEPING THE TAX BURDEN LOW

In order to fund welfare payments and social assistance services for lower income groups, welfare states impose high taxes on the higher-income group. Singapore, too, has a progressive regime of taxation: roughly only the top third of workers pay income taxes. However, while the distribution of taxation is progressive, the absolute amount of taxes is low. For example, income tax revenue is 7% of Gross Domestic Product (GDP) in Singapore,² compared to 29% in Denmark.³ Again, the underlying assumption in Singapore is that incentives matter. Not only might high taxes induce a brain drain of talent in the higher brackets, the lower-income group would have less incentive to upgrade their skills and work hard, particularly if they knew they would be well taken care of by the state. This would reduce the competitiveness of Singapore’s economy overall.

CHILDREN IN THE NON-WELFARE STATE

To a large extent, the Singapore Model adopts the philosophy that more generous social assistance should be extended to children, who cannot be expected to exercise full self-reliance. Spending on children’s education is the one area in which Singapore most resembles a welfare state: Education is of high quality and very low cost, and primary school education for citizen children is not only an entitlement, but also compulsory.

However, there are differences. While children cannot control their destinies, parents are expected to exercise responsibility for their families. For instance, whatever social assistance we provide for children should not translate into incentives for parents to have more children than they can provide well for. Otherwise, we risk doing more harm to future generations who may become caught in a vicious cycle of poverty and reliance.

Hence, while children’s kindergarten and primary education are heavily subsidised by the Government, regardless of the number of children a family has, childcare is not. Additional childcare assistance for the low-income working mother is available only for the 1st to 4th child, and rates are lower for the 3rd and 4th child. The Baby Bonus is likewise available only up to the 4th child. Unlike in other states with a more liberal welfare system, we do not give parents a yearly cash grant per child they have.

SUPPORTING SELF-RELIANCE, PROMOTING SOCIAL BONDS

Singapore policies ensure that people have incentives to be self-reliant, and to build and maintain strong family and community bonds. Incentives, alone, however, cannot be fully effective if people are willing but unable to act in the way that we wish them to. Hence, we can structure our social assistance system to make people want to be self-reliant, but unless we also help make them able to become self-reliant, many will try but fail.

For this reason, a large part of our social spending goes towards training. For example, in FY 2005, the Ministry of Manpower committed almost S$99 million to fund training for employees through the Skills Development Fund.4 As a point of comparison, the Ministry of Community Development, Youth and Sports provides only about S$10 million a year in financial assistance to those on Work Support, a temporary assistance programme for those who are work-capable but in financial hardship.

In fact, Work Support has features to help ensure recipients are both willing and able to become self-reliant. Low assistance amounts and strictly-enforced maximum programme lengths help provide incentives for people to help themselves. At the same time, training grants, funded by the Singapore Workforce Development Agency, and case management help ensure that those who want to help themselves are given the resources to improve their own lives.

We also make it possible for families to maintain strong family ties by giving preference to couples who wish to live near or with their parents in our allocation of public apartments. We support the growth of a vibrant community life by providing financial support to organisations who wish to do their part to help others.

THE SOCIAL VALUE OF SELF-RELIANCE

There is also a positive social argument for the Singapore Model. The argument is that self-reliance and family and community support are valuable in their own right. Even if low-income individuals could be cared for by the state without economic ramifications, Singapore would be worse off if more of her people no longer saw value in working hard to support themselves and in not having to depend on the charity of others.

Even if the state could remove the need for family members to provide the first line of support for each other, society is likely to be worse off in terms of a weakening in family ties and a sense of shared responsibility. Even if the Government could completely take over the role of community organisations in providing assistance to the less fortunate, it cannot deliver assistance with the flexibility and warmth that community organisations can. The end result would be a lower quality of life for the very groups we want to help.

THE EVOLUTION OF THE SINGAPORE MODEL

There is no doubt, however, that the Singapore Model is evolving. Social assistance spending has been rising at a fast clip. Although the main source of the increase has been on child-related assistance, we have also been spending more on elderly and disability services. The Government will increasingly having to bear the burden of caring for these groups because traditional forms of support, primarily our families, are no longer as strong. Widening income gaps and an ageing population will put a strain on traditional forms of social security and assistance. The recent CPF changes and Workfare scheme are just some of the measures introduced to help Singaporeans cope. It is likely that we will see new forms of social insurance evolving to meet these very different challenges in the years to come.

NOTES

1. The Public Assistance Scheme is a needs-tested financial assistance schemes for those who are unable to work owing to old age, illness or disability, and who have no means of subsistence and no one to depend on.
2. 2006, StatBank Denmark, http://www.statbank.dk/
3. Manpower Research and Statistics Department. Singapore Yearbook of Manpower Statistics, 2007 (Singapore: Ministry of Manpower, 2007).