Governing a ‘First-World’ Country with ‘Third-World’ Mindsets – A Response to Singapore Budget 2009 (Resilience Package)

“The Budget is an extraordinary package for the gloomy road ahead. However, we are facing a global phenomenon, a problem too large for this unprecedented Budget to resolve”, says Irvin Seah, an economist at the Development Bank of Singapore; and hence the tagline given to the Singapore Budget 2009, “The Resilience Package”. The tagline is propaganda by the government of Singapore that they have taken extra-ordinary measures in this recession, which is the deepest since Singapore gained her independence in 1965. The government perhaps expects that now since it has taken unprecedented moves, the individuals and families will take what has been given, be thankful to government for taking these bold steps and endure or be ‘resilient’ in these tough times. The Prime Minister of Singapore actually reiterated this in his Chinese New Year message to Singaporeans when he said, “meanwhile, let us be grateful (to the government) for what we have in Singa­pore – a stable society, a sound economy, and a reputation which draws talent, investment and jobs to our shores”.

Budget 2009 is indeed one that had tried to take bold initiatives. But did these ‘bold’ steps fall short or did not go all the way?

The initiative of the government to draw 4.9 billion from past reserves must truly be appreciated. Of course one can argue that they need not draw from the past reserves as this amount could be drawn from the current reserves accumulated since the last General Election. This stimulus package have already been factored into the annual forecast by the economists, who conclude that at most it will add between 1 and 2 percentage points to Singapore’s economic performance this year. What’s worse is that no expert can predict when this great economic crisis will end. The government may then need to draw on the current accumulated reserves as ‘off-budget’ initiatives in the future, to address a worsening recession.

Another initiative of the Singapore Budget 2009, which must be appreciated, is the $5.1 billion component, “jobs for Singaporeans”. The ‘Jobs Credit Scheme’ of this component especially gives added incentive for the employers to choose the resident worker over those that require a work permit to be legally employed in Singapore. Of course, some would try and justify that the employers could save !00% and not a mere 12%, if they just retrenched workers but the question must be asked, “how many employers really do want to retrench workers, loose productivity and competitiveness as a result, and go out of business as a consequence of that?” Of course as in all well-intentioned schemes, the “devil is in the detail”.

But is this factor enough for the resident worker to be ‘resilient’ in this season of great economic depression? Selena Ling an economist at Overseas Chinese Banking Corporation feels that the government could have been more generous in terms of helping individuals directly. She says, “a lot of measures were biased towards helping companies because they expect that what helps companies will help individuals. They have prioritised saving jobs as the key theme this year, so they are thinking that as long as you have a job, you are okay”.

How right is her observation! Could the Budget have initiated measures that would have targeted workers directly in addition to trying to save jobs? Is this an opportune time to have initiated measures like unemployment insurance; which will be a means of temporary income for eligible workers who become unemployed through no fault of their own and who are ready, willing, and able to work?

It cannot be deduced that Unemployment Insurance is not appropriate for a highly industrialized Asian ‘tiger economy’ like Singapore. South Korea the first country to be identified as a ‘tiger economy’ has a (un)employment insurance scheme which was first put into place in 1 July 1995. The unemployment scheme was further extended rapidly in the wake of an unprecedented economic crisis in 1997.

Benefits fall into two broad categories in the South Korean Employment Insurance Act and are calculated using different rates. The first category is ‘Unemployment Benefits’ which is calculated at a rate of 0.9% of the employee’s total annual wage; of which both the employer and employee must pay 0.45% each. The second category is described as ‘Employment Security and Vocational Development’ and it is paid by the employer only. The amount paid by the employer ranges from 0.25% (for a company with less then 150 employees) to 0.85% (for companies with more than 1,000 employees) and the percentage is applied to the year’s total wage of all employees. The government of Singapore could have shown greater empathy and concern for the resident worker of Singapore during this downturn, by announcing an initiative like unemployment insurance.

But the government of Singapore which chooses to govern ‘first-world’ Singapore with ‘third-world’ mindsets, is still averse to being seen as a “welfare-state”, and has avoided putting sufficient “hard cold cash” in the hands of low-wage earners.

The Straits Times highlighted one such person, Tan Beng Yeong, 47 and his family (wife Nancy a homemaker aged 41; two children aged 17 and 15). Mr. Tan lives in a 2-room HDB rental flat and earns $700 working as a plumber. He admits that sometimes he cannot even put food on the table with what he earns and that his utilities have been cut at least twice in the recent months because he is in arrears to the utilities companies to the tune of $1000. He is able to get by only because of the loans he has been extended by his friends and relatives. Mr. Tan says, “It is not that we are not grateful. It is good to have rebates and all, but it will be better for people like us to have money in hand. Right now, I don’t even have enough money to celebrate Chinese New Year properly with my family”.

The Central Provident Fund’s (CPF) FAQ section on Workfare Income Supplement (WIS) Special Payment will provide low-income workers with an additional 50% of the WIS payment and that it will be disbursed throughout the year (currently two disbursements in a year). There are 290,000 persons who are eligible for WIS payment. But self-employed and informal workers who did not register with CPF and contribute to their medisave were excluded from the WIS payments. Such a requirement discriminates against a worker like Mr. Tan. If Mr. Tan an informal worker has to decide between contributing to his medisave account or to put food on the table for his family, guess which one e would choose?

Another worker who will receive his WIS payment is Mr. Md. Noh Marsidi who earns $900 working as a security guard (also reported in the Straits Times). He says that he will spend the $900 WIS payment which he will get this year, to settle his outstanding service and conservancy charges ($700) and utilities bill ($600). Simple math with show that even with the extra $900 in WIS payment, a hardworking person like Mr. Md. Noh Marsidi, cannot live a dignified life and would have to live with debts.

Singapore has accelerated from being a ‘third-world’ country to being a ‘first-world’, high cost society in less than half a century. Singaporeans cannot continue to live in a high cost society while having to accept lower salaries. Even Member of Parliament, Inderjit Singh commented recently that, “If we would like to see Singapore moving up as one of the most developed countries in the world, and costs increase accordingly, lower income Singaporeans might need a minimum wage to survive.” Mr. Singh also suggested that the government should “incentivize companies to implement it (minimum wages), or the government has to supplement wages to a minimum level.”

In reality, advocacy should go beyond the minimum wage to advocating for living wages. What is a living wage? A living wage is an income which will provide this disadvantaged segment of the population with minimally satisfactory living conditions, to the context of Singapore. It is different from minimum wages, as those drawing minimum wages, could still live in poverty. Living wages, will give the disadvantaged a right to life, liberties and opportunities. How much should it be? A living wage should be capped to price of renting a room from the open market. Cost of average rental room in the open market-divided by 30-times 100. Why? Because, nobody should spend more than 30% of their income on accommodation, as then they become cost burdened and may have difficulty affording necessities such as food, clothing, transportation and medical care.By paying people a `living wage,' we show respect for them and what they do. We enable them to give something back. They have the income to spend more, local businesses, professionals, schools and even religious organisations, benefit. We also benefit as a community because people who are able to meet their basic needs by working a 44-hour week have time and energy for their family, their faith community, and civic life.

In reality, the government of Singapore has not diverted from its fundamental stand even with this ‘bold’ Budget, by the standards of this ultra-conservative government, which has adopted neo-liberal economic policies. Budget 2009 despite its magnitude looks very similar to past stimulus plans, which is a broad mix of supply-side measures to help businesses, public-sector spending and cash handouts to stave off social discontent. What cannot be disputed though is that Singapore’s growth-model needs a re-think and that this re-think cannot be done with ‘third-world’ mindsets.


Ghost said…
I'm actually not a big fan of giving money directly to people but giving money to people directly may be a good thing now. In this current crisis when the problem start from the U.S and the scale of the problem is worldwide, it might be better for the Singapore government to give out cash so that Singapore companies can actually sell their goods to people with some money to spend. God knows no one in the U.S and Europe is buying anything