Population increases in Singapore: balancing growth and quality-of-life

General Legal Judicial

Authors: Mukul G. Asher & Chang Yee Kwan, NUS

Singapore’s White Paper on population, issued on January 31 2013, has generated intense debate on the appropriate balance between growth and quality-of-life for Singapore citizens, illustrating the accelerating dilemma between the two faced by Singaporean policymakers and society.

The White Paper projects (the assumptions and methodology used remain unclear, making replication and checking the internal consistency of the projections difficult) that Singapore’s total population will be between 6.5 and 6.9 million in 2030 (5.3 million in 2012), with citizens (including between 15,000 and 25,000 citizenships granted each year) accounting for 3.6 to 3.8 million — around 55 per cent of the total. It is projected that by 2060, the citizen population (assuming no net immigration) will fall to only about 2.6 million, implying that citizens may well constitute a minority of the population by 2060. This makes some citizens anxious about their role in Singaporean society.

The White Paper asserts that even as 30,000 or so individuals will be granted Permanent Resident (PR) status each year, the total number of permanent residents in 2030 will be the same as the current level of between 0.5 and 0.6 million.

A total population of 6.9 million in 2030, with citizens at 3.8 million and PRs at 0.6 million, will leave 2.5 million foreign workers. The median age of citizens is projected (assuming no net immigration) to increase from 40 years in 2012 to 55 in 2060. Younger immigrants may reduce the median age slightly, but their ageing process will be even quicker than of those born in Singapore.

The White Paper projects that up to 2020, 3 to 5 per cent annual GDP growth can be achieved provided productivity (the precise definition of which is not stated) grows at between 2 per cent and 3 per cent (the White Paper terms it an ‘ambitious stretch target’), and the overall workforce grows by between 1 per cent and 2 per cent. The paper further postulates that annual GDP growth will further moderate to 2 to 3 per cent between 2020 and 2030. Even this represents an improvement over the 1.3 per cent achieved in 2012. Given the projected trends, productivity will have to be driven by an increasingly ageing population

The White Paper recognises that Singapore’s demographic trends portend a lower economic growth era compared to the past, with a higher proportion of the aged spending a rising share of their lifetime in retirement. This recognition notwithstanding, the overwhelming impression conveyed is that the current business location strategy of economic growth, and current methods of economic, social, and fiscal management, including the absence of social risk-pooling arrangements for addressing retirement and health care needs, such as mandatory membership of government-sponsored, but not necessarily funded, pension and healthcare schemes, will continue.

Some countries, such as Australia, approach social risk-pooling through an old-age pension programme covering a substantial proportion of the population and financed through the general government revenues. Singapore uses limited insurance based on commercial principles for healthcare, and no insurance mechanism for pensions. The 2013-2014 Singapore budget acknowledges the need for greater use in healthcare of insurance mechanisms for risk-pooling. But it is silent on any concrete proposals. No such acknowledgement has been made for pension arrangements.

The absence of such risk-pooling arrangements is a major factor in the economic and social insecurities felt by Singapore citizens, thereby contributing to quality-of-life concerns. Enhanced transparency of fiscal and budgetary flows and stocks would be helpful in this regard.

The White Paper also implies that the wage share in national income (42 per cent in 2011) will continue to not only be kept subdued, but also below the share of capital (51 per cent). This trend is exacerbated by relative inequalities of income and increases in the cost-of-living, further contributing to the anxiety of citizens.

The White Paper projects that about two-thirds of Singapore citizens would hold PMET (Professional, Managerial, Executive and Technical) jobs by 2030 as compared to about half in 2011. Yet for generating better quality economic growth it would have more instructive to use the distinction between ‘creative’ and ‘distributive’ jobs articulated by the economist Roger Bootle, with ‘creative’ jobs being more conducive to productivity-driven economic growth.

Whether current methods of economic and social management provide an appropriate balance between the allocation of the available labour force between creative and distributive tasks is an issue which merits much higher priority in public policy research concerning Singapore. In this context, the late economist Mancur Olson’s work may be instructive. His work focused on the formation of relatively narrow coalitions over time that acquire excessive policy influence, accentuating rigidities in the economy and society. This may hinder the addressing of pressing public policy challenges requiring new directions.

The White Paper may also overestimate the ease with which the flow of new citizens, PRs, and foreign workers can be fine-tuned. Changes in these flows inevitably affect business costs and longer-term planning, especially of small and medium enterprises. They also have an impact on the quality of life of citizens through effects on congestion in transport and other public amenities, especially in the medium-term. Poor planning for population increases can thus cause a great deal of strain.

For example, the first phase of the mass rapid transit (MRT) system initiated in the 1980s was designed for a population target of 4 million people, a figure already exceeded in 2000. An increase in population would only exacerbate congestion in the short-term. Future expansion of the existing public transport system will create a dilemma as significant investment in land, which also competes against other high-capacity usage needs such housing and public space, is needed.

The White Paper and its accompanying debates have performed a very important function by highlighting the trade-offs that are needed between the current methods of economic, social, and fiscal policies and management on one hand, and quality-of-life concerns on the other. The manner in which the accentuating dilemma between the two is addressed will have significant implications for the future trajectory of Singapore.

Mukul G. Asher is Professorial Fellow and Chang Yee Kwan is Research Fellow at the Lee Kuan Yew School of Public Policy, National University of Singapore.