Monday, 26 December 2011

Tackling inequality: Charting own path

By Sim Ann, Facebook note, 22 Dec 2011

I HAVE a team of volunteers in my constituency who assist residents in need.

For those who need a job, my team refers them to training or job-matching schemes. For those with temporary financial difficulties, we tide them over with FairPrice vouchers and ComCare funds. We also help them apply for various types of assistance to cope with their expenses, from utility bills to kindergarten fees.

Nothing makes our volunteers happier than to see a household get back on its feet. Indeed, many households do. Through the various government assistance schemes, we have been able to help many families overcome their setbacks.

But our residents' challenges are becoming more complex. As a result of globalisation, workers are now forced to compete on a world stage. Low-skilled workers especially are at risk. But even professionals and executives can find it difficult to get a new job at their old pay, especially when they are past a certain age.

Globally, we see increasing polarisation of employment opportunities. Income gaps are widening around the world. Singapore is not immune.

Rising family break-ups also mean that some problems, which could have been handled with the combined resources of the extended family before, now require external intervention.

My volunteers and I support improving social safety nets in Singapore. Stronger and more extensive social support will cushion our people against hardships, and provide much-needed breathing space for troubled households and individuals to resolve their problems and get back on their own feet again.

But we do wonder sometimes, though, if more widespread assistance is a panacea for all our social problems.

For example, one woman who approaches us for help regularly has an unemployed husband. He has been staying at home for years, and refuses to get a job, even though he is able-bodied and quite capable of working.

On occasion, our volunteers have been dismayed to find people they have helped continuing to spend money on habits they can ill afford, like smoking.

How do we meet the real needs of residents and still remain responsible for the public resources we are dispensing? How do we fulfil our instincts to be helpful and caring, without eroding the sense of pride and self-reliance that has characterised our society? In the long run, does providing more social assistance foster greater dependency? Who will pay for it all?

In our own way, my small team of volunteers and I find ourselves pondering the dilemmas that inevitably arise when we seek to do more to help those who need it.

These are also questions that preoccupy policymakers and experts throughout the world, including - and perhaps especially - those in developed nations that have constructed elaborate and costly welfare systems.

We all wish to see a more caring and compassionate society where no one is left behind, with full opportunity for all to make the most of our lives.

This is why the Government has been strengthening our social safety nets, and will continue to do more.

It is planning more initiatives to support the elderly. In health care, it is recruiting more doctors and nurses, and providing more hospital beds and nursing home places, as well as acute treatment and outpatient care, at affordable rates. It is helping workers, especially those at the lower end, to secure better jobs with higher pay, by improving their skills and raising their productivity.

But the Government is making these moves carefully, doing its best not to undermine incentives to work or weaken the economy, which ultimately has to generate the resources to pay for these social programmes.

Developing our own models

SOME have argued that Singapore should follow the northern European model of more radical redistribution and comprehensive welfare payouts, to narrow the income gap.

There are certainly lessons we can pick up from the northern European experience. But we first need to understand the context in which these societies operate.

The Scandinavian countries spend a great deal. In Sweden, for example, government expenditure amounts to around 50 per cent of gross domestic product (GDP). This is funded by high taxes, with the standard value-added tax set at 25 per cent, and with personal income tax rates of up to 57 per cent.

By comparison, in Singapore, government expenditure amounts to just 17 per cent of GDP, the goods and services tax is 7 per cent, and personal income tax rates do not exceed 20 per cent.

Even before the debt crisis and concerns over the future of the euro, the Scandinavian countries were finding it difficult to keep all their welfare schemes going. Across Europe, many countries are now stuck with increased dependency and high unemployment. Their economies are weighed down by the heavy burdens of high taxes and generous welfare. In Italy, state pensions alone account for 14 per cent of GDP, almost as much as total government expenditure in Singapore. How would Singapore benefit if it were to model itself after these economies?

Aside from the difficulty of sustaining generous benefits, comprehensive welfare schemes can also foster perverse behaviour, affecting the character and tone of society as a whole and eroding trust and social cohesion.

Take, for instance, benefit fraud - the practice of making fraudulent claims in order to obtain more welfare benefits than one ought to receive. This is a problem in many European countries, posing a heavy cost to taxpayers.

Another problem: Generous compensation rates, while well intentioned, encourage over-claims and long-term absenteeism. Sweden, for instance, has one of the healthiest populations in the world, yet the proportion of Swedes who claim sickness benefits is among the highest in Organisation for Economic Cooperation and Development countries. The Swedish government has had to introduce stricter conditions and safeguards in its sickness benefits scheme, to limit the temptation for people to game the system.

Feeling our way forward

THERE is much that Singapore can learn from other countries' experiences, but we have to adapt practices that work elsewhere to our local context. That way we can evolve our own social model, one that emphasises enterprise and drive, rather than the redistribution of a shrinking pie; one that encourages self-reliance instead of welfare; and one that helps build a fair, just and inclusive society.

Our government spending will inevit-ably rise over the next decade, as our social needs grow and our programmes expand to meet them. But the Government can only spend within its means.

We have kept taxes low in Singapore, especially direct taxes on income. This keeps us competitive and encourages our people to excel in their work, and to make the most of their abilities. For this reason, we must be cautious in taking on new state-funded welfare commitments.

With prudent fiscal management, we will also preserve our ability to spend in a counter-cyclical fashion. We have been strict with ourselves during good times. That is why when we run into rough weather, we have the means to act decisively and navigate through safely.

The $20.5 billion Resilience Package, launched during the recent global financial crisis, is a good example. The last thing we want is to be forced to raise taxes and withdraw social spending when the economy is down and people have lost their jobs, as has happened in other countries.

To be sure, there is a lot that needs to be done on our social agenda. We need to strengthen our 'many helping hands' approach to social assistance and make sure no one falls through the cracks. We need to ensure the good provision and timely delivery of social services, particularly where needs are rapidly growing. This includes developing well-trained personnel, growing robust social institutions, and keeping services affordable.

The Government is aware of these needs. We are indeed expanding our social safety nets in order to make them more inclusive. But we will continue to try to stretch taxpayers' money so every dollar is well spent - and really does good.

Whatever we do must be affordable and sustainable. Otherwise, we will get into serious trouble in the longer term, and ordinary Singaporeans - and future generations - will suffer.

Ultimately, we cannot solve our problems just by uncritically copying what other societies have done. We will have to feel our own way forward, and develop our own solutions, suited to our own context and circumstances.

This is how we can develop a unique model of social welfare that benefits all Singaporeans.

The writer is Senior Parliamentary Secretary (Law and Education) and a Member of Parliament for Holland-Bukit Timah GRC.

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