Moves aplenty as Singapore stands at cusp of demographic shift

By Kelly Ng, TODAY, 29 Aug 2015

For years, policymakers and experts here have been seized by the effects of an ageing population, raising social spending and putting in place a raft of comprehensive initiatives and policies.

These include elderly-friendly infrastructure and greater support all round for seniors, ramping up healthcare facilities, driving productivity improvements, raising the re-employment age and transforming the Singapore Armed Forces (SAF).

Based on official population projections, the Republic is now on the cusp of major demographic shifts.

From next year, enlistment rates for full-time National Service (NS) will begin to fall, Defence Minister Ng Eng Hen said in 2012.

Come 2020, more citizens will leave the workforce than start work each year, the National Population and Talent Division (NPTD) has forecast.

By then, the number of working-age Singaporeans will decline while citizens aged 65 and older is expected to more than double from 440,000 today to 900,000 by 2030.

Based on latest statistics, the citizen population stood at 3.3 million as of June last year. The citizen old-age support ratio was 5.2, a drop from 5.5 in 2013. Over the same period, the citizen median age has crept up from 40.0 to 40.4, while the proportion of citizens aged 65 and above has increased from 11.7 per cent to 12.4 per cent.

In an interview with this newspaper earlier this month, Manpower Minister Lim Swee Say cautioned that unless Singapore can get the best of its manpower, this would become the key bottleneck of growth in the future. Nevertheless, he pointed out that it is not a given that the Republic’s workforce will shrink beyond 2020. Other factors, such as marriage and procreation, are at play. There are positive news on that front: The number of births this year is on track to match last year’s figure of about 33,000. The figure, last seen in the most recent Year of the Dragon in 2012, is the highest in 10 years, Prime Minister Lee Hsien Loong said in his National Day Rally speech.

Mr Lim had added: “I would say that as Singaporeans, we should not just surrender, put our hands up and say, ‘Look, there’s no way we can up our birth rate, therefore, let’s accept that, eventually, our workforce will shrink, our population will shrink,’”

Apart from an ageing population, former government chief statistician Paul Cheung, who is currently Professor of So-cial Policy and Analytics at the National University of Singapore, tells TODAY that policymakers also have to pay attention to two other demographic trends: The rising number of elderly singles and trans-national marriages.

In our Big Read this week, we look at the potential impact of the major demographic shifts on four areas: Workforce, defence and security, healthcare and social spending.

WORKFORCE: HOW TO GET THE BEST OUT OF IT

Over the years, policymakers have attempted to buffer an ageing workforce with a combination of incentives to raise productivity and deepen the skills of workers.

For instance, schemes such as as the Capability Development Grant and Productivity and Innovation Credit encourage companies to improve processes and invest in technology. The SkillsFuture movement announced at this year’s budget also provide Singaporeans with opportunities to upskill and remain competitive and employable. It was also announced at the National Day Rally that the re-employment age will be raised to 67 years from the current 65 years, and this will be legislated by 2017,

For the first decade or so of the millenium, Singapore had pursued a high-growth model dependent on a large supply of foreign labour. This approach saw the Republic thrive economically, in contrast to other economies which were facing a shortage of jobs, wage stagnation and unemployment - in particular, youth unemployment, Mr Lim had said. However, the old model was unsustainable on the social and economic fronts, with congestion and other social prob-lems emerging and productivity falling. In recent years, the Government has tightened its foreign manpower policies through dependency ceiling ratios and levies.

Professor Cheung noted that importing labour is a classic response for sustaining the economy faced with the prospect of a shrinking workforce, but the inflow has to be calibrated. “The pie is too big for Singaporeans to chew, and in fact, the pie is continuing to grow. And our local workforce is increasing, but at a very, very slow pace. So there is almost no choice,” said Prof Cheung.

Still, he said the lax foreign manpower regime of the past was overdone. “There was no demographic reason for it...I was personally surprised that the Government opened the tap so much then,” said Prof Cheung, who was previously also Director of the United Nations Statistics Divison.

Since 2010, the inflow of foreign workers has been moderated. Last year’s growth in imported labour was the second slowest since 2004, behind 2009 when there was a recession and overall employment fell.

In his interview with TODAY, Mr Lim had reiterated that the tightening of the Republic’s foreign manpower regime was not a reaction to past mistakes, but was a reflection that realities had changed.

Experts noted that a sustained curb on foreigner numbers over the long term may adversely affect local businesses, especially if the population starts to platueau and shrink.

Said Nanyang Technological University (NTU) economics professor Walter Theseira: “I believe many companies were able to cope in the interim by hiring mature Singaporean workers (who are) willing to take on some of the lower-skill jobs that foreign workers hold in Singapore. However, as our older workers age and retire, even this pool of available labour will shrink.”

Economists and population experts reiterated that a competitive workforce can be sustained without excessive reliance on foreign labour, through a concerted effort to raise productivity and improvements to the educational system.

Pointing to examples in Europe and the United States, former GIC chief economist Yeoh Lam Keong said the Republic should target a labour force growth of 0.5 to 1 per cent through 2020, and 0.5 per cent thereafter. “The faster growth rate through 2020 will give local SMEs (small and medium enterprises) time to adjust and prevent a hollowing out of domestic business capability,” he said.

The productivity drive should be concerted and carried out industry by industry, with more help given to local SMEs, he said, adding that over-reliance on foreign labour dampens productivity. “You make cheap unskilled and semi-skilled labour so available that employers have no incentive to upgrade their operations,” he said.

The experts also felt that improvements to the educational system are necessary to nurture an adaptive labour force for the knowledge-based economy. Singapore must shift away from rote learning for examinations, said Mr Yeoh, and focus more on “workplace skills”.

Institute of Policy Studies (IPS) research fellow Christopher Gee added: “The education system must re-focus on developing a broad-based student population who can learn adaptively and perform in a creative, open-ended, problem-solving and collaborative work environment.”

Employers can also play a role in nurturing human capital. In Germany, for instance, unions help to develop school curricula. “We have made a start with the SkillsFuture movement, but can do a lot more,” said Mr Yeoh.

In the meantime, wage-insurance and unemployment credit programmes can be introduced to give those who are in-between jobs “breathing room” to find a new job in a new industry, thus keeping the labour market flexible, he said.

While the economy can be sustained with some injections of foreign labour, the greater concern is preserving the “Singaporean core”, said Prof Cheung. More can be done by the Government to “put Singaporeans at the front” of its policies, he added.

Based on NPTD’s figures for last year, every two in five people (40 per cent) in Singapore are non-residents. Prof Cheung noted that in Japan, only 1.6 per cent of its 127.3 million population are foreigners, based on figures from Japan’s Statistics Bureau in 2013.

The oldest country in the world, Japan’s fertility rate had gone well below replacement level since the 1970s. Last year, it saw a record low number of newborns. “In the past, people will say, ‘The ageing population in Japan is dragging the country down.’ But in Japan itself, people are quite happy about it, They seem quite accepting of the ageing phenom-enon, and they don’t take in any foreigners,” he said.

He added: “They are very ethnocentric...The elderly have a very big role and get involved in all the other things. They help to reinforce the cultural elements... Yes, in a way, you can say that the Japanese are not as dynamic as before be-cause of the elderly, but on the other hand, the society seems to be quite happy and is coming to terms with it.”

In Singapore, managing interactions between Singaporeans and foreigners will be a key policy concern in the years ahead, he said.

“Thinking ahead, we need good ways of managing them, whether to absorb them (as citizens) or give them a proper place to stay...all these will be very important,” he said. Prof Cheung also suggested that the Government offer some incentives to encourage Singaporeans who are overseas to return home and settle here. “A lot of people see no ad-vantage of coming back to Singapore. Because Singapore is so competitive and they not only have to compete with Singaporeans but also the foreigners...They may come back for food and for a holiday, but not for the long haul,” he said.

Prof Cheung also pointed to the rising number of trans-national marriages as a noteworthy trend. Over the last two decades, the proportion of marriages that are between a citizen and a non-citizen has doubled to about 40 per cent. “That means the foreign content in Singapore families have gone up. So how do you preserve the local culture?“

DEFENCE AND SECURITY: TAPPING ON TECHNOLOGY

NS enlistment rates are projected to fall from next year. By 2025, the number of people enlisted for full-time NS will dip by 25 per cent compared to 2011 - from about 26,000 to about 19,500.

While manpower constraints and new transnational threats have prompted the Singapore Armed Forces (SAF) to mod-ernise and streamline its defence systems, defence experts said technology alone may not be sufficient to make up the numbers.

Prime Minister Lee Hsien Loong revisited this challenge during a lecture organised by the Singapore Management University in July, cautioning against the prospect of becoming a “Dad’s Army” — making reference to a sitcom about the British Home Guard during World War II, which comprises volunteers otherwise ineligible for military service, either owing to age or by being in professions that were exempt from conscription.

Apart from tapping on technology, more creative human resource policies are needed to enhance the attractiveness of military careers, said defence expert Ho Shu Huang. “Soldiering still requires (human) presence in the field, either to close in on the enemy, or to occupy ground. Technology, as it currently stands, has its limits,” said Mr Ho, an associate research fellow at the Institute of Defence and Strategic Studies under the S Rajaratnam School of International Studies.

“There will be a natural limit as to how lean the SAF can go as a degree of redundancy has to be built in,” said Mr Ho, noting that in wartime, there will be casualties which further reduce a military’s manpower. The “value proposition” of a military career must transcend remuneration and job prospects, he said. He noted that Singaporeans, in general, do not appreciate enough the importance of defence as a public good, with the SAF being a largely deterrent force. “There is no history of soldiering, which has been the traditional conduit of military values across generations in many (other) societies,” he said. “The ideal would be for prospective recruits to see the SAF as an employer of choice beyond transactional reasons…Especially in Singapore, where there are many options for potential recruits other than a military career.”

Mr Ho also suggested introducing a wider range of military career models, such as by encouraging mid-career recruits and allowing military personnel to take sabbaticals. However, these options may be unpopular if a late start or time away from the military career hinder’s one’s chance of promotion. “The only way to mitigate this is for (SAF) to recog-nise non-military experience as relevant,” said Mr Ho. The authorities are already working on this. Full-time National Servicemen (NSFs) may see smoother transitions into the civilian workforce as the SAF looks to accredit leadership, technical and specialist skills picked up over their two-year NS stints. Vocations that could benefit from this move in-clude signal operators, soldiers who serve as transport operators and those in the medical field, such as SAF combat medics.

The Ministry of Defence is working with the Singapore Workforce Development Agency to finalise the training institutes and courses that will be accredited. More details will be released over the next year.

Mr Yeoh noted that homeland policing could also be affected by the manpower crunch. “Policing, as opposed to our capital-intensive military defence, is labour intensive,” said Mr Yeoh. The size of the police force has remained stagnant in the last 20 years, and much of policing work has been outsourced to security companies whose personnel are not well trained, he said. “You need policemen who are on the ground and know people in their neighbourhoods to effectively deter crime.”

The manpower crunch faced by the police came under the spotlight during last year’s Committee of Inquiry hearing for the Little India riot, with then-police commissioner Ng Joo Hee appealing for 1,000 more officers to boost the force.

The Singapore Police Force has sought to overcome the challenge by harnessing technology to boost its crime-fighting abilities. Initiatives underway include body-worn cameras for police officers, and installing cameras in all Housing and Development Blocks by next year.

HEALTHCARE: A BIGGER SAFETY NET FOR INDIVIDUALS

With a greying population due to rising life expectancy, healthcare is expected to claim a larger share of the Govern-ment’s budget going forward.

The World Health Statistics’ (WHS) report last year ranked Singapore as fourth highest for life expectancy at birth (83 years), ahead of the United Kingdom (81 years) and United States (79 years). By 2030, the ratio of working-age citizens to those aged 65 and over will fall by more than half from 5.2 today to 2.1, based on official projections.

As Singapore becomes a mature economy, rising expectations for better care coupled with medical technology ad-vancements may put upward pressure on costs, experts noted. However, many of the retiring baby boomers come from less-educated, low-skilled cohorts and have lower Central Provident Fund balances. According to the CPF Annual Report last year, 42 per cent of current active CPF members have not met the S$36,000 Medisave minimum sum at age 55. In 2003, the Republic spent 4.6 per cent of GDP on healthcare service, half that of the United Kingdom (9.1 per cent) and less than a third that of the United States (17.1 per cent), according to WHS.

In recent years, the Government has ramped up spending and rolled out new initiatives to extend subsidies for long-term care to a larger segment of the elderly population. Preparation for the healthcare needs of an ageing population have long been underway, since the early 1980s when Mr Howe Yoon Chong was the Health Minister, said Prof Cheung.

By the end of this year, MediShield Life will be rolled out to provide universal health insurance coverage for all Singaporeans for life. The Pioneer Generation Package which has been launched will also take care of most of the medical needs of seniors born in 1949 or earlier and who became citizens before 1987.

Prof Cheung said: “Within the next ten years, I don’t think healthcare will be an issue. But beyond that, nursing homes become a big issue...a lot of people will grow older, have mobility issues...How do you deal with people needing long-term care, nursing home care and old folks’ home in large numbers? In an urban context, that is a big issue.”

Some health economists also feel that the Government’s focus on providing for “big bills” that are largely hospital-based while leaving “small bills” typically to individuals has resulted in an acute care-centric system.

This could become an issue, especially given the rising numbers of elderly single. Based on official projections, the number of single residents aged 60 and above could balloon to well over 150,000 in 2030, compared to more than 50,000 currently.

National University of Singapore’s health economist Phua Kai Hong called for a shift towards long-term and community-based healthcare system. “Now the default seems to be to wait for people to fall sick and go to the hospital…We need to professionalise and incentive the long-term care industry, not leave it only to non-governmental organisations or the maids,” said Dr Phua.

The community can become more involved in healthcare provision, said Mr Gee, who added that more responsibilities should be given to social workers and volunteer citizens. “They are stronger touch points in preventive and chronic care, and also more accessible in community,” he said.

For instance, long-term care for a chronically ill patient who does not require further medical diagnosis might be better managed by a community worker who is in regular contact with the patient. Existing initiatives such a the Neighbours for Active Living Programme, which trains volunteers to look out sick elderly in the South East district, can be expand-ed to other geographical communities. Healthcare can also be co-located with other services, such as in schools, social service centres and community centres, said Mr Gee. Community care could also expand to non-traditional forms such as remote care via tele- or e-services.

“Assisted living communities” is one model the Government can look into, suggested Prof Cheung. A common feature in the United States, such communities have no special medical equipment that one would find in a nursing home but trained staff are usually available around the clock to help the elderly with their daily affairs, such as household chores, medication management, and even toileting and bathing for those who are less mobile.

To that end, the S$3 billion Action Plan for Successful Ageing announced by the Health Ministry earlier this week will commit to building Active Ageing Hubs in at least ten future HDB estates. Bigger than the existing Senior Activity Cen-tres, these hubs will cater to both active and less mobile seniors by providing day care and other services that help in their daily living, such as housekeeping and grocery shopping.

Mr Yeoh cited Hong Kong as a country with comprehensive national long-term care infrastructure, where there is a day-care centre or nursing home within a one-kilometre radius of most residences.

Healthcare institutions should also introduce more programmes to train para-professionals, including those managing home care, said Dr Phua. “The work may not be glamorous but we still need professional training for caring at home, instead of conveniently delegating this to maids,” he added.

Experts also called for healthcare financing to be “nationalised” through widening eligibility criteria for subsidies and services under the Community Health Assist Scheme. “This will facilitate the outcomes-based regulation of healthcare and a locality-based delivery of healthcare,” said Mr Gee.

SOCIAL SPENDING: GROWING THE TAX BASE

While the Government has raised income tax rates for top earners here as it moves towards a more progressive tax system, taxes paid by a broader swathe of Singaporeans, such as the Goods and Services Tax (GST), might have to go up in the future to pay for social spending, said tax experts and economists.

In the Budget statement earlier this year, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said that the revenue measures the Government had already undertaken will provide sufficiently for the increased spending planned for the rest of this decade.

About three weeks ago, the Ministry of Finance responded to online chatter, saying there was “no basis” to claims made by some online websites that the Government will raise GST after the coming General Election.

GST was first introduced 21 years ago in 1994 at 3 per cent. It has remained at 7 per cent since July 2007.

Some of the experts whom TODAY spoke to said they expected the GST to go up in future to 9 or 10 per cent, in line with the Asia-Pacific average, Nevertheless, they said the key to growing Singapore’s tax revenue is by enhancing business’ competitiveness on the global stage.

Mr Tay Hong Beng, KPMG Singapore head of tax, said the Government should help businesses improve their profitability through more programmes to enhance their operational efficiency and encourage more overseas ventures. “In-creasing business profits and improving the pay of workers will all contribute to more taxes without drastic adjustment to tax rates,” he said.

Noting that only about 30 per cent of all Singapore residents pay income tax, Mr Tay said increasing the tax burden on a minority of taxpayers “might not be the fairest way forward”.

Nevertheless, growing the taxed population may be a more sustainable solution for tax collections, said PriceWater-houseCoopers Singapore’s tax leader Mr Chris Woo. “If we continue to promote Singapore as the place for corporates to invest in, and attract more high-value people and operations here, it will broaden the base for corporate and income tax collections,” he said.

During the Budget statement, Mr Tharman announced that Temasek Holdings will be included in the Net Investments Return framework, which will allow the Government to spend part of Temasek’s expected long-term returns. Mr Tay said that whether this move will help defray social spending in the long run is unclear. “This is because such gains are tied to global economic performance and investment yields,” he added.

Asst Professor Theseira said taxpayers can expect to pay more in the medium and long term, with higher-income earn-ers contributing a larger share. The proceeds can fund social initiatives to help the unemployed, and support medical expenses and retirement provisions for middle- and lower-income groups. “It is fair that we all are asked to pay a bit more to fund them, although, of course, in general the more fortunate amongst us should contribute a larger share,” said Asst Prof Theseira.