Social Policy in an Ageing Society: Age and Health in Singapore

Social Policy in an Ageing Society

Also by David Reisman Adam Smith’s Sociological Economics Alfred Marshall: Progress and Politics Alfred Marshall’s Mission Anthony Crosland: The Mixed Economy Conservative Capitalism: The Social Economy Crosland’s Future: Opportunity and Outcome Democracy and Exchange: Schumpeter, Galbraith, T.H. Marshall, Titmuss and Adam Smith The Economics of Alfred Marshall Galbraith and Market Capitalism Health Care and Public Policy The Institutional Economy: Demand and Supply Market and Health The Political Economy of Health Care The Political Economy of James Buchanan Richard Titmuss: Welfare and Society Schumpeter’s Market: Enterprise and Evolution State and Welfare: Tawney, Galbraith and Adam Smith Theories of Collective Action: Downs, Olson and Hirsch

Social Policy in an Ageing Society Age and Health in Singapore

David Reisman

Edward Elgar Cheltenham, UK • Northampton, MA, USA

© David Reisman 2009 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited The Lypiatts 15 Lansdown Road Cheltenham Glos GL50 2JA UK Edward Elgar Publishing, Inc. William Pratt House 9 Dewey Court Northampton Massachusetts 01060 USA

A catalogue record for this book is available from the British Library Library of Congress Control Number: 2009921532

ISBN 978 1 84844 094 4 Printed and bound by MPG Books Group, UK

Contents Acknowledgements

vii

1.

Introduction

1

2.

Old and ill 2.1 Indicators and inputs 2.2 The demographic iceberg 2.3 The cost of growing old

5 5 9 22

3.

The Provident Fund 3.1 The Central Provident Fund 3.2 The Ordinary and the Special Account 3.3 The Minimum Sum 3.4 Income streams and annuities 3.5 Modifications and extensions 3.6 Retirement income above the floor

34 34 39 50 58 63 70

4.

Affordable health care 4.1 Promotion and prevention 4.2 Personal responsibility 4.3 Affordable access 4.4 Competition 4.5 Cost containment

73 73 78 78 95 96

5.

Payment for health: Medisave 5.1 The delivery of care 5.2 Subsidies for beds and subsidies for patients 5.3 Medisave: rationale and rationality 5.4 Medisave: limits and exclusions 5.5 A decent minimum?

101 101 106 111 118 122

6.

Payment for health: MediShield and Medifund 6.1 MediShield 6.2 Medifund

126 126 139

v

vi

Social policy in an ageing society

6.3 6.4

The preconditions for policy The best in the world?

150 160

7.

Home and family 7.1 The family in Singapore 7.2 Old people on their own 7.3 Homes and nursing homes 7.4 Insurance: the options for care

162 162 171 177 179

8.

Assets: capital and property 8.1 Savings 8.2 Housing

188 188 194

9.

Labour in the retirement years 9.1 A manpower shortfall 9.2 The participation rate 9.3 The employment rate 9.4 The older worker

204 204 215 222 226

10.

Older workers: the policy options 10.1 The retirement age 10.2 Retirement age and Minimum Sum 10.3 Training and retraining 10.4 Pay 10.5 A reappraisal of work 10.6 Laws 10.7 A new consensus

228 228 234 237 244 250 256 261

11.

Conclusion 11.1 The three ratios 11.2 A share in the future

265 267 274

Bibliography Index

281 295

Acknowledgements The author would like to express his thanks to Lim Hua Sing, Naohiro Ogawa, Phua Hong Kiat, Soh Ning En and Wang ShiHui for their encouragement and assistance.

vii

1. Introduction The Republic of Singapore is a city-State. It is situated in tropical SouthEast Asia, at the tip of the Malay peninsula. It is 1° 17' (136.8 kilometres) north of the equator. Singapore’s total landmass is 692.1 square kilometres. It is 12.61 per cent larger than at independence due to the steady reclamation of coastal land. Singapore is approximately 3.5 times the area of Washington, DC. Singapore’s population in 2008 was 4.84 million. There are three main ethnic groups: 74.8 per cent are Chinese, 13.5 per cent Malay and (the fastest-growing) 9 per cent Indian. The population density per square kilometre at 6652 is the third highest (after Monaco and the Special Administrative Region of Macau) of any country in the world. Cities score worse than states: in Delhi it is 9294 although for India as a whole it is no more than 336. In Nigeria the population density is 145. In China it is 137. For the continent of Asia it is 152. For the world as a whole it is only 45. Agriculture has given way to high rise. About 53 per cent of the world’s population lives in rural communities. In Singapore, 100 per cent of the population is urban. In rural Asia only 31 per cent of the population has access to safe water and hygienic sanitation. In Singapore everyone does. Singapore is made up of one large island and 53 smaller ones. Built-up areas account for 50 per cent of the territory. The rest is given over to parkland, (15) reservoirs, military areas and (4 per cent of the total) forest, mainly secondary. Roads take up 12 per cent of the total land area. The highest peak is Bukit Timah, 164 metres above sea level. Singapore has virtually no natural resources apart from its human capital and its strategic location on vital shipping lanes. The port of Singapore is the world’s busiest in terms of total shipping tonnage. Changi Airport is the fifth busiest in Asia and the nineteenth busiest in the world by passenger traffic. Exports plus imports as a ratio of GDP were 428 per cent in 2004. This is believed to be the highest ratio in the world. The figure for Luxemburg is 271 per cent, for the UK 53 per cent, for the USA 25 per cent (Heston et al., 2006). A small open economy, Singapore is abnormally exposed to fluctuations in world demand and in foreign direct investment. Its macroeconomics are not its own. The rate of economic growth in Singapore was 6.4 per cent on average between independence in 1965 and the ‘Asian economic crisis’ in 1997/98. 1

2

Social policy in an ageing society

Singapore recovered quickly from the regional downturn. Growth was 6.6 per cent in 2005, 8.2 per cent in 2006, 7.7 per cent in 2007. A maturing economy, the trend rate in future might be less. The Asian Development Bank calculates that it will probably lie between 4 per cent and 6 per cent per annum. The banking crisis in 2008 and the recession that followed will halve or more than halve that figure in the short term. In the long run, an economy where the fundamentals are sound is likely to return to business as usual. National income per capita in Singapore in 2007 was S$52,994 (US$35,163). This was higher than Japan (US$33,577), the previous front runner in Asia. It was the seventeenth highest in the world. The GDP per capita in the USA was US$45,814. In the UK it was US$35,134. The standard of living has increased almost tenfold in the four decades since Third World Singapore became an independent nation on 9 August 1965 The first Prime Minister, from 1965 to 1990, was Lee Kuan Yew. He, together with other founding fathers such as Goh Keng Swee, developed the blueprint that shapes Singapore’s political economics to the present day. It is not a model which has much time for a welfare State. Yet Singapore is ageing fast. This book is about the future of social policy in an evolving Singapore where the young are becoming old and there are not enough children to pick up the burden of dependency. Singapore is a new country with a young population. By 2030 the blush will have turned to grey. Old people need money. Old people need medical attention. This book, concentrating on the double challenge of the old and the ill, asks if the answer will be the nationalisation and the politicisation of the gift relationship. The founding fathers expected the transfers and the payments to remain the sacred duty of filial children proud to repay their intergenerational debt. This book asks if an ageing population will be the catalyst that shunts social policy on to a new and unexpected track that the founding fathers could not have foreseen. Chapter 2, ‘Old and ill’, summarises the problem. Health status outcomes are good, health care inputs are on-stream, but still an ageing population will put disproportionate pressure on scarce resources that have alternative uses. The resident birth rate is too low even to reproduce the current stock of Singaporeans. Immigration attenuates the population imbalance but creates new problems as well. Chapter 3, ‘The Provident Fund’, examines the compulsory savings that Singaporeans put into their retirement accounts. Not all Singaporeans have balances adequate to see them through 20 sunset years and more. Not all Singaporeans are satisfied with the rate of return on the Government bonds in which so much of their money is invested. Not all Singaporeans feel that unfunded balances without fiscal subsidisation are the appropriate

Introduction

3

way to pay for life’s final act in a mature democracy where even unknown strangers have a right to be old and ill. Chapter 4, ‘Affordable health care’, situates health policy in the context of its proximate objectives. Defining good health to be the meta-objective, Singapore has also made five intermediate facilitators into valued endstates in themselves. These are the promotion of good health, the inculcation of responsible attitudes, universal access to basic care, a move to market competition and the containment of cost. Health care policy in Singapore is expected to match up to the subordinate goals that the decision-makers have explicitly made both their health-maximising means and their consensually validated ends along the way. Chapter 5, ‘Payment for health: Medisave’, continues the discussion of mandatory savings that was begun in Chapter 3. It explains that Singaporeans are required to hold medical savings accounts which can be drawn down to cover the cost of care. Yet the money put aside might not be enough. Deductibles and co-payments mean that much must be paid out of pocket. A number of conditions and treatments are not on the list. Medisave must be complemented by further Ms if the old and the ill are not to die where they fall. Chapter 6, ‘Payment for health: MediShield and Medifund’, shows that there are two further strings to Singapore’s bow. MediShield is State insurance. The risks are pooled. Major hospital bills are less of a strain. Private top-ups allow for more comfortable stays. Medifund is State charity. In keeping with the promise of basic care for all, the Medifund endowment can be drawn upon to assist the impoverished who have exhausted their means, sold their homes and have no relatives on whom they can rely. The chapter notes that social insurance does not cover all the contingencies and that social assistance is only intended for the desperate and the destitute. It speculates that a major investment in both the second and the third M would nonetheless be a useful policy option where hypothecation is inadequate and the family is not around. Chapter 6 was about national pooling. Chapter 7 is about the microsocial network. Headed ‘Home and family’, it discusses the living arrangements of senior citizens. It explores the extent to which they can look to their children for cash and care. Singapore is an Asian society. Asian cultures have traditionally assumed that the family would care for its own. Singapore is also a modernising society. Do adult children really welcome the burden of an Alzheimer’s parent when they have children of their own to support? Will singlehood and divorce, significantly amplifying the existing overhang of widowhood, mean that ever more of the old and the ill will be living alone? Will a greater proportion of old people in Singapore need to go into old people’s homes? If so, who then will pay?

4

Social policy in an ageing society

Chapter 8, ‘Assets: capital and property’, continues the discussion of the economic constraint. It emphasises that Singaporeans are asset rich even if they are often cash poor. Singaporeans have voluntary savings: the chapter argues that they ought to have more but that deferred gratification is being undermined by the consumer culture of live for today. Singaporeans also have homes: the chapter shows that trading down, renting out and remortgaging are all ways in which Singaporeans can monetise their property in order to support themselves when they are old and ill. Chapter 9, ‘Labour in the retirement years’, turns to the third of the factors of production. Many older Singaporeans cannot afford to stop work. The fact that labour is the bottleneck input means that it is in the national interest for them to carry on. Adding value, they are also earning income which will complement their mandatory savings. Their work will ensure them a better standard of living. Chapter 10, ‘Older workers: the policy options’, asks what the State can do to unfreeze a frozen resource. Training and retraining subsidies, a later age of retirement, wage supplementation where otherwise older workers would not be worth their keep are all expedients that the Government can explore in its quest to help the more mature to help themselves. Chapter 11, ‘Conclusion’, draws together the threads. It says that if the family is not there and if the elderly cannot prolong their working life for ever, then State intervention might be the only way to correct a social failure. The Good Samaritan as described by Titmuss cannot easily be invoked in support of a new Singapore that turns generous and open-handed in order to nurture the old and succour the ill. Singaporean political culture will not know what to make of declarations such as the following: Social gifts and actions carrying no explicit or implicit individual right to a return gift or action are forms of ‘creative altruism’. . . . They are creative in the sense that the self is realised with the help of anonymous others; they allow the biological need to help to express itself. (Titmuss, 1973 [1970]: 239)

The residual supplier as described by Tawney is likely to have a greater appeal in a pragmatic political culture that cost–benefits defined resources in the light of prudently ranked targets: ‘Politics, it may be suggested, is, or ought to be, the art of achieving by collective action ends which cannot be attained with the same measure of success by individual effort, and often cannot be attained by it at all’ (Tawney, 1953: 93). Whether the heart or the mind, whether sentiment or reason, this, however, is clear. Matter in motion bows to no conventional wisdom. The old and the ill may be the catalyst that makes practical Singaporeans reassess what they want their State to do.

2.

Old and ill

The present is good. The first section of this chapter shows that, in terms of outcomes and inputs, Singapore is on a par with other developed countries. The future is a problem. The second section quantifies the demographic iceberg. Singapore is growing old. The third and final section assesses what the upward drift in the population bulge can mean for the cost of health care.

2.1

INDICATORS AND INPUTS

Health status in Singapore is what would be expected in a country with a good standard of living and a clean environment that has invested prudently both in prevention and cure. The infant mortality rate is 2.6 per 1000 live births: it had been eight in 1980 and 82 in 1950. In the USA it is seven, in Sweden and Japan three, in China 23, in India 62. Life expectancy at birth is 77.9 for men, 81.8 for women: the average is 15 years longer than at internal self-government in 1959. The corresponding figures are 75 and 80 in the USA, 78.5 and 85.5 in Japan, 66 and 70 in Indonesia, 61 and 63 in Laos. Figures 2.1 and 2.2 show where Singapore stands. Healthy life expectancy at birth is 68.8 for males, 71.3 for females: in the USA it is 67.2 and 71.3, in Japan 72.3 and 77.7, respectively. Adult mortality in the productive years from 15 to 60 is 85 per 1000 for males, 50 for females: in the USA it is 144 and 83, in Sweden 82 and 51, respectively (World Bank, 2007). Figures 2.3 and 2.4 illustrate Singapore’s relative performance. The World Health Organisation ranked the effectiveness of Singapore’s health care system sixth among its 191 member states: France was first, Japan 10th, the UK 18th, the USA (which spends the largest percentage of its GDP on health) only 37th. Fairness of financing was a different matter. There Singapore, heavily reliant on out-of-pocket payment, was number 101 (World Health Organisation, 2000: 154). Colombia topped the list for fairness. The measurement is based on the fraction of a household’s capacity to spend (income minus expenditure on food) that goes on health care. There are 2.9 hospital beds per 1000 of population in Singapore (less than 3.3 in the USA or four in the UK, much less than 7.6 in France or 5

6

Social policy in an ageing society

100 80 60 40 20

us si a

e

R

bw ba

Zi

m

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do

ne

PD

R

si a

na hi C

In

di

a

an

en ed

Ja p

In

Si n

Sw

ga

U

po

re

SA

0

Source: World Bank (2007).

Figure 2.1

Infant mortality rate (per 1000 live births)

100 80 60

Males

40

Females

20

a

hi n In do a ne La sia o P Zi DR m ba bw e R us si a

C

di In

U S Sw A ed en Ja pa n

Si

ng a

po r

e

0

Source: World Bank (2007).

Figure 2.2

Life expectancy at birth

14.3 in Japan). There are 1.3 doctors per 1000 of the population. In Japan the figure is 1.98. In the USA it is 2.2, in the UK 2.3, in France 3.4 (World Health Organisation, 2006b; World Bank, 2007). Figures 2.5 and 2.6 indicate Singapore’s position in a representative subset of countries. As so often in health policy, outcomes are not proportional to inputs. Even so, the supply of professionals, in the past tightly capped, is being allowed to expand. More nurses are being trained in recognition of the worldwide

Old and ill

7

100 Males 80

Females

60 40 20

Source:

AS EA N

Ja pa n

Si ng ap or e

U SA

0

World Bank (2007).

Figure 2.3

Healthy life expectancy at birth

900 800 700 600 500

Males Females

400 300 200 100

Source:

e us si a

bw

R

R

ba

Zi

m

PD

si a

o

La

ne

na hi C

do In

di

a

n In

pa

en

Ja

ed

U

Sw

Si

ng

ap

or

e

SA

0

World Bank (2007).

Figure 2.4

Adult mortality in the productive years 15–60 (per 1000)

shortage: of 21,000 nurses currently employed in Singapore, almost a third are from foreign countries, notably China and the Philippines. There is now a second local medical school: as well as the (undergraduate) School of Medicine at the National University of Singapore, there is the Graduate

8

Social policy in an ageing society

Source:

us

si

a

e R

bw

R

ba m

Zi

La

on In d

o

es

PD

ia

na C

hi

ia In d

n Ja

pa

en

Si

ng

Sw

ed

SA U

ap

or e

16 14 12 10 8 6 4 2 0

World Bank (2007).

Figure 2.5

Hospital beds (per 1000 of population)

5 4 3 2 1

Source:

a Ru ss i

In do ne sia La o PD R Zi m ba bw e

na Ch i

In di a

Ja pa n

US A

Sw ed en

Si

ng ap or e

0

World Bank (2007).

Figure 2.6

Doctors (per 1000 of population)

Medical School jointly run by the National University of Singapore and Duke University. Duke is one of the top six medical schools in the USA. A third medical school at the Nanyang Technological University will come on stream as soon as economic conditions permit. Doctors may also have trained at 140 recognised foreign institutions. In 1993 the number was fixed at only 20. The intention was to block supplier-induced demand, to contain total cost and to prevent too many bright young people from going

Old and ill

9

into medicine when other sectors of the fully-employed economy had a need for them as well. The rule was relaxed in the new millennium in order that foreign nationals together with foreign-trained Singaporeans might expand the doctor pool. A patient may now be treated by a Singaporean from Hadassah, an Italian from La Sapienza or a Thai who completed his education at the Christian Medical College, Vellore, India. As in other countries, doctors (especially public-sector hospital doctors) complain of exhausting on-calls, heavy caseloads, sleep deprivation, lightning explanations to trainee housemen, inadequate time for personal research. Protracted waits for specialist clinics are unpopular with patients. Delays are believed to deter patients from seeking an early diagnosis. Consultations are often said to be unacceptably short. Migration of doctors to private hospitals may be excessive. Singapore has the lowest doctor-to-patient ratio in the developed world. Barr does not deny that the doctor shortage delivers a technocratic gain: ‘This phenomenon . . . contributes directly to the high throughput of patients of which the government boasts as evidence of the efficiency of its hospitals’ (Barr, 2008: 411). What he does say is that the economics may have cut into the care that gives the enterprise its legitimacy. An increase in the numbers of medical professionals is inevitable if Singapore is to service its growing population, cope with the old-age bulge and act as a hub for medical tourism. About a third of the doctors now in practice in Singapore have basic degrees from other countries. Foreign countries will have subsidised the cost of their education. It is an external economy for Singapore. More doctors, home and foreign, will be needed to cope with the growing need. Geriatric medicine is now a core module for undergraduate medical training in the local medical schools. Training in care of the elderly is compulsory for all general practitioners. There are only 7128 qualified geriatricians in the USA – one for every 2500 older Americans. By 2030 (when there will be 70 million elderly Americans) the USA will need at least 36,000. Not economising on the specialists, Singapore is determined that the general practitioners at least will have had the training they need to care for the old.

2.2

THE DEMOGRAPHIC ICEBERG

The United Nations defines a society to be ‘ageing’ where 7 per cent of the population is over 65. Once 14 per cent of the population is over 65, the society is said to be ‘aged’. Singapore, already ‘ageing’, soon to be ‘aged’, can no longer claim to be young.

10

2.2.1

Social policy in an ageing society

The Elderly

The elderly, 65 and above, comprised 3.4 per cent of the resident population in 1970 and 4.9 per cent in 1980. They were 8.6 per cent in 2006 (Department of Statistics, 2007a: v). By 2030 it is expected that they will make up between 18.7 per cent (as estimated by the Singapore Department of Statistics) and 23 per cent (as estimated by the World Bank). By 2050 the figure will be 27 per cent. This is about the same as the corresponding proportion in Europe (28 per cent), more than that in China and the UK (both 24 per cent), much more than in sub-Saharan Africa (6 per cent). In 2050 there will be two billion people over 60 on the planet. They will outnumber the under-14s. The over-75s will account for 8.9 per cent (Ministry of Health, 1999: 29; World Bank, 2007). Projections are not infallible, and the unexpected can surprise. Even so, a number such as two billion does suggest that the policy-makers cannot afford to be complacent, reactive or wait and see. Singapore’s 23 per cent in 2030 is less than the projected figures for Japan (29 per cent) and Hong Kong (27.7 per cent), about the same as Australia (21 per cent) and the USA (21 per cent), double the rate in Malaysia (10 per cent), triple the rate in India (8 per cent) (Ministry of Health, 1999: 17, 18; World Bank, 2007). About 20 per cent of the Japanese population is already over 65. Figure 2.7 indicates the likely state of play in 2030. The World Bank predicts that the figure for the world as a whole will be 11 per cent. For the developed countries, about 25 per cent of the population will be over 65 in 2030. Singapore will be above the average for the world as a whole but (just) below the average for the developed world. About 1,555,000 Singaporeans (29.9 per cent of the total) will be 60 and above by 2030. Bottom-heavy in the fertile 1950s, Singapore by 2030 will be top-heavy and old (see Figure 2.8). It is a great burden for the young and productive to have to bear. There were 381,100 Singaporeans aged 65 and above in 2007. In 2030 there will be an estimated 1,181,000, out of a total population projected to be between 5.2 and 6.5 million. By 2030 the median age in Singapore will be 41.2 years. In 2050 (when 35 per cent of Singaporeans are expected to be aged 60 or above) it will be 53.7. This will be the fourthhighest median age in the world, just behind Macao SAR (55.5), Japan (54.9) and South Korea (54.9), all in East Asia (United Nations, 2007: 67–71; Ministry of Manpower, 2007a: 2). Other old-old countries in 2050 will be the Czech Republic, Estonia, Italy and Spain. The equivalent figure to Singapore’s 53.7 will be 41.1 in the USA and 43.4 in the UK. In 2007 the median age in Singapore was 36.4 (approximately the same

Old and ill

11

Source:

In di a C hi na In do ne si a La o PD R Zi m ba bw e R us si a W or ld

ed en Ja pa n

SA

Sw

U

Si ng ap or e

% 35 30 25 20 15 10 5 0

World Bank (2007).

Figure 2.7

Percentage of population 65-plus in 2030

% 25 20 15 10 5 0 1957 Source:

1970

1980

1990

2000

2010

2020

2030

World Bank (2007).

Figure 2.8 Projected percentage of over-65s in the Singapore population as in the USA and Australia). It was 19.5 in 1970 and 18.8 in 1957 when the under-20s made up 52.2 per cent of the population. It is mainly the African countries such as Burundi (20.8) and Uganda (23.3) that will have a median age in the low 20s in 2050. Things have moved on since Singapore was ranked not 4th but 116th by median age in 1950 (United Nations, 2007: 67).

12

Social policy in an ageing society

2.2.2

The Fertility Rate

The low birth rate as well as the longer life expectancy is at the root of the top-heavy distribution. Selected fertility rates are shown in Figure 2.9. The fertility rate in Liberia is 6.8, in Angola 6.6. In the UK it is 1.9, in Switzerland 1.4, in Italy 1.3. About half of the world’s population currently lives in countries where the fertility rate is below 2.1. The fertility rate in Singapore in 2007 was 1.29 children per woman (1.09 per Chinese woman). It last reached the replacement ratio of 2.1 in 1976. Not one of the three main ethnic groups now approaches the figure of 2.1. It is hard to believe that the fertility rate was 6.41 in the Malthusian Singapore of the 1950s, 4.7 in 1965, 3.07 in 1970. The average number of children per married woman is only 2.3 (1.9 per university-educated married woman). In the early days the Government was urging young couples to ‘Stop at Two’. Families were living in slums and squatter colonies. Poverty, unemployment and inadequate medical support meant that overpopulation was a threat to all. The answer was the Family Planning and Population Board, set up in 1966 to implement antinatalist policies that would cut down the births. General education on family planning and low-cost access to demand-led abortion made it easier for parents to limit the family size. Higher priority for small families in the allocation of school places and housing units (core merit goods, disproportionately provided by the State) gave them a focused incentive to do so. Couples who had more than two children paid more for hospital care, enjoyed less income tax relief and were given less maternity leave. Cash benefits were paid to low-income

Source:

World Bank (2007).

Figure 2.9

Selected fertility rates

a si us R

bw e ba m

PD R

Zi

La o

es

ia

na

do n In

C hi

In

di

a

n pa Ja

en Sw ed

U SA

Si

ng

ap

or

e

4 3.5 3 2.5 2 1.5 1 0.5 0

Old and ill

13

7 6

Total fertility rate

5 4 3 Malay 2 Indian Fertility rate 1

Chinese

19

5 19 7 6 19 0 6 19 5 7 19 0 8 19 0 8 19 1 8 19 2 8 19 3 8 19 4 8 19 5 8 19 6 8 19 7 8 19 8 8 19 9 9 19 0 9 19 1 9 19 2 9 19 3 9 19 4 9 19 5 9 19 6 9 19 7 9 19 8 9 20 9 0 20 0 0 20 1 0 20 2 0 20 3 0 20 4 0 20 5 06

0

Year

Fertility rate

Source:

Replacement rate

Chinese

Malay

Indian

World Bank (2007).

Figure 2.10

Fertility rates in Singapore: total and by ethnic group

women with a low level of education who agreed to sterilisation before the age of 30 and had had no more than two children. Mothers with at least five O-level passes were, of course, given enhanced child relief for up to three children. Graduate mothers were given priority in selecting the school of their choice. The target was the quality as well as the quantity of children. From the late 1980s the Government began to put the policy into reverse. ‘Stop at Two’ became ‘Have three or more if you can afford it’ and the brakes came off. Female civil servants were no longer granted one week’s leave as an incentive to become sterilised unless (as a proxy for a low level of intelligence) they had obtained not even one O-level pass. Presterilisation and pre-abortion counselling became mandatory for men and women with less than three children. More hostels were built for eligible undergraduates and ‘networking hubs’ for single civil servants were set up. The Social Development Unit was created to link up the unmarried and get them hitched. Young people in Singapore have limited time to meet prospective partners once they enter the labour force. Antinatalist Singapore had become pronatalist Singapore because the circumstances had changed so much. There is now the ‘Baby Bonus’: S$4000 cash is paid for the first and second child, S$6000 for the third and

14

Social policy in an ageing society

fourth. There is the ‘Children Development Account’. The Government matches the parental contribution: it puts in up to S$3000 for the first and the second citizen-child, up to S$6000 for the third and the fourth, up to S$9000 for the fifth child and all subsequent children. There is also the ‘CPF Housing Top-Up Grant Scheme’. Since 89 per cent of singles contemplating marriage want to live in their own homes (and only 2 per cent want to stay with their parents), targeted housing grants and deferred down-payments encourage twenty-something couples to take the plunge (Ministry of Community Development, Youth and Sports, 2008: 1, 2 and Annex A). Earmarked medical savings (discussed in Chapter 5) can be used to cover pre-delivery and delivery expenses even for the third and subsequent births. Generous withdrawals are also allowed for assisted conception in costly forms such as in vitro fertilisation and intra-uterine insemination. The Government funds half the cost of up to three cycles of assisted reproduction in public hospitals. In Singapore IVF contributes 1.3 per cent to total births. In Britain it is as much as 4 per cent, in Denmark 7 per cent. The ‘Grandparent Caregiver Tax Relief’ and the ‘Foreign Domestic Worker Levy Concession’ (discussed in Chapter 7) make it easier and more economical to arrange daytime care for the young. Child tax relief (S$4000), the ‘Parenthood Tax Rebate’ (S$5000 for the first child, S$10,000 for the second child, S$20,000 for the third child and beyond) and the ‘Working Mother’s Child Relief’ (15 per cent for the first child, 20 per cent for the second child, 25 per cent for the third and further children) significantly reduce the income tax liability. A couple with three children on a joint income of S$100,000 a year will pay 70 per cent less tax over 10 years. For a dual-income couple on S$50,000 with a similar number of children the reliefs will add up to 16 tax-free years. They do so (earlier requirements having been suppressed) without a qualifying educational minimum. Working mothers can claim paid maternity leave for up to 16 weeks. For the first two confinements the employer covers the first two months of the leave. The State pays the rest, up to a maximum of S$20,000 per birth. For the third and subsequent confinements, all 16 weeks are covered by the State, up to a ceiling of S$40,000 per birth. A woman retrenched because of pregnancy alone must be paid her maternity benefits by her former boss. A miserly employer may not automatically dismiss his pregnant staff as a way of enriching his bottom line. The State pays a proportion. The employer pays the rest. Yet the maternity wage is not the whole of the burden. About 55 per cent of the Singapore labour force is employed in a small or medium enterprise. About half of those employees are women. Singaporean SMEs have little slack to take in. The Government does not refund the expense of hiring and training a short-timer to cover for the absentee childbearer. Nor does the State pay

Old and ill

15

compensation for the loss of business where regular clients expect to deal with their tried-and-tested contact. It is a reason to hire fewer women, or to pay them less. It is by the same token a reason to keep up their productive contribution by encouraging them to work from home. Parents are allowed to take six days of paid childcare leave per year (plus a further six days of unpaid childcare leave) to spend time with an infant below the age of two: the State and the employer split the cost, up to S$500 per day. A similar number of unconditional paid days may be claimed for a child aged two to seven. Parents can claim a total of 15 days of full-pay unrecorded leave per year to look after (up to three) children under 12 who fall ill. The children must be Singapore citizens. Singapore does not pay good money for nothing. Putting it all together, the bundle of pro-family measures and initiatives is a considerable one. About 83 per cent of respondents to a survey in 2007 were clear in their own mind that the current package has indeed created a better environment for having and raising children (ibid.: Annex A). A better environment does not mean, however, that the incentives will be powerful enough actually to stem the tide. Material inducements in places like Taiwan, Japan and South Korea have had very limited success. In Taiwan the birth rate (it was 7.04 in 1951) is now only 1.1 children per couple. In Japan it is 1.34. In South Korea it is 1.2. The money spent on paid maternity leave, childcare subsidies and even free milk powder might just as well have been saved. The lowest rates of fertility in the world are found in East Asia. In East Asia the family plays the principal role in supporting the dependent. Perhaps the family is feeling the strain. The European welfare States, interestingly, have fared slightly better. In Britain the fertility rate is 1.91, in Denmark 1.85, in Finland 1.83. In Sweden the fertility rate has risen from 1.6 in 1979 to 1.88 in 2007. Public policy has made a not insignificant contribution. Parental leave in Sweden is 13 months. At least two months can only be claimed by the man. Parents receive 80 per cent of their pay while on leave. Companies are legally bound to hire back their employees on a part-time basis up to the time that a child is eight years old. Tiered child allowances are paid and they are generous. Childcare, moreover, costs only S$30 a month. In Singapore it costs on average S$670 a month. Singapore may have to look carefully at the Swedish experience if it wants to expand its population. It has begun the process by contributing up to S$300 per month towards the cost of a child attending a childcare centre. Additional childcare centres are being built. By 2013 there will be over 1000 subsidised centres, staffed by qualified professionals. They will be offering places for over 83,300 children. Employers might also want to provide in-house crèches as a fringe benefit. Such facilities will meet the needs of parents with young children.

16

Social policy in an ageing society

Yet marginal improvements pale in the face of social trends. Family planning, female participation in the labour force, reluctance of men to contribute to household chores, the low take-up of paternity leave (only 0.5 per cent of Japanese fathers make a claim), limited flexibility in hours of work, rising levels of education and productivity (and therefore rising opportunity cost), delayed marriage (and therefore delayed childbearing), the nuclearisation of the family, the high cost of supporting a child, a competitive education system in which private tuition can be a must, a tendency towards ‘high quality’ children in preference to large families that spread scarce resources too thin have all contributed to the dramatic shrinkage in birth cohorts. Mandatory procreation is not on the cards. There is only so much that public policy can do. Pigovian subsidisation since the 1980s has been a watershed that has failed to turn the tide. Singaporeans are practical people. They know when the money is not enough. Quite a considerable ‘Baby Bonus’ would be required if it were to have a significant and lasting impact on family size. Countries ranging from Spain to Canada have experienced a comparable decline. It is not much comfort to the Singaporeans who would like to have children but are deterred by the financial strain and the brake on advancement at work. What is surprising is that in Singapore the very low birthrate is accompanied by comparatively low female representation in the labour force. The participation rate is only 54.3 per cent for women in the prime-age cohort from 25 to 55. A comparable figure for Sweden would be 78 per cent. In the UK it is 70 per cent. In the USA it is 69 per cent. It would evidently be a mistake to blame the low birth rate overall on careerist women who have got the work-life–balance all wrong. Many women even so do work. High pay and Maslow-like selfactualisation can without doubt be a disincentive to resident offspring. Importantly, the opposite can also be true. Singaporeans are more likely to marry when pay is rising and jobs are secure. Only 21,962 couples tied the knot in the bad year of 2003. In the good year of 2007 it was 23,966. Economic buoyancy itself can be a baby bonus. It makes young couples feel more confident about the future. 2.2.3

Dependency

Figure 2.10 shows the fall in the total fertility rate. One consequence is that the rate of growth of the over-65s is currently 3.7 per cent per annum. In the UK it is 1 per cent. In the US it is 1.3 per cent. In China it is 2.7 per cent. Singapore’s 3.7 per cent is exceptionally high. Increasing by 194 per cent between 1998 and 2025 (as opposed to projected figures of 46 per cent in the US and 75 per cent in Japan), the upsurge in Singapore’s over-

Old and ill

17

65s is expected to be one of the fastest transformations in the population pyramid on record (McCarthy et al., 2002: 199). It took Sweden 86 years to achieve a similar swing. Thanks to infrastructure such as sewers, good medical attention, affordable public housing, rising living standards, the fastest-growing age-groups in Singapore are the 75–84s (6.7 per cent) and the over-85s (8.1 per cent). Other countries are reporting a similar trend. In the UK the fastest growing age group is the over-80s. Record immigration has not stopped the median age from drifting up. In Japan the fastest-growing segment of the population is the over-100s. Increasing at 11 per cent per annum, Ogawa predicts that by 2025 there will be 168,000 Japanese aged over 100. The United Nations anticipates that the figure will reach 1 million by 2050. In 1963 there were 153. In 2008 there were 36,276 (Ogawa, 2005: 377). More people are not only reaching age 65 but living longer thereafter. In 1957 the average length of life in Singapore was 60.5 for males and 66.6 for females. In 2007 the figures were 79.9 and 81.8. The fact that Singapore has become a low-mortality society means that an average life expectancy at 65 of 14.9 years and 16.8 years is now the norm. A steadily improving standard of health suggests that the figures will continue to rise. Extrapolating from past trends, males in 2030 will be living to the age of 87.2, females to 90.1. The official estimate is that, of Singaporeans alive in 2006, one in two will live beyond 85, one in seven to age 95, and one in 20 to age 100. Women will make up the great majority of the old-elderly. It is a universal phenomenon. About 86 per cent of Japanese over 100 are women. Someone will have to pay for the extra years. Many if not most of those years will be consuming years without an income from work. It is all a question of numbers. The rate of growth of the over-65s is currently twice that of the 15–64s who must support them: 3.7 per cent per annum in contrast to the total resident population’s 1.7 per cent. Singapore is more and more like a pyramid trying to stand on its point. The ratio of the over-65s to the working-age 15–64s was 5.9 in 1970, 7.3 in 1980, 8.6 in 1990, 10.1 in 2000 and 11.4 in 2005 (Ministry of Health, 1998; Teo et al., 2003: 401; Department of Statistics, 2007a: v; World Bank, 2007). The Ministry of Health in 1998 predicted it would be 29 (3.5 to 1) in 2030 (Ministry of Health, 1998). The Ministry of Manpower in 2007 predicted it would be 25 (4 to 1) (Ng, 2007c). The World Bank expects it to be 37.7. Not 11.4 (as in 2005) but possibly as few as 2.6 economically active persons will be supporting one old person in 2030. In 1970 approximately 17 working adults had been there to help. The equivalent ratio in Hong Kong to Singapore’s 37.7 will be 32. In Japan the old-dependency ratio, now 26, is expected to be at least 50: no more than two economically active producers will be supporting each

18

Social policy in an ageing society

retired consumer. The number will lie between 67 and 70 by 2050. This will be the highest old-dependency ratio in the industrialised world. The European Union is only slightly less exposed. The number of residents aged 65 and above will effectively double from 17.1 per cent in 2008 to 30 per cent in 2060. Those aged 80 and above will triple from 4.4 per cent to 12.1 per cent. Even with positive net migration, the fall in birth rates will be so severe as to occasion a drop in numbers in the EU27. The olddependency ratio is expected to rise from 25.4 per cent in 2008 to 53.5 per cent in 2060. By 2060 there will be only two Europeans of working age for every European aged 65 and above (Giannakouris, 2008: 1). The ratio was four to one in 2008. Singapore is not the only part of the world that is growing old. To the old-dependency ratio must be added the young-dependency ratio. That at least is falling: 77.8 per cent of the Singapore population was made up of child dependants in 1957, 68 per cent in 1970, 41 per cent in 1980, 32.3 per cent in 1990, 30.9 per cent in 2000, 26.8 per cent in 2006. Extrapolation suggests that the figures for the young dependent will be 21.5 per cent in 2020 and (assuming a small rebound in births) 27.7 per cent in 2030 (Department of Statistics, 2006a: v; 2006b: viii; World Bank, 2007). The total dependency ratio was 81.7 in 1957. It fell sharply to 48.2 in 1980 and then more gradually, to 40.8 in 1990 and 38.6 in 2006. The projection is that it will rise to between 43 and 49.9 by 2020. It will be between 56.4 and 65.4 by 2030. Figure 2.11 (using the projections of 43 and 56.4 which were made by the World Bank) plots the falling curve for the young and the rising curve for the old. It suggests that total dependency is U-shaped. It predicts that the two curves will cross just after 2020. Before that date the nation will reap a dividend from the more rapid fall in the young dependent. After approximately 2020 the more rapid increase in the old dependent will cause the numerical burden of dependency to go up. The financial burden will increase before that. The reason is that the rise in cost that is occasioned by the retired normally exceeds the fall in cost that is the consequence of lower fertility. Hospitals are more expensive than schools. At least the financial burden, geographically speaking, will be reasonably even. Singapore is a city-State. Radin Mas has a disproportionate number of delicate older women. Pulau Tekong has a supernormal headcount of sturdy young men. In the Outram area about 21 per cent of residents are over 65. In the new town of Punggol the old are only 4.6 per cent of the total. Overall, however, the geographical distribution of old and young is not (or, perhaps, not yet) a primary policy issue. In Singapore there is no real equivalent of the rural–urban migration and the pockets of

Old and ill

19

Dependency ratio

70 60

Old-age dependency ratio

50 40

Child dependency ratio

30

Total dependency ratio

20 10 30 20

20 20

10 20

00 20

19 9

19 8

0

0

0

Year

Sources:

Calculated from Department of Statistics (2007a: 23); World Bank (2007).

Figure 2.11

Dependency ratios of resident population

elderly people left behind in the villages that is encountered in neighbouring countries such as Indonesia. In 2007 the total dependency ratio in Singapore was 37.9: 26.0 under 15 and 11.9 65 and over (Department of Statistics, 2007a: 19). The equivalent figures for the 11.9 per cent in Singapore, as shown in Figure 2.12, were 6 per cent in Laos, 27 per cent in Sweden, 26 per cent in Japan, 24 per cent in the UK, 18 per cent in the USA. In the OECD countries about 70 million people are expected to retire within the next 25 years. They will be replaced in the labour force by only five million home-grown new entrants. Looking back over the last 25 years, the imbalance was the reverse. About 45 million older workers were withdrawing from the labour force. About 125 million baby-boomer newbies were competing to replace them. In 1966 the total dependency ratio in Singapore peaked at its all-time high of 95.4. In 1957 it was 81.7. This was the reflection of a very youthful population: while child dependants accounted for 77.8 of the 81.7, old people comprised only a very small 3.9. Half a century on, later-life dependants had more than made up for lost time. New solutions had to be found. Foreign labour, contract or permanent, was one of those solutions. 2.2.4

Migration

Imported inputs compensate for low natural increase. They damp down the dependency rate. Foreigners in 2008 made up 21.5 per cent of

20

Social policy in an ageing society

La

o

PD Zi R m ba bw e R us si a

si a ne

do

hi na In

C

di a In

an Ja p

en ed

SA

Sw

Si ng Source:

U

ap

or

e

% 35 30 25 20 15 10 5 0

World Bank (2007).

Figure 2.12

Old-age dependency ratios, 2007

Singapore’s population. They accounted for 1.2 million out of the total population of 4.84 million. Of that total, 3.16 million were Singapore citizens and approximately 478,200 were Permanent Residents. Just under ten per cent of the people who call Singapore their home are Permanent Residents. They tend to be better educated than the locally born population. About 77 per cent of new Permanent Residents in 2008 had had post-secondary education. The corresponding figure for nativeborn Singaporeans is 36 per cent (National Population Secretariat, 2008: 2). Singapore has for some time had a persistent shortage of labour, both manual and skilled. Despite the limited land area, the Government is anticipating that there might be a critical mass of 6.5 million bodies by 2030. It is rather a lot of bodies in a small territory of only 692.1 square kilometres. Perhaps the optimum will be more like 5.5 million bodies if open spaces, greenery and parks are not to give way to stressful congestion, cramped conditions and coast-to-coast overbuilding. A comparison may be made with the United Kingdom where, assuming an average family size of about two children, net immigration of 250,000 a year and a sustained improvement in life expectancy, the population, 61 million in 2007, could be approaching 75 or even 80 million by 2081 (Office for National Statistics, 2008b). It is the equivalent of building two, three or four new cities the size of London in a country already suffering from pressure on infrastructure, pensions, health services and energy supplies.

Old and ill

21

Britain like Singapore is a crowded island. Perhaps the more is not the merrier after all. Thinking the unthinkable, it might even be desirable to rein in the rate of economic growth. Britain and other developed countries get by well enough on 3 per cent or even less. It is sometimes asserted that red-hot economic development meets Singaporeans’ determination to enjoy a rapid rise in their material standards even at the cost of other objectives such as uninhibited public debate and free time to appreciate their surroundings. Slower growth might undermine the popularity of an A-team that has scored well in terms of economic improvement. Be that as it may, a less-pressured economy would undeniably do much to alleviate the shortage of labour. Irrespective of the precise growth rate, it is clear that the population will have to rise and that gung-ho parenting will not be enough. Singapore needs 60,000 live births a year just to maintain its current population size. In 2007 only 39,490 babies were born. The number of deaths will outstrip the number of births by 2020. Without immigration, the population will then begin to shrink. The underlying growth in productivity has averaged 2.5 per cent over the last decade. For the economy to continue to grow at 6 per cent per annum, the nation needs growth in the labour force of 3.5 per cent each year. This suggests an extra 87,300 new workers each year. In 2007 Singapore was short of at least 20,000 people. Its citizens and its Permanent Residents were not enough to keep the 6 per cent on course. There were 150 people in Singapore when the settlement was founded by Raffles in 1819. There were 458,000 when Lee Kuan Yew was born in 1923. There were 2.07 million in 1970. Immigration was the main source of population growth at least until the Japanese invasion in 1942. It is the main source of population growth now. Singapore is used to foreigners coming in to settle. Unlike Japan, it has long been a multiracial, multicultural society. An entirely separate issue is whether Singaporean poaching is draining poorer countries of doctors, nurses and skilled technologists. It is a topic in globalisation turned malign which many countries, not just Singapore alone, will have to address. The population of Singapore is growing at the rate of 4.4 per cent per annum. The non-resident population is growing at 14.9 per cent, the resident population at 1.8 per cent. The number of Permanent Residents is increasing at 8.7 per cent per annum. Singapore citizens are multiplying at the rate of only 0.9 per cent per annum. The result is a decline in the share of Singaporeans in the total population stock. It was 86 per cent in 1990. It was only 67.2 per cent in 2007. While replacement migration is essential, it should be remembered that large sectors of the domestic population are economically inactive. There

22

Social policy in an ageing society

are approximately 270,092 retired people and 318,561 female homemakers. About 18 per cent of the housewives have post-secondary education: the figure was only 3.1 per cent in 1990 (Department of Statistics, 2006b: Table 88). There are approximately 288,600 Singaporeans aged 25 to 54 who are neither working nor seeking jobs. Drawing these people into the labour force would both raise household incomes and enrich the production possibilities. Chapter 9 returns to the unused potential. It concludes that taking in the slack will not be enough. Foreigners will be essential if Singapore is to face up to the growing dependency of the very old.

2.3

THE COST OF GROWING OLD

It is not all doom and gloom. The AXA study found that, while people encounter more health problems as they grow older, 53 per cent of the retired persons in the multi-nation survey described themselves as ‘rather healthy’ and a further 21 per cent said they were ‘very healthy’ (AXA, 2007: 20). In Singapore the figure was not 74 per cent but 79 per cent. In France it was 63 per cent. In the USA it was 82 per cent. Investment was paying dividends. Older people in Singapore tend to exercise and to be abstemious with drinks. In Singapore, some 49 per cent of retired people say that they eat well in order to stay healthy. In France the figure was 24 per cent, in the USA 67 per cent. The OECD calculates that per capita health expenditures for the over65s in its member states are 2.5 to five times higher than for the under-65s. The cost is even greater for the over-75s (OECD, 1996: 53). In Korea the elderly, only 5 per cent of the population, account for 9 per cent of all hospital admissions and 17 per cent of all admissions for chronic diseases (Heller, 1999: 45). Koreans aged 65–74 consumed 3.3 times as much health care in 2005 as did Koreans aged under 65. In the Slovak Republic it was 3.1 times as much. In Canada it was 3.5 (OECD, 2007). In the UK in 2001–02 the over-65s accounted for 16 per cent of the population but used up 39 per cent of the health care budget. The over-85s cost the most, each old person absorbing £3315 of health care resources annually when the national average was only £646 (Office for National Statistics, 2004). A year later the £3315 had become £4146. Half of all hospital beds in Britain are occupied by the over-65s: the over-75s alone account for a third of the total (Mullan, 2000: 133). The incidence of stroke, on average two per 1000 population in England and Wales, rises steeply from less than one per 1000 among people under 45 to more than 15 per 1000 population in the subset aged 85 and above. Disabilities are common. They necessitate continuing treatment (Kavenagh et al., 1999: 385).

Old and ill

23

In Japan in 1999 the average annual medical costs of patients over 65 were 8.3 times the costs of patients aged between 15 and 44. The average length of hospital stay was twice as long. The lifetime medical expenditure of the average Japanese is US$17,000: half of this amount is spent after age 70. It all costs money: ‘Medical care costs for the elderly, growing at the rate of 9 per cent annually, are the main driver of the increase in medical expenditure’ (MacKellar et al., 2004: 74). The share of the elderly in total health care costs in Japan was 14 per cent in 1975, 35 per cent in 2000. It is projected that older people will account for half of the total cost in 2025: ‘International studies consistently show that the costs per capita of health care for the elderly are between six and eight times those for young and middle-aged people. . . . Thus there is a built-in ageing cost escalator’ (ibid.: 24). The people who are going to be old in 2025 or even 2050 have already been born. There is not a lot that can be done. The pattern in America is the same. In the USA, older consumers in 2003 spent on average US$3899 of their own money on health care. The national average for the population as a whole was US$2574 per annum. The over-65s had three times the number of hospital admissions. They spent an average of 5.8 days per hospital episode. The figure for the nation as a whole was 4.8 (Department of Health and Human Services, 2005). The over-65s in America constitute about 20 per cent of the population. They consume over 50 per cent of the health care services. The curve is in the form of a J: In the early years of a person’s life, health consumption is relatively high, usually around 150–200 per cent of the lowest age-specific consumption rates. During the remainder of life, consumption increases more or less steeply to reach its final levels, which are expressed as a multiple of minimum consumption – usually between four and seven times the minimum level. (Cichon et al., 1999: 154)

Figure 2.13, using data from the Netherlands, shows how early the minimum is reached and how rapidly, after the late 60s, grey beards can grow into euros. Figure 2.14 constructs similar curves for public health spending in a further four European countries: Denmark, Germany, Austria and Finland. As before, the economic burden falls rapidly in infancy, remains relatively stable in the middle years, and then rises sharply from something like the late 50s. Interestingly, one of the curves turns flat from approximately age 80 while the other three actually fall. This may mean that, while old people cost more going from the minimum to the peak, beyond the peak the economic outlay begins to go down. The doctors cut back on all but palliative care.

24

Social policy in an ageing society 30 25

1000

20 15 10 5 0 0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 88 92 96 Age (years) Source:

Van Ewijk et al. (2000).

Figure 2.13

The age profile of health care expenditure in the Netherlands

% of GDP per capita

25 20 Denmark

15

Germany Austria

10

Finland 5

94

84

90 –

74

80 –

64

70 –

54

60 –

44

50 –

34

40 –

30 –

24

14

20 –

10 –

0– 4

0

Age-group

Source:

OECD (2006a: 44).

Figure 2.14

Public health expenditure by age-group in selected European countries

Old and ill

25

The evidence from Japan does not suggest a plateau or a late-life decline. As Figure 2.15 shows, per capita spending continues to rise (although possibly at a slower rate). Since medical attention in Japan can be taken neat or mixed together with quasi-clinical complements made possible through long-term care insurance, Ogawa and his colleagues recommend that the expenditure curve should be drawn twice. Both curves rise. The augmented curve rises even more. While there is no documented J-curve in Singapore, the higher cost of the older cohorts may be inferred from Figures 2.16a–d. The estimate was made in the following way. For each class of ward the hospital admission rate per 1000 of population was multiplied by the average size of hospital bill. Another way of demonstrating that the economic burden rises with age is to examine data on disbursements recorded in the Household Expenditure Survey. Figure 2.17a shows that spending peaks in the early 30s when the children are young. Equally interesting is, however, Figure 2.17b. This shows that the percentage of spending is greater as the main income earner grows old. The private burden becomes greater in the twilight phase of the life cycle when personal earnings begin to fall away. In Singapore in 1961 the principal causes of death were communicable, infective and parasitic diseases (approximately 40 per cent), diseases of the circulatory system (15 per cent), diseases of the respiratory system (15 per cent), cancer (10 percent) and suicides (10 per cent). The picture has changed since then (Chia, 2002: 173). In 2006 three chronic conditions 180 160

Thousand Yen

140 120 100 80 60 40 20 0 0

10

20

30

40

2004 with long-term care insurance

Source:

50 Age

60

70

80

90

2004 without long-term care insurance

Ogawa et al. (2007).

Figure 2.15

100

Estimation of change in monthly per capita health care expenditure by age: Japan, 2004

26

Social policy in an ageing society

Health care expenditure (S$)

1400 1175.9

1200

1036.9

1000 Male 800

Female

600 400 200

222.4 188.9

233.8 216.3

0–14

15–64

0 65 & above

Age Source:

Ministry of Health, www.moh.gov.sg.

Figure 2.16a

Expected health care expenditure by age (Class A ward)

Health care expenditure (S$)

1200 980.1

1000

864.2

800 Male

600

Female

400 185.4 157.4

200

194.9 180.3

0 0–14

15–64

65 & above

Age Source:

Ministry of Health, www.moh.gov.sg.

Figure 2.16b

Expected health care expenditure by age (Class B1 ward)

– cancer (28.5 per cent), heart and hypertensive diseases (23 per cent), pneumonia, influenza and asthma (13.7 per cent) – accounted for 65.2 per cent of all deaths (Ministry of Health, www.moh.gov.sg). All three are age related: both prevalence and vulnerability increase as the human capital begins to

Old and ill

27

Health care expenditure (S$)

450 394.6

400

348

350 300 250

Male

200

Female

150 100

74.6

63.4

78.5

72.6

50 0 0–14

15–64

65 & above

Age Source:

Ministry of Health, www.moh.gov.sg.

Figure 2.16c

Expected health care expenditure by age (Class B2 ward)

Health care expenditure (S$)

400 338.8

350

298.7 300 250

Male

200

Female

150 100

64.1 54.4

67.4 62.3

50 0 0–14

Source:

15–64 Age

65 & above

Ministry of Health, www.moh.gov.sg.

Figure 2.16d

Expected health care expenditure by age (Class C ward)

depreciate. A demographic transition is at once an epidemiological one. It is also a financial challenge. The chronic conditions are more expensive to treat. Old-fashioned malaria rapidly and cheaply got the job done. The chronic and the catastrophic require capital-intensive diagnosis,

28

Social policy in an ageing society

Health care expenditure (S$)

300 250 200 150 100 50 0 65

Age of main income earner

Source:

Department of Statistics (2005: Table 19A).

Figure 2.17a

Average monthly household health care expenditure

% 12.0 10.0 8.0 6.0 4.0 2.0 0.0 65

Age of main income earner

Source:

Department of Statistics (2005: Table 19B).

Figure 2.17b

Percentage of average monthly household expenditure spent on health care

protracted therapy and long-term support once the patient has been sent home. Old people are more likely to impose a burden on the health care infrastructure. The data on hypertension presented in Figure 2.18 make clear the direction of the bias.

Old and ill

29

70

Percentage

60 30–39

50

40–49

40

50–59

30

60–69

20

30–69

10 0 Total Source:

Males

Females

Ministry of Health (2005: 13).

Figure 2.18

Age-specific prevalence of hypertension in Singapore

About 45.5 per cent of new cases of end-stage renal disorder were in the 60-plus age group. There were 42 hip fractures per 100,000 Singaporeans in 1990 but 58 in 1999. The rise (of 16 per 100,000) reflects the fact that 83 per cent of hospital admissions for osteoporotic hip fractures were for patients aged over 65. Diabetes affects 0.5 per cent of young adults aged 18 to 29 and 8.2 per cent of the population as a whole. For the elderly, 60 and over, the prevalence jumps to 28.7 per cent. For high cholesterol, the respective rates are 5.2 per cent below 29 and 26.7 per cent above 60. The National Survey of Senior Citizens found for 2005 that only 35.8 of the over-55s reported a clean bill of health. The others were suffering from chronic ailments such as sight problems (13.6 per cent), diabetes (17.0 per cent), bone or joint problems (15.5 per cent of males, 30.9 per cent of females) or high blood pressure (37.9 per cent and 41.2 per cent, respectively). The proportion increased with age. At least the older people felt that they had access to care. Only 0.4 per cent of all senior citizens said they had not seen a doctor because they did not have the money (Ministry of Community Development, Youth and Sports, 2007: 43, 46). About 85.5 per cent of Singaporeans aged between 65 and 74 are suffering from diabetes, hypertension or high cholesterol. Approximately one Singaporean in four aged 60 and above has been affected by age-related macular degeneration. ARMD is the most common cause of vision loss and blindness among the over-60s in developed countries as well as being associated with falls, anxiety and depression. Some Singaporeans are affected by more than one of these conditions (Ministry of Health, 2005: 73, 75). Alzheimer’s Dementia affects 5 per cent of Singaporeans over 60 (2.2 of the men, 7.8 of the women) and 13 per cent over 70. Just over

30

Social policy in an ageing society

80 70 60 50 40 30 20 10 0

Males Females

er ov 75

&

69

–7 4 70

65 –

64

59

60 –

49

50 –

39

40 –

30 –

29

Be

20 –

19

Total

lo w

Residents per 100 population

25,000 cases in 2008 had been diagnosed in the existing population. Some statisticians predict that the number will be 45,000 in 2020, 70,000 in 2030 and possibly even 187,000 by 2050. In the United States one over-65 in 10 and five over-85s in 10 suffer from some degree of dementia: the total of 4.5 million cases may reach 16 million by 2050. In Japan there are already 1.7 million dementia patients. There will be 3.2 million by 2025. The economic cost of dementia worldwide is believed to be as much as US$156 billion. The drugs to contain Alzheimer’s Disease (which are not subsidised by the state or refundable through Medisave) currently cost up to S$3000 a year. It can be a heavy burden if the old person lives on for 20 years. The suicide rate among the over-60s in Singapore is twice the national average (see Figures 2.19 and 2.20). For the over-75s is two to three times that of the middle-aged, four to eight times that of the 15–24s. Elderly people who attempt suicide are 50 times more likely to be successful. From 2000 to 2003, in the 60 to 79 age-group, there were 26 suicides per 100,000 men and 13.3 suicides per 100,000 women. The total was 17.3 per 100,000 in 2002. It was 27.6 in 2008. It is little consolation to know that it was 40 in 1995 (52 among the Chinese) when the demographic was on balance so much more youthful. The ratio for the population as a whole was 9.3 in 2003. It was 10.3 (419 people) in 2006. The ratio of elderly suicides per 100,000 of the population in the United States and Australia is 10 (Tan, 2006). It has been estimated that about 8 per cent of the over-60s suffer from depression. The figure for the whole of the population over the age of 18 is about 5.6. Poor health, diminished respect for the repositories of tradition,

Age-group Sources: Calculated from Department of Statistics (2004) and Registry of Births and Deaths (2005).

Figure 2.19

Suicide rates by gender and age-group, 2003

Old and ill

31

40

Per 100 residents

35 30 25 2005

20

1999

15 10 5

er

4 &

ov

–7

9

75

70

–6 65

4

9

–6 60

9

–5 50

9

–4 40

9

–3 30

–2 20

Be

lo

w

19

0

Age-group Sources: Calculated from Department of Statistics (1998b and 2004); Registry of Births and Deaths (1999 and 2005).

Figure 2.20

Comparative suicide rates, 1999 and 2005

a younger generation which cannot spare quality time, a reluctance to ask for antidepressants, a failure on the part of the doctors to detect chronic dejection at an early stage, language barriers with social workers, the loneliness of living on one’s own, are all reasons why the old might feel gloomy and cut off. Despite the informed guesses of the doctors and the academics, only 2.8 per cent of older men and 3.7 per cent of older women mentioned depression when they were interviewed for the 2005 National Survey (Ministry of Community Development, Youth and Sports, 2006: 44). It is hard to establish the precise figure because Singaporeans (the cultural reticence is not uncommon in East Asia) prefer to complain of aches and pains rather than psychic distress which many regard as a sign of weakness. Because of the stigma, a number of people (especially so among men) do not seek counselling in time. It is believed that one in four teenagers and young adults suffers from psychological problems such as anxiety, anorexia or low self-esteem. As with the old, the figure is subject to underreporting. More than half of the pedestrians killed on the roads in Singapore are over 60. Old people, suffering from chronic degenerative disease and noncommunicable disability, are more likely to be bed-blockers. The average length of hospital stay for an old person is 11.3 days whereas for the nation as a whole it is 4.9. Barr estimates that the over-65s in Singapore are

32

Social policy in an ageing society

admitted 2.8 times as often as patients aged 15–64. They stay 1.66 times as long (Barr, 2001: 721). The elderly make disproportionate use of the two most heavily subsidised classes of wards: B2 and C. In 2004 the average hospital bill in a Class C and Class B2 ward for a young-elderly patient aged 50–64 was, respectively, 1.3 and 1.7 times that of the average hospital bill across all age-groups (Ministry of Manpower, 2006a: 27). In 1998 the over-65s (then 7 per cent of the population) accounted for 19 per cent of resident patients seen at polyclinics and 32 per cent of Singapore hospital-days (Department of Statistics, 1998a). By 2004 the hospital-days had become 40 per cent (Department of Statistics, 2005: 51). In 2005 in Japan nearly half of all hospital inpatients were 65 and above. One-third of these had been hospitalised for over a year (Ikegami, 2005: 129). The median public hospital admission rate in Singapore in 2006 was 79.8 per 1000 resident males, 75.7 per 1000 resident females. For the over-65s it was 210.8 and 160.0, respectively. For the over-70s it was 371.4 and 331.8 (Ministry of Health, moh.gov.sg). Old people in Singapore account for 99 per cent of admissions into long-stay institutions. About 90 per cent of hospitalisations occur in the last 10 years of a person’s life. The typical Singaporean is hospitalised on average 11 times in his or her lifetime. Of the 11 episodes, eight occur after the age of 55 (Tay, 2003: 155). About 13.5 per cent of Singaporeans over-55s reported in 2005 that they had been hospitalised within the last year: the comparable figure for 1995 was 7.0 per cent. The percentage rises steadily from 9.0 per cent in the age-group 55–64 to 22.7 per cent for the over-75s (Ministry of Community Development, Youth and Sports, 2007: 45). The elderly, 8.6 per cent of the population, consume nearly 30 per cent of prescription drugs. Part of the cost can be contained by reforms in the practice of medicine such as a greater reliance on generics (already two-thirds of total drugs prescribed), affordable screening, early detection by general practitioners, a greater number of gerontologists (some of them dialectspeakers), better equipment such as heart monitoring devices linked electronically to a medical centre, regular check-ups, higher take-ups, better follow-ups. Expensive hospital stays can be reduced by day-case surgery and outpatient care from a primary doctor. More generally, health education, reasonable exercise and a smokingfree lifestyle can make cost-effective prevention take the place of expensive and unpleasant cure. History itself is on the side of better health. The present cross-section of old people was exposed to the deprivations of the Great Depression, the Japanese occupation and the hard times in the 1940s and 1950s. The next cross-section is likely to be in better shape: ‘Disabilityfree life expectancy is rising faster than life expectancy’ (Mullan, 2000: 188). The stereotype of the old person as sickly, shaky, befuddled and eccentric

Old and ill

33

is being challenged by rising standards that may one day compress sustained ill health into no more than the final three or four years that close the book. However welcome, trends such as these will only slow down the rise. They will not make it go away. Yadav in 1997 found that 20.5 per cent of Singaporeans aged 60–64 were suffering from some form of disability. The figure rose to 64.6 per cent over the age of 85 (Yadav, 2001). Arthritis and cognitive impairment were the most common forms of impediment. Estimating the regression for Singapore, Lim, Ow and Tran calculate that national health expenditure (NHE) is intensely age sensitive: When the proportion of elderly in the population increases by 1 per cent, NHE will increase by more than tenfold in both long-run (16.07 per cent) and shortrun (11.5 per cent). . . . The elderly use more healthcare services than any other demographic group and their utilization of healthcare has increased over time. (Lim et al., 2005: 40)

Functional disability (as measured by the ‘activities of daily life’ such as eating and dressing, which will be discussed in Chapter 7) is on the increase. In 1985, 14.4 per cent of adults aged 75 and older were dependent on others for at least one ADL. In 2004 this had increased to 26.3 per cent. In 1997, 3.4 per cent of adults aged 60 and above required assistance in performing at least one of the self-care tasks. A follow-up study in 2004 found that the figure had risen to 5.0 per cent. The rise in Singapore was in contrast to the experience of the United States and some other Western countries. There the prevalence of latelife functional disability is higher than in Singapore but the trend is down despite the expansion in the cohort (Ng et al., 2006: 26–7). Higher incomes, lengthier education, earlier detection, better treatment have all played their part. More, however, is still needed to reduce the percentage rate of functional disability even as the absolute burden is bound to rise.

3.

The Provident Fund

Singapore’s Central Provident Fund (CPF) is the centrepiece of Singapore’s social economy. It is, second only to the family, the nest-egg that smoothes the passage through old age and dependency. It is the earmarked medical account that makes health care affordable. CPF can be used to buy a home. CPF converts private savings into public investment. CPF insulates a cautious government from the discretionary ratchet of populist tax and spend. This chapter is concerned with the contribution that forced saving makes to the well-being of the old and the ill in a country that has sought to avoid the pitfalls both of American Social Security and of British National Insurance. The chapter is divided into six sections. Section 1 defines the Provident Fund. Section 2 explains the Ordinary and the Special components. Section 3 examines the balance at retirement which, it suggests, might not yet be very large. Section 4 explores the maze of repayments and annuities. Section 5 identifies problem areas which the superannuation system will one day have to address. Section 6 asks the big question: will CPF be sufficient to afford its members a decent minimum in their sunset years?

3.1

THE CENTRAL PROVIDENT FUND

The Central Provident Fund was established by the British in 1955. It was redesigned by the Singaporeans in 1963. The Fund is administered by a statutory board which is under the Ministry of Manpower. Membership is mandatory for all employees earning more than S$600 a year (S$50 a month). Contributions are paid by the employer in the band from S$600 to S$5999. Once income reaches S$6000 a year (S$500 a month) the employee as well as the employer must contribute. There is no unfunded or pay-as-you-go (PAYGO) State pension in Singapore. The exception is the small minority that built up an entitlement under the pre-CPF system. A State pension goes against the ideological principle that one person should not pay for an unknown stranger’s old age. It is believed that it would be a disincentive to work and save. The example of France and other European countries suggests that PAYGO 34

The Provident Fund

35

might not be financially sustainable as the population ages and the cost goes up. Proposals for a national pension plan in Singapore are regularly shelved. Contributions to the CPF are bipartite. For each staff member under 50 the employer currently puts in a monthly sum equal to 14.5 per cent of the employee’s pay up to a salary ceiling of S$4500 (previously S$6000). The employee puts in 20 per cent. Perhaps the contributions are too low. The rates used to be higher: initially only 5 per cent and 5 per cent, they became 6.5 per cent and 6.5 per cent in 1968 and rose steadily after that. By 1984 they had peaked at 25 per cent and 25 per cent. The employer’s contribution has been reduced in crisis years to protect jobs that might otherwise have been relocated to lower-wage economies. In 1986 and again in 1999, it was temporarily reduced to 10 per cent until the economy picked up. Long-horizon pensions were sacrificed in order that short-horizon dismissals and unemployment might be avoided. Workers were priced into jobs and multinationals retained. The employer is not required to make up the superannuation saving that is thereby wiped out. Using CPF as a microeconomic tool that cuts the cost of doing business in Singapore is a shortsighted choice. Supply-side economics would do better to leverage on other costs such as the property tax, public-utility prices or the rentals charged by the Jurong Town Corporation and other public-sector landlords. Public-sector landlords have a very high profile in industrial rentals in Singapore. Contributions for the over-50s are at a reduced rate: 10.5 per cent from the employer, 18 per cent from the worker for those aged 50–55, 7.5 per cent and 12.5 per cent for the 55–60s, 5 per cent and 7.5 per cent for the 60–65s, 5 per cent and 5 per cent for employees aged 65 and above. The rates are shown in Table 3.1. The aim of the age-related employer’s contribution is to protect the less productive against avoidable retrenchment that would cut still further into the resources that would later cushion their retirement years. The simultaneous reduction in the employees’ own CPF contributions increases their take-home pay. It is a supply-side financial incentive that eases the marginal and the slowing-down into work. Yet it has a less desirable side-effect. Lower rates deprive the more mature, some of them already facing pay cuts, of additional savings that they could have accumulated for use later on. The Workfare supplement (discussed in more detail in Chapter 10) tops up the incomes of the lower income earners who take home less than S$1500. A solution must be found to help the at-risk in the deciles just above. Especially vulnerable are those whose CPF had gone into their houses or who have to provide for two generations of dependants.

36

Social policy in an ageing society

Table 3.1

CPF contribution rates

Employee age (years)

Contribution by employer (% of wage)

Contribution by employee (% of wage)

Total contribution (% of wage)

35 & below Above 35–45 Above 45–50 Above 50–55 Above 55–60 Above 60–65 Above 65

14.5 14.5 14.5 10.5 7.5 5.0 5.0

20.0 20.0 20.0 18.0 12.5 7.5 5.0

34.5 34.5 34.5 28.5 20.0 12.5 10.0

Note: The figures relate to employees in the private sector, non-pensionable civil servants, employees of statutory boards, and Permanent Resident employees from the third year of PR status onwards. Source:

CPF, www.cpf.gov.sg.

Table 3.2 shows the destination of the funds. CPF is made up of three accounts: Ordinary, Special and Medisave. Contributions to Medisave go up with age. The other two ratios go down. Figure 3.1 graphs the behaviour of the three accounts. Contributions to the Special Account cease at age 55. Contributions to the Ordinary Account tail off until they are only 1 per cent at age 65. Contributions to the Medisave Account trace a plateau of 9 per cent from age 60. The State does not match the private payments. Both the colonial Government and later (after 1959) the People’s Action Party rejected the idea of an Exchequer top-up on the UK model. There is, however, tax relief. CPF contributions may be set against income and company tax. The same exemption extends to additional contributions made voluntarily by the account holder to ensure that he/she has the maximum balance by the retirement age. Also exempt are interest on the balances, dividends and capital gains on assets sheltered under the CPF, withdrawals for approved purposes such as housing and, at the end, the liquidation of the account at age 55 or 62. Taxpayers in the higher bands derive disproportionate benefit from the fiscal subsidy. For them at least, a threshold of the historic S$6000 and not the current S$4500 would be preferable since it would reduce their liability. The seven-tenths of taxpayers who do not come into the income tax net do not enjoy the tax subsidy at all. In the 2006–07 fiscal year the value of tax forgone on the employees’ contributions to CPF amounted to S$5.7 billion. Tax relief on the employers’ contributions inflated the figure still

The Provident Fund

Table 3.2

37

Share of CPF credited into each account

Employee age (years)

Ordinary Account (percentage of contribution)

Special Account (percentage of contribution)

Medisave Account (percentage of contribution)

35 & below

0.6667 (23.0)

0.1449 (5.0)

0.1884 (6.5)

Above 35–45

0.6088 (21.0)

0.1739 (6.0)

0.2173 (7.5)

Above 45–50

0.5509 (19.0)

0.2028 (7.0)

0.2463 (8.5)

Above 50–55

0.4562 (13.0)

0.2456 (7.0)

0.2982 (8.5)

Above 55–60

0.575 (11.5)

0 (0.0)

0.425 (8.5)

Above 60–65

0.28 (3.5)

0 (0.0)

0.72 (9.0)

Above 65

0.1 (1.0)

0 (0.0)

0.9 (9.0)

Note: The first line in each cell is the proportion of the contribution held in the account. It adds up to 1. The figure in parentheses is the share of the contributor’s income (up to S$4500). It adds up to the percentage shown in Table 3.1: in the case of the first cell, 34.5 per cent. Source:

CPF, www.cpf.gov.sg.

further. It is a large sum of money. Tax relief for dependent children in the same year was only S$1.6 billion (Inland Revenue Authority, 2007: 111). It should be remembered, however, that the interest paid on CPF savings is relatively low. Gain-maximising investors would have to shift their CPF money into an approved investment such as unit trusts to make their taxsheltered assets genuinely competitive. Occasional supplementation from the Government’s overall budget surplus only proves the rule. While some discretion is shown in favour of the most in-need, the subsidy granted is in fact very small. Early retirement or later retirement, self-reliance is the norm. Old people simply take out, plus interest, what they and their employer have already put in. The contributions plus the interest are tax free. That is the bulk of the fiscal welfare. The personal-account, defined-contribution system shelters social security from the rise in dependency. There is no pooling, no sharing, no crosssubsidisation and no redistribution. There is no crediting-in of payments

Social policy in an ageing society

Percentage of income

38 % 25.0

OA

20.0

SA MA

15.0 10.0 5.0 0.0

OA

35 and below

above 35– above 45– above 50– above 55– above 60– above 65 45 50 55 60 65

SA

23.0 5.0

21.0 6.0

19.0 7.0

MA

6.5

7.5

8.5

13.0 7.0

11.5 0.0

3.5 0.0

1.0 0.0

8.5

8.5

9.0

9.0

Age of employee

Source:

CPF, www.cpf.gov.sg.

Figure 3.1

Contributions by age, income and account (%)

for university students or the unemployed. Retirement balances are sealed off from the electoral cycle and the vote motive. Save-as-you-earn, CPF does not presuppose that pension plans should be augmented out of tax revenues or that there should be an intergenerational promise. For that reason, there is no looming exhaustion of reserves and no pension-driven pressure for a budget deficit. There is no imminent threat that payouts will have to be pruned back because current and future generations will not tolerate the higher tax rates of PAYGO in an ageing society where the worker-to-pensioner ratio is decreasing. Japan is at greater risk. State pensions (introduced in 1961, made universal in 1981) rose from 0.65 per cent of GDP in 1970 to 8.20 per cent in 2003. Medical benefits paid through the social security programme went up from 2.79 per cent to 6.52 per cent of the GDP over the same period. Both changes reflect the ageing population (Ogawa et al., 2007: 196). Contributions (jointly paid as in Singapore by employee and employer) have risen at a slower rate. The result is that the Government is having to subsidise the PAYGO pool. Even the rise in the pensionable age from 60 to 65 in 2013 will not eliminate the burden on the taxpayers. The replacement ratio in Japan is 59.1 per cent of average male earnings. Less than Italy (88 per cent) and below the OECD average (68.7 per cent), more than the USA (52 per cent) or the UK (48 per cent), it represents a sizeable commitment to older people at a time when younger people are becoming hard to find. In the USA the ratio of current contributors to pensioners in 1950 was

The Provident Fund

39

16:1. By 2030 it may be as low as 2:1 (Mullan, 2000: 163). Cash flow will be inadequate. The system, financed by transfer payments from the young to the old, may become fiscally unsustainable. The Singapore system is built on firmer ground. It is all a matter of personal responsibility. CPF balances are accumulated in the working years and run down in old age. Transfers within the kin-group are common in Singapore. Transfers via the welfare State are less common. Because of CPF, undignified complaints are few that a different generation of faces in the crowd is being unfair to today’s old people by denying them support. CPF is national: there is no job-lock, no impediment to portability, no duplication of facilities, no divisive heterogeneity. CPF is sealed: save in cases of permanent disability or irrevocable emigration, there is no premature withdrawal, even for prolonged illness or long-term unemployment. CPF is safe: the surplus is held in special Government securities which guarantee the same rate of return to the Board that the Board has guaranteed to its members. CPF is mandatory: self-reliance by decree, it is an embodiment of the fear that too little gratification would be deferred if hypothecated savings were not made compulsory. CPF is also public sector rather than private. Superannuation funds are held by the Board and invested by the Board. Nationalisation in all countries is a topic of conversation. It is always a focus for debate.

3.2

THE ORDINARY AND THE SPECIAL ACCOUNT

CPF balances are divided into three accounts. Two are for retirement: the Ordinary and the Special Accounts. The third is Medisave. Medisave will be discussed in Chapter 5 on the payment for medical care. 3.2.1

The Superannuation Accounts

The Ordinary Account (holding approximately two-thirds of the contributions) is a home for long-term savings. The money can be released at age 55 to members who have met and will retain the CPF Minimum Sum (complemented as required by the Medisave Minimum Sum). The CPF Minimum Sum forms the basis for the Retirement Account that is opened at age 55. The money cannot be touched until age 62. Only account holders with CPF balances of less than S$5000 are excused the Minimum Sum. Members with balances of S$5000 and above are allowed to withdraw the first S$5000 but must retain the balance above S$5000 towards their Minimum Sum. Members who have set aside the Minimum Sum may withdraw the remainder of their CPF savings once they turn 55.

40

Social policy in an ageing society

CPF is not intended to solve all the problems of the lowest-income groups. The genuinely deprived will need to rely on relatives and social safety nets. As with the very poor, so with the very rich. CPF was not designed with the top quintile of income earners in mind. It was assumed that the top 20 per cent, while expected to put in CPF on their income tranches of up to S$4500, would assume responsibility for their supplementary financial planning. Pre-retirement, savings in the Ordinary Account can be used for approved investments. The first S$20,000 must be left in the Account. Above that threshold the remaining funds can be diversified into named assets under the terms of the CPF Investment Scheme (CPFIS). Approved assets include fixed deposits, unit trusts, annuities, Singapore Government bonds and bills, bonds issued by Singapore statutory boards and investment-linked insurance products. No more than 35 per cent of the balances can be invested in shares, property funds (REITS) and corporate bonds. Only 10 per cent can be invested in gold. About S$42 billion in 2007 was eligible for investment through the CPFIS (Ng, 2007c). Realised gains must remain in the CPF. The Ordinary Account can also be used for one’s own or one’s children’s full-time Singapore-based tertiary education. Beneficiaries are required to restore the withdrawals to the Ordinary Account no more than one year after their children have graduated. Disproportionately, the balances in the Ordinary Account are used for house purchase (Asher, 2002; Reisman, 2007a). Between October and December 2007, about 65 per cent of CPF contributions were withdrawn. Of that money, about 37 per cent was used to service mortgages (www. cpf.gov.sg). A further 24 per cent was put into investment through CPFIS. Only a small percentage of total CPF withdrawals – 28 per cent in all, perhaps as little as 14 per cent in the case of the Ordinary Account – were actually made to fund retirement. Desirable as housing and investment may well be, old age is barren if the annuity is thin. There is a strong argument for returning the Central Provident Fund to its original purpose. It should not be expected to do too many jobs at once. Especially is this so since the ratio of withdrawals to contributions is already rising steadily over time. The upward trend is shown in Figure 3.2. The rise can only accelerate as more and more older Singaporeans withdraw their balances in old age while fewer and fewer younger Singaporeans put new money in. A property-owning democracy gives its citizens a stake in their nation. It also leaves them asset rich but cash poor. They are vulnerable to the property-price cycle when their golden years lose their sheen. Chia and Tsui, building on the fact that 80 per cent of total CPF balances have been withdrawn to finance home mortgages, write as follows about the open door:

41

1.2 1

0.8 0.6

0.4 0.2 0

19 5 19 5 5 19 7 5 19 9 6 19 1 6 19 3 6 19 5 6 19 7 6 19 9 7 19 1 7 19 3 7 19 5 7 19 7 7 19 9 8 19 1 8 19 3 8 19 5 8 19 7 8 19 9 9 19 1 9 19 3 9 19 5 9 19 7 9 20 9 0 20 1 0 20 3 0 20 5 07

CPF withdrawals-to-contributions ratio

The Provident Fund

Source: CPF, www.cpf.gov.sg.

Figure 3.2 Ratio of CPF withdrawals to contributions As funds in the CPF accounts can be withdrawn even before one retires, the CPF scheme is not merely a saving vehicle for old age security and maintenance. Indeed, this unique feature of pre-retirement withdrawal has transformed the CPF scheme into an alternative scheme for individuals to enhance asset holdings and for the government to finance merit goods and to fine-tune the economy. (Chia and Tsui, 2003: 45, 46)

Ramesh is even more to the point: ‘It is possible to make a case that income-maintenance function is peripheral to CPF’ (Ramesh, 2004: 73). The Ordinary Account (holding 67 per cent of the three-account CPF) is the first of the two superannuation accounts. The Special Account (holding 14.5 per cent of the total) is the second. It was created in 1977 in order to ensure that not too much of CPF would prematurely drain away. This account, earmarked for retirement, cannot be touched until age 62. The drawdown age will go up gradually to reach age 65 in 2018. The longer the savings are invested in CPF, the longer they earn interest and the larger they become. Because the Special Account is so illiquid, interest is paid at a higher rate. Even so, since 2001 it has been possible to invest even Special Account balances in safe assets outside the fund. These include fixed deposits, Singapore Government bonds, unit trusts and insurance products. 3.2.2

The Rate of Interest

Interest paid on the Ordinary Account was 2.5 per cent before 2007. As with other CPF rates it was pegged to the prime rates of the three large local banks. It is still 2.5 per cent for Ordinary Account balances in excess of S$20,000. On

42

Social policy in an ageing society

the first S$20,000 it is now 3.5 per cent. An extra 1 per cent is being added. This additional 1 per cent is intended to be a permanent supplement. As for the Special Account, the balances in the past have attracted interest at 4 per cent. In 2008, the rates on balances held in the Special, Medisave and Retirement Accounts (SMRAs) were re-pegged to the yield on 10-year Singapore Government bonds (10YSGS) plus a permanent add-on of 1 per cent. The return will be subject to volatility but it could exceed the historic 4 per cent. Or it could fall short. In 2008 it would have been approximately 3.77 per cent (including the extra 1 per cent). The historic rate of 4 per cent will serve as an interest-rate floor only until the end of 2009. Given the 4 per cent floor and the 1 per cent top-up, the return until then will be 5 per cent. From 2010 there will be a binding minimum of 2.5 per cent. Singaporeans are anxious about a floating rate. They fear they may earn less than under the old system. Many would prefer a fixed to an unknowable return. As a floor of 2.5 per cent is being retained for the Ordinary Account, it would be consistent to retain a floor of 4 per cent on the Special Account as well. The yield for a 10-year Singapore Government bond since 1998 has soared to 5.69 but also sunk to 1.79. The average has been 3.5 per cent. Low returns do little for a comfortable retirement. The movement in the yield is shown in Figure 3.3. Returns are on a downward trend. That being the case, younger CPF members would be well advised to transfer their money from the Ordinary to the Special Account in order to earn more in interest. Government bonds with 30 years to maturity would produce an even higher rate of return as well as matching assets more closely to liabilities. Members’ SMRA money remains in their accounts for an average of 30 years. Thirtyyear bonds are issued in Japan, the USA and other countries. They are not, however, issued in Singapore. Even the market for 20-year bonds is so thin as to make trading difficult. These bonds were not available in Singapore before 2007. The rate of return on 20-year bonds was 3.27 per cent in 2007 and 3.30 per cent in 2008. The additional 1 per cent cuts off when the sum of the various CPF balances reaches S$60,000. This means that all balances up to S$60,000 will attract interest of at least 3.5 per cent. The threshold is rather low. Since the Minimum Sum is intended to cover only the indispensable necessities, it would have been sensible for the cut-off to be pegged to the Minimum Sum (S$106,000 in 2008) instead of an arbitrary S$60,000 that was plucked out of the air. Being realistic, however, about 70 per cent of all CPF members (but only 55 per cent of active members) have less than S$60,000 in their accounts. The recurrent cost to the Government of the extra 1 per cent will be at least S$700 million a year. This is a considerable commitment, equal to

The Provident Fund

43

6

10-year bond yield (%)

5

4

3

2

1

0 1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Source: Monetary Authority of Singapore (MAS) – Singapore Government Securities (SGS), https://secure.sgs.gov.sg/apps/goto/?app=prices.

Figure 3.3

Average rate of return on Government bonds

the Government’s annual grant to the Housing Development Board (Ng, 2007c). That in itself is a departure from the principle that CPF does not normally tax one group in order to subsidise another. It is a breach with the convention that top-ups are not across the board but targeted on the most deprived. A transfer of this magnitude may not be sustainable if there is market turmoil or a downturn in the economy. It is to be hoped that the rates will not be made subject to swingeing cuts in bad years when the budget surplus goes into the red. There is a precedent. Employers’ contributions were reduced in the recessions of 1986 and 1999 in order to inject a short-run stimulus into the economy. Is the CPF rate of return any more secure? 3.2.3

Sovereign Funds and Reserves

The new rate of 3.5 per cent is higher than the old rate of 2.5 per cent. Yet the return on Government investments is higher still. The State-owned investment company, Temasek Holdings, has averaged annual returns of 18 per cent since it was created in 1974. The Government of Singapore Investment Corporation (GIC) has secured an average annual return of 7.8 per cent in US dollars (5.8 per cent in Singapore dollars) since it was created in 1981. Some account holders in CPF would like to have their share of the success.

44

Social policy in an ageing society

Temasek and the GIC are sovereign wealth funds. At least 28 countries now have such funds. The oldest is the Kuwait Investment Authority, set up in 1953. The largest is the Abu Dhabi Investment Authority, started in 1976. Two thirds of the SWFs are funded from oil or commodity revenues. Others derive their revenues from the privatisation of Government assets, a fiscal surplus or a balance of trade surplus. SWFs are used to manage the nation’s reserves, including its foreign assets held abroad. Some SWFs are studiously non-political: the Singapore SWFs invest with a view to commercial return alone. Other SWFs are feared to be an arm of their State: rightly or wrongly, they are seen as a threat to national security. Save for Australia, Hong Kong, Norway and New Zealand, such public-sector investment funds are not normally transparent about their portfolios. One reason is the fear that disclosure will be an invitation to mimics and speculators: their rational expectations will enable them to preempt the fund’s potential gains. A second reason is that a State fund (as opposed to a shareholder-dominated trust) has the luxury of buying low-cost, low-return assets in the expectation that two or even three decades down the road they will finally grow their blossoms and fruit. Another reason is that the domestic electorate will be disappointed if shortrun gains go down. It will, just as bad, be bullish about spending rather than ploughing back if short-run gains go up. Politicians tend to assume that they know better what the nation can afford. Worldwide assets of the sovereign funds, worth about US$2 trillion to US$3 trillion in 2007, are expected by the International Monetary Fund to reach US$7 trillion to US$10 trillion by 2012. For purposes of comparison, the gross domestic product (GDP) of the United States in 2007 was US$12 trillion. Temasek and GIC already hold combined reserves of at least US$258 billion. There is a great deal that can be done with US$258 billion. Some suggest that a part of the 18 per cent, of the 7.8 per cent, should be used to supplement the superannuation fund. Interest of 8 per cent or even 10 per cent could then be paid into CPF accounts. Instead the public-sector savings are being salted away in the ever-accumulating reserves of the GIC, Temasek Holdings and the central bank, the Monetary Authority of Singapore. Much depends on the view that is taken of the underlying need for a reserve. Some argue that the obsession with huge buffers deprives presentday Singaporeans of social services and generous pensions. They say that a Midas-like assumption that the means are identical to the end is a manifestation of a Freudian retentive personality that cannot let go. Others argue that Singapore is a small, open economy which has experienced bad times in the past and may in the future have to cope with unforeseeable vicissitudes. No one can predict what disruption might be caused by wars, floods, earthquakes, protracted recessions, banking crises and outmigration. Minimax

The Provident Fund

45

and risk-avoidance dictate that a nation like a household ought to save for a rainy day. In the macroeconomic downturn of 2009 the Government was given special permission to tap S$4.9 billion from the reserves to unfreeze lending and protect employment. It would not have been able to do this if it had not built up a war chest just in case. CPF is a self-financing, self-sustaining system. It is built around the axial principle of individual responsibility. Public finance only very exceptionally supplements the return or shifts the incidence. Drawing down the Government’s reserves would violate the code. It would also violate the law. The Government does not have the right to spend more than half of the Net Investment Income (the NNI) that it earns. The rest must be locked away in store. The elderly will increasingly put a strain on health care. New programmes will be required to tackle the widening income gap. The NNI will have to be redefined to encompass not just interest and dividend income but also capital gains (unrealised as well as realised) and expected returns (averaged on a rolling basis over a 20 year investment horizon). Such a redefinition could add as much as S$10 billion annually to the Budget. The sum would represent about one fifth of public revenues. NNI, evolving into Net Investment Returns (NIR), will become more liberal – but the withdrawal limit of 50 per cent is not about to be relaxed. It is encoded in a constitutional amendment of 2007 that can only be suspended in a national emergency. It is true by definition that Temasek-type and GIC-type returns would contribute to ageing Singaporeans’ much-needed wherewithal. The criticism is sometimes made that the Government should be paying more than 1 per cent above the bond rate for the use of money which it is de facto investing for an even higher return. Ong Kian Min, speaking in Parliament, was not speaking for himself alone when he expressed the view that paternalism through a forced loan is costing the account holders money that is rightfully their own: The CPF Board can only lend our CPF money to the Government by purchasing bonds issued by the Government, and it is paid the interest. The Government then invests this money borrowed from CPF. When it makes gains on the investments, it decides on the most prudent use of the surpluses. . . . I cannot understand how the Government can say it will not be responsible for providing for my retirement but I must lend the Government my retirement savings for investments and any gains earned on my money is not my money. It is not the Government’s as well, but it is up to the Government to decide how best to use it because the Government knows best. . . . What I am basically asking is whether the Government would share a portion of the returns it makes with the individual CPF members from whose money the Government has invested and made money? (Ong, 2007)

46

Social policy in an ageing society

The Government decides on the fund managers and the investments. The Government decides on the distribution of the surplus that comes in. What Ong is suggesting is that the Government should more directly involve the account holders in the decisions and the rewards. At 4 per cent S$5000 grows into S$24,000 over 40 years. At 10 per cent it will become S$226,000, almost 10 times as much. More money is preferable to less money when one has three further decades to support. Ong therefore reaches the following conclusion: ‘We cannot afford not to give investment returns a try. Investment returns are a crucial, but missing, weapon in our armament to combat our ageing population’ (ibid.). Critics maintain that fixed interest paid for CPF is a cheap source of public finance. In poor countries this is often the case. Where the median member is young and the tax base is inadequate, there is a strong temptation to plunge superannuation balances into the infrastructure of roads and schools. Singapore, however, is no longer a poor country. It can draw upon a large pool of capital. It can borrow if need be on its A1 credit rating. While the CPF rate is lower than the average return on the investments that it makes, the fact is that the Government has other ways of raising revenue which are cheaper still. As for the account holder, it should not be forgotten that CPF balances are secure investments. They are ring-fenced from stock market volatility, not subject to in-period transaction costs, exempt from charges, free from the bid–offer spread. Pensioners do not want to outlive their funds. Nor, however, do they want their funds to be mismanaged through irresponsible speculation that leaves them with little or nothing at the end. Returns in the commercial sector can go down as well as up. Principal as well as interest can be put at risk by cutthroat corporations that venture into junk paper or non-performing collateral in order to expand their market share. The returns on CPF balances are not in any case out of line with other instruments that satisfy a comparable risk appetite. Some Singaporeans have complained that the floating Special rate, pegged at 1 per cent above the floating bond rate, makes them feel uncertain about their future. They would feel more uncertain still if the rate of return were to be pegged to office blocks in Seoul or hotels in Shanghai. Singaporeans, moreover, who want higher returns do not need to turn to Temasek or GIC for expertise in asset management. So long as they retain S$20,000 in their Ordinary Account and S$60,000 in total, they have the freedom to invest outside through the CPFIS. Even the foundation $20,000 can be used for house purchase. Experienced investors already have the freedom to seek superscale returns from professional advisers, diversified portfolios and unit trusts. High-net-worth investors regularly exercise that option. Some of their retirement planning takes the form of loans via

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CPF bonds to the State. Some of it goes into equities or gold. As with so much in Singapore, the existing system is a compromise between authority and exchange. Investors have choices. The choices are, however, situated within tramlines that are decided upon at the top. 3.2.4

A More Flexible Portfolio

Not every economist sees the need for the tramlines. CPF balances belong to the members. The liberal market and the capitalist respect for property rights both suggest to such economists that the account holders must be deemed the best judge of how to manage their wealth. Why should shares be artificially capped at 35 per cent of investible balances when there is no limit to CPFIS investment in unit trusts? Why should high-net-worth members in their 40s or early 50s still be required to pay monthly when they have already set aside their full Minimum Sum? There is another point as well. While CPF balances may be free from the risks of illiquidity, default or currency fluctuations, they are exposed to other risks. Investors are not compensated for changes in Government policy. Floating bond rates do not lend themselves to precise predictions. Laws can change. Governments can change. A great deal can happen in the world in 30 years. Compulsion itself makes investors feel uneasy. There is no escape and no arbitrage. Most important of all, there is a school of thought which questions whether CPF investments really squeeze all the juice they can from the account holder’s lemon. What ifs are notoriously untrustworthy. It is tempting nonetheless to invent lucrative scenarios that would leave the CPF managers far behind. A sum of S$60,000 invested in CPF at the new rates will be worth S$92,000 at the end of 10 years. At 7 per cent the same S$60,000 would grow into S$118,000. Over 20 years the figures would be S$138,300 and S$232,100, respectively. The extra sum of S$26,000 or S$93,800 would make a real difference to living standards in old age. The question must be whether members can reasonably expect such a gain to be delivered with a tolerable degree of risk. A real-world case will at least show what can be done. In California, the California Public Employees’ Retirement System (CalPERS) in 2007 managed a portfolio of S$240 billion on behalf of its 1.5 million members. The return on its investments (shown in Figure 3.4) was 11.8 per cent over one year, 13.8 per cent on average over three years and 9 per cent on average over 10 years. Interestingly, it was able to perform strongly despite the fact that it was relatively unadventurous (Microsoft, General Electric, Bank of America shares, United States Treasury bonds) in the assets that it held. Just over 61 per cent of its portfolio was in quoted equities, 25 per

48

Social policy in an ageing society 30

Percentage rate of return

25 20 15 10 5 0 1980 –5

1985

1990

1995

2000

2005

2010

–10 –15

Source:

Calpers

CPF

CalPERS (2006).

Figure 3.4

Comparisons of percentage returns

cent in bonds and only 7 per cent in property (California Public Employees’ Retirement System, 2006: 76, 78). If other group investments can perform well, a loose inference might be that CPF should have more freedom to take risks in the interests of its members’ well-funded retirement. Some say it should be allowed to invest directly in Temasek and GIC. Some say that it should at the very least employ top-class analysts in order to secure a competitive return. A competitive return is, as it happens, rather like the weather. Sometimes it is sunny and sometimes it snows. Generalisation is forever the prisoner of ifs, buts, wheres and whens. Between 1993 and 2004, 75 per cent of CPFIS investors earned less than the 2.5 per cent interest they would have received from the Board. Some investors actually made losses. Between 1997 and 2007, however, out of 156 CPF-approved unit trusts with a five-year history inside the CPFIS, 128 grew by more than 5 per cent per annum over the decade in question. The truth would appear to be selective. To vary the period is to vary the return. Yet there are grounds nonetheless for being hopeful. As Tan writes: ‘Historical records have shown that the market return of equities and bonds over a long period of time have been much higher than short-term interest rates. It should be able to earn an average rate of return of more than 6 per cent per annum’ (L.Tan, 2007: 21). The Hang Seng Index in

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Hong Kong rose by 105 per cent between 2002 and 2007 (43 per cent between 1997 and 2007). The Straits Times Index (STI) in Singapore rose by 129 per cent over the five-year period, 85 per cent over the last decade. The Dow Jones Industrial Average (DJI) since 1997 has risen by 9 per cent a year. And then there are Temasek and the GIC: 18 per cent and 7.8 per cent are a strong advertisement for taking risks. Figure 3.5 summarises the position. It shows that investors, if they do their homework and have the God of Fortune on their side, stand a reasonable chance of decent returns outside the CPF. Assets that consistently perform well are likely to bounce back in time. Short-run fluctuations are more likely to correct themselves where the time-horizon is long. Retirement balances are long-term investments. A young person of 15 will not retire for 50 years. The roller-coaster ride will not necessarily spoil the trend. Much depends on the moment of entry and exit. While theory teaches that the prudent investor will buy at the trough and sell at the peak, it is also possible that even the most astute and sensible will reach the age of dependency just at the time when the market is depressed and flat. The average value of shares crashed in the Asian financial crisis of 1997–98. The Straits Times Index was 2216 in 1997 but 1259 in 1998. Bulls who invested just before the collapse and cashed out just after the fall would have gone into the red. Bottom-fishers whose investment strategy was the reverse would have made an attractive profit. Timing is vital. In 2000 the S$ 600,000 Hang Seng, $500,639

500,000 400,000

DJI, $386,730

300,000 STI, $206,329 CPF, $132,729.3

200,000 100,000 0 1985

1990

1995

Hang Seng

Source:

www.finance.yahoo.com.

Figure 3.5

Returns on S$60,000

2000 DJI

STI

2005 CPF

2010

50

Social policy in an ageing society

Straits Times Index stood at 2230. In October 2007 it was 3763. In January 2009 it was 1733. Many people are too busy to get the timing right. CPF may pay them less but at least it spares them the wear and tear. Many people, moreover, do not find usufructs and derivatives an especially gripping topic. It is often said, and not just in Singapore, that punters put more effort into planning a holiday than they do into planning their retirement. Furthermore, remunerative placement is complicated. Not all Singaporeans have the financial sophistication to understand the charges or to diversity a portfolio. They do not set themselves clearly defined targets. They do not see why investors sell to cut their losses when the market is going down. They do not grasp that CPF interest is locked in forever while a collapse in stocks and shares can swallow up their capital. They do not know that the trade-off between bonds and equities is influenced by inflation and cycles. Overwhelmed by the variety and the choice, it may be that all but the best-educated investors should not venture into CPFIS or beyond. Lacking financial literacy, there is a danger that their retirement funds if not left with the CPF will evaporate into myopia and miscalculation. A different point of view, however, would be that Singaporeans are better educated than they were in 1963, and that an important part of their schooling must now involve money management. Dependent people need trustworthy shepherds. Independent people can think things out for themselves. Different people have different levels of risk tolerance, different views on the retirement age, different ideas about the monthly income they would like to enjoy. A mixed system, opt-out as well as opt-in, would do something to satisfy the different tastes and preferences of people in a heterogeneous and increasingly individualistic culture.

3.3

THE MINIMUM SUM

At retirement, CPF members are expected to have saved a Minimum Sum. The pension-pot is held in their Retirement Account. The prescribed sum was S$80,000 in 2003, S$106,000 in 2008. It will rise to S$120,000 in 2003 dollars by 2013. The actual amount will be S$134,000 on the assumption, not necessarily a realistic one, that inflation will be just over 1 per cent. No more than half the Minimum Sum can take the form of a pledged property. If the property is sold, the amount pledged must be returned (together with interest at 2.5 per cent) to the Retirement Account. Even if the property has not been pledged, house sellers over 55 who have drawn upon their CPF

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funds to pay for their homes must use the revenues to cover the shortfall in their Minimum Sum. In that way a property downgrade, like the winding up of a CPFIS portfolio, will help to fund a better-paying annuity. 3.3.1

The Median Balance

Reality lets the planners down. Of the active Singaporeans who turned 55 in 2005, only about 40 per cent had set aside the 2005 Minimum Sum (then S$90,000) (Ng, 2006). The figure would have been 60 per cent had Singaporeans not been entitled to withdraw half their CPF balance when they turned 55. From 2009 that 50 per cent will be progressively phased out. Members who cannot meet the Minimum Sum will be allowed to withdraw only S$5000. Figure 3.6 shows the percentage of active members who met the Minimum Sum at age 55 between 1996 and 2006. The proportion falls continuously from 58 per cent at the beginning to 36 per cent at the end. The proportions must be interpreted with caution since the Minimum Sum itself more than doubled in the same period. It was (the amounts are indicated in parentheses) S$45,000 at the beginning and S$94,600 at the end. Figure 3.7 is reassuring and positive. It shows that the median CPF balance for three older cohorts – 50–54, 55–59 and 60+ – has risen continuously. In 1981 the three figures were S$4250, S$1250 and S$1250, % 70.0 60.0

58.0% 55.0% 55.0% 52.0%

48.5%

50.0

45.5%

43.0%

40.0

39.0% 38.0% 38.0% 36.0%

30.0 20.0 10.0 0.0 1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

($45,000) ($50,000) ($55,000) ($60,000) ($65,000) ($70,000) ($75,000) ($80,000) ($84,500) ($90,000) ($94,600)

Source:

CPF, www.cpf.gov.sg.

Figure 3.6

Percentage of active members who met the Minimum Sum at age 55, 1996–2006

52

Social policy in an ageing society 160,000

50–54

CPF balance (S$)

140,000

55–59

120,000 100,000 80,000 60,000

60 & above

40,000 20,000 0 1975

1980

1985

1990

1995

2000

2005

2010

Year 50–54

55–59

60 & above

Source: Central Provident Fund Board (selected years).

Figure 3.7 Trends in median CPF balances, 1981–2006

respectively. By 2006 the balances had grown to S$150,000, S$125,000 and S$45,000. The average sum at retirement in 2005 was S$55,000. This is an improvement on earlier years. Only 24 per cent of the over-55s in 1998 held S$16,000 or more (Ministry of Community Development, 1999). Even so, it still falls far short of the Minimum Sum. The difference between the average and the median is a reminder of the dispersion. One reason for the range of values is that amounts held are lump sums but contributions made are percentages of income. Incomes in Singapore are not all the same. Average sums that are not age adjusted do not mean a great deal. No one would expect a 25-year-old to have much in his/her account. It is probable nonetheless that half of Singaporeans in work in 2007 had less than S$45,000 in CPF. The President of the Society of Financial Service Professionals in Singapore is even more pessimistic. He calculates that 75 per cent of members had less than S$20,000 (G. Ng, 2008: H20). The CPF Board estimates that only half the active members who turn 55 in 2013 will have achieved the Minimum Sum and the Medisave Minimum Sum. Research reported in 2006 established that 50.9 per cent of adults aged 65 and above held less than S$5000 in their CPF accounts at age 55 (Teo et al., 2006: 60). Among those in the 50 to 55 age-group in 2006, two out of three had CPF balances of less than S$100,000. The average balance for active members in this age-group in 2006 was S$65,800. Much of the Minimum Sum took the form of a pledged property rather than cash. Lower-income earners had sunk more than they could afford into house

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purchase. The middle classes had yielded to the same temptation. That left their Ordinary Account depleted and threadbare. The past had nothing and the present does not have enough. The future, however, will be a better-stocked cupboard. Retirement funding will be approaching its target by the time that today’s young people are ready to cash out. Under the current regulations, the Minister for Manpower has predicted, ‘84 per cent of new entrants to the workforce would have enough to meet the Minimum Sum for retirement, even for low wage workers and even after buying their first home’ (Ng, 2007b). Figures 3.8, 3.9 and 3.10 suggest that the Minister may have been right to put his faith in the rising trend.

CPF balance (S$)

80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 1975

1980

1985

1990

1995

2000

2005

2010

Year Male (50–54)

Figure 3.8

Female (50–54)

Trends in average CPF holdings (50–54-year-olds)

CPF balance (S$)

70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 1975

1980

1985

1990

1995

2000

2005

Year

Male (55–60)

Female (55–60)

Figure 3.9 Trends in average CPF holdings (55–60-year-olds)

2010

54

Social policy in an ageing society

CPF balance (S$)

25,000 20,000 15,000 10,000 5,000 0 1975

1980

1985

1990

1995

2000

2005

2010

Year Male (>60)

Source:

Central Provident Fund Board (selected years, Appendix G, H).

Figure 3.10 3.3.2

Female (>60)

Trends in average CPF holdings (60-plus age-group)

Singaporeans without CPF

Not all active members have adequate balances. Not all Singaporeans, moreover, are active members. As of December 2007, 1.54 million out of 3.16 members of the CPF scheme were active members. About 48 per cent were active and 52 per cent were inactive. An active member is one who is currently making contributions. Employees at the margins often have to do without CPF. The forgotten groups include part-timers, odd-job occasionals, casual and contract workers. Employees who earn less than S$500 a month are not required to join. Most of them cannot afford to do so. It is the employers as well as the workers who may be responsible for the gaps. Employers are required to pay CPF contributions (at a reduced rate) for each worker who earns at least S$50 a month. They are obliged to pay the full 14.5 per cent when the monthly wage reaches S$1500. That is the law. The law, however, can be evaded. Many firms fail to pay their CPF in order to underbid their competitors. Many of the cash-in-hand and the daily-paid are too afraid of being terminated to complain. Many of the low-paid genuinely prefer to have the cash. Many are so anxious about this week’s food that they cannot devote much thought to an annuity that will look after them when they are too old to earn. The self-employed, like the marginal, tend to be under-represented in the CPF. Between 1984 and 1992 they were a grey area. Although not obliged to join any part of CPF, they did have the chance to subscribe to

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the third of the three components. They were allowed to pay voluntary contributions (both the employee’s and the employer’s share) to buy themselves into Medisave. Since 1992 both of the Medisave payments (but not the two other CPF commitments) have been compulsory for the self-employed. Only currently included are those with annual earnings of at least S$6000. As many as 145,000 persons have simply ignored the law. Some of the self-employed have failed to pay because of financial pressures. Ownerentrepreneurs going bankrupt have other claims on their budget. Some have not paid because they have bought private medical insurance. They see no reason why they should have to pay twice. Some have not joined because they do not want to be told what to do. They say that Singaporeans should decide for themselves if they require healthcare cover or not. Whatever the reason, Medisave arrears among the self-employed now stand at S$413 million. Taxidrivers are not allowed to renew their yearly licences until they have settled their debt. Other groups such as lawyers find it easier to let the liability run on. Unpaid Medisave does nothing for the credibility of the system. In spite of that there are those who argue that all three parts of CPF should be made mandatory for all of the self-employed. People who do not work do not earn CPF. The unemployed and the unemployable are left out. So are an unacceptably large number of women. Male CPF membership is 1.14 times the female CPF membership in the pre-retirement cohort aged 50 to 54. The average CPF balance in that early-50s age group was 1.69 times higher for men than for women at the time of the 2000 Census. The figures were S$66,123 and S$39,211, respectively. The disparity had narrowed by 2006. Then the ratio stood at 1.35:1. The absolute amounts were S$75,057 for the men, S$55,278 for the women (Central Provident Board, 2007). For the over-60s, the 1.69 in the Census year rose to 2.20. Inequality between the genders increases with age (AWARE/Tsao Foundation, 2005). The disparity reflects the lower participation rate: 44.5 per cent of working-age women, as opposed to 18.9 per cent of working-age men, were not in the labour force in the Census year of 2000. The Labour Force Survey in 2007 found the figure to be almost the same: 54 per cent in, 46 per cent out. In the USA, Australia and Hong Kong the equivalent participation rate is about 60 per cent. As many as one-third of middleaged women in Singapore are believed never to have had a job outside the home. The disparity also reflects the fact that women earn on average 73 per cent of male average pay: S$3148 per month in 2007, as opposed to S$4335 for the men. The lower figure may indicate that more women are working

56

Social policy in an ageing society

part-time, that they have had less formal education, or that there is a glass ceiling which blocks the promotions. The rational explanation in all three cases might be that women are more likely to drop out to care for children and the elderly. In 2005 in Singapore there were 545,261 economically inactive women aged 15 and above who were expressing no interest in a job (Department of Statistics, 2006b: Table 88). Some had turned down shift duty at night or work at a distance from their home in order to protect their homemaker role. Some would have accepted jobs if near-free childcare and studentcare facilities had been provided. Some had been forbidden to seek outside work by a traditional husband who said nan zhu wai, nu zhu nei to make clear that women’s place is in the home. Whatever the reason, the income will not have been earned and saved when a woman in her 60s wants to buy an annuity for life. A hopeful sign is that more women want to earn than are currently doing so. In a survey conducted by the Ministry of Community Development, Youth and Sports in 2007, 81 per cent of single women and 62 per cent of married women indicated a preference to be a working mother. They wanted to combine a job with children. Several inferences follow. First, since 34 per cent said that they wanted to quit the labour force while their children were young, policies to encourage extended leave and/or homeworking must be considered. Second, since working parents emphasised the importance of trustworthy and affordable caregivers, women who cannot rely on their own parents should have easy access to affordable public facilities (Ministry of Community Development, Youth and Sports, 2008: 1, 2 and Annex A). Women have a longer life expectancy. They have more years in which to suffer from deteriorating health. There are about twice as many nonambulant and semi-ambulant females as males in the 65+ age cohort (AWARE/Tsao Foundation, 2005: 9). Women have a greater probability of being widowed. They are less likely to be sophisticated in money management. The AXA survey in 2007 produced some interesting results. In the UK, 42 per cent of working-age women said that their living standards would decline after retirement. The comparable figure for working-age men was 27 per cent. In Singapore it was not a decline that the women were fearing so much as a void. Only 52 per cent of working-age women in Singapore thought that their income in their retirement years would see them through. The remaining 48 per cent were hoping that someone else would provide (AXA, 2007: 28). The feminisation of poverty is an unwelcome byproduct of an ageing population. Women are the carers. A pro-family policy is wedded to their unwaged labour in the home. In 2006 there were 398,600 housewives without a CPF

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account. There is a strong case for crediting non-earning housewives with an equal share in their husband’s CPF balance. Better still, it would be a great improvement if the working partner were to open a second CPF account for the stay-at-home spouse. A husband can claim tax relief of up to S$7000 if he contributes voluntarily to such a reserve. It is in addition to the same exemption he can already claim for making cash top-ups to his own account. Perhaps the State should put in a matching contribution that goes beyond tax. Such assistance will be especially important where the husband is low paid. He might simply not have the money for his wife’s retirement account. Caregivers who look after disabled adult children or their husband’s aged parents will not be going out to work. They will not therefore be earning the CPF or putting by the private savings that they will need for their own retirement years. They will not have the money for an annuity. They will not, being unwaged, qualify for the Workfare Income Supplement. WIS is paid to employed workers on low incomes. It is not paid to housewives. They are treated as ladies of leisure who do not need the money. The truth can be quite different. Their unwaged contribution, not least through caring for the elderly in the multigenerational household, is in fact an indispensable element in Singapore’s welfare community. Women in informal or one-off employment, excluded from Workfare and thin on contributions, will be in the same exposed position. As long as CPF remains the primary retirement account, it must ensure that the financial interests of the whole population are properly protected. The national ideology in Singapore has a strong commitment to home and family. The CPF position of stay-at-home mothers and full-time housewives must in all equity be regularised. Singapore is, as it happens, not the only society to be trapped in the lose–lose game. Only three out of 10 of Britain’s 12 million non-working women over the age of 45 now qualify for a full State pension. They have not paid the full 44 or (from 2010) even the full 30 years of national insurance contributions. The fault is said to be entirely their own. In Singapore there are still further complications. Divorce does not mean that the wife will automatically acquire a half share in her husband’s CPF. While CPF built up during the couple’s marriage will normally be divided up along with the other matrimonial assets, the Courts will still have to adjudicate on the distribution. Since CPF in Singapore is often invested in CPFIS assets or used to purchase a home, the calculation is by no means straightforward. Even a widow does not have an automatic lien on her deceased husband’s account. A CPF member has the right to nominate his beneficiary.

58

Social policy in an ageing society

If he nominates his children (or, for that matter, his aged parents), then the wife has no further claim. In case of intestacy, the children (or the member’s aged parents) are entitled to half the member’s CPF. There may not be a great deal left. The husband tends to die first. Medical care in old age may severely deplete the Medisave that he has put aside. Many widows are destined to be poor in old age unless a solution can be found.

3.4

INCOME STREAMS AND ANNUITIES

The drawdown age is 62. It will rise to 63 in 2012, 64 in 2015 and 65 in 2018. CPF members at the drawdown age gain access to the Minimum Sum stored up for them in the Retirement Account. Before 2008 they had three choices. First, they could buy a risk-pooled annuity from a life insurance company: perhaps because they did not understand the nature of an instrument that promised to pay them a monthly income for life, perhaps because they were underestimating the likelihood that they would outlive their savings, very few (only 4.1 per cent of the total in 2006) actually did so. Second, they could leave the money on deposit with the CPF Board. Third, they could put the money in an earmarked bank account. Choosing the Board or the bank, their money would be unfrozen gradually over 20 years. In each case the deposit-taker would pay interest on the sinking balance that remained in the account. The interest and the drawdowns dried up at age 82. Forced savings were by then exhausted. After that, the ex-members were on their own. In the past the system met members’ requirements because 20 years was long enough. Life expectancy at birth was 61 years in 1959. It was 79 years in 2007. Since the 1970s, life expectancy in Singapore has gone up on average by three months every year. Improvements in medicine, nutrition and lifestyle mean that the lifespan is likely to increase still further. The age of 82 or even 85 no longer seems like an outlier or an exception. There are already 26,000 Singaporeans over the age of 85. Among CPF members in 2007, 72 per cent of the 65-year-olds were expected to reach 80. Some 55 per cent of those 65-year-olds would still be alive at 85. CPF members are healthier than the average. For the Singapore population as a whole, the figures were 67 per cent and 47 per cent (Ministry of Manpower, 2008b: 2). Whether 55 per cent or 47 per cent, the message is stark. Poverty among the very old is just round the corner. One possibility would have been a drawdown period not of 20 years but of 30. The monthly payments would be as much as one-fifth less but at least there would be more of them. It would not be a good decision. The sums

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would be too small. Also, 7 per cent of males and 11 per cent of females are already expected to survive to age 95. The numbers can only rise. Soon 95 will be the new 82. It will be the 95-year-olds who will be left with nothing to spend. An alternative would have been to retain the staged withdrawal system but to postpone the starting age. Postponement augments the contribution years. It increases the likelihood that the member will retire with the full Minimum Sum. Claiming from 65 and not from 62, simple repayments would last (because of compounding) until the member is 88. This will in effect win the member six more good years before the money runs out. The option has been tried in a number of countries, including the UK. There the State pension increases by 10.4 per cent for every year (up to age 70) that individuals defer their claim beyond the retirement age of 65. In Japan the pensionable age will be raised to 65 by 2013. Individuals retiring at 70 already receive benefits that are 142 per cent greater than they would have received at age 62. A more comprehensive alternative is an annuity for life. This is the option that has been adopted in Singapore. Life expectancy at 62 will soon exceed the CPF’s increasingly out-of-touch 20 years. An annuity is a bulwark against destitution in old age. A whole-life guarantee does not cut off when beneficiaries, already in their 80s, might have another decade or two to live. In 2007 the Government took a lead. Proposals were put forward for a deferred (late-life) annuity. A once-for-all premium of up to 10 per cent of the Minimum Sum would be collected at age 55. It would be nonrefundable. A small repayment of S$250 to S$300 would be made monthly. It would come on-stream from age 85 when the Retirement Account had been emptied. The proposals were not very popular. Many Singaporeans, ignoring the statistics, did not believe that they would actually make it to 85. They did not want to squander even part of the Minimum Sum on a tail-end transfer that they might never bank. Money is money. An unused annuity would be lost for ever. An unused Retirement Account would go to their children. The outcome was that the Government set up the National Longevity Insurance Committee. CPF Life, adopted in 2008, was built around its compromise plan. The letters in ‘Life’ stand for Lifelong Income for our Elderly. All working CPF members with at least S$40,000 in their Minimum Sum will from 2013 be required to buy an annuity at age 55. Singaporeans with less than S$40,000 in their Minimum Sum or who will be over the age of 55 in 2013 will be encouraged to opt in. Unlike the others, they will not be obliged to do so.

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When members reach 55, the cash balance in their Minimum Sum (but not the property pledge) is split into two parts. The larger part goes into their Retirement Account. As before, the balances earn interest, payable at the fluctuating SMRA rate, from the drawdown age to the age at which members would like their Life annuity to kick in. The smaller part is held back to purchase the Life annuity. No new cash is required. The entire premium is deducted upfront from the Minimum Sum. The Retirement Account is analogous to Medisave: it is personal savings. The Life annuity is more like MediShield: it is compulsory insurance. Interest accruing to the premium is not refundable. It is pooled with the interest accruing to other people’s premiums. In that way it helps to fund the system and to make it more affordable. Such risk-sharing and interestpooling is a departure from the self-provision that characterises the core business of the CPF. CPF Life offers the member a choice of 12 options. They can best be seen as two groups of six. From the first group members must select the age at which they would like their annuity repayments to begin: 65, 70, 75, 80, 85 or 90. The earlier the repayments start, the larger the premium will be, but also the larger the monthly payout that will be received. From the second group members must decide whether or not they want their family to receive a refund equal to the Life premium paid in minus the Life transfers paid out in the event that they die early. Plans than offer a refund repay less per month than plans that do not. The spectrum of start-dates and the possibility of a refund meet the preferences of Singaporeans. Initial proposals for a single age (85) and a single policy on refunds (none) were scrapped because Singaporeans had made clear that they wanted a more flexible approach. The downside is that the policyholder might see the system as complicated and confusing. Tables are being posted online. A guidebook in four languages is being distributed. CPF counsellors are on hand to assist. Administrative cost is being incurred. In spite of that, ordinary people might not be sure how to proceed. They might tick the default option and leave it at that. Members who fail to register a choice will also be assigned to the default plan. It is probable in any case that preferences will converge on the standard product. The important thing is that Life offers additional choices for the minorities, even if small, who do not want the mean. The Longevity Committee estimates that 60 per cent of active members aged 50 in 2008, 55 in 2013, will have at least S$67,000 (half the target value of S$134,000) in cash in their Minimum Sum when they turn 55. It anticipates that about 80 per cent of those members will opt for the R80 plan. R80 is the option that makes monthly payments from age 80 and that refunds unused balances to the heirs. Most people will want a plan with a

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refund. Only about 10 per cent of members are expected to select the norefund feature. For a representative male choosing the launch-age of 65, the difference in monthly reimbursement will be about S$40. What the default option will mean in financial terms is this. The member with S$67,000 will pay a premium equal to 24 per cent (males) or 28 per cent (females) of that sum at age 55. From the drawdown age until they turn 80 they will live on the depleting capital from their Retirement Account plus the interest that it attracts. A male will take home S$610. At age 80 he will move on to his Life annuity. The monthly repayments for the rest of his life will be the same: S$610. They will be S$570 for a woman. Figure 3.11, taking the figure of S$67,000 in cash in the Minimum Sum, shows that the repayments under the old system would have been S$530 per month for 20 years and that is all. Figure 3.12 is a schema showing the flow of funds into and out of the Retirement Account (RA) and the Retirement Premium (RP) under the new R80 plan. Here the member will take out S$610 for 15 years from age 65 to 80 and then begin to claim an identical sum from the retirement annuity that he has bought. The details vary with the plan that is selected. Members who opt for Refund 65 will put in 100 per cent of their Minimum Sum at age 55. From the drawdown age they will claim exclusively from Life. Their annuity will pay out S$650 (males) or S$590 (females) for life. This annuity offers the highest Life payout per month, but there is a price. The whole of the Retirement Account must be committed from the start. At the opposite extreme is, of course, Refund 90. In this case the premiums at age 55 are only 6 per cent and 8 per cent, respectively. Members claim exclusively from their Retirement Account until they move on to Life at 90. The repayments from age 90, at S$560 and S$540, are less. The difference is not very great. The income stream varies with gender and with the nature of the plan. It depends on the actual amount held at age 55 in the Minimum Sum. Cash MS: $67,000

RA: $67,000

65

$530/mth

85

$530/mth

Figure 3.11

Old system: repayment for male with S$67,000 cash Minimum Sum

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RP: $16,235

$610/mth

Cash MS: $67,000

RA: $50,765

65

$610/mth

80

$610/mth

$610/mth

Figure 3.12 New system: R80 plan for male aged 65 with S$67,000 cash Minimum Sum

Members with the full Minimum Sum will claim more. Members with only S$40,000 will claim less. The dispersion extends from S$350 to S$1100. It also depends on the twin unknowables of future mortality rates and future investment returns. The Longevity Committee, recognising that no one can predict the precise relationship between assets and liabilities 30 years down the road, therefore made a recommendation which is bound to unsettle the investor: ‘Premiums and payouts should be determined by an independent actuarial consultant and reviewed periodically to reflect actual mortality and investment outcomes’ (Ministry of Manpower, 2008b: 3). One tweak here and another tweak there – annuitants never know where they stand. Members choose their plan at age 55. The choices are irrevocable. They have to be as they affect the actuarial basis of the risk-pool. Insurance presupposes that a certain level of probability can be quantified in advance. Yet circumstances do change, and members at 55 are arguably too young to precommit themselves for ever. Members alter their preference from R80 to R65 when their business fails and they urgently need the cash. They alter their preference from R to NR when they get a divorce or fall out with their relatives. A system that is strong on flexibility should in all consistency make it possible for individuals to change their mind. CPF Life will be administered by the CPF Board. Private-sector insurers will not be involved. The CPF Board has a track record. Its payouts, reflecting its minimum guaranteed interest rate of 3.5 per cent, are better than those of most commercial annuity providers. It is economically efficient in that it spreads its administrative overheads. Loading aside, CPF is safe. While no private annuity provider in Singapore has become insolvent, sub-

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prime mortgages and insider trading abroad have undermined confidence in the financial intermediaries. CPF comes with the backing of the State.

3.5

MODIFICATIONS AND EXTENSIONS

Political economy in Singapore is a work in progress. The Minister of Health once encapsulated the perpetual tâtonnement in the following words: ‘A radical, big-bang, complete overhaul approach to health-system reform is not advisable. Instead, it is through a series of deliberate, carefully considered incremental policy changes over many years that we build a sustainable health-care system’ (Khaw, 2008b). The most negative thing that Singaporeans say about the changes is that they are contradictory: the leadership doesn’t know its own mind. The most positive thing that Singaporeans say about the changes is that they are adaptive: policies are rethought when circumstances require something new. The Minister of Health would argue that political economy in Singapore is pragmatic and incremental. It is not one big vision but an eternity of small improvements. Superannuation policy in Singapore reverts to type. It is an empire on which the concrete never sets. While the system must deliver what it has promised, it must also adapt its arrangements in order to fill in the gaps. This section discusses some of the proposals that are likely to be brought forward as Life ages and Singapore itself matures. 3.5.1

Freedom to Choose

Membership (as in most other countries) is compulsory. Compulsion is not always welcome. Some Singaporeans would like to opt out in order, collecting their Minimum Sum at age 55, to make their own retirement provisions. A large group would buy an annuity from the CPF. Another group, perhaps just as large, would choose a commercial insurer. Competition would ensure that both sides were kept on their toes. One size might not fit all. Where it does not, respect for persons suggests that a thousand flowers should bloom. Only one flower is blooming under Life. Yet there is a reason. Risk profile in Life must be comprehensive. A national system presupposes a national pool. Otherwise there will be adverse selection, cherry-picking, free ridership and at the end of the day income maintenance for the destitute residuum and the old. The hard cases are not required to join. The physically and mentally incapacitated are exempted: they will never be fit for employment. The terminally ill are exempted: they will not live long enough to get economic benefit from an annuity. Members unable to stake S$40,000 or who will

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be over 55 in 2013 are also exempted. They do not have enough in their account to pay for their lifetime payback stream. CPF Life is compulsory but only selectively so. The most neglected who most need its protection are not in a position to buy their way in. Importantly, some quite prosperous Singaporeans can claim an exemption as well. This is the case where individuals are in receipt of a private annuity, an occupational pension or some other benefit which is at least equal to the monthly income they would receive under Life. No one has a need to be covered twice. It is an open door: the well-heeled can substitute a private annuity for a Life annuity. They must, however, do so with their own savings. The Minimum Sum cannot be used to pay for full opting out. It is a source of frustration to members who have a substantial stash and valuable assets but who have not yet put their wealth into an annuity. Although such persons can support themselves in old age, they are obliged nonetheless to buy Life despite the fact that they have more lucrative uses for their Minimum Sum. Life, ironically, could benefit financially if they were to drop out. At least in other countries, the prosperous tend to run up more life-years than the desperate. They are bad risks precisely because healthy people are likely to put a greater strain on the fund. The economics of annuities is the mirror image of health insurance. The CPF Board favours a monolithic Life. Others are less convinced. It cannot be expected, as Section 3.2 has implied, that private insurers will be happy with the nationalisation and the monopolisation of the captive market. There is, however, a middle way. The CPF Board could supply the basic tier. Approved companies could provide the icing on the cake. Members could be given the opportunity to buy a rider for higher payouts or to index link their annuity against inflation. In opting for such a public– private partnership, Life would be doing no more than what MediShield has already done in the field of health. Interestingly, the CPF system already authorises a commercial complement in at least one case. Funds from the Minimum Sum can already be released for a private annuity provided that the private product is not at the expense of the Life annuity. The arrangements for the joint purchase would be as follows. A male with S$67,000 cash in his Minimum Sum and opting for the R80 plan would put S$16,235 into his RP as before. This would entitle him to S$610 per month for life from age 80. At the same time, however, he would take the remaining S$50,765 out of his RA and use it to buy a private annuity. The private annuity (using figures supplied by NTUC Income) would pay him S$440 per month for the rest of his life, starting from the age of 65. From 65 to 80 he will be living on S$440 per month. After 80 he will be living on S$440 plus S$610 – a total of S$1050. The double-income stream is shown in Figure 3.13. Figure 3.13 is similar

The Provident Fund

RP: $16,235

65

$610/mth

Cash MS: $67,000

RA: $50,765

65

Annuity: NTUC Income

$440/mth

80

$440/mth

$440 + $610 = $1050/mth $610/mth

Figure 3.13

New system: R80 plan for a male with S$67,000 in cash Minimum Sum

to Figure 3.12, but there is one difference. In Figure 3.12 the member had no private annuity. Instead he took S$610 each month from his Retirement Account for 15 years and then moved on to the public annuity. In Figure 3.13 the member has no Retirement Account. Instead he has a private annuity which pays him S$440 per month for life. When he turns 80 the State steps in with a further S$610. 3.5.2

Inflation

The system is not inflation-proofed. Fixed payouts may be viable when inflation is no more than 1 to 2 per cent. Yet prices when Life was adopted were rising at between 4 and 6 per cent. At 5 per cent, the purchasing power of money halves every 14.4 years. An R80 contract taken out at age 55 must inevitably lose much of its attraction when rising rents, rising oil prices, rising food prices, rising medical bills all mean that the real value that is received falls far short of the real value that was promised. The tax is not a proportional one. The poorest annuitants with the lowest balances will be the hardest hit. They cannot tighten their belt much further. They do not have much fat to spare. Indexation would address the problem of prices. It is not, however, the Singaporean way. Singaporeans fear that the cat will never catch its tail if interest, rent and wages rise when prices rise and prices rise when interest, rent and wages rise. Devaluation would be the consequence. It would

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be a slippery slope. All the food and all the raw materials are imported from abroad. A falling parity would make the inflation worse. Still further devaluation would be all but inevitable. Furthermore, in the specific case of Life, the sheer cost of index-linked payments would lead to higher premiums, lower payouts, and a lower percentage of exempted marginals voluntarily joining up. CPF Life would in that way deliver less of the protection that was intended. It would also become an intergenerational burden on younger policyholders who are not yet at the withdrawal stage. Such a transfer would go against the ideological commitment to individual responsibility that validates the system. A self-funding solution might be found in stepwise averaging. Here the recently retired would receive less and the long retired would receive more. Such a system would, say, pay out S$500 in the earlier years but S$700 later on. The problem is that in Singapore the step-up approach encounters strong if non-rational cultural resistance. Singaporeans like their value for money. Many fear they will not live long enough to enjoy the jackpot repayments. Formal indexation is problematic. Even so, there already exists partial inflation-proofing. The reason is the bunching of assets that is unique to the Singaporean portfolio: ‘About 85 per cent of active CPF members turning 55 own homes, and 75 per cent of CPF members pledge their property as part of the MS. With inflation, the value of their homes is likely to go up, both in selling price and rental value’ (Ministry of Manpower, 2008b: 41). Asset values rise with inflation. Owner-occupiers are protected from avaricious landlords. Besides that, interest rates normally go up in periods of inflation. Nominally at least, such a rise beefs up the balance in the Retirement Account. 3.5.3

Redistribution

The implications for redistribution are ambiguous. On the one hand the better-off have better incomes and more discretionary savings. It is the poor who are most in need of the annuity. They might not have much else to spend. On the other hand, the upper deciles eat better food, pay for better doctors, and face fewer hardships. It is the lower deciles who may have the shorter life expectancy. If they do die younger, they will receive a smaller payout stream. Little is known in Singapore about the correlation between social location and expected life-years at the retirement age. More is known about the highs and the lows in other ageing societies. Thus, in Britain, life expectancy is known to be considerably greater for the professionals and the managers than it is for the machine-minders and the manuals (Reisman,

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2007b: 236–73). Male life expectancy at age 65 is 18.3 years in the top occupational group but only 13.3 – five years less – in the lowest. For women the figures are 20.7 and 16.9. The averages, 15.6 years and 18.7 years respectively, conceal a significant dispersion (Office for National Statistics, 2007: 34). Boys born in the London suburb of Hampstead are likely to live 11 years longer than boys born in Kings Cross, only five underground stations away. In Scotland the life expectancy for boys in prosperous Lenzie is 82. It is, at 54, 28 years less in the Calton district of Glasgow (Boseley, 2008). A boy in Calton would last longer in India where it is 62. Premiums for private annuities in Britain are sometimes differentiated to reflect social distance. In such cases it is the wealthier postal codes that have to pay more or take out less. Little research has been done in Singapore on the microsociology of dying young. Private insurers do not class-correlate their charges. They do not shade their premiums either by income or by a proxy for income such as the size or nature of housing space. All that the private sector currently quantifies are the non-standard contingencies of age and gender. It might well be that lifestyle and health care are equal enough in Singapore to ensure that life expectancy is no longer a function of social stratification. If so, then the across-the-board nature of the Life annuity would make actuarial sense. If not, then there would be a conflict of principles. Fairness in CPF means that there is no cross-subsidisation. That is why women under Life receive smaller payouts than men. If, however, all identifiable groupings pay the same premiums but some identifiable groupings spend more life-years on earth, then there is an inequity. The shipyard workers are de facto paying a transfer to the stockbrokers. Or, of course, vice versa. The relativities, if they exist, are simply not known. One day they might be. If future research should one day pinpoint a correlation between longevity and social origin, then the balance between the deprived and the prosperous might at that stage have to be revisited. New Life premiums might have to be introduced in order to make the payments at 55 proportionate to the life-years for which each class of annuitant will be in a position to claim. 3.5.4

CPF without Life

The size of the problem should not be underestimated. As many as 25 per cent of CPF members will be exempted because their balances fall below S$40,000 or because they are seriously ill or both. Another 15 per cent will receive payouts of only S$350 to S$600. Many Singaporeans will be too old: there were 1.06 million CPF members who were over 50 in 2006. Not everyone in Singapore is in any case a member.

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Economic upgrading, second only to kin, is the Singaporean safety net. Embourgeoisement, education, growth, ambition, assiduity, discretionary saving, the Minimum Sum, home ownership, higher participation rates, rising productivity, rising remuneration, full employment – all add up to the prediction that over time the marginal will increasingly be swept up into the mainstream. Over half of the present-day’s over-60s have not even completed their primary education. They are the ones who will have to wash up and sweep in the food courts for an unskilled wage that pays not much more than the annuity for which they do not qualify. The future will, however, be a different country. Primary poverty was endemic in the old Singapore. It is much less common today. History in Singapore has a smile on its face. The national ideology teaches that primary poverty given enough time will more or less wither away. In the long run the aim is for all citizens to retire with their full CPF Sum and to draw down the full promised Life that will meet their basic needs. In the short run, however, the excluded are on the doorstep. Over time they will be fewer in number but they will always be there. Even in the food courts the old cannot sell tissue paper and collect empty drink cans until the day they die. The severely handicapped without supportive children will be on their own. The old and the ill will run out of funds. Self-reliance must be tempered with solidarity if the needy, the weak and the forgotten are to enjoy a decent old age. Moderate benevolence need not mean condoning free riders who prefer feckless idleness to honest toil. It only means that an economy must not lose sight of compassion, mutual aid and the social compact upon which supply and demand are built. Eunice Olsen put ethics back into exchange when she said in Parliament that even a market economy is obliged to do what is right: We want a country where Singaporeans can grow old, knowing that this country will take care of them, especially if they have no means to take care of themselves or have no one to depend on. Many of them have given so much to Singapore and when they reach a certain age, it is time that this country gives back to them. I hope that the Government will keep its promise of not leaving anyone behind. (Olsen, 2007)

There is no tax-financed State pension as of right. CPF Life is a selffunded stream for which the beneficiary will require a CPF account and a minimum balance. What the Government can do is to assist the almost-there to get on board. To that end it has used money from its budget surplus to set up a dedicated fund with an initial capital of S$260 million. A modest Life bonus allocated from this fund makes it possible for 50–55-year-olds within striking distance of the S$40,000 minimum to sign

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up. Low balances go with low incomes. To qualify for the bonus they must be earning less than S$4500 a month. They must be living in a property with a relatively low annual rental value of S$11,000 or less. The bonus is not intended to ensure blanket inclusion. As with the Workfare scheme, recipients of the grant must already have a CPF account. They must have shown willing by building up a balance. They must hold at least S$20,000 to qualify for the full bonus of S$4000: lower sums will attract a pro-rated allowance. The family can pay contributions for its own. This is an opportunity for husbands and children to help housewives to win an entitlement. The absolutely deprived will be assisted to join. Yet they must not expect that their balances will be topped up to such an extent that the relatively successful wonder why they had bothered to try. As the Longevity Committee writes: ‘Those who dutifully and regularly contributed to their CPF should not receive less compared to others with smaller CPF savings’ (Ministry of Manpower, 2008b: 15). The almost-there are to be treated well but not very well. Their balances being smaller, their monthly payouts will be less. Otherwise they might be deprived of the economic discipline that forces them to earn and save. There are other policy options, too, which the State could explore. Employers could be required to pay a Life surcharge to credit in the lowwaged: they would no doubt object that any such tax on jobs is a disincentive to creating any local jobs at all. Joint annuities could be offered to married couples: a housewife would retain a share in the annuity even after the sole breadwinner’s death. The premiums charged to new members could go up: the money could be used to cross-subsidise the povertystricken and guarantee them a share. A no-refund policy could be adopted. It would free up funds. It would allow the policy-makers to reduce the floor below S$40,000 or even to eliminate it altogether. The refund option is not in the spirit of insurance. Necessary as it may have been in 2008 to make the Life system attractive to Singaporeans, still it goes against the rules of the game. Singaporeans at age 62 have approximately a 50–50 chance of living to age 85. Half will make it and half will not. It is unusual for losers first to gamble and then to demand a refund of their stake. The pooling of premiums ensures that the long-lived will enjoy a better prize than they would have done had their own personal stake not been augmented by that of the short-lived who were not still there to claim. The Singapore system is self-financing. Interest earned and payouts made would both be greater if the no-refund option had been selected and the pooled resources ploughed back. Bonuses, refunds and postponement are policy instruments that address the needs of the almost-there. A more difficult problem is what to do

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about the genuinely rock-bottom. The Community Development Councils provide limited financial assistance to old people who have run out of money. The charities and the temples are there for the hungry and the desperate. Not all poor people feel comfortable with the idea of asking bureaucrats and neighbours for help. People in Singapore are expected to stand on their own two feet. Morality aside, State support is not believed to be fiscally sustainable. The Singapore system is that general taxation should only in exceptional circumstances be channelled into welfare transfers. Social risk-pooling in Singapore does not mean that public finance will become the third party to the contract. In a tax-and-spend society the excluded would probably be given honorary Life. CPF savings would probably be pooled into a national pension plan. In Singapore the superannuation system will probably remain resolutely factored down. Inclusion threatens affordability. Altruism threatens costeffectiveness. Whatever the attractions of Life, the bottom line is that it will not do a great deal to help the old and the ill who happen also to be poor.

3.6

RETIREMENT INCOME ABOVE THE FLOOR

The philosophical message encoded in the words Minimum Sum is that it is the amount just required to meet the representative Singaporean’s basic needs. It is not intended that the Retirement Account should satisfy all potential tastes and preferences. Sensible people will complement their CPF with a fully paid-up home, the Medisave maximum, a MediShield policy, top-up private health insurance, bank deposits, stocks and shares, full-time work, part-time work, rents, reverse mortgages and subsidies from family members. If some or all of the pieces are in place, the representative Singaporean should be able to enjoy a comfortable retirement. If people are planning to fund themselves through their Minimum Sum alone, their living standards will be social subsistence and not much more. The CPF Board has committed itself to a decent payments stream in the retirement years. It associates a decent standard of life with purchasing power equal to 20 per cent to 40 per cent of the individual’s average monthly income at the close of play. Lim calculates that for most Singaporeans the replacement ratio from the Retirement Account does indeed lie within this band (Lim, 2002: 72, 74). Holzmann, MacArthur and Sin, agreeing on the range, warned that the actual amounts would not be very large. The repayments stream would not be enough to sustain the lifestyle to which retired members had become accustomed (Holzmann et al., 2000: Appendix B10, 6). Equivalent to two years of mean national earnings, the payout from an

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annuity accruing to the median balance in 2003 was no more than S$583 per month (Hateley and Tan, 2003: 89). A sum of S$106,000 in 2008 would have produced a payout of S$910 a month for 20 years from age 64. A sum of S$120,000 would have allowed for monthly withdrawals of S$1219 over the same CPF-standard period of time. If it had been used to purchase a pre-Life annuity, the S$120,000 would (allowance made for the performance of the underlying investments) have generated a monthly income of S$900 for life. Although the annuity paid out about 27 per cent less than the 20-year plan, the reimbursement was still roughly a third of average personal income. As such it fell within the CPF’s guideline range. The stream was never intended to be handsome. It would certainly be less than the final-salary element in a typical British occupational pension. It would be enough for basic food and clothing but possibly not enough for newspapers and holidays. It would not be enough if State-sponsored Medisave and MediShield had been used up and yet a heart-bypass patient remained in a critical condition. It would certainly not be enough if the beneficiary had to pay for long-stay chronic care or an old people’s home: residential care is not covered by Medisave and MediShield. Chia and Tsui, assessing the adequacy of the CPF Minimum Sum (S$80,000 in 2003), concluded that it might be enough for the male elderly but that females would need a balance of at least S$6000 more (Chia and Tsui, 2003: 59). If expensive treatments were required, or if the cost of care were to escalate, then the shortfall would be even greater. One inference was that the Minimum Sum for females should be at least S$6000 higher. In fact, as was shown in Figures 3.8, 3.9 and 3.10, the average balance held by females aged 55 and above was not only considerably less than that held by elderly men but also fell far short of the Minimum Sum. Raising the Minimum Sum would not in the circumstances solve the problem. Life was introduced in 2008. The money per month was not very different: S$67,000 drawn down over 20 years under the old system paid out S$610. The time-period, however, was open-ended: every member of Life became an annuitant who would receive his/her payment not for 20 years but for the duration. The change was therefore in the number of years but not in the adequacy of the balances. After as before, the sums involved remained relatively small. Yet adequacy should not be left entirely to the experts. It is important as well to find out just how much purchasing power representative Singaporeans would like to have in their old age. The National Survey of Senior Citizens in 2005 collected some evidence on the payments and the perceptions. As for the facts, it found that 70.4 per cent of all the over-55s were living on monthly income from all sources of no more than S$1000. A further 20.6 per cent had a monthly income of S$1000 to S$2000. As

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for the opinions, it discovered that 79.2 per cent of the sample considered that their resources were ‘adequate’ or ‘more than adequate’. Of those who said their income was not adequate, 16.4 per cent cited high medical bills (Ministry of Community Development, Youth and Sports, 2007: 29, 30). Not all surveys have confirmed that S$1000 a month is really enough. A survey conducted at Nanyang Technological University in 2005 discovered that graduates felt an ideal monthly retirement income would be about S$2267, non-graduates about S$1646 (Chan et al., 2005: 35). Other studies (single-pooled) have come up with figures in the range from S$1800 to S$2000. Soh, interviewing 30 university undergraduates in 2008, found a mean value of S$1869: the responses went from S$400 to S$5000, with a standard deviation of S$1476. Some respondents (6.7 per cent) said that they had no idea. The most commonly cited figure was S$2000. It was quoted by 17.9 per cent of the sample. Thirty over-50s, interviewed at the same time, revealed a mean valuation of only S$1255. The results ranged from S$400 to S$3000, with a standard deviation of S$718. What this means, clearly, is that S$350, S$570, S$610 or even S$1100 would not be enough. Ordinary people knew this and accepted it: 74.1 per cent told the investigators that CPF would not provide adequate funding. Only 25.9 said that it would (Soh, 2008). Chan and Yap, interviewing 3000 resident baby-boomers born between 1947 and 1964, discovered that requirements were surprisingly modest: ‘Overall, the modal household income baby-boomers expect to have during old age/retirement is in the category of $500–599 per month, with 32 per cent expecting to have this amount. . . . This is followed very closely by the $1000–1999 category (28 per cent)’ (Chan and Yap, 2009: 60). The remaining 40 per cent is divided equally between those who expect to have less than S$500 and those who expected to have more than S$2000. About 32 per cent said that family members would be their principal source of support in old age. The rest, anticipating that they would be on their own, cited income from work (21 per cent), pensions and CPF (20 per cent) and asset income (15 per cent). Either way, they would be lucky to reach the S$1500 that the Ministry of Community Development, Youth and Sports would associate with the bare necessities that they will need. It is a strange old world. The average monthly expenditure of all households in Singapore in 2003 was S$3244. The highest quintile spent S$6160. The lowest quintile spent S$1259 (Department of Statistics, 2005: viii). The respondents to the surveys frequently quoted lower figures. Maybe this is because they were referring to their own spending and not that of their household as a whole. Maybe the reason is simply that they were being more realistic about what they would be able to afford when the monthly pay-cheques stopped coming in.

4.

Affordable health care

CPF is a republic with three states. The Ordinary and Special Accounts were visited in Chapter 3. The Medisave Account will be visited in Chapter 5. The present chapter deals with the philosophy of care. Health policy is about morbidity and mortality. Yet it is about the national ideology and the social consensus as well. This chapter argues that Singapore’s three Ms of medical savings, medical insurance and medical assistance can only be understood in the context of the tasks and objectives that the system has set itself. The Government in 1993 issued a White Paper. That document, Cmd. 16, Affordable Health Care, remains the guiding light and the manifesto. In it the policy-makers state that, while health status must be the primary maximand, subordinate objectives must also be defined in order that the route and not just the destination should be in line with the national need. Affordable Health Care sets out five intermediate objectives, five agreedupon ends along the way (Ministry of Health, 1993: 2). The five sections of this chapter explain in turn the properties of those subordinate goals.

4.1

PROMOTION AND PREVENTION

The first goal is ‘to nurture a healthy nation by promoting good health’. The first objective relates to education and deterrence, in the belief that prevention is cheaper and more humane than a subsequent cure: ‘The most effective way of reducing disease levels in a community is to prevent the onset of the disease condition . . . Disease prevention . . . has formed the basis for health care policies in Singapore’ (Ministry of Health, 2001: 36). One example would be the campaigns to publicise the dangers of smoking and the need to keep fit that are mounted by the National Healthy Lifestyle Programme. Another example would be the information on diet and exercise that is disseminated (in all four national languages) by the Health Promotion Board. Chronic non-communicable diseases are the main cause of illness and death in Singapore today. Campaigns to make people aware of risk factors are an important part of public policy. Cancer is the leading cause of death worldwide. It killed 7.6 million people in 2005. This was 13 per cent of total world deaths in that year. As much as 40 per cent of those deaths could 73

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have been prevented by a healthy diet, physical activity and not using tobacco (World Health Organisation, 2006a). Aware of the threat to the lungs, liver, bladder and throat, the government in Singapore has launched the National Smoking Control Programme. It has organised the ‘Quit and Win’ competitions. It has held ‘Kick Butt’ parties. It has levied punitive duties that make cigarettes at about S$11.60 for 20 the costliest in Asia. The same packet would cost S$2 in Indonesia and S$3.60 in Malaysia. It has commissioned its own advertisements which make liberal use of aggressive, gory, in-your-face scare tactics. It has banned smoking altogether in public places such as bus shelters, underground car parks and non-airconditioned offices. It has introduced the Ramadan Programme (jointly with the Singapore Islamic Council) which targets the Malay population. Citing the passage in the Koran which reads ‘Whatever harms the body or other people is sinful’, the programme exhorts Muslims to give up smoking not just in Ramadan but for ever. Some success can be reported. In 1986 about 20 per cent of all Singaporeans over 18 smoked cigarettes on a daily basis. By the time of the National Health Survey in 2004 the figure had declined to 12.6 per cent (Ministry of Health, 2005). This is one of the lowest prevalence rates in the world. In the USA the rates are 22 per cent (for women) and 28 per cent (for men). In the UK the proportions are 23 per cent and 25 per cent, respectively. In Singapore only 3.5 per cent of all women and 21.8 per cent of all men still smoke. Even so, the black spots remain. Fully 29.9 per cent of Malay males are regular smokers. Female smokers are also a problem in the making. Although only 3.5 per cent of Singaporean females smoke at all, the proportion of younger women aged 18 to 29 who smoke daily has risen from 5.2 per cent in 1998 to 6.6 per cent in 2004. For young Malay women, the figure is 12.8 per cent. The Fresh Air for Women Programme, the STRONG Programme and the Get Fresh Programme have apparently not done the impossible. In Japan the proportion of all males who smoke fell from 82 per cent in 1965 to 47 per cent in 2004. The proportion of young females rose in the same period from 7 per cent to 21 per cent (Ogawa et al., 2006: 24). If the trend continues, women smokers may eventually outnumber men. This has been the experience of Sweden and Spain. As for a sedentary lifestyle, the National Health Survey in 2004 was able to establish that over half of Singaporeans take no exercise at all. Only 24.9 per cent (more men than women) do more than 20 minutes of cardiovascular exercise at least three times a week. The figure has improved since 1998 when it was only 16.8 per cent. The slogan ‘Keep Fit. Fight Stroke’ has produced results but they have not been outstanding. A recent study

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in Hong Kong found that lack of physical activity was responsible for approximately 6400 deaths a year (26.6 per cent of the Hong Kong total). This was more than the 5700 deaths (18.2 per cent of the total) that could be attributed to smoking (Lam et al., 2004). The Health Promotion Board blames lack of physical activity, together with excessive smoking and drinking, for diseases such as cancer. The incidence of colorectal cancer in Singapore is among the highest in the world. Malnutrition in Singapore is negligible. Economic growth and high living standards have put paid to that. Unhealthy eating, obesity and high cholesterol are, however, a serious concern in the light of the high incidence of diet-related cancers and cardiovascular disease. About 6.9 per cent of Singaporean adults were obese at the time of the 2004 Survey. A further 24 per cent were overweight. About 19.1 per cent of adult Malays are obese. Singaporeans anxious about their waistline are the top pill-popping dieters in Asia: 12 per cent are taking weight-loss drugs. It was expected that costsharing for medical treatment would encourage Singaporeans to invest in good health. Compulsory medical savings (Medisave) too was expected to build in a bias in favour of health maintenance: money unspent, not pooled, is for ever one’s own. Self-interest is not always enlightened. The economic deterrent, it would appear, has not been enough. The facts speak for themselves. Something like two-thirds of all Singaporeans (and three-quarters of all growing teenagers) do not consume the recommended two portions of fruit (72 per cent: down from 85 per cent in 1998) and two portions of vegetables (57 per cent: down from 80 per cent in 1998) a day. Less than 10 per cent eat the recommended amount of wholegrain rice and high-fibre foods. Less than a third have the recommended intake of calcium. Approximately 79 per cent of Singaporeans consume too much saturated fat, 90 per cent too much sodium, 70 per cent too little fibre, 63 per cent too little vitamin A (Ministry of Health, 2001: 39, 40). Just under half of Singaporeans are eating more than they should: 48.2 per cent, up from 31.8 per cent in 1998. More than half the schoolchildren eat deepfried foods more than twice a week. There are 744 calories and 29 grams of saturated fat in a single plate of the very popular char kway teow. This is in sharp contrast to the traditional Japanese diet of seaweed, rice, tofu, vegetables, fish and only a little animal fat that is believed to keep down the rate of diabetes and stroke. The pamphlets, the television advertisements, the public forums, the getai roadshows, the fun runs, the fruit vouchers have all done their bit to raise awareness about healthy living. People now know the pitfalls in salt and sugar. Yet the ability of the Government to change people’s attitudes is not 100 per cent. While the proportion has fallen from 25.4 per cent in 1998, approximately 18.7 per cent of Singaporeans aged 18 to 69 still suffer

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from high cholesterol. The number of heart attacks among Singaporeans aged 35 to 64 increased by 31 per cent between 1991 and 2001. The Ministry of Health is responsible for health policies and standards. Its mandate is preventive, curative and rehabilitative. The Ministry collaborates on issues of professional practice with the Singapore Medical Council. It works with the World Health Organisation to contain cross-border epidemics such as H5N1 (‘bird flu’), the Nipah virus (spread by pigs) and SARS (Severe Acute Respiratory Syndrome) (World Health Organisation, 2007c). It has a high profile in immunisation and health screening. It ensures that diagnostic tests are available free of charge or at highly subsidised rates in government polyclinics, in 728 neighbourhood clinics and in the community centres. The intention is that cost-effective procedures should spot health problems early, before complications impose their cost. An illustration of a subsidised scheme would be the Integrated Screening Programme for the over-40s and the Community Health Screening Programme for the over-50s. Every Singaporean aged between 40 and 69 is entitled to a blood test for late-onset diabetes and high cholesterol: the charge is S$8 instead of the usual S$15 to S$25. Every woman aged 40 and above can request a pap smear for cervical cancer: she will pay S$10 instead of S$15 to S$40. Once she is over 50 she can have a mammogram for breast cancer: at S$52, it is half price. The elderly pay between S$5 and S$20 for their package. The sum is small but it is out of pocket. Medisave funds cannot be withdrawn for this purpose. Almost two-thirds (64.2 per cent) of the over-55s in Singapore go for regular health screening (Ministry of Community Development, Youth and Sports, 2007: 46). Reminders are sent out to the 1.4 million people in the target age-group. As for the young, the National Child Immunisation Programme targets communicable diseases such as poliomyelitis (although Singapore is now polio free), tuberculosis, whooping cough, tetanus, mumps and rubella. It does this through the public-sector polyclinics and the schools. The take-up rate is well over 90 per cent (for BCG against tuberculosis, 98 per cent). All injections except for hepatitis B are free of charge. Immunisation against diphtheria and measles is compulsory by law. In its drive to promote and prevent, the Ministry of Health is supported by other departments. One of the most proactive of these is Education. The Ministry of Education teaches the importance of a healthy way of life. It facilitates health screening. It provides a School Dental Service. It conducts tests and advises on vision. Singapore, at 60 per cent in 12-yearolds, has one of the highest rates of schoolchild myopia in the world. As for weight loss, the School Health Programme at one time incorporated a dedicated Trim and Fit (TAF) element to ensure that fat children – they were at least 3.6 per cent of all children in 2007, up from 2.8 per cent in

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2004 – knew about low-calorie food and got enough exercise. TAF was later abandoned, partly because of playground stigma and partly because of a countervailing anxiety about anorexia nervosa. Controversial as it may have been, the problem that TAF had sought to address was a real one. Britain has not done much better. Obesity levels have quadrupled in only 25 years. About 40 per cent of all British adults are now classified as overweight. A further 20 per cent are believed to be obese. The average British family spends as much each week on gambling (£3.60) as it does on fresh vegetables. It spends less (£2.80) on fresh fruit. It budgets £2 each week for chocolate (Office for National Statistics, 2008a: 8). Despite the £40 million that was spent between 2002 and 2007 through the Healthy Schools Programme, 62 per cent of British children still do not eat the recommended amount of fruit and vegetables. Two-fifths do not have breakfast. Three-fifths eat at least one takeaway meal a week. Seventeen per cent do no exercise at all. Tubbiness and a shortened life expectancy are inevitable if children surrender to a lifestyle that adds so little to their health capital. By 2011 all schools in Britain will be required to teach teenagers how to prepare a healthy meal. Over 800 new cookery teachers will have to be trained. Eight simple dishes will go on the syllabus. Singapore’s Ministry of Education has not got involved in menuplanning to the same extent as Britain’s Department for Children, Schools and Families. Irresponsible eating is, however, a universal problem. The Ministry of Education may yet have to do more to fight the flab. The Ministry of the Environment and Water Resources is responsible for sewerage, drainage and safe water. Access to sanitation is 100 per cent. The Ministry collaborates with the Agri-Food and Veterinary Authority of Singapore (the Singapore equivalent of the Food and Drug Administration in the USA) to maintain food standards. It tries to limit air pollution: this can on occasion be a public bad blown across from land-clearing fires in Malaysia or Indonesia. Its brief extends to the containment of vectorborne diseases, the prohibition of all but lead-free petrol, the fluoridation of drinking water. Operating through the National Environment Agency, it has made people aware of dengue. The drainage of swamps has effectively eliminated malaria. Subsidised intervention has filled the gap left by market failure. The work of Environment has been complemented by the Housing and Development Board (HDB). The HDB, established in 1960 to ensure the provision of adequate and affordable accommodation, is a statutory board linked to the Ministry of National Development. About 84 per cent of Singapore citizens plus Permanent Residents stay in high-rise public units, almost always purchased, rather than in the squatter colonies and the inner-city slums that were a cause of so much illness when

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today’s grandparents were growing up. Singapore, historically speaking, has tackled the infrastructure first. It has tended to put prevention before curative care. The Ministry of Manpower, too, has a hand in health. It is responsible for industrial and occupational health as well as for the quantity and quality of non-Singaporean labour. It runs the Workplace Health Promotion Programme. This is a joint effort, in collaboration with the National Trades Union Congress (NTUC) and the Singapore National Employers’ Federation (SNEF). There are no nuclear plants, coal mines or no-go danger zones in Singapore. Yet tunnels can collapse, cranes can topple and drilling can lead to deafness. Workplace intervention does what it can to arrest occupational asthma and repetitive strain disorder before they impose an avoidable economic burden on the doctors and the hospitals.

4.2

PERSONAL RESPONSIBILITY

The second goal is ‘to promote personal responsibility for one’s health and avoid over-reliance on state welfare or medical insurance’. Most Singaporeans probably believe that individuals have the primary responsibility for their own health status. The Government has built on that sense of duty. Its policies inculcate the vision that the citizen’s duty is not just to the self but to the whole. Thus, in Singapore, medical savings are compulsory lest the improvident ride free. An out-of-pocket payment must almost always be made at the point of delivery. The patient should not be tempted by the ‘buffet syndrome’ to overconsume unlimited (‘free’) services at the expense of a third party, be it State, employer or private insurer. Even in the most subsidised wards the patient must pay at least a fifth of the cost. Even for polyclinic mammography, the over-50s are granted only a 50 per cent reduction. This nexus makes the relationship between cost and benefit more visible and overutilisation less likely. Singapore’s not entirely reassuring 30th place in the World Health Organisation’s table of disease-free days and the high rate of breast cancer that ought to have been detected early on suggest that underconsumption as well as overconsumption can remain a problem that must be addressed.

4.3

AFFORDABLE ACCESS

The third goal is ‘to provide good and affordable basic medical services to all Singaporeans’. The Government guarantees that all Singaporeans,

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even if they are destitute or low paid, will have access to adequate care, up to date, cost-effective and medically trialled. The basic package will evolve over time as medical science develops and economic growth makes the nation better able to pay. Inexpensive primary care, the subsidised wards and the Medifund scheme are the symbol of the undertaking to leave no one below the line. They are a commitment to equity. They are not, however, a commitment to equality. Equal treatment for equal need irrespective of the ability to pay is not a citizenship right. Only the basic package is the quid without the quo. 4.3.1

Basic and Beyond

Public funding is finite. The basic package does not include non-essential services such as cosmetic surgery. It does not extend to experimental procedures not yet of proven effectiveness. It does not bundle in life-prolonging care (intensive beds being among the most costly) for patients unlikely ever to regain a satisfactory standard of health. The Government is not promising the latest equipment for all or unlimited attention irrespective of the probable success. Nor, however, is the Government impeding Singaporeans from obtaining such treatment at their own expense. The Government is neither encouraging nor discouraging the consumption of extra care and additional frills. What it is saying is simply that the public cannot finance the components that are not core. The aim is equity. It is not equality. In committing itself to a floor level of access, Singapore is not committing itself to a National Health Service. William Beveridge and Aneurin Bevan in the British 1940s, T.H. Marshall and Richard Titmuss later on, wanted a comprehensive health system that ensured a brotherly overlap in life experiences through adjacent beds in a one-class hospital. Their ideal was the universalisation of the best on the basis of medical need alone and not the ability to pay (Reisman, 2005). The Government in Singapore shares with the British authors a general recognition that community, citizenship and Gemeinschaft cannot be marginalised into obiter dicta. Its ideology is built around the nation as an organism as well as around the market capitalism of earning and shopping. The important difference is that the British welfarists had gone further. It was not the basic package alone but the medically optimal package that they wanted to make the fellow team-mate’s as of right. The delivery system in the warm-hearted socialism of the British social engineers was itself a part of the message. The canonical theorists of the National Health Service treated common care as an architect of comradeship and integration: ‘There must be no allocation of resources which could create a sense of separateness between people’ (Titmuss, 1973 [1970]:

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268). This conception of health care as an agency of socialisation is almost entirely absent from the Singaporean literature. The Singaporeans have preferred to rely on social institutions such as education, public housing and military service to instil a sense of belonging, nationhood and interdependence. Health care is medicine in Singapore. It is not nation-building to heal the divisions that tear us apart. Basic health care is fairness but not sameness. The Minister of Health has illustrated the distinction in the following way: ‘Is Lasik surgery clinically indicated? Perhaps. But there are other options for the patient. He can buy glasses at lower cost’ (Khaw Boon Wan, cited in Chua, 2004: 29). The patient will see just as well. It is never easy to know where to draw the line. Does the guarantee mean keyhole surgery or a six-inch scar? Should a severed hand be reattached or should there be a hook? Should patients be promised hospital convalescence because they have no one at home? The author of the present book was a member of the Ministry of Health’s project team that studied the prioritised lists employed in Canada, New Zealand, Medicaid in Oregon and elsewhere in order to develop a methodology in Singapore for identifying what should be done first (Ministry of Health, 2002c). Oregon’s early mistakes – initially it gave tooth capping a higher priority than appendectomy – must not be allowed to discredit the attempt. Oregon was trying to define a foundation package to which all members of the system would have a claim. Outcome per dollar was a central part of the exercise. Interventions which promised large benefits at low cost were given a high ranking. Services which were high cost, low payoff were moved to the bottom. The authorities would draw a line at the point where the budget was used up. Services below the line in Oregon were not reimbursed. Cost-effectiveness may have been the primary consideration but it was not the only one. The authorities in Oregon complemented their economics with other criteria and selective standards. These included perceived fairness, equal access and urgency of need. In all cases the rationing was explicit and it was in the public domain. The Singapore team was impressed by the logic of a list. It also recognised that the package described by the ordinary citizen as ‘die-die-must-have’ is bound to escalate over time. The team concluded that it would be difficult to please everyone but that it would be even worse to commit the taxpayer to filling a bottomless pit. The commitment in Singapore is to the basic health floor. There is no commitment to across-the-board access for equal need. The result is that access above the floor can be very unequal indeed. Singaporeans are required to put money into earmarked medical saving accounts. The payments are not a fixed sum but a percentage of income. The

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system is such that it builds the pre-illness, pre-retirement distribution of income into the ability to pay. Members take out what they (and their employers) put in. People with higher incomes will build up a bigger balance. The interest accruing to the accounts is tax free. The exemption is itself an architect of unequal command. Although everyone in Singapore pays the Goods and Services Tax (GST), only one-third of income earners (many of them foreign professionals) pay income tax. There were only 745,071 resident and 24,500 non-resident income-taxpayers in Singapore in 2007. About 25 per cent of resident income earners pay income tax. The higher their marginal rate, the more the tax relief is worth to them (Inland Revenue Authority, 2007: 110). Medisave and interest apart, there is unequal income and unequal wealth. Rationing by purchasing power is the essence of market economics. The ability and not just the willingness to pay is the effective demand that makes the doctors and the beds spring to attention: ‘Access to health care reflects the distribution of incomes in society as a whole’ (Ham, 2001: 742). Hsiao is concerned that the outcome in Singapore will be unjust even if the reward system there is avowedly meritocratic: Since humans are endowed with unequal ability, given unequal social support or economic opportunity, it means our incomes are vastly different. Thus, Singaporeans have unequal access to health care. This was a conscious decision made by the government in trading off equity and efficiency. (Hsiao, 2001: 736)

A social insurance system funded out of progressive taxes would better serve the social objective of horizontal and vertical levelling. The healthy would pay for the sick. The affluent would pay for the deprived. Well and good – but indiscriminate levelling is not what is meant by fairness in Singapore’s careful and cautious compromise. Pauly has some sympathy with a system that knows when to call a halt: ‘Whether the system advanced the cosmically “right” trade-off between access and cost is a question that is impossible to answer and foolish to ask (unless one knows what is “right” for a society)’ (Pauly, 2001: 730). It is foolish to ask the question. It is impossible to answer it. The only solution is to ask one further question and hope for the best: could the basic entitlement in Singapore have been set too low? 4.3.2

Income Inequality in Singapore

The Gini coefficient is the numerical measure of income inequality. The higher the coefficient, the greater the inequality. It is well known that the Gini coefficient in Singapore is relatively high. It rose from 0.436 in 1990 to 0.442 in 2000 and 0.485 in 2007 (Department

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of Statistics, 2000b: 2; 2001: 84; 2007b: 9; 2008: 6). After an adjustment for taxes and safety nets it went down to 0.439 in 2006 but then leapt to 0.460 in 2007. A statistic of 0.485 or even 0.460 is high. It is higher than the United States (0.41), the UK (0.36), Indonesia (0.34), the Netherlands (0.31), Norway (0.26) or Japan (0.25). It is, of course, lower than China (0.45), the Philippines (0.46), Malaysia (0.49), Argentina (0.53), Zimbabwe (0.61) or Sierra Leone (0.63) (United Nations Development Programme, 2006). Singapore is above the median. The ratio of the top 20 per cent to the lowest 20 per cent of average incomes was 9.99 in 2000. It had become 12.90 by 2007 (Department of Statistics, 2008: 6). It may become higher still. The distribution of earned income in Singapore is skewed. In Singapore in 2007, 2090 assessable residents had an annual income of at least S$1,000,000 each. They paid an average of S$321,955 in income tax. Their income tax alone was 11 per cent of the total income tax take (Inland Revenue Authority, 2007: 110). Some very rich people make their homes in Singapore. What has inflated the Gini coefficient is likely to have been the impact of some very poor people as well. A fundamental change seems to have occurred in Singapore in the decade following the ‘Asian Crisis’ in 1997–98. For the bottom 60 per cent of workers, individual wages had declined cumulatively by 7 to 15 per cent by 2006 despite a return to full employment and a rate of economic growth of 5 to 7 per cent. The median monthly starting pay for labourers and cleaners had, for example, gone down from S$860 in1996 to S$600 by 2006 (Yeoh, 2007: 41). At the top, the rich had bounced back. Income inequality in Singapore is on the rise due to the globally integrated labour force, the liberalisation of trade and investment, the intense competition with low-wage economies such as China, the computerisation of routine clerical work, the offshoring of production processes that need not be completed at home, the hollowing-out of manual jobs even as the worldwide premium on tradable skills has increased. Pay is stagnating for less-educated groups such as foreign labourers, older workers, and unskilled locals in their prime. Inequality in earnings is magnified by asset ownership. Capital gains and income earned abroad are tax exempt. The Department of Statistics reports that the average monthly household income from work in 2008 was S$7750. The median monthly household income from work was S$5480 (Department of Statistics, 2009: 1). The figures for 2006 had been S$6260 and S$4500 (Department of Statistics, 2007b: 3). The figures at the time of the Household Expenditure Survey in 2005 had been even lower. They are shown in Figure 4.1. The Sunday Times in 2008 sampled 353 Singaporeans to find out how much money would be required by a family of four for a comfortable standard of living. The answers confirm that S$7750 or even S$5480 would

Median = $3.83

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160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0

on

Frequency

Affordable health care

Monthly household income

Source:

Department of Statistics (2005: Table 68).

Figure 4.1

Resident household by monthly income from work, 2002/03

more or less be enough. At the bottom there was 24 per cent who said they could manage on less than S$4100 per month. In the middle there was 42 per cent who wanted S$4100 to S$5800. At the top there was 24 per cent who were determined to have S$5800 and above (D.W. Tan, 2008: 7). If the sample is a representative one, life in Singapore is perceived by Singaporeans as being expensive but for all that still affordable. The totals, however, conceal the microclimates. Figure 4.1 provides evidence on the distribution and not just the averages. In 2005 there were about 90,000 to 100,000 resident households with an average monthly income of S$640 per month. The top decile had an average monthly income of S$17,080 (Department of Statistics, 2007b: 3). Assuming a family of four, the average income per capita went from S$160 or less to S$4270 or more. Life was good in 2005 and better still in 2008. The lowest decile in 2008 had an average monthly household income of S$1310. The highest decile had an average monthly household income of S$23,020. Average household income from work increased in both nominal and real terms for all income groups in 2008 (Department of Statistics, 2009: 4). The exception would be those households where there was no work at all or where incomes were far below the average or the median for the decile. Absolute deprivation is the primary concern. Even very poor people must eat. The Department of Statistics estimates that a family of four needs S$1040 a month for basic necessities. The Ministry of Community Development, Youth and Sports pegs the public assistance line at S$1500 (Yeoh, 2007: 41). Either way, the S$1310 being earned by the lowest

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income decile has had to be augmented by Government benefits such as CPF top-ups and rebates on utilities in order to guarantee all citizens a decent minimum. Resident households with no working member received on average S$1480 per capita as their share in the Government’s budget surplus in 2008 (Department of Statistics, 2009: 6). Absolute deprivation is the primary concern. Yet deprivation can be relative as well. The existing dispersion in income from work is in the range of 17.5 to 1. Income from other sources such as rents and investments widens still further the distribution. The difference is there. The real question is whether it should be called an inequitable difference or whether it is simply what happens when one player scores well at chess. 4.3.3

The Debate That Never Was

Income inequality is a fact. It is also a broad philosophical topic that lies beyond the remit of health care in Singapore. Affordable health care in Singapore is about basic access, not societal levelling. Levelling and health in Singapore are widely regarded as two separate themes rather than two sides of a single coin. Health is a topic that is widely discussed. Income inequality is a footnote and an also-ran. One reason is historical. In the formative years of modern Singapore, Communism was a live issue. In Malaya, Comrade Chin Peng was fighting the British and an Emergency from 1948 to 1960 had to be declared. In Vietnam there was Dien Bien Phu in 1954 and the fall of Saigon in 1975. President Eisenhower in the United States, referring specifically to South-East Asia, had expressed the fear that the countries would fall like dominoes. Many ethnic Chinese were proud of the achievements of Mao’s China. Many still had relatives in China and were subject to blackmail. The Labour Front party in Singapore was known to have been infiltrated. Cold War Asia was so polarised that an argument for more equal incomes could be taken to be subversive and Marxist. Later on the People’s Action Party decided that it had to clamp down on disruptive strikes and cost-pushing unions. In 1955 alone there were 275 strikes. Almost one million man-days were lost. Continuous disturbance was a brake on investment and expansion at a time when unemployment stood at 13.5 per cent and the population was growing annually by 4.4 per cent. The People’s Action Party made the decision that militant proletarianism had effectively to be crushed if multinational capital and transnational talent were to be attracted into the country. Exports, jobs and a First World standard of living come at a price. Lee Kwan Yew encapsulates his plus-sum vision in the following words: ‘Sustained growth ensures stability, which encourages investments that

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create wealth. . . . We have established a virtuous cycle – low expenditure, high savings; low welfare, high investment’ (Lee, 2000: 130). The national ideology became general affluence through growth rather than specific affluence through redistribution. People were expected to pull themselves up by their own bootstraps. Equality in the circumstances became an emphasis on a level playing field. It was not a sharing out of life’s prizes after they had been fairly and justly won. The media went along with the groundswell. Even if an advocate of ‘soak the rich’ had wanted to throw exploitation and injustice into the meltingpot, it is unlikely that he would have found it easy to make his views widely known. Nor would a levelling strategy necessarily have a general appeal. Told that the average American chief executive in 2007 was being paid 262 times the salary of the average American worker, many people in Britain would think of minimum wages, punitive taxes and shareholder caps on excessive compensation. Told that the top 1 per cent of American households increased their share in the national income from 8 per cent in 1980 to 16 per cent in 2004, many people in Singapore would put in extra hours, improve their commercial Chinese and sign up for an MBA. Singapore is a dynamic society, always looking to the future. The beneficiaries of economic growth and political stability, residents have, as Ho explains, become accustomed to moving up and moving on: Singaporeans born in the first 10 years of independence were likely to have enjoyed high upward mobility for two reasons. First, they could easily overtake their parents in terms of educational attainment as the preceding generations tended to be more lowly educated on average. Second, there were tremendous investments and innovations in public education in the early years of nation building. (Ho, 2007: 44)

Mean schooling was 3.16 years in 1960. It had risen to 9.3 years in 2006. The rate of change cannot be kept up. Even with the expansion in educational opportunities, the bottom deciles are being left behind. The upper deciles are consolidating their head start. Educated parents have higher incomes. They have smaller families. They can invest more in coaching and fees. It may be that an intergenerational transmission of life-chances and privileges is emerging. It may be that social mobility is not what it was before social space became mapped and marked. Ho finds that one more year of schooling for the father is associated with about 0.168 more years of schooling for his son (ibid.: 44). Only 47 per cent of the prestigious grants awarded in 2008 by the Public Service Commission went to university entrants dwelling in public-sector properties. About 82 per cent of Singaporeans live in such units. The middle classes are sealing in their gains. Class reproduction is making itself felt.

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Tan Ern Ser has made clear that a middle-class standard of living is not the same as a one-class society. Interviewing Singaporeans on the contours of subjective layering, self-perceived, 2 per cent told him that they were upper class, 41 per cent that they were middle class, 51 per cent that they were working class and 6 per cent that they were lower class. One of the surprises thrown up by his study is that subjective self-definitions are only loosely linked to objective criteria such as income category or type of house. In the income band S$3000–S$7999, 46 per cent of respondents said they were middle class and 52 per cent that they were working class. For the occupants of five-room flats the percentage calling themselves middle class and working class, respectively, was exactly the same – 49 per cent (Tan, 2004: 15, 16). Near-universal home ownership is apparently not enough for a society to see itself as homogeneous and flat. In fact, Tan says, an achievementorientated society can be riven by jealousy and bitterness precisely because different talents are crowned with different prizes: Singapore is a meritocratic society that operates on the basis of equality of opportunity and rewarding by performance. Logically, this does not make it a classless society, since equal opportunity does not necessarily lead to equal outcomes, and rewarding by merit assumes unequal attainments. Indeed, Singapore society is characterized by a hierarchy of positions with unequal power, authority, resources, and rewards. (Ibid.: 2)

The aspirations may be the same but the outcomes are not. Consensus, however, is quintessentially itself. Even more than ability, Singaporean respondents told Tan, the principal determinant of success is luck: ‘This finding resonates with a common stereotype of the Chinese as gamblers’ (ibid.: 22). That said, most people in Singapore – 78 per cent in Tan’s study – seem to believe that Singapore is a land of opportunity. If they do their best they will succeed. In the case of younger Singaporeans, the figure was 82 per cent. In the case of residents in small one- and tworoom flats, the proportion was 79 per cent. The deprived were 1 per cent more optimistic about the open road than was the population as a whole (ibid.: 71). Older Singaporeans, in the consumption phase of their life cycle, were more inclined than the average to look to State welfare for an improvement in their standard of living. Support for State welfare appears to be more closely correlated with age than with class. The belief in an open road is itself an important reason why income equality is not widely debated. Ex ante there is general access to training (including tertiary education). Ex post there is an observable rise in living standards. The average household income of S$4943 in the Census year of 2000 had been S$3076 a decade before. It had risen by 2.8 per cent per

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annum in real terms. About 35 per cent of families in 1999 earned at least S$5000 a month, 10 per cent at least S$10,000. The figures had been only 16 per cent and 2.8 per cent, respectively, in 1990 (Department of Statistics, 200l: 79). In 2000 the average household income was S$4943. In 2008 it was S$7750. Between 2000 and 2008 the average household income had risen annually by 2.3 per cent at a time when inflation was 2 per cent or less. Singaporeans take pride in improvements such as these. The Census of 2000 revealed that 72 per cent of citizens lived in four-room HDB flats or in even more expensive units. About 57 per cent of working citizens were in non-manual occupations. About 40 per cent of working citizens had completed at least their secondary education. Only 8 per cent of Singaporeans lived in households with a total monthly income of S$1000 or less. Singaporeans expect that the Census of 2010 will reveal data that are certainly no worse and probably much better than this. The upgrading is shown by Figure 4.2. It reveals that most of the new jobs being taken up by residents pay more than the median income. Intergenerational mobility and improvement is a fact. Nine out of 10 jobs obtained by residents between 1997 and 2007 were for professionals, managers, executives and technicians (PMETS). At the same time the proportion of full-time employees who were on a low income of S$1200 or less had fallen significantly. They comprised 22 per cent of the employed labour force between 2003 and 2006. In 2007 they comprised 20 per cent. The median monthly income in Singapore rose by 7.7 per cent in the year ending June 2007 (Ministry of Manpower, 2008a: 20, 21). Figure 4.3 illustrates the downward trend. The figures in the brackets below the years are the real purchasing power of S$1200 in 2004 dollars. Clearly, S$1200 was worth more in 1996 than it was in 2007. The change in the consumer price index (CPI) in that period was 9.2 per cent. This, however, is less than the fall in the resident population on low incomes, which was 12.9 per cent. In all of this, Singapore has been able to build on the availability of education and the determination of young people to succeed. The literacy rate is 94.2 per cent. Households where no one has completed secondary education have a median income of S$1443; where at least one child has completed polytechnic, S$5324; where there is at least one graduate, S$7929 (5.5 times the income of the least-educated category) (Department of Statistics, 2001: 81). The rate of return to education is believed to be as high as 13.1 per cent (Sakellariou, 2003) or 13.2 per cent (Low et al., 2004). The productivity of labour itself advanced annually by 4.1 per cent on average between 1979 and 2000. Real wages have gone up by approximately the

88

Working Proprietors ($3,000)

2.6%

Professionals ($4,330)

38.6%

Technicians & Associate Professionals ($2,710)

27.4%

Clerical Workers ($1,840)

5.5%

Median income $2330

Ministry of Manpower (2008a: 6).

The figures in parentheses are the average income for each occupational group.

Managers & Administrators ($5,830)

20.9%

Above median income

Figure 4.2 Share of resident employment growth, 1997–2007

Source:

Note:

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

% 45.0

Service & Sales Workers ($1,430)

3.8%

Production Craftsmen ($1,750)

–5.0%

Plant & Machine Operators ($1,350)

–10.0%

Below median income

Cleaners & Labourers ($870)

16.3%

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500

35

450

30

400 Number ('000)

300

20

250 15

200 150

Share (%)

25

350

10

100 5

50 0

0 1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

($1,273) ($1,247) ($1,251) ($1,250) ($1,235) ($1,222) ($1,227) ($1,221) ($1200) ($1,195) ($1,183) ($1,159) Number ('000)

454.2

406.7

360.4

363.5

n.a

314.6

327.6

324.5

331.5

n.a

363.7

339.5

Proportion (%)

33.1

28.8

25.6

25.9

n.a

21.6

22.6

22.2

22.2

n.a

22.2

20.2

Notes: 1. Data exclude full-time National Servicemen. 2. The Labour Force Survey was not conducted in 2000 and 2005 because of the General Household Survey and the Population Census, respectively. Source:

Ministry of Manpower (2007d).

Figure 4.3

Low-wage workers earning $1,200 or less (full-time basis)

same percentage. Even if people find payment for health a burden in the short run, it is a characteristic of a young country that young people look to the future. They expect to ride upward on the moving staircase. The mindset is growth and improvement, meritocracy and ambition. Progress keeps the green-eyed monster at bay. Tomorrow is all around. The relationship between income, age and education is illustrated in Figure 4.4. 4.3.4

Inequality: Growth or Redistribution?

Economic growth has meant a truce on inequality. Resentment and alienation become less divisive once men and women grasp that they are all passengers on the same escalator going up: ‘In the advanced country . . . increased production is an alternative to redistribution. . . . It is the increase in output in recent decades, not the redistribution of income, which has brought the great material increase, the well-being of the average man’ (Galbraith, 1958: 86, 87). Growth, Galbraith argued in The Affluent Society, is the ultimate solvent of social tensions.

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Social policy in an ageing society 8000 Lower Secondary

7000 6000

Upper Secondary

Income (S$)

Secondary

Degree

5000 Polytechnic Diploma

4000 3000 Upper Secondary

Polytechnic Diploma

2000

Secondary Lower Secondary Primary

1000 Degree

0 15–19

20–29

30–39

40–49

Primary

50–59

60 & Over

Age (years)

Source:

Ministry of Manpower (2007d: Table 17).

Figure 4.4

Median monthly income by age and qualifications

Growth was essential but it would not be enough. Galbraith, writing when Harold Macmillan was reminding the British that they had never had it so good, was insistent that growth by itself would not be the panacea that would eliminate poverty and privation for all time. State intervention would be required if good schools were to be built, medical care made affordable and the deprived given a helping hand up: ‘An affluent society, that is also both compassionate and rational, would, no doubt, secure to all who needed it the minimum income essential for decency and comfort’ (ibid.: 265). Galbraith, in other words, was a theorist both of growth and of redistribution. Growth in Singapore has traditionally taken precedence over sharing out. The question is whether Galbraith on redistribution is now just as relevant in the new Singapore as Galbraith on prosperity as a safetyvalve may be said to have been in the troubled Singapore of the Emergency years. Globalisation, the upgrading of skills, the stagnation in lower-decile pay, the increase in the GST, the high price of food and the widening Gini coefficient are changing the nature of the game. They are suggesting to thinking Singaporeans that to reopen the debate on relative shares is not to destabilise the fabric of managed capitalism. The Communists were fighting the British in the jungles of Malaya at the very time that Galbraith and Macmillan were proclaiming their truce. To criticise inequality then would have been to imperil the goose that was laying the golden eggs. To fail to criticise inequality now might have precisely the same effect. Lee Kuan Yew has taken the lead in recognising the

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social cost that the unequal distribution of brains and aptitudes can all too easily impose: ‘A society will remain cohesive only if there is a certain sense of equity and fair play. If I have unbridled capitalism, winner takes all, like in America, and have an underclass, I will find my minorities over-represented and society will be in jeopardy. They will riot’ (Lee, 2008b: 20). That is just the problem. On the one hand Lee is calling for a cohesive society with a strong sense of affiliation and community. On the other hand, he is opposed to idle parasites who are quick to take and slow to give. His solution may be guarded but it is nonetheless the State: We raised the levels of the losers. We give them (subsidised) homes which they will not be able to buy, we give their children equal education in schools they otherwise can’t afford, health services and so on. When they lose their jobs because the jobs have migrated – and they are not educated enough to take the jobs that require higher skills – all right, you take this job, lower pay, we make it up. Here is Workfare – give you extra, but continue work. If you stop working, we give you nothing. We want no layabouts. (Ibid.: 20)

No one should feel abandoned. No one, however, should refuse to do his or her share. Yeoh Lam Keong is also concerned about the latent threat to the social compact. As Vice-President of the Economic Society of Singapore and a senior officer in the Government of Singapore Investment Corporation, his assessment of public policy issues must be taken seriously. Yeoh has issued the following warning about social exclusion: With long-term wage stagnation, this poverty gap will not easily be whittled away. An under class of our own may be developing. If wages continue to stagnate, there will be a limit to poverty alleviation through working longer and harder, or driving the unemployment rate lower. In the long run, this malign combination of median wage stagnation and rising inequality is potentially poisonous for the social compact underpinning Singapore’s virtuous circle of strong governance. . . . Many will feel their stake in the common enterprise of prosperity has been eroded. What remains may be the bitter, zero-sum politics of envy and dead-end populism. (Yeoh, 2007: 41)

Belt-tightening, downward mobility and income insecurity are the new realities in a world where the new East Asian tigers are Vietnam and China. Singaporeans left behind will feel angry and afraid. A rising tide no longer lifts all the boats irrespective of size. Just as bad: some Singaporeans are concerned that they will soon have no boat at all. Governments lose legitimacy where significant numbers of their citizens feel that they are on their way down. Class conflict is not going to erupt on to the streets. That, however, is no reason to be complacent about the latent Them-and-Us. Perceived

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Apartheid, the unloved child of unsentimental productivity, would undermine the heavy investment that has been made in nationhood and solidarity. As Galbraith himself has warned: ‘Perhaps the disadvantaged are now too few to make a revolution. But they could make life uncomfortable for all’ (Galbraith, 1986: 5). He also says that it is dispossession even more than Chairman Mao that is the real threat to stability and harmony in the modern exchange economy: ‘Capitalism wouldn’t have survived if it hadn’t had the rough, hard edges taken off by the welfare state’ (Galbraith, 1988: 81). Yeoh is not proposing a welfare State along Galbraithian lines. The politicisation of the gift relationship is not the Singaporean way. There is also a widely shared perception in Singaporean political circles that ambitious welfare in Europe and America has itself fallen victim to overstretched budgets, manipulative scrounging, crowding out and fiscal exigency. What Yeoh is saying is that the existing emphasis on upgrading, mobility and incentives must be complemented by proper safety nets if the affluent society is truly to be all-encompassing and not just cost-effective: ‘With Singapore’s per capita income at around US$31,000 (S$45,000), it is undesirable, indeed unacceptable, that the bottom 10 per cent of Singapore households still struggle to meet basic needs and have little means to invest in their families’ betterment’ (Yeoh, 2007: 42). The average household income rose annually by 2.3 per cent from 2000 to 2008. Not so the average income of the lowest decile. Life in the top decile is good. It is the lowest two deciles who are not keeping up. It is they who most need the help (Department of Statistics, 2006c: 27). 4.3.5

Unequal Incomes and Unequal Health

Workfare will be discussed in Chapter 10. It is one way of improving the position of the bottom deciles. Unemployment benefits and a pension plan might one day have to be considered as well. And then there is health. It is possible that the payment for health will have to be reappraised in the light of a new emphasis on the effective integration into Singaporean life of the disabled, the schizophrenic, the uninsurable, the not-very-intelligent, the poorly paid, the old and the ill. A resilient community presupposes a citizen’s minimum. That is the policy and the commitment. Social risk-pooling may be inevitable in a society that turns no one away. Inequality of income is not the same as inequality of health status. It is often the case once a country has reached a certain level of affluence that there is no significant link between incremental spending and incremental health. Marginal improvement is small once the nation has reached the

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flat of the curve: ‘The marginal contribution of medical care to health in developed countries is very small. . . . Medical intervention has a significant effect on outcome in only a small fraction of the cases seen by the average physician’ (Fuchs, 1974: 64). The result is of direct relevance to the evaluation of inequalities in spending and health. In 2005 in Singapore the dispersion in average monthly household income was 13.9. The top decile of resident households was earning 13.9 times more than the bottom decile (Department of Statistics, 2006c: 28). Translated into medical care, the top quintile in the Household Expenditure Survey in 2002/03 was putting a monthly average of S$330.7 into health while the lowest quintile in the same year was found to be budgeting only S$102.4 (Department of Statistics, 2005: 100). The ratio was 3.2:1. What is needed next is, however, the third ratio. It is the dead end that stops dead the debate. The third ratio is not known. The third ratio would identify the dispersion in health status. It is the most relevant of the three to the discussion of affordable health. If the richer deciles are spending more on A-class wards and tastier food, the patterned privilege is in hotel accommodation but not in medical attention. It is only a topic in health if the richer deciles are consuming non-marginal care which is boosting their outcome indicators to a plane that the deprived cannot reach because they have run out of cash. If the cut-off for basic care is too low, then affordable access might remain even now an unconquered peak. People with larger Medisave balances will be in a position to afford more treatments, more tests and more drugs. People with higher incomes will be better placed to come up with extra funding when the Medisave account runs dry. People with private insurance will be better able to cover the deductibles and the cost-shares, to choose a top-of-the-range appliance, to pay for the most experienced surgeon. Patients who can afford a hip replacement will not have to live in pain. Patients who can afford a wonder drug will not feel that their chances are slim. Money talks. Not everyone has the same amount of money to spend. If the cut-off is too low, then there is an inequity that should be addressed. If it is not, then there is an inequality – and life is full of those. Income inequality need not mean unequal access to essential services. It is not even clear that unequal access to essential services will be translated into unequal medical outcomes at the end of the day. Dramatic as the income inequalities are, they might not mean that the better-doctored enjoy more disease-free life-days specifically because they can pay for lifesaving medical care. The rich need not be in better health than the poor. A one-off study in the Singapore Medical Journal showed in 1999 that the percentage of perfect functioning actually declined as the level of income rose. What the

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Social policy in an ageing society

investigators found was that 61.7 per cent of households with incomes under S$30,000 reported perfect vision, 96.9 per cent perfect dexterity and 73.9 per cent perfect mental health. The figures for households earning S$180,000 or more were only 29.7 per cent, 89.2 per cent and 27.8 per cent, respectively (Wang and Chen, 1999: Table VIII). The study was not followed up and little further research has been done. Ignorance keeps its own counsel. The facts are not known. Wang and Chen thought that the rich were in worse shape than the poor. The Singapore Heart Foundation inferred, however, that the poor were in worse shape than the rich. Although selective, their evidence confirmed a widely held intuition, that S$180,000 is after all a very good antidote to feeling ill. Their research method was a sample survey of 280 low-income households conducted in 2007. The Heart Foundation discovered that 32 per cent of respondents were suffering from high blood pressure and 10 per cent were at risk from diabetes. The National Health Survey in 2004 had found that the figures for the population as a whole were less: 25 per cent and 8 per cent, respectively (J. Tan, 2008: H26). Almost half of the lower-income sample suffered from two medical conditions or more. One explanation might be lifestyle: the lower-income sample might have been pigging out on fat and smokes. Another explanation might be economics: incomes might have been too high for means-tested Medifund but too low for urgent and essential attention. Hypertension and diabetes might have been all that the 280 respondents could afford. The precise causes are not clear. Until, however, the reasons are known, the policymakers will not be able to prescribe the appropriate cure. Evidence from the Singapore Dental Health Foundation (SDHF) in 2008 was just as difficult to interpret. This study found that most lowincome employees (defined to be employees earning less than S$1500 a month) did not visit the dentist at least twice a year. Mindset, as before, seems to have been at least as important as economics. One-quarter of the blue-collar operatives in the sample said they had not seen a dentist because they were too busy to invest in prevention. Two-fifths said it was because they felt no pain and therefore concluded that they had no need. Crucially, however, about a fifth said they had cut back on dentistry because money was tight (SDHF, www.dentalhealth.org.sg/publicinformation). Money talks. Deprived people find it harder to make themselves heard. Yet it is not just in Singapore that diamonds are a patient’s best friend. Alzheimer’s Disease affects 400,000 people in Britain. The drug Aricept which keeps the symptoms at bay costs £2.50 per day – £912 a year – and the treatment must continue. It is only available on the National Health Service for patients suffering from the more severe forms of the disease. The National Institute for Clinical Excellence (NICE) which advises the

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NHS on treatments has ruled that Aricept is not cost-effective for patients in the early stages of the disease. The High Court has backed it up. The result is that patients in the early stages of the disease who want to stem its advance are required to find the £912 a year for themselves. It is a large sum of money for a worker on the minimum wage. The minimum wage currently stands at £5.73 per hour. The low-waged worker would have to work for 165 hours to buy a year’s supply of Aricept for his or her spouse or parent. It separates the sheep from the goats.

4.4

COMPETITION

The fourth goal is ‘to rely on competition and market forces to improve service and raise efficiency’. Singapore since its foundation as a free port in 1819 has always been a centre of enterprise and price signals. It is in keeping with that tradition that it should avoid a National Health system lest this take decisions away from supply and demand. In the public sector there is a choice of ward: patients are free to select their class. Private hospitals compete with State: patients are entitled to spend their Medisave and MediShield in the sector that they prefer. There are many general practitioners. Patients can shop around and choose again. Both the Singapore Medical Association and the Singapore Dental Association have withdrawn their fee guidelines. The Competition Commission of Singapore discourages professional bodies from acting as cartels. Prior to the Competition Act of 2006 the Singapore Medical Association had issued Guidelines on Fees (GOF) to doctors in private practice. Fees for public-sector practitioners were and are influenced by the Ministry of Health. While only guidelines, doctors who charged more than the GOF norm had to inform their patients in advance. Where they did not do so, they could be asked to refund the difference. After 2006 the fees were hived off to the free economic market. The notion of overcharging ceased to have any operational significance. No less an authority than the Director of the National Neuroscience Institute has expressed the opinion that it was a serious error of judgement to rely on competition when authority would have been the more reliable tool: The abandonment of the GOF has made patients the easy prey of unscrupulous private specialists. They can now charge as much as they think they can squeeze out of patients. Charges tend to vary, depending on the patients’ addresses, whether they have medical insurance policies or are dressed expensively or wear jewellery. Foreign patients are more likely to be overcharged because they have no time to shop around. (Lee, 2008: A23)

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Social policy in an ageing society

A doctor demands S$100,000 for a gall bladder procedure that usually costs S$10,000. A doctor wants S$32,000 for knee reconstruction when the GOF norm had been S$2700 to S$4400. Dr Lee is concerned about unnecessary procedures, harm to patients, ‘shameless profiteering’ and an ‘erosion of medical ethics’. The market mode of allocation presupposes roughly equal stocks of knowledge. Health care is, however, the world of information asymmetry. Dr Lee writes that ‘medical care is not a commodity’ (ibid.). Market failure to her suggests pragmatic GOF. It is, however, the thrust of Government policy that supply and demand should play an important role in price-determination and in the bottom-up selection of the most appropriate agent. Hospitals are now allowed to advertise their services and charges. Before 2004 they could make their product known only in the Yellow Pages or through brochures available on their premises. Doctors can provide information about their qualifications, contact details and prices. They must not, however, create unjustified expectations, exaggerate their success rate, run down their competitors or include testimonials or endorsements in their publicity. The law must ensure that claims are statements of fact and nothing more. Given the safeguards, it is hoped that value for money will be promoted through the hawking of the wares. Patients will have the opportunity of learning what is on offer. The Internet nowadays is a consumer-led and cost-efficient way of sampling the pool. The client has access to television documentaries and newspaper reports. Posters on buses and taxis are within the law. The Ministry of Health contributes to competition by providing a website on which the prices of hospital procedures are listed and compared. Implicit in this is the idea that the responsible shopper, even if a patient, has no wish to pay over the odds. The website is being extended to include comparative success indicators such as recovery and survival following surgery or sugar levels among diabetics receiving treatment. Many patients will not look at such data. Even more will not act on it. Primary-care doctors are, however, a different matter. Transparency augments their freedom to identify the right intervention for their patient. It also gives suppliers a benchmark by which to assess their performance. Hospitals do not want to be named and shamed. Institutions that are shamed will have a material incentive to improve.

4.5

COST CONTAINMENT

The fifth goal is ‘to intervene directly in the health care sector, when necessary, where the market fails to keep health care costs down’. The

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consideration relates to market failure and specifically to care-cost inflation. The statement of intent in the White Paper could not be more evocative: ‘In health care, supply tends to create its own demand, thus raising health care expenditure. The Government therefore needs to intervene to prevent an oversupply of services, to dampen unnecessary demand and ultimately to control costs’ (Ministry of Health, 1993). Health care takes up 14.3 per cent of the GDP in the United States. The figure focuses the mind on what could happen even in low-spending Singapore. Retail prices rose from a CPI of 99.7 in 1998 to only 102.2 in 2003 (2.7 per cent). Health care prices rose from 100.1 to 111.3 in the same six-year period (11.2 per cent) (Department of Statistics, 2004: 214). The official figure for medical care cost inflation was about 2 per cent per annum from 1998 to 2003. The official estimate for 2002 to 2006 was 2.4 per cent a year. Lim calculated that the annual increase in health care costs for the longer period from 1994 to 2003 was something like 3.8 per cent (M.K. Lim, 2004: 91). Asher and Nandy in 2006 calculated that medical cost inflation was by then running at 3.2 per cent per annum. Although less than 3.8 per cent, it was four times the general rate of inflation (Asher and Nandy, 2006: 82n). A year later the Department of Statistics announced that the figures had become even more worrying. General inflation from September 2006 to July 2007 had gone up to 2.7 per cent (the highest in 12 years). Health care cost inflation had reached 5.9 per cent. It was the fastest rate of change of any of the main categories of consumables. Food had risen by 3.7 per cent. Transport had risen by 2.2 per cent (Department of Statistics, 2007c). Taking 2004 = 100, all items had gone up to 104.2 but health care had gone up to 107.4. By early 2008 the situation had worsened still further. The CPI was rising at 6.7 per cent. Health care was rising at 7.3 per cent. Lower oil prices, falling food prices and world-wide recession will damp down the increases. They will do nothing to narrow the gap. The rate of change in the medical price index has been in excess of the CPI as a whole. Fees in hospitals have soared. Wages of auxiliary staff have gone up. Traditional Chinese medicine (not included in the medical price index but a burden nonetheless) cost 33 per cent more in 2007 than in 2005. Figure 4.5 shows that the gap is increasing over time. Any kind of inflation in Singapore is a threat to the system. Wages, interest rates, CPF accounts are not index linked. Inflation could halve or more than halve the purchasing power of medical savings and retirement accounts. That is why macroeconomic policy is a topic in social economics as well as the cycle. An appreciating exchange rate (so long as it does not eat into growth or put employed people out of work) is good for good health. It keeps down the prices of imported consumables, raw materials and, indeed, medical inputs brought in from abroad. Yet sector-specific policies

98

–3

–2

–1

0

1

2

3

4

5

6

7

2001

2002

2003

Year

2004

2005

2007

Food Clothing & Footwear Housing Transport & Communication Education & Stationery Health care Recreation & Others CPI

2006

Figure 4.5 Percentage change in prices

Sources: Department of Statistics, Singapore Press Release – Singapore Consumer Price Index, November 2007, www.singstat.gov.sg/news/news/ cpinov2007.pdf; Department of Statistics (2007d: Chapter 18), www.singstat.gov.sg/pubn/reference/yos/statsT-prices.pdf.

Percentage change

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are needed as well if costs are not to soar. Regulations and rules nudge the clients and the providers in a direction other than that which would have been ground out by pure market freedom and the invisible hand. In the case of health, cost control operates through both supply and demand. On the supply side, the number of doctors is limited by restrictions on foreign-trained professionals and by the ceiling entry into domestic medical education. Financial counselling preadmission has been made compulsory so that patients will make informed choices in the light of affordability. New techniques and areas of specialisation have been made subject to prior authorisation. Subsidies in the State sector and licences in the private sector have influenced the bedstock. Services in public (but not private) hospitals have come under the umbrella of indicative price caps: it focuses the mind to have a guideline to the effect that the total costs of surgery in Class C ought not to exceed S$330 but that in B1 the charges can go to S$6435. The Casemix method reimburses the hospitals on the basis of type of treatment provided and not just patient-days in beds. In a number of ways it has been the Ministry’s policy towards inputs and outputs rather than demand-side limitations that has kept care-cost inflation within bounds. Yet the demand side is designed to be cost containing as well. Thirdparty payment in some countries has meant a tendency towards excessive consumption of marginal treatments together with a failure to seek out the best value for money. Medical savings accounts are therefore in line not just with goal five (cost containment) but also with the goals of promoting good health (goal one) and encouraging personal responsibility (goal two). Patients are unable to claim reimbursement if they turn directly to a specialist or hospital rather than waiting for a gatekeeper referral. The list of procedures on which patients can spend their Medisave and MediShield is more restrictive than most Singaporeans would prefer. General practitioners reduce waste by counselling on side-effects, guarding against supplier-padded demand and assisting clients to overcome their information asymmetry. Reimbursement by diagnostic-related group discourages suppliers from recommending unnecessary tests, extended stays, speculative interventions or branded drugs. It is a reason why generics in Singapore now represent two-thirds of the total. Prominent among the demand-side controls have been out-of-pocket deductibles and rationing by co-payment as an incentive to spend money cost-consciously. The findings of the RAND health experiment in the United States showed that cost-sharing does serve as a barrier to use (Newhouse and the Insurance Experiment Group, 1993: 41, 338). Singapore does not in the first instance ration care by British-type waiting times or waiting lists. It allocates not by inconvenience, queues and delay but, more directly, by the willingness and the ability to pay. The question must be whether the

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downward-sloping demand curve that was identified by RAND can be expected to ration care in the Singapore context. The bite of the charges can, for one thing, be frustrated by rising disposable incomes, non-medical savings and the income elasticity of demand. Household spending on medical care was 1.7 per cent of total household spending in 1978, 2.6 per cent in 1988, 2.6 per cent in 1993, 3.3 per cent in 1998, 5.1 per cent in 2003 (Department of Statistics, 2000a: xiv; 2005: viii). A figure of 5.1 per cent is not excessive compared with 21.3 per cent for food and 22.4 per cent for housing. The Engel Curve is on the side of personal responsibility. Whereas consumer spending on food, clothing and household durables rose by 2.5 per cent annually between 1990 and 2003, the average annual rate of growth of private spending on education and health was 8 per cent (Monetary Authority of Singapore, 2004: 44). Singaporeans do not feel that they need to make small savings where their health is concerned. People whose living standards are high are in any case better placed to pay for private insurance. Medisave may contain moral hazard. It is not the only kid on the block. Health insurance might still allow the weakness of will to slip through the net. Culture has a spending bias. There is a tendency in Singapore to proxy quality by costliness: ‘Providers compete by recruiting the best-known physicians with higher pay and by having the most sophisticated expensive technology. Price competition is secondary’ (Hsaio, 2001: 734). Unequal information blunts the edge of cost-sharing. Charges are a disincentive but still the patient as principal assumes that the doctor knows best. Conspicuous production is a subtle form of supplier-induced demand: ‘The market power on the supply side is much greater than the demand side. Providers can induce demand, offsetting the reduction in patient-initiated demand from being uninsured’ (ibid.: 734). The ‘ad hocs’ and the add-ons add up. They make the demand-side restraints porous. Perhaps they will not be enough to hold back the tide.

5.

Payment for health: Medisave

The third CPF account is Medisave. About 18.8 per cent of total CPF claims are held in this account. Medical savings accounts (MSAs) in Singapore are expected to become universal. Compulsion makes the system work: Voluntary enrolment may result in healthier people choosing MSAs program while leaving traditional comprehensive health insurance plans to face higher average risk and subsequently higher average premiums. Also, when catastrophic health insurance protection is voluntary instead of mandatory, as in the case of voluntary MediShield enrollment in Singapore, enrollees are exposed to greater risk of catastrophic spending. In this case, adverse selection in the voluntary catastrophic insurance program can also emerge. (Hanvoravongchai, 2002: 34)

The self-employed are allowed to opt out of the superannuation component. As for Medisave, however, they have no choice but to remain on board. Medisave is one part of Singapore’s ‘Three Ms’. The second M is MediShield. The third M is Medifund. The three Ms are discussed in this chapter and the next. The first section of this chapter explains the delivery of health care in Singapore. The second section discusses the subsidies and the means-test. The third section, returning from provision to prepayment, says what Medisave is and what it is not. The fourth section examines the limits and the exclusions. The fifth and last section is entitled ‘A decent minimum?’. It asks how much medical attention the representative Singaporean will need. It asks how much Medisave the members will have in store to put things right.

5.1

THE DELIVERY OF CARE

Singapore has both a public and a private delivery system. Patients, local and foreign, can move freely between the sectors. The majority of beds in the State sector are subsidised. Beds in the private sector are not.

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Manpower and Institutions

The public sector provides about 20 per cent of primary care. It operates 18 community health polyclinics and 15 maternal and child health clinics. Charges are regulated. A 50 per cent subsidy is paid to the supplier. About 300 general practitioners are employed in this sector. The private sector provides 80 per cent of primary care. It does this through 2000 practices. There the average consultation fee is S$10–S$15 and the rate is not regulated. Patients, not registered as in a capitation system, are free to walk in for a consultation at any practice. Continuity can be a casualty. It is likely that Singaporeans in future will be encouraged to select a single family doctor entrusted with both prevention and cure. General practice will make medicine more holistic. It will facilitate care in the community. At hospital level, the proportions are reversed. About 80 per cent of admissions and beds are accounted for by seven public hospitals – the two largest are Tan Tock Seng (1258 beds) and Singapore General (1600 beds) – plus six specialist centres in the fields of ophthalmology, dermatology, oncology, dentistry, cardiology and neuroscience. The State sector’s dominant role in provision allows it to influence the number of beds, the benchmark price of services and the introduction of advanced medical technology. All seven acute hospitals and six speciality institutes have since 1985 been ‘restructured’ or ‘corporatised’. This means that they are wholly owned by the State but are run as private cost centres (albeit not for profit) with managerial flexibility and operational autonomy. They employ commercial accounting systems and aim at the normal targets of productivity and efficiency. They set their own charges and remuneration schedules. They are subject only to broad policy guidelines from the Government through the Ministry of Health. There is currently little demand for outright privatisation. The average length of inpatient stay in Singapore is 5.3 days. In Britain it is seven. In Japan it is 36. The average length of stay is far longer in Japan than in any other industrial society. Bryan Turner is not surprised by the lack of medical convergence and the survival of practice variation. Despite the globalisation of institutions, he says, different communities still interpret the sick role in different ways: In Japanese culture there is a more positive approach towards sickness, not simply as the absence of work but as a positive vacation and recreation. The Japanese pamper their sick in a way which would be unusual in western societies. The Japanese approach is to emphasize ‘ansai’ (peace and quietness) as the principal form of therapy for an illness. Hospitalisation is a form of vacation which is positively required for the restoration of health. (Turner, 1995: 53)

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Furthermore, until long-term care insurance was introduced in Japan in 2000, there was often no prepaid alternative for the old but a hospital bed. The philosophical underpinnings of institutional care are different in Singapore. One consequence is that three to five days is the norm. The public hospitals are grouped into two integrated clusters: Singapore Health Services (Singhealth) (in the east) and the National Healthcare Group (NHG) (in the west). Grouping is intended to minimise duplication and encourage competition. Legally, the property rights lie with an umbrella organisation, Ministry of Health Holdings Pte. Ltd. The public hospitals receive an annual grant (‘subvention’) for the provision of heavily subsidised medical services. The subsidy is based upon the services delivered (costed by diagnostic-related category) and the comfort level of the wards. In 2007 the Government paid out S$1.5 billion in direct medical subsidies. The figure is scheduled to rise to S$2.2 billion by 2012. The bulk of the subsidy goes to B2- and C-class wards in the restructured hospitals: ‘Each year about two thirds of recurrent government health expenditure is spent on subsidising acute care services in public sector hospitals and institutions’ (Lee, 2004: 1). On average, the Government subsidy for each C-class patient is S$4200. Using the median salary of S$2170 in 2007 as a benchmark, it is a great deal of money. Class A wards (offering one- or two-bedded rooms, attached bathroom, air conditioning, telephones, televisions, superior meals, more comfort, more floor space, the right to select one’s own consultant) are, like the private hospitals, not subsidised at all. B1 (which is four-bedded but with good amenities) receives a subsidy of up to 20 per cent of cost. B2 is six-bedded with ceiling fans: each bed attracts up to a 65 per cent subsidy. Finally, there is C. The full subsidy is 80 per cent but there are fans, limited privacy, and eight or 10 beds (down from 40 beds) in the room. The patient also has to walk to communal toilets and bathrooms. Some Singaporeans think that C-class carries a stigma. Status-minded as they are, Singaporeans are also money-conscious. The lower-class wards are the lower-cost ones. Ward charges in A are S$244–S$275 per day, in B1 S$160–S$169, in B2 S$45–S$58, in C S$23–S$27. S$23 is less than a tenth of S$244. The costs of medical treatment itself are also very different. A heart bypass operation in A costs between S$28,460 and S$34,166 at the 90th percentile. In C the equivalent figure is from S$3833 to S$5007. The standard of medical care is believed to be the same irrespective of the physical amenities. A senior consultant or specialist will treat the more-serious cases irrespective of the category of ward. For the more routine procedures the patient in C-class must expect to be seen by a registrar from the roster. The bed occupancy rate in the Singapore public hospitals is approximately 90 per cent. At Singapore General it has reached 95 per cent, at

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Changi General 96 per cent. Average occupancy is significantly lower in the private sector. At Raffles Hospital, for example, it lies between 40 per cent and 60 per cent. Excess capacity raises the unit cost but ceiling operation leaves little slack for unforeseen emergencies. Micro-management becomes especially difficult: patients who request a specific class of ward may have to accept a different grade, while patients who need a specialised ward such as cardiology may have to wait. Meaningful competition between institutions presupposes some buffer stocks and some idle potential. Holding some capacity in reserve, it is important nonetheless to ensure that the beds are fully occupied. Moderate postponement is sometimes the price that must be paid for the elimination of waste. Expansion in any case is taking place. In the public sector, 2010 sees the opening of a new 550-bed hospital at Yishun in the north. In 2015 a new hospital of the same size will come on-stream at Jurong in the west. In the private sector, several sites for new hospitals have been released by the Urban Redevelopment Authority. These will be situated in different parts of the island. Additional capacity is inevitable in view of the rising demand for beds and professionals as incomes rise and new people come in. Better education, old age and higher incomes will mean longer and more frequent consultations. Singapore has 8200 acute-care hospital beds. Of these, 6300 are in the public sector. The remainder fall into two categories. First, there are the ‘community hospitals’: typically charitable foundations such as Ren Ci, these voluntary welfare organisations provide inpatient convalescence and rehabilitative care for the chronically ill who no longer require an acutecare bed. The other is the private sector, run by companies and in business for a profit. In Singapore there are 16 private hospitals. They account for 20 per cent of all beds. In Hong Kong the private hospitals also have a minority position, dwarfed by the 44 State institutions. In Taiwan and Korea, on the other hand, they are the principal players. Public hospitals in those countries are responsible for only 33 per cent and 13 per cent of all beds, respectively. The leading names in Singapore in the private hospital sector are Raffles Medical Group (which operates Raffles Hospital) and Parkway Group Healthcare (which runs Mount Elizabeth, East Shore, Novena and Gleneagles Hospitals). Private hospitals are an economic asset. Singapore is positioning itself to be an invisible exporter of medical services. In doing this it is competing for an international clientele with other regional hubs such as Thailand, Malaysia, India and Dubai. Singapore is cheaper than the USA but it is by no means the lowest-cost centre. A heart bypass in Singapore would cost an international patient approximately US$18,500. The figure includes

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surgery and the hospital stay but excludes airfares and hotel accommodation for family members. In America the cost would have been at least US$130,000. In Thailand, on the other hand, it would have been US$11,000. In India it would have been US$10,000. In Malaysia it would have been US$9000. US$9000 is less than half the US$18,500 that the same procedure would have cost in Singapore (Woodman, 2007: 8). Inpatient stays may be shorter in Singapore; and Singaporeans (relying mainly on anecdotal evidence) like to say that the quality of care is better. Singaporean doctors in 2001 separated Nepalese twins joined at the head. Singaporean doctors in 2005 carried out Asia’s first kidney-cum-bonemarrow transplant. It may be that the Singapore brand name will pull in the customers (especially the high-end customers) even if price alone might direct the rational shopper to Bumrungrad in Bangkok or Apollo in Chennai. Singapore Airlines is a great way to fly. Raffles Hospital is a great place to have one’s joints repaired. Eleven hospitals in Singapore have been accredited by the Joint Commission International in the USA. This is the largest concentration of accredited hospitals in the region. One-third of JCIaccredited hospitals in Asia (including Turkey) are in Singapore (ibid.: 58). The number of foreign patients in Singapore is increasing by 15 to 20 per cent a year. About 410,000 foreign patients (555,000 including foreign nationals already residing in the country) were treated in Singapore in 2006. They spent US$890 million, excluding the multiplier spillovers such as shopping. It is intended that medical tourists should number one million by 2012. By that year the medical travel and tourism market could be generating S$7 billion in revenue and creating as many as 13,000 new jobs. Singapore’s push into biomedical research at its new Biopolis centre and its success in attracting major multinationals such as Novartis to locate production as well as product development in the Republic will contribute through synergy to making Singapore a regional life sciences hub. Four out of every five foreign patients in Singapore are being treated in the private sector. Foreigners from countries such as Indonesia, Vietnam, Cambodia and even Russia make up 35 per cent of Raffles’s patient load and 65 per cent of that at Parkway. The public sector treats a higher proportion of locals. Only 5 per cent of patients admitted to public hospitals are foreigners. Although the sectors are separate, there are nonetheless spillover effects. Negatively speaking, there can be rising costs and the active poaching of staff. Hopefully the competition with foreign medical centres will keep local prices within limits. On the positive side, the sectors can cooperate in the shared use of expensive equipment. A common electronic medical records system would ensure the patient’s seamless move from one sector to another.

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Private hospitals have shorter waiting times, higher staffing ratios, costlier amenities, newer technology. On the other hand, specialists in the private sector tend to be independent contractors who do not report to other clinicians. Enjoying greater autonomy, they are subject to less supervision. Whether this flexibility means a higher standard of service and a better chance of recovery is a different matter.

5.2

SUBSIDIES FOR BEDS AND SUBSIDIES FOR PATIENTS

Affordable Health Care made clear that C-class was not intended to be the Ritz: ‘The ambience in the more heavily subsidised wards should be kept simple, with only those creature comforts which are absolutely necessary. That way we will not inadvertently provide and subsidise Class A standard of service at Class C rates’ (Ministry of Health, 1993: 6). The basic minimum was a part of the system. What Singaporeans regard as basic has, however, gone up over the years, and so has the standard of comfort in the lower-cost B2- and C-class wards. Toilets and showers are being resituated within the ward. The number of beds per section is coming down. Not everyone wants air-conditioning. B2 or even C is not all that Spartan any more. That is the problem. As the gap narrows, so there is a probability that the affluent will trade down in order to enjoy the lower prices made possible by the subsidy. The proportion of patients in C-class was 27 per cent in 2001. It was 40 per cent in 2006. Incomes in Singapore are rising year on year. So, perhaps surprisingly, is the demand for the less-expensive beds. This means that natural selection cannot be relied upon for the natural triage. If the more-affluent patients were spontaneously withdrawing into A-class wards and the private sector, the lower-income deciles would de facto be getting more of the subsidy. If, however, the comfortably-off were retaining a high presence in the subvented facilities, then there might be no alternative but to differentiate the charges. The means-test would be an acknowledgement that beds per se were a poor proxy for income and wealth. The means-test would target the taxpayer’s money on the patients who found it the most difficult to pay. Historically, there was no means-test for the subsidised wards. A C-class bed attracted an 80 per cent subsidy irrespective of the occupant’s financial status. The system changed in 2009. Equal citizens were still given access to all four classes of ward. What happened in 2009 is that the co-payments came to be shaded by the ability to pay. There were alternatives. The most expensive would have been to increase the funding for all on the citizenship principle that a merit good may not

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be treated as a commercial consumable. Discrimination by income band is sometimes said to be incompatible with the Hippocratic ‘to help the sick’. The most costly response would have been to build more C- and B2-class wards. More beds would have reduced the pressure without the need to prune out the prosperous. The most radical alternative would have been to end altogether the bed subsidy and the four-class hierarchy. Wards then would expand and contract on the basis of supply and demand. Patients would buy the product that best satisfied their tastes and preferences. Fine-tuning and meanstesting would be exclusively and universally opt-in. Ex ante, the desperate who found it difficult to pay for insurance would be assisted by the State to keep up their contributions. Ex post, the poverty-stricken who had fallen through the insurance net would be assisted by the State to settle unaffordable medical bills. Ex ante or ex post, it would be the patients and not the beds that would attract the subsidy. Even if the beds were no longer subsidised, of course, the hospitals themselves still would be. It is all a matter of Pigou. Health care has spillovers. These externalities are not internalised by the narrow focus of the market dyad (Reisman, 2007b: 64–75). Neither a greater financial commitment nor a withdrawal of the bed subsidy has been seriously proposed. That left the compromise that was adopted in 2009. The beds would continue to pull in a subsidy. Yet a means-test would be used to determine the charge. Income deciles above the line would co-pay more. Income deciles below the line would co-pay as before. Thus would scarce resources be redistributed. The haves would succour the needy. The assumption was being made that an additional transfer from the top to the bottom could reasonably be demanded. Not everyone would agree. The middle classes feel that they are contributing disproportionately through progressive income tax and property tax. They are unlikely to welcome the proposal that medical bills too should victimise the successful. Paying the taxes that pay for other people’s public housing that the top two deciles are deemed too rich to buy, the hard-pressed and the hard-working say that it is unfair for them as a minority to be means-tested more for their C-class beds as well. The sandwiched and the squeezed have serious reservations about being marginalised in this way. It is not just the itinerant vendors and the rag-and-bone persons but the hotel receptionists and even the schoolteachers whose bank accounts regularly go into the red. There is also the long-term cost escalation that can be the unintended consequence of forcing the middle classes to trade up. The Minister of Health seemed to be anticipating the expansion when he spoke as follows about the de facto privatisation of the burden of care: ‘A high income patient occupying a C-class bed does prevent another low-income patient from using that service. When a C or B2 ward is full, the high-income

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patient can easily afford an alternative ward’ (Khaw, 2008a). The objective of affordability suggests that lower-cost care should be skewed towards the least-privileged patients. Yet the objective of cost containment must also be taken into account. If the middle classes move into the more expensive wards or shift out into the private sector, the share of health care in the GDP is likely to rise. The trend is already there. In 2008 27 per cent of patients opted for private hospitals and A-class wards. A year before it had been 16 per cent. Means-testing (together with more generous Medisave withdrawal limits) can only accelerate the process. More demand will cause a rise both in quantity and price. The escalation will lead frightened consumers to purchase hospitalisation insurance which, some of it a response to the means-test, will boost demand for medical services still further later on. It is a well-known dystopia in health economics, described as follows by Feldstein, which Singapore for 20 years was able to avoid: For the community as a whole . . . the spread of insurance causes higher prices and more sophisticated services which in turn cause a further increase in insurance. People spend more on health because they are insured and buy more insurance because of the high cost of health care. (Feldstein, 1973: 252)

The public-sector health care budget will be contained. Private spending and the total burden will go up. Means-testing can have an inflationary bias. Even if it contains the Government subsidy per bed, still the total cost of hospital care might expand. Much depends on the income level below which the bill attracts the subsidy. In nursing homes, the full fee is charged above the threshold of S$1000 per capita. If the same cut-off were to be adopted for hospital wards, one-third of C-class and one-half of B2-class patients would lose the subsidy. At, however, the more generous cut-off of the 90th percentile, the effect would be small. Means-testing in this latter case would do little to limit overcrowding or keep the public-sector burden down. It could cost more in administrative overheads than the money that it saved. Looking forward, of course, the token payment would be a foot in the door. Once the principle had been conceded, it would become possible to adjust the threshold down or the salary-to-subsidy ratio up. This was the experience with the GST. Introduced at only 3 per cent, it soon became 5 per cent and after that 7. Charges can be massaged up or down. While time will tell whether the bias will lead to tokenism and exclusion, the initial cut-off at least turned out to be a generous one. The General Household Survey in 2005 found that the median household income from work was S$3830. Assuming that there were two working adults in each household, the median individual

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income from work would have been S$1915. This is relatively close to the median individual income from work of S$2170 that emerged from the Labour Force Survey of 2007. When the means-test was introduced in 2009, the threshold for subsidised beds was fixed at an average monthly individual income (including bonuses) of S$3200. Patients earning S$3200 or less continued to enjoy the 80 or the 65 per cent subsidy rate at the public hospitals. For economically inactive citizens, the cut-off was determined by home ownership and imputed rental. Owneroccupiers in residential property with an annual value of S$11,000 or less receive a subsidy of 80 per cent in C-class, 65 per cent in B. Almost every HDB home is now valued below S$11,000. Citizens in higher-valued properties receive subsidies of 65 per cent and 50 per cent, respectively. Based on data from the 2007 Labour Force Survey, it is estimated that about 64.2 per cent of income earners are entitled to the full subsidy while only 16.6 per cent will be given the minimum (Ministry of Manpower, www.mom.gov.sg/ publish/momportal). The subsidy could have been restricted to the bottom 10 or the bottom 20 per cent. The intention was that the middle-income groups should not face an intolerable strain. The top two quintiles did, however, lose some of their subsidy. A sliding scale would be applied. In the income band from S$3200 to S$5201, subsidies would be reduced in steps of 1 per cent. Above S$5201, patients would co-pay up to 35 per cent (not a flat 20 per cent) in a C-class ward and up to 50 per cent (not a flat 35 per cent) in Class B2. The rates cited are for citizens. Subsidies for Permanent Residents are 10 per cent less than for citizens of similar income status. Non-residents (the term includes the long-term Gastarbeiter on a Work Permit or an Employment Pass) are not eligible for the subsidy. Interestingly, the 20 per cent subsidy in the Class B1 wards is not subject to the means-test. It is not felt that rich people are taking up poor people’s places in the highest-class subsidised wards. The impact of the means-test will depend on the closeness of fit between income group and ward class. It is important to establish just how many middle-class Singaporeans are actually being treated in the more subvented wards. If there are very few, then that in itself would be a reason to dispense with expensive assessments. There is no need for a sledgehammer to kill a fly. The most-subsidised wards, historically speaking, have on balance been selected by the most-deprived patients. The evidence suggests that the full 80 per cent subsidy has in practice gone disproportionately to lower-income households. It has been pocketed much less by affluent professionals who Benz home to a harbourfront condominium. That said, the distribution of workload by ward class does not parallel the income structure as closely

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Table 5.1

Inpatient services: ward class choice by per capita household income in 2002

Average household income from work (2000)

Per capita household income percentile

S$802 S$2198 S$3636 S$5666 S$12,611

Bottom 20% 20th–40th% 40th–60th% 60th–80th% Top 20%

Source:

Distribution of workload by ward class (%) Class A

Class B1

Class B2

Class C

3 5 9 16 34

14 21 26 28 28

48 48 45 41 28

35 26 20 15 10

Lee (2004).

as one might expect. Lee Eng Meng (Lee, 2004: 2,4), reporting on a twoyear survey of fully three million patients in the public hospital system, has shown that some at least of the well-to-do were stubbornly holding out for their rights (Table 5.1). What Lee’s table reveals is that, of every 100 patients belonging to the top 20 per cent of income-earning households in 2002, fully 38 per cent opted for the lowest categories and the highest subsidy. As many as 10 per cent were prepared to share a fan-cooled room with nine complete strangers. They were saying that they wanted angioplasty in the National University Hospital at S$4058 and not at S$16,350. They were also saying that they wanted the subsidised outpatient treatment upon discharge to which subsidised inpatients are entitled and A-class inpatients are not. Patients with chronic complaints such as diabetes find economical followup especially valuable. C-class may be no-frills but it makes the money for medicines go further. The survey also reveals that 3 per cent of the least-well-off were choosing A-class with no subsidy at all. Since Medisave can be used only for health, the balances are expansionary where members trade up in order to run down their non-fungible accounts. Other studies have made even more dramatic estimates of the extent to which Medisave has had the perverse effect of pushing up the cost. Results from the 1990s show that 17 per cent (Ministry of Health, 1993: 36) or even 24 per cent (Tan, 1997: 297) of patients earning less than $1000 per month had used Medisave to fund treatment in an A- or a B1-class ward. They seem to have wanted a high standard of hotel-and-catering comfort. They seem not to have understood that the reimbursement is not 100 per cent. They seem not to have grasped that Medisave balances belong to them and not to the State.

Payment for health: Medisave

Table 5.2

Ward class

A B1 B2 C Source:

111

Inpatient services: average total bill, Government subsidy and patient bill in 2002 Average total bill before Government subsidy S$

Average Government subsidy S$

Government subsidy as % of total bill

Average patient bill (after subsidy) S$

3,277 3,105 3,613 3,807

0 663 2,513 2,990

0 21 70 79

3,277 2,442 1,100 817

Lee (2004).

Members spend only what is already theirs. Balances unspent at death will go to their children. Medisave was always exempt from Estate Duty. Few Singaporeans paid death duties in any case. Only 1301 estates were taxed in 2006–07 (Inland Revenue Authority, 2007: 119). In 2008, partly to give family-centred locals the incentive to accumulate more wealth, partly to encourage wealthy foreigners to bring their assets into Singapore, partly because the practice of Hong Kong, Malaysia and Australia had shown which way the wind was blowing, Estate Duty was abolished altogether. Beds are expensive. Table 5.2 shows Lee’s estimation of how much the Government – the taxpayer – is actually putting in to support each class of ward. The difference in the bill for stay and treatment is considerable. A costs the client on average about four times as much as C. C costs the taxpayer on average about four and a half times as much as B1. As the clients trade down, so the public finance goes up. The burden can become a heavy one, especially in the light of the ageing population. Means-testing limits the drain from the common pool.

5.3

MEDISAVE: RATIONALE AND RATIONALITY

Medisave was introduced in 1984. The then Minister of Health was Goh Chok Tong. Later he became Singapore’s second Prime Minister, from 1990 to 2004. Medisave took the place of the free hospital care and the subsidised public clinics that had been the legacy of the British colonial period. Britain at home had introduced the National Health Service in 1948. In a limited way it had tried to share its vision with its Empire. The

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Government of Singapore took over the commitment to access because public policy always takes on this moral responsibility. Two decades after independence, however, Singapore decided to face up to the challenge in its own way. While retaining the State’s involvement in public health and spillovers, it sought to involve the individual more directly in the payment for personal health, both prevention and cure. 5.3.1

Medisave: What It Is Not

Medisave, historically speaking, was intended as a breach with the Britishstyle unification of the purchaser with the provider role. It also had a fiscal dimension. It was intended as a rejection of tax-funded care. Payment out of general tax is the predominant mode of health care finance in the UK, Sweden and the Hong Kong public hospital sector. In Hong Kong, where over 60 per cent of the population have no private medical insurance or employee medical benefits, patients in public hospitals pay only HK$100 (US$12.8) a day. The fee includes consultations, treatments and meals. The attraction of payment out of general tax is the relatively low cost of administration and the all-inclusive commitment to equal access for all. For some at least, there is also the disadvantage of in-period lobbying that in James Buchanan’s view can all too easily set the moral anarchists loose: ‘As laws and regulations have multiplied, competing group interests have been promoted. And persons selected for governmental office have exploited their positions to advance their own private interests under the guise of non-existent “national purpose”’ (Buchanan, 1986: 117). The various public services become embroiled in a politicised struggle for shares: flagrant snatch-and-grab makes the Government look weak. Piecemealism, incrementalism, creep and drift can lead to increasing State expenditure: interest groups can be persuasive and public spending wins votes. Undignified conduct like this is not possible in the Singapore Medisave system. Except for small top-ups, it is the account holders and not the community who put in the cash. Tax financing has the further disadvantage that it is subject to uncertainty: revenues are forever hostage to the performance of the economy. Over time, there is the economic burden of non-earning dependants who demand more and more. There is the moral issue of how much one generation should pay for another. There is the long-term upward drift in tax rates where the proportion of working taxpayers is going down. Higher tax rates are a disincentive to effort. They are also a political minefield where citizens vote against them and companies take their resources abroad. An alternative in 1984 would have been mandatory social insurance, administered (like MediShield later on) by an independent public board.

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The model would be Canada, the Netherlands or Japan. The employers and employees make contributions to the common pot. These can be income related or across the board. Sometimes but not always these revenues are augmented by local or central government. Sometimes but not always the contributions are paid through hypothecated tax. Sometimes but not always there is cost-sharing out of pocket. Sometimes but not always the public hospitals are grant-aided in order that they might price below cost. Whatever is the case, the source of the money is clear. Taxes are a mixed bag. Social contributions are purpose specific. Premiums in a system of universal insurance are based on the average risk in the community or nation. The only discriminatory weighting, and then not always, is by the proxy of age. Premiums do not track the individual’s own probable exposure. Equity is interpreted as non-judgmental inclusion. As with vegetables in the supermarket, the price is the same for all. The consequence is de facto cross-subsidisation within the social pool. The transfers would have been less had each applicant been risk rated after a medical and a lifestyle check. Moral hazard is an unintended outcome of tolerant pluralism. If the premiums are the same for the drinker as for the jogger, the medical guarantee may encourage the reckless to take unnecessary risks with their health. The doctors and hospitals are reimbursed by the fund. Because the money follows the patient, the client has economic sanctions to apply. If one supplier is unresponsive, the rational consumer can try a different shop. The customer can choose from a range of approved treatment centres, public and private. Social reimbursement is in that way different from Britain’s National Health Service where payment and provision are two sides of a single coin (Reisman, 2007b: 103–5). The NHS in Britain is the monopoly supplier of medical treatments provided free of charge at the point of consumption. For outside competitors offering more comfort, non-generic drugs, more convenient appointments and shorter waits, the consumer-subscriber even in Britain is obliged to pay again. A self-supporting fund can avoid a deficit by raising current contributions. It is easier for a board to increase premiums than it is for a Chancellor to put up taxes. Also, a single national fund is sometimes said to have the advantage of economies of scale. It can be better placed to spread its overheads, to coordinate, to predict and to plan. A single computing network will have a comprehensive print-out: using electronics, it might be better able to spot overcharging, underperformance, human error, duplication, surplus and fraud. A giant organisation will also be able to leverage on its concentrated power. It might be able to contain the quantities it authorises and to impose fees that follow its own preannounced schedule.

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As with all insurance, however, there is the administrative overhead. Monies must be collected and claims settled. The overload will be multiple where (the experience of countries such as Thailand, Taiwan, Korea and Japan) there are several national insurance funds. Furthermore, selffunding insurance is available only to people who can pay. Some cannot. Since a social system cannot abandon the out of work and the out of luck, an additional cost is incurred. Unless the Government puts in a grant, the pool itself has to credit in the penniless. Not all members of the community will be in good health. A healthstatus inequality can be as much of a challenge as an imbalance in the ability to pay. Commercial insurance will demand higher premiums from subscribers who are likely to be at risk. Social insurance, on the other hand, will allow the old and the ill to contribute at the standard rather than the actuarial rate. Premiums rise. Taxes rise. The young and the healthy will not necessarily be pleased to put up the stake for the big eaters who take out more. Social insurance is more than the sum of its humanitarian plus-points alone. Singapore in 1984 could have turned not to social but to private insurance. This would have been an even greater step away from the British system of publicly financed service. Private cover, often arranged through a workplace-based group plan, is the most common form of health insurance in the United States. The premium is experience rated by the industry, the occupation, the community or (in exceptional cases) the discrete applicants themselves. Competition between insurers makes each agency more costconscious, more anxious to please. The customer knows best. Yet competition can be a mixed blessing. The fact that there will be more than one club carries with it the threat of adverse selection and cream-skimming. Those with existing medical conditions are denied cover outright, made subject to exclusion clauses or asked to pay at a higher rate. The retired, the impoverished and the chronically ill are the most likely to be priced out. The tax-funded complements of Medicare (for the 65-plus) and Medicaid (for the poor) have been introduced in the United States to correct the market failure. 5.3.2

Medisave: What It Is

Singapore in 1984 rejected tax-funded State provision, compulsory social insurance and free-market private insurance. Medisave was the payment alternative that was selected. It was a brave decision. Singapore was the initiator and the first mover. No country had previously tried out the product. Medisave is operated in the public sector through the CPF system. All CPF members have a separate Medisave account of their own. In contrast

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to the Ordinary and the Special Accounts, the Medisave contributions go up with age. Old people are more likely to require expensive care. The rates, rising from 6.5 per cent of individual income for members aged under 35 to 9 per cent for members aged 60 and above, are shown in Table 3.2. The income on which the contribution is levied is capped at S$4500. The respective contributions of the employer and the employee follow the proportions for CPF as a whole. Approximately two-fifths of Medisave is subscribed by the employer. The rest is paid by the employee. In Shanghai, in contrast, the MSAs have a more socialistic bias. Four-fifths is paid by the right-hand file. Only one-fifth is paid by labour. There is a maximum monthly limit for Medisave contributions in Singapore. The limit is S$330 (below 35), S$385 (33–44), S$440 (45–54) and S$480 (over the age of 55). There is a Medisave Contribution Ceiling (MCC) (revised annually in July). It is the maximum the member can hold in the account. In 2008 the Ceiling was S$34,500. Funds in excess of the maximum are credited to the CPF Special Account (for members under 55) or the CPF Retirement Account (for members over 55 where their CPF Minimum Sum falls short). There is also a Medisave Minimum Sum (MMS). This is the amount members must retain in their Medisave Account when they withdraw their CPF savings at age 55. In 2008 it stood at S$29,500. Neither the MCC nor the MMS should be confused with the Medisave Required Amount (MRA). The MRA is the balance that members are required to have in their Medisave Account after meeting the CPF Minimum Sum at age 55. If members do not have at least the prevailing MRA they may transfer money from their Ordinary or Special Account to their Medisave Account for this purpose. If they do not, they will not be able to withdraw at all from their CPF accounts even if they have met their CPF Minimum Sum. Unlike the Ordinary Account, the MRA cannot be withdrawn at 55. The Ordinary Account cannot be used for health care unless the whole of the Medisave balance is depleted. Fixed for 2008 at S$14,000, the intention is that the MRA should rise to S$25,000 in 2003 dollars by 2013. The purpose of the MCC is to restrict demand on the model of the deductibles and the co-payments. Intended to contain spending and therefore cost, it is also a way of preventing the tax exemption from diverting excessive subsidy to the higher-income brackets. The fiscal concession should not become a loophole for tax avoidance or serve as an incentive to put too much money in. Yet there is a downside. The ceiling also limits the access to care. That is why it is described by Hsiao as a ‘glaring contradiction’: ‘This amount is not sufficient to protect the elderly who have serious chronic diseases and need surgery’ (Hsaio, 2001: 735). Old people

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need larger balances than do the young. The cap frustrates the time-driven objective of compulsory savings. It makes it more difficult for people in their working years to prepare adequately for high-cost old age. MSAs do have a life-cycle objective. They enable patients to cover the costs of their medical care both in their working years and, having saved up over time, in their post-retirement old age. In that way they make good use of the member’s ‘life-cycle saving capacity and health spending pattern’: Average income and capability to save for an average person are usually high through working years compared to retirement. In contrast, the average level of health spending is usually low at younger ages and becomes higher in later years of life. Encouraging individual savings during economically active years for later health spending is therefore viewed as an attractive way to assure sufficient funds for health care in the future. (Hanvoravongchai, 2002: 6)

MSAs require no cross-subsidy from the healthy, the young and the stillemployed. Rather, members while still healthy cross-subsidise themselves against the day when they will be in need: ‘From a risk pooling standpoint, medical savings accounts are just a different way of pooling financial risk. Instead of taking a pool of funds across many individuals in one year, medical savings accounts take the pool of funds over many years for one individual’ (Bauhinia Foundation, 2007: 17). In a rapidly ageing society this radical narrowing of intergenerational equity has a moral as well as an economic dimension. Young Jack pays for Old Jack. It is closed-ended and save-as-you-earn. The taxpayer through the State is not expected to fill the gap. The rule is that risks are not pooled. Yet there is an exception. Family members (immediate or, assuming that closer kin have already drained their own accounts, more distant) are allowed to share their Medisave holdings with one another. Such transfers are believed to be in keeping with ‘Asian values’. Aged parents who have used up their Medisave or a bedridden unemployable who has no contributions history will not have to depend on charity. Not all Singaporeans are in paid employment. Earning nothing, they are putting nothing into their Medisave nest-egg. The magnitude of the intra-familial support was demonstrated by the National Survey of the over-55s in 1995. It found that 65 per cent of health care spending by elderly women and 43.8 per cent by elderly men was being financed out of their children’s Medisave. Only 17.9 per cent of the sample said that they were able to depend fully on their own Medisave balances (Ministry of Health, 1996: 47). At least the Medisave was there. About 52 per cent of acute patients treated at public hospitals in 1998 used their children’s Medisave to settle at least a part of their bill. A further 44 per cent

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drew upon their own Medisave accounts. The two figures add up to a total of 96 per cent. Not far short of 100 per cent of patients used CPF of some kind to pay (Ministry of Community Development, 1999: 115). The National Survey in 1995 found that only 40 per cent of the over-55s had any CPF of their own at all (Ministry of Health, 1996: 29). Those that did have CPF did not have very much. Only 10 years after the introduction of a new life-cycle plan, it is what one would expect. The future, however, is likely to be a different place. Balances will build up as the ground zero of 1984 recedes into history. More women will earn their own Medisave through work. More husbands will pay voluntary contributions to bring in the housewives and the informal caregivers. More Singaporeans will work beyond the age of 55. More older people – only 0.4 per cent in 2005 – will have health insurance (Ministry of Community Development, Youth and Sports, 2007: 9). More of the self-employed will be swept up into the Medisave system: the income floor at only S$6000 a year will be less and less of an obstacle. More and better education will boost lifetime incomes, contributions and savings. Medical accounts, challenging moral hazard, will put a premium on a preventive lifestyle: no one wants his or her hoard to be unnecessarily depleted. Medisave may not have been broad enough or deep enough in the past. In the future, however, the financial strain on the extended family is likely to be less. The National Survey in 2005 showed that the degree of independence had indeed improved. Fully 62.3 per cent of the 55-plus (74.9 per cent of all males, 50.9 per cent of all females) were paying for their own health care. Only 26.9 per cent were depending on their children. Not unexpectedly, the proportion rises with age: 50.8 per cent of the over-75s in 2005 were continuing to rely on their filial sons and daughters (Ministry of Community Development, Youth and Sports, 2007: 47). In a National Health Service the burden would be shared with all productive citizens. In Singapore the apple falls near the tree. Although there is no statutory grant or subsidy to Medisave, there can be unexpected top-ups out of general taxation. Historically, Singapore has often had a budget surplus. One of the ways in which the overhang has been recycled into the circular flow has been to supplement the MSAs of members who hold below-average balances. Using the balances as a proxy variable in a needs-test ensures that the old with fewer system-years, the sick who have exhausted their accounts and the poor in difficult circumstances will be given priority supplementation. The sums handed out have in the event been relatively small. In 2007, for example, the Medisave accounts of Singaporeans aged 50 and above were topped up with incomerelated grants ranging from S$67 to S$333. In 2008 the one-off payments went from S$150 (at age 51) to S$450 (at age 76).

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Except for occasional top-ups, the Singapore system is funded through bipartite contributions. It is legitimated in the language of self-help. There is, beyond the basic package, no expectation of a citizenship entitlement that is not a function of the ability to pay. Schmidt is critical of the Singapore system for this reason. It suffers badly, he writes, from ‘its openly exhibited class character’: Whoever pays higher premiums gets better service, and whoever pays nothing gets only very little when in need. Moreover, there is hardly any redistribution from the rich to the poor, because the savings accounts approach means that each person saves only for him- or herself. Coverage is thus largely provided in proportion to the individual’s income rather than his or her need. . . . The solidarity principle which plays a much greater role in collectivist systems such as those of Canada and several West European countries is clearly marginalized. (Schmidt, 2004: 980–81)

The Singapore system, relying as it does on employee/employer contributions and incorporating no measure of good health or bad, does not discriminate between members who have to pay for costly chronic illnesses and those who have been lucky in the lottery of life: Some may find it unjust that some patients are bound to reach their upper reimbursement limits much more quickly than others through no fault of their own. Would it not be fairer to compensate them somewhat for their bad luck, for example through a more flexible system of entitlements, one that was better adapted to circumstances beyond the individual’s control? (Ibid.: 981)

5.4

MEDISAVE: LIMITS AND EXCLUSIONS

Medisave may be used to pay for treatment in both public and private institutions. All classes of ward are covered, although subject to the same maximum limits. Authorised reimbursements may be topped up without restriction in order to give the patient a chance to purchase supplementary amenities. The system in that sense is an intellectual mix. There is freedom to choose and signalling by price. Simultaneously, there is paternalism in the authorisation of treatments and regulation in the licensing of suppliers. Liberty within limits, MSAs may be seen as an investment in economic rationality. They force the budget-constrained consumer to use scarce information in a cost-effective way. Medisave can only be withdrawn for approved, health-related purposes. There are limits. For medical or surgical inpatient stays, members can claim up to S$450 for daily hospital charges. For surgery they can claim from S$150 to S$5000 depending on the nature of the intervention. For

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Caesarean section with hysterectomy members can claim up to S$2400. For inpatient psychiatric care the ceiling is S$150 per day. For HIV antiretroviral drugs the maximum is S$550 a month. For renal dialysis the monthly limit is S$450. There is a maximum of S$3000 per annum for convalescent and inpatient stay (S$5000 for psychiatric care). The limits (which are not automatically uprated in line with fees) are generally enough to cover charges incurred in B2- and C-class wards in public hospitals. Charges in A- and B1-class wards and in the private hospitals will, however, exceed the withdrawals possible from Medisave. When Medisave was launched it was restricted to inpatient care in public-sector hospitals. Soon afterwards it was released for inpatient care in all hospitals. As for outpatient attention, the few exceptions made at first were for in vitro fertilisation, hepatitis B vaccinations, renal dialysis, thalassaemia treatment, HIV anti-retroviral drugs, radiotherapy and chemotherapy. Later, however, it became clear that preventive medicine, early diagnosis and outpatient care had the potential to save money. While remaining concerned about the bottomless pit of waste and overuse, the authorities in 2006 significantly expanded the pass-through for outpatient visits. Since 2006, up to S$300 a year from the account holder’s own Medisave (plus the same sum from each of a further nine family members’ accounts) may be withdrawn for the long-term outpatient management of diabetes, high blood pressure, stroke and lipid disorders such as high cholesterol. Approximately one million Singaporeans suffer from one of these four chronic dysfunctions. The regulations also allow Medisave withdrawals of up to S$300 for day-case surgery. This sum is adequate for 84 per cent of all subsidised day surgeries. Day surgeries were 36 per cent of all operations in Singapore in 1997. They were 57 per cent a decade later. Day surgery is a welcome development. Being so much less expensive than surgery with an overnight stay it helps to contain the share of health in the GDP. From 2008, sufferers from asthma and chronic obstructive pulmonary disease have also been entitled to claim for outpatient service on the same terms. At the same time, patients with a confirmed diagnosis of cancer were allowed to draw up to S$600 a year for procedures such as magnetic resonance imaging (MRI scans) and computerised tomography (CT scans). Since there are 40,000 such patients, total withdrawals could be in excess of S$25 million. Each withdrawal is capped in order to protect the account holder from unnecessary dissaving. Other dysfunctions continue to be excluded. An example is continuing (lifetime) medication for mental illness. At some time in the future, outpatient psychiatry may become a charge on the Medisave system. Respite care might also go on the list so that family caregivers can have a break.

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While non-medical options are likely to be rejected, the underlying interest in approved treatments outside the hospital setting is to be welcomed. Outpatient attention can be cost-effective. It contains hospital costs and frees up scarce beds. Withdrawals for outpatient care totalled S$9 million in the first year and a half following the 2006 liberalisation. Not all potential claimants actually exercised their rights. The most optimistic explanation is that Singaporeans prefer to pay small sums out of pocket. They want to leave their Medisave with the Board against the possibility of a large disbursement later on. Inpatient or outpatient, a number of conditions are not eligible for the Medisave refund. These include age-related complaints such as arthritis, rheumatism, hypertension, cataract and glaucoma. Also excluded are the ambulance services, full medical check-ups, long-term institutional stays, primary-care consultations, accident and emergency clinics. Hospitalisation cannot be claimed if the patient stays in hospital for less than eight hours unless the admission was expressly for day-case surgery. Medisave cannot be used to pay for traditional Chinese medicine (TCM). This is a surprising omission. As many as 45 per cent of Singaporeans have consulted a TCM practitioner. Approximately 12 per cent of daily outpatient attendances are at TCM clinics. The charges are relatively low. Perhaps it is assumed that they can be covered without difficulty out of pocket. Also, standards are sometimes said to be ill-defined. The reply would be that acupuncturists and others are now expected to sit for the local licensing examination conducted by the Singapore TCM Practitioners Board of the Ministry of Health. Training in Chinese medicine is, moreover, available at well-respected institutions such as the Nanyang Technological University (teaching in collaboration with the Beijing University of Chinese Medicine). It is possible that TCM will in future be included in the Medisave list. At present it is not. Clients pay directly for the services they consume. Medisave cannot be used for experimental treatments not yet recognised in Singapore as effective. It cannot be released for last-ditch attempts to save the patient’s life where the chance of recovery is slim and the quality of life (doctor-perceived) is expected to be unsatisfactory. It cannot be used for complementary services such as meals-on-wheels, home nursing and ambulances. There is a great deal of cannot in the system. The Singapore lists seem restrictive and even brutal at times. Can-do is morally superior to cannot if the outcome of cannot is that sick people suffer and sometimes die. Choices, however, will always have to be made. That is a fact. One might argue that the purse strings are too tight and that the funding ought

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to go up. What one may not argue is that the budget ought to become so generous that there will no longer be a need to set priorities. No medical system in the world can afford to do that. At least the Medisave entitlements are constitutional rather than ad hoc, transparent rather than implicit. Discretionary rationing on the part of clinicians and administrators need not be any more responsible or responsive. Secrecy makes the underlying trade-offs less visible. That does not mean that they do not exist. MSAs are protected by the exclusions. The logic of the restrictions is that members’ Medisave should not be used up too quickly, least of all for unneeded luxury, without adequate provision being made for highcost interventions that cannot be paid for out of current earnings. It is a point of view. The list of exclusions is sometimes described as arbitrary and paternalistic. It is sometimes called a prima facie deviation from the personal responsibility that is enshrined in Affordable Health Care. If the money belongs to the patient, it is argued, then the patient and not the Ministry ought to decide what is value and what is waste. Much depends on how far the consumer’s sovereignty can be trusted in the unusual area of health. Ignorance makes it difficult or impossible for the body-holder to come up with good answers. If the authorities know the probable outcomes, the third-party effects and the cost-effectiveness ratios, then it is in the public interest for non-rational decision-making to be kept to the minimum. It is even possible to argue that the authorities have been if anything too liberal and too permissive. While a referral from a general practitioner is required if Medisave is to be used for hospital treatment, the member is free to select an A-class bed when a C-class bed would have been enough. Medisave in general shows a healthy respect for economics. Low deductibles and token co-payments are eschewed: small claims would too rapidly devour the medical savings that will be needed in old age. Retrospective reimbursement and open-ended schedules are avoided: high benchmarks would give private suppliers a financial incentive to inflate their charges. The downside of the financial stringency is that as many as one patient in five with a chronic condition may be failing to keep up his or her medication because he or she cannot afford to do so. Needles, swabs, syringes and insulin can cost a diabetic S$300 a month. Medisave caps the individual’s withdrawal at S$300 a year. It also imposes a deductible of S$30 and a copayment rate of 15 per cent. Some diabetics respond by cutting down on the tests and the injections. It is a false economy where it leads to worse health and bigger bills several years down the road (J. Tan, 2007: H6). If overconsumption is unattractive to the economists, then underconsumption is unattractive to the doctors. Financial stringency is a compromise. It is intended as a stimulus to responsibility, deferred gratification and value

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for money. It is called into question if a significant proportion of the sick are unable to pay.

5.5

A DECENT MINIMUM?

The average Medisave balance in 2007 was S$13,600 (Ministry of Health, www.moh.gov.sg). It was enough for 13 inpatient episodes in a Class C ward. In 2000 the average had been S$8300. By definition, however, not all the balances came up to the average. Half the Medisave members in 2004 held less than S$8900 in their accounts. About 17 per cent held less than S$1000 (J. Lim, 2004: 11). Some 15,800 Singaporeans in the CPF net (about 0.6 per cent of all CPF members) had no Medisave at all. Many of them were old as well as ill. Approximately 58.6 per cent of Singaporeans reaching 55 in 2006 had attained the Medisave Minimum Sum. The remaining 41.4 per cent held 60.0 59.0

Per cent

58.0

58.8%

58.6%

2005 ($27,500)

2006 ($28,000)

57.5%

57.0 56.0 55.0

54.7%

54.6%

2002 ($23,000)

2003 ($25,000)

54.0 53.0 52.0 2004 ($25,500) Year Notes: *Excludes pensioners and self-employed. The brackets below the years indicate the Minimum Sum for that particular year. Source:

Central Provident Fund Board (2007).

Figure 5.1

Percentage of employees* holding the Medisave Minimum Sum at age 55

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30,000

Average balance (S$)

25,000 20,000

18,983

20,512

22,292

23,267

24,360

2005

2006

15,000 10,000 5,000 0

2002

2003

2004 Year

Note: *Excludes pensioners in the former civil service scheme (now suspended) and the self-employed. Source:

Central Provident Fund Board (2007).

Figure 5.2

Trends in average Medisave balances* at age 55

less. This is shown in Figure 5.1. The absolute amounts are included as well as the percentages. That is because the amount of money called the Minimum Sum is raised every year. Singaporeans reaching 55 in 2006 had an average Medisave balance of S$24,360 (Central Provident Fund, 2007: 21): ‘This is enough to cover 15 times the average Class C hospital bill for seniors (about $1,000), as well as annual MediShield premiums (of around $5,360) after retirement’ (Ministry of Community Development, Youth and Sports, 2006: 50). Putting it in other terms, they had enough to cover 10 average hospitalisations in the subsidised Class B2 wards (Khaw, 2007). Where subsidised, B2- and C-class care is concerned, more than 90 per cent of bills can now be covered. About 80 per cent of all Singaporeans are now using Medisave to pay for at least a part of their hospital bills. Judy Lim calculates that, based on the average bill size at Singapore’s largest public hospital in the late 1990s, a household would need at most 17 months of Medisave contributions for each episode of hospitalisation ( Lim, 1997: 281). The holdings of 55-year-olds in recent years are shown in Figure 5.2. Singaporeans who die after the age of 65 currently have an average balance of just S$3500 left in their Medisave account. That is the average: only a third of the over-60s currently have a CPF account at all. More than 60 per cent

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of all Singaporeans who die (regardless of their age) currently have less than S$2500 left. It is worrying that the figures are so low. It is, however, at least as reassuring that they are in the black. Higher incomes and better education will hopefully boost the average balances in years to come. Despite the fact that so many Singaporeans have not reached the Medisave Minimum Sum, it is believed that medical care in Singapore is generally affordable. The average bill in the six public hospitals (excluding the seventh, the Institute of Mental Health, because it houses long-stay patients such as the senile) is S$3473 (in Class A wards), S$878 (in Class C). Some patients, however, pay more than the average. At the 95th percentile the figures are S$10,769 and S$2747, respectively. The actual amounts can be even greater. This would be the case where patients were not content with a B2 or a C standard in the restructured hospitals, or where they opted for higher-quality materials or private treatment. It would also be the case if there were complications and the bill mounted up. The sum of S$13,600 is not very great. A single treatment episode can cost as much or more. Approximately 16.4 per cent of CPF members earn less than S$1000 per month (Department of Statistics, 2004: 48). At that income level they will not be well placed to pay for a pharmaceutical breakthrough or an organ transplant. Treating cancer with Avastin can cost in the region of S$140,000. Herceptin, for early treatment of breast cancer, costs a notional S$70,000. Heart surgery can cost S$34,000, colon cancer S$29,000. Follow-up attention means long-term cost. Inpatient stays are reimbursed only up to S$450 per hospital day. Expenses per surgical intervention are capped. Long-stay institutional care cannot be claimed. There are no data on the patients who leave hospital earlier than is medically indicated because they are reluctant to pay. Nor is there any evidence on the number of doctors who do not even propose expensive procedures because the ceilings and the shares put them out of the patient’s reach. Co-payments can be crippling. Twenty per cent of a major surgical bill can be a serious deterrent to the long-term unemployed, the chronically ill, the elderly, the low-paid. A sizeable deductible can wipe out the lifetime savings of the middle-income earner, not rich enough to afford a coronary and not poor enough to claim from Medifund. Seniors already retired had an average Medisave balance of only S$5300 in 2006. It will not even cover their expected future MediShield. It will not be enough for their medical needs. A more general concern is the low ratio of Medisave withdrawals to the gross national product. Asher and Nandy have calculated that withdrawals in 2004 constituted no more than 0.22 per cent of GDP: ‘Even if the total national healthcare expenditure is taken as 3 per cent of GDP, Medisave withdrawals account for only 7 per cent of the total. . . . After more than

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two decades of operation, the Medisave account as a source of financing healthcare is of marginal importance’ (Asher and Nandy, 2006: 80). MediShield plus Medifund account for a further 2 per cent of national care spending. The 3Ms, Lim found, only represented about 10 per cent of the health care total. The rest was employer benefits (35 per cent), government subsidies (25 per cent), out-of-pocket payments (25 per cent) and private insurance (5 per cent) (Lim, 2004: 86). Earlier estimates had suggested the same general picture. Shortt had calculated that in 1995 direct payment by consumers accounted for 57.7 per cent of total medical expenditure, Medisave for only 8.5 per cent (Shortt, 2002: 160). In 2002 Hanvoravongchai had worked out that the 3Ms together covered less than 10 per cent of overall health expenditure. MediShield and Medifund financed only 1.1 per cent and 0.3 per cent, respectively (Hanvoravongchai, 2002: 16). The Ministry of Health was in broad agreement: Medisave in 2000 was funding about 7 per cent of the total, MediShield a further 1.2 per cent (Ministry of Health, 2001: 17). Concentrating on the insurance component, Tan estimated in 1997 that basic MediShield was reimbursing only 5 per cent to 27 per cent (depending on the class of ward) of the total cost of surgery for colorectal cancer or a heart transplant (Tan, 1997: 300–302). The message from all of these studies is clear enough. The lion’s share of hospital bills was being settled through past savings or with help from the family. The Ms were not the major source of payment for health. Some see this as a major plus: ‘The key to Singapore’s efficient health care system is its emphasis on the individual to assume responsibility towards their own health and, importantly, their own health expenditure. The result is a system that is predominantly funded by private rather than public expenditure’ (Tucci, 2004). It is easy to say that the system is really private payment dressed up as public policy. The alternative is to say that it does its job: ‘Singapore is unique among developed countries in achieving excellent health outcomes at a low economic cost. Part of its success may be attributable to its health financing system, which combines individual responsibility with targeted subsidies’ (Taylor and Blair, 2003: 1). You get what you pay for. You pay for what you get.

6.

Payment for health: MediShield and Medifund

The previous chapter was about compulsory saving. The present chapter is about risk-pooling and discretionary relief. Section 1, MediShield, shows how health-specific savings can be invested voluntarily in medical insurance. Section 2, Medifund, reasserts that there is a public-sector safety net when savings dry up and the family is not enough. Section 3 returns from the parts to the whole. Examining the ‘Three Ms’ as a unified system, it lists the economic and social preconditions that make the Singapore system work. It asks if the tripartite attack is uniquely tied to Singaporean conditions or if, like the rubber tree, it can be transplanted elsewhere and flourish. A failure to copy international best practice means shortfall and neglect. Unthinking mimicry, however, is just as bad. The chapter ends with the template. Section 4 lists the criteria by which a good health care system can be evaluated. It says that the mix of savings, insurance and relief in Singapore can usefully be assessed in terms of that check-list as well as in the context of the five goals that the system has explicitly set itself.

6.1

MEDISHIELD

Medisave may be enough for the hospitalisation of the median patient. The balances are not, however, adequate for the extraordinary cases where the patient falls victim to a high-ticket calamity such as a motorway pile-up or a chronic complaint such as renal failure. A heart patient in 2006 whose treatment was costed ex ante at S$15,225 ended up with a bill for S$560,000. A stent had failed. Blood had to be bought A two-day stay had ballooned into 344. Health insurance is necessary when the budget bursts. The State health insurance system in Singapore is MediShield. The expedient had initially been rejected in 1983: ‘In countries with a prepaid health care system, demand for medical services invariably outstrips the financial capacity to supply them . . . This results in overloading the system and lowering the standard of health care’ (Ministry of Health, 1983: 1). Patients might inflate their demands because they were riding free on a 126

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multi-member reserve. Consumers might proceed towards zero marginal utility because their spending did not presuppose the depletion of their own deferred gratification. When, therefore, the insurance element was introduced in 1990, it was hedged about with a range of caveats and restrictions, guidelines and co-payments, ceilings and thresholds. Provision would not be free on demand. There would be no subsidy from tax. Medisave would remain the first line of defence. As with the licensing of the casinos 15 years later, MediShield aroused grave suspicions on the part of a cautious old guard that was afraid of the implications for cost. MediShield, like Medisave, is a public-sector initiative. Both the belt and the braces are administered by the CPF. Yet there is also a commercial second string. Private companies offer additional services and greater comfort. They fill the middle ground between the major emergency that comes under MediShield and the moderate claim for which Medisave will be enough. The amount of business that they do is necessarily restricted by the size and strength of the State monolith. The private sector sometimes complains that capitalism cannot succeed so long as socialism pushes it into a corner. The public sector would reply that the mixed insurance economy offers both sectors a decent chance to get involved. 6.1.1

A National Pool

MediShield premiums can be charged directly to Medisave. In that way the individuation of earmarked accounts blends seamlessly into the pooling of catastrophic insurance. Both systems are intended to be self-financing. The difference is that Medisave has no redistributive bias whereas in MediShield there is a cross-subsidy from the healthy to the ill. Medisave is self-insurance through personal saving. MediShield is national insurance and a common resource. Medisave is compulsory. MediShield is opt-out. In Taiwan, Korea and Japan national insurance is mandatory. In Singapore it is no more than strongly recommended. All CPF members, both Singaporeans and Permanent Residents, are automatically included unless they ask to be released. Non-CPF members such as the self-employed may apply to join. The maximum age at entry is 75. Membership ceases at age 85. While rising life expectancy suggests that the cutoff will one day have to be reappraised, the current practice is to leave the problem on hold. It is not economic to include very old people because of the enhanced risk of sickness and hospitalisation that was documented in Chapter 2. Many of the retired, not still at work, would not be able to pay the fair premium. Women in particular not only live longer but earn and save less.

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A Confucian solution would be to invite adult children to keep up their aged parents’ lifetime premiums out of their own Medisave accounts. A quantity discount could be given where a sandwiched child becomes responsible for multiple subscriptions. A variant would be a single rate for all. Lifecycle averaging would mean that the dutiful young would pay actuarially more when they are earning and the deserving old would pay actuarially less when they no longer can. A more statist alternative would be for lifetime MediShield to be offered free of charge to all over-85s. For fine-tuning the concession could be concentrated in the lowest income quintile. Such a subsidy would mean that the State guaranteed the entitlements of the old-old with the justification that warm-hearted ascription takes precedence over counting-house achievement. What cannot be known is what the consensus will make of the crediting in. As with the Confucian choice, there is no certainty that burden shifting of this kind would be popular with the adult children and the taxpayers who would have to pay. The result is that the over-85s currently draw down their Medisave and retain their citizen’s access to Medifund but that they are no longer eligible for MediShield protection against all the things that go wrong. The problem should not be exaggerated. Outside providers do fill the gap. IncomeShield, a Government-approved private policy, offers lifelong coverage. It does so, however, at a cost. Annual premiums reach S$2743 at age 76, S$6237 at 100. Not all centenarians have S$6237 to spare. A compromise solution might be for the very old to remain uninsured but for the bed subsidy to be increased. A concessionary co-payment of 10 per cent and not 20 per cent in the C-class wards would halve the hospital bills of the over-85s. Singaporeans are not obliged to join MediShield but most in practice do so. About 90 per cent of the 21–60 age-group, about 78 per cent of the total resident population, had joined MediShield by 2007. Only 400,000 eligible account-holders are currently turning down the insurance supplement. As for the elderly, 82 per cent of seniors in their 60s, 60 per cent of those in their 70s, had taken out MediShield in 2004 (Ministry of Community Development, Youth and Sports, 2006: 49). High coverage ensures that the pool is a representative cross-section of good health and bad. When MediShield was introduced in 1990, the intention was that it should cover 80 per cent (by value) of large medical bills. Large bills were taken to mean those in the top 5 per cent or top 10 per cent (by number) of total bills run up. By 2005, MediShield was reimbursing no more than 44 per cent of those bills. For a hospital episode costing S$10,000, the patient was having to co-pay S$5600. There was not enough butter on each piece of bread.

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On top of that the system had moved from surplus into deficit. MediShield in 2005 had large reserves of S$524 million. The reserves averaged out at about S$300 per policyholder. That credit did not, however, mean that the system should have been less restrictive. Benefits for the basic plan (the superscale MediShield Plus, plans A and B, remained in surplus) first exceeded premiums in 2002. In 2003 new premiums paid in were S$54.2 million while the reimbursements paid out were S$65.3 million. Costs, expectations and life expectancy had all gone up. The system could not sustain such a loss forever. In 2005 the Government decided to bite the bullet. Insurance payouts were increased to cover 60 per cent of the largest hospital bills (defined as those in excess of S$10,000) in wards B2 and C. Almost immediately it was recognised that the bullet would have to be bitten again. The 60 per cent turned out to be 56 per cent. Even 60 per cent would not have been enough. Furthermore, the maximum payout could be claimed only when the bill reached S$10,000. Under S$10,000 a sliding scale was applied. Below S$3000, for example, only 27 per cent of the cost would be reimbursed. The remaining 73 per cent was charged to the patient (Teo, 2008: 1). It was clear that a further increase was required. In 2008 the maximum payout was raised to 80 per cent. As many as 1.2 million people are on the basic MediShield plan for subsidised wards B2 and C. The higher percentage will be of benefit to them. The 1.7 million people on enhanced schemes covering B1- and higher-class wards will not be affected. Yet there was a price in that all MediShield premiums had to be raised. The under-30s, for example, were expected to pay S$30 a year from 2005, S$33 (inclusive of GST) from 2008: it had been a token S$12 before 2005. A MediShield member aged 59 paid S$160 from 2005, S$225 from 2008. At age 79 the figures were S$510 in the earlier period, S$615 in the later one. The rise for the elderly was by far the steepest. A MediShield member aged 84 paid S$705 a year from 2005, S$1123 from 2008. The over-80s also face an excess that is double that paid by their younger counterparts. The monthly burden should be seen in perspective. A member aged 84 would have to find another S$35 each month. The member aged 59 would have to find another S$5. For most members the increment will not be an impossible hurdle. There is also a loyalty discount of 10 per cent for each decade of membership. It can knock S$70.50 off a long-standing 84-yearold’s annual premium. In 2008 there were only 5800 members aged 81–85 in the MediShield pool (moh.gov.sg/mohcorp). Strongly opposed to index linking lest the cure be the cause of the disease, the Government has nonetheless made clear that ongoing revision of the rates must be expected on a regular basis. It always makes sense to be up to

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date. Yet there is one aspect of MediShield which seems to be frozen in time. There is little discussion about the convention that age and age alone should be the heuristic. It is possible that the black box should be reopened in order that the criteria and the standards can more sensitively be appraised. One option would be a pre-entry check-up. There is currently no medical examination except, occasionally, for new members over 60. Co-payment does reduce the ease with which asymmetrical self-knowledge can be passed on to the pool. It may not be enough. A system which risk-rates by age alone is open to self-selection. A check-up would separate the sheep from the goats. Another option, following on from underwriting, is the fine-tuning of contributions. An applicant is already expected to reveal his full medical history. The present system, purely either/or, has no alternative but to turn him down if he is likely to be an above-average drain. There is a better way. MediShield could include the hard cases but also risk-rate their protection. They would be charged what the contingency demands. A further option would be a no-claims bonus or a non-smoker’s discount. There is currently no rebate for members with an exemplary history of regular payments and minimal withdrawals. To introduce such a rebate would be to reward responsible club-members who had followed the advice on lifestyle and prevention. Premiums are not means-tested, wealth-tested or income related. Now that subsidised beds are being rationed by the ability to pay, it would be only one step further in the same direction for MediShield contributions too to be shaded in such a way that the rich pay more. What is clear is that there is a kaleidoscope of opportunities. All that is needed is the debate. 6.1.2

Singaporeans without MediShield

Approximately 89.3 per cent of all CPF members have MediShield. About 1.2 million are covered by basic MediShield. It is administered by the CPF Board. A further 1.7 million have subscribed both to basic MediShield and to Medisave-approved add-on plans. The supplementary plans are integrated with basic MediShield but supplied by non-CPF insurers. All in all, about 78 per cent of all Singaporeans and Permanent Residents are in the MediShield net (Teo, 2008: 2). About 22 per cent of the target population therefore remains outside. The position is illustrated in Figure 6.1. The MediShield umbrella does not protect the 22 per cent. Singapore may one day adopt the principle of universal participation. It has not yet done so. Some people choose not to sign up because they have family, savings and private insurance. They do not feel that they have a need. Some people, however, remain outside the MediShield system for reasons which are a greater cause of concern.

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3,500,000 3,000,000

No. of members

2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2003

2004

2005

2006

2007

Year Total CPF members

Total MediShield coverage

Note: The jump in membership between 2005 and 2006 reflects the stricter regulations introduced in 2005 on the use of Medisave to purchase top-up medical insurance. The jump between 2006 and 2007 is due to the extension of MediShield to dependent children unless opted out. Source:

CPF Statistics (2003–2007), cpf.gov.sg.

Figure 6.1

Trends in CPF membership and MediShield coverage, 2003–2007

Time is on the side of protection. Larger Medisave balances and greater personal savings will make insurance more affordable in a more affluent future. The Cost Review Committee in 1996 found that 25 per cent of Singaporeans aged between 61 and 70 had opted out of MediShield (Ministry of Trade and Industry, 1996). Three years later the InterMinisterial Committee reported that only 30 per cent of the over-65s had any MediShield cover at all (Ministry of Community Development, 1999: 115). Things have improved since the 1990s. That, however, is no reason to turn a blind eye to the continuing shortfall. Some of the excluded are poor. There is currently no plan to use Medifund to buy MediShield for the absolutely deprived. Some of the poor are also old. They are the cohort most likely to require expensive medical care but to lack the Medisave and the personal savings necessary to pay for it. The Government has on occasion paid seniors’ premiums for one or two

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years in order to get them on to the MediShield books. The support was once-for-all and there was a question-mark: how would the elderly keep up the payments once the free years had gone by? Some of the excluded are old. Some, on the other hand, are young. As late as 2007, half of all children (390,000 children) did not enjoy any MediShield cover. Although the young are statistically less at risk from dread diseases such as stroke, they can still experience a need for high-cost care. A child can be hit by a cricket ball. A child can be bitten by an insect. The rules were therefore changed in 2007. All registered newborn babies, primary school children and older children up to the age of 20 now have to be enrolled automatically unless the mother and father expressly refuse. The annual cost to the parents’ Medisave is S$33 per child. It is expected that the new regulations will raise to 85 per cent the proportion of Singaporeans and Permanent Residents who are included under MediShield. Some of the excluded are non-working women. There are in Singapore about 200,000 housewives for whom the breadwinner has not purchased a MediShield policy. It would make sense for all husbands to pay the subscriptions for a stay-at-home wife. Yet there is another group, also excluded, that will be more difficult to bring in. These are the uninsurable. A hole-in-the-heart baby does not qualify for insurance. To include children born with congenital disabilities, it is argued, would raise the premiums for all under-30s from S$33 to S$210. A patient who is being treated for coronary heart disease does not qualify. The patient’s family could become bankrupt because he/she needs expensive treatment for a preexistent condition. Singaporeans already suffering from medical problems such as cancer, dementia or multiple sclerosis must declare their risk factors when they apply for MediShield. They may be refused outright or an exclusion clause may be inserted. The fact that the insurer is a statutory body does not mean that diagnosed kidney patients will be taken on board. Public insurance is obliged to turn down a heart applicant precisely because he/she is ill. MediShield is a not-for-profit self-financing insurance scheme. It cannot afford to admit known loss-makers. This would impose an inequitable burden on the membership as a whole. Two out of three Singaporeans will suffer from cancer, a stroke or heart disease at some time in their life. One in ten will suffer from diabetes. Early entry is the answer. It is the insurance that insures the insurance. Singaporeans should join MediShield when they are still young and healthy. Once the child is in, the adult cannot be pushed out. Early enrolment is a bulwark not just against big bills incurred in childhood but against later conditions which might render an applicant uninsurable for life. Renewal of MediShield is guaranteed up to the age of 85.

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133

Exclusions and Restrictions

MediShield covers all classes of ward. Patients may claim for a range of hospital services, including intensive care, surgical interventions and implants. Although mainly intended for expensive inpatient attention, MediShield also covers approved outpatient procedures such as kidney dialysis, chemotherapy and radiotherapy. Treatment for diabetes and hypertension counts as approved. Certain medicines will be reimbursed. Illustrations would be the immunosuppressants cyclosporin and tacrolimus, often prescribed for transplant patients. The logic of MediShield is that it should concentrate its resources on large hospital bills of at least S$10,000 but that it should cover them adequately. Smaller hospital bills are believed not to be genuinely catastrophic, in either the medical or the financial sense. High hurdles and upward discrimination allow the system to target the money on the need that is the most acute. As with Medisave, there is much that cannot be claimed. Not all risks can be entertained. Without the exclusions, it is argued, the co-payments and the premiums would have to go up. While the list of allowable conditions is likely to expand over time, the MediShield package is not intended to be comprehensive. MediShield does not extend to ambulance fees, vaccinations and (since medical tourism to Malaysia or Thailand saves so much money the restriction is likely to be relaxed) medical treatment overseas. It does not pay for abortion, mental illness, maternity (including Caesarean section) or dental work. It does not pay for the recurrence of 11 named conditions (including cancer, heart disease and renal malfunction) if the patient has received treatment in the 12 months prior to joining the scheme. It does not cover non-standard drugs (often still very expensive) where these are regarded as experimental. It does not cover injuries arising from war or civil commotion. It does not cover long-term care, domiciliary or residential. It does not cover cosmetic surgery, gender reassignment, drug addiction, alcoholism, attempted suicide or self-inflicted injury. The management of sexually transmitted diseases and of AIDS (in contrast to Medisave) is also excluded. It is a short-sighted omission. In 2007 there were 3483 Singaporeans who had been diagnosed as HIV-positive (422 of them, 392 male, with full-blown AIDS). The trend is resolutely upward. There were 173 new cases reported in 1997, 442 new cases a decade later. Since a sample survey conducted by the Ministry of Health in 2007 found that one hospital patient in 350 is unknowingly HIV-positive, the true figure is likely to be much more. The number of AIDS cases could reach 15,000 by 2010. AIDS patients are commercially uninsurable, always refused. Medication can cost as much as S$1000 a month (although as little

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as S$200 if the patient travels to Thailand for a generic). Private health apart, there are public health implications. It is not good economics to pass a moral judgement on conditions which infect bystanders and impose neighbourhood costs. It is not clear if there is citizen or patient input into the MediShield list. What is clear is that the entitlement is selective. Not all of human life is there. Concerned that tough love in Singapore has had a tendency to throw out the baby with the bathwater, Hsiao says that he sees no logic in MediShield’s obsessive cheese-paring: These restrictions contradict the rationale for using a public monopoly to provide catastrophic insurance and defeat the purchase of insurance. These irrational practices leave those who need risk protection the most without insurance coverage. Those who can’t afford to pay have to forgo medical care or plead for public charity. (Hsiao, 2001: 735)

It is, Hsiao says, always a false economy for sickness insurance to be designed in such a way as to keep the sick out. As Barr writes: ‘Clearly, rationing has been an important element in the control of Singapore’s health costs’ (Barr, 2005: 163). The rationing takes the form of charges as well as prohibitions. As with Medisave, there is the hurdle of a high deductible. There is no co-payment for certain expensive procedures such as kidney dialysis, chemotherapy and radiotherapy. For other kinds of care, the cost-shares can be a heavy burden on a sick person who may be too ill to work. The deductible threshold for patients under 80 is S$1000 per annum in a C-class ward, S$1500 in B2. Thresholds are calculated on an annual rather than a per-episode basis. For patients over 80 the bar is raised to S$2000 in C-class and S$3000 in B2. The co-payment is higher because older people are more likely to claim. If older players were not assigned a greater handicap, the MediShield premiums would have to be higher across the board. Once the deductible has been met, the patient must thereafter co-pay a share of the bill. At first the share is 20 per cent. For bills from S$3000 to S$5000 the co-payment falls to 15 per cent. Above S$5000 it is 10 per cent. Patients can claim back their MediShield co-payments from their Medisave accounts. Reimbursement is based on a table of approved fees. Payment is made according to the schedule, following the logic of the diagnostic-related group (DRG). Thus a patient having renal dialysis on the basic plan can claim S$1000 per month. Room and board is priced at S$450 per day (S$900 per intensive-care day). MediShield pays S$1240 for a 28-day course of chemotherapy. It pays up to S$7000 for surgical implants. It pays up to S$1800 for stereotactic radiotherapy for cancer. There is a maximum

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limit of S$50,000 in the policy year, S$200,000 in the policyholder’s life. Many people find the claims limits too low and the deductibles and copayments a strain. The phrase ‘it’s better to die than to fall ill’ picks up the fears of many Singaporeans. 6.1.4

The Private Sector

MediShield in the past has been not one pathway but three. Members wishing coverage more comprehensive than the basic wards C and B2 could opt for one of the two upgrades known as MediShield Plus. As of 2004, MediShield Plus had enrolled 339,539 members. The upscale arrangements were attractive to Singaporeans who preferred stays in the more expensive Class A or Class B1 wards of the restructured hospitals or in the private sector. Reimbursements were higher. Charges were higher as well. MediShield Plus had two options. Plan A set annual premiums at S$60 (aged 30 or younger) to S$1950 (at age 79–80). It reimbursed up to S$625 per day of hospitalisation (after a deductible of S$4000). Plan B charged from S$36 to S$1170. It paid up to S$375 per day after a deductible of S$2500. In each case, the customer paid more for a better quality of ward. MediShield Plus was no different in that respect from private insurance. Recognising that it was the equivalent in all but name, the Government in 2005 hived off the Plus plans from the Board. NTUC Income, a non-State cooperative with links to the trade unions, tendered for and was awarded the contract. IncomeShield offers Plan MA and Plan MB. The supplements, as before, carry higher premiums and reimburse larger claims. In Singapore there is, outside the State system, an expanding market in private insurance. Some plans are unrestricted: Singaporeans are free to buy any financial product they like so long as the agency has satisfied the stringent requirements of the Monetary Authority of Singapore as financial regulator. Some Medisave approved Private Integrated Plans (PIPs): Medisave can be released to pay the premiums but approval is required from the Ministry of Health. An annual ceiling of S$800 on such withdrawals is imposed. The figure of S$800 is a total. It includes other top-ups such as ElderShield. Of just under three million Singaporeans covered under the basic MediShield scheme, 59 per cent have used Medisave to buy enhanced plans from private insurers. The rest have not. One inference is that some Singaporeans, with or without MediShield, are underinsured. The proportion will rise as means-testing shifts part of the cost of the subsidised wards from public finance to the better-off patients themselves. Private insurance is always problematic. Selection keeps premiums competitive: the young and healthy are economically cherry-picked while the

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old and sick are consigned to the residual State. A national scheme has the advantage not just of economies of scale but of a comprehensive risk panel. The fortunate who pay premiums for claims they never make are matched up with the high-maintenance who are a net drain on the pool. The policymakers are fully aware of the case for a full resident base. While reluctant to make mandatory the single umbrella, they have opted for a joint-package solution which fulfils a similar function. It is financially unattractive in Singapore for the CPF member wanting to upgrade into B1-, A-class or private care to opt out of MediShield. Since 2005 Medisave funds have not been made available for PIP upgrades unless members have also subscribed to the public flagship that ensures them the basic tier of B2 and C. The MediShield membership rose at a stroke from 1.32 million to three-quarters of its target catchment. Only one claim will need to be filed even though the client is drawing upon two sets of entitlements: the foundation bundle from the State and the enhancement extras from the market. Because of the joint-product property, data on insurance plans are subject to double-counting. Many Singaporeans have more than one plan. Five private insurers are registered to transact PIP business. They are NTUC Income (IncomeShield is the largest plan, with 500,000 members), American International Assurance (offering HealthShield Plus), Great Eastern Life (with SupremeHealth), Aviva (MyShield) and Prudential Assurance (PruShield). A total of 25 approved plans are on offer. About 80 per cent of policyholders have their claims processed within a week. As the number of participants expands, as the policies subdivide into differentiated packages, so the premiums may be expected to become more competitive and the benefits better tailored to the preferences of the client. If the private sector performs well, there are bound to be calls for the privatisation of core MediShield as well. Many well-to-do Singaporeans, already buying top-of-the-range international insurance, are no doubt wondering why they have to put money into MediShield or even Medisave at all. MediShield has a claim limit of S$50,000 per annum and S$200,000 per lifetime. Private policies (‘as charged’) now exist which set no limits to the amount that can be claimed per day or per procedure. Some reimburse as much as S$500,000 per annum. Some offer unlimited lifetime cover. The benefit does, however, come with a cost. MediShield premiums range from S$33 to S$1185. Private premiums go from S$70 to S$7000. The Ministry, authorising PIP, imposes its own conditions. Renewal must be guaranteed. A non-discriminatory premium must be charged even if a member subsequently develops a chronic condition. The minimum deductible must be S$3000 for Class A beds, S$2000 for Class B1. The

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minimum co-payment must be at least 10 per cent. Medisave, initially, could not be released to pay for private insurance that dispensed with cost-sharing or promised too comprehensive a package. Later, and despite the continuing concern with cost containment, the Medisave-eligible preconditions were made more liberal. Some ‘as charged’ plans are now CPF-approved despite the fact that they do not place limits on the claims. The Ministry now allows private insurers to offer a rider that absorbs the cost-sharing element. Such a rider effectively makes the service free at the point of consumption. Since the Government is resistant to cost inflation and overconsumption, Medisave cannot be used to purchase this supplement, which must be paid for in cash. It is a face-saving restriction. The marginal cost of a rider is too small to be a deterrent. Some insurers offer extra services. Some, for example, will reimburse for traditional Chinese medicine. Great Eastern covers congenital defects from the third year of the policy. Prudential reimburses ambulance fees. It also pays for accommodation for an accompanying parent when a child has to go into hospital. Aviva offers ‘moratorium underwriting’. Preexistent conditions (so long as they are not incurable, like AIDS) are included in the package, without a supplementary premium, after a five-year symptomfree waiting period. Two years or five years is a reasonable compromise. Ten years to life is excessive. Not only does unwarranted cautiousness deprive the client of cover, it also denies the insurer that is willing to take a risk the opportunity to add to its profits through the gains from trade. If, of course, the condition returns in the waiting period, then out of pocket will be all that remains. Where public insurance plus private insurance both turn the patient down, then income, annuity, savings, Workfare and the extended family will have to fill as much of the gap as they can. It might not be enough. Even natural loss-makers have needs that must be met. From the point of view of the cancer patient, the denial of insurance can feel like a sentence of death. Other countries, recognising that health care is not like the textbook economic tradable, have legislated to prohibit exclusion (‘open enrolment’) and to standardise premiums (‘community rating’). Singapore has not taken the big step of forcing the private sector to sell on these terms. There is no local equivalent of the US Health Insurance Portability and Accountability Act. It may not always be so. No market can be totally free if there is a general consensus that it has social duties as well as commercial rights. Yet regulation itself can be a threat to good health. Inclusion pushes up the premiums: the healthy might drop out while the old and the ill might not be able to pay. Prohibitive charges lead to supplementary secondbests: the State might have to compensate the insurers for welcoming in the uninsurable. Either way, social democracy is a serious door.

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The NTUC Income’s Managed Healthcare System (MHS), introduced in 1994, is an interesting outlier in the market for non-MediShield insurance. It is a health maintenance organisation (HMO), one of Singapore’s very few. The MHS limits the patient to named general practitioners, preferred-provider specialists and listed procedures. Members register with a single clinic. They develop a long-term relationship with a doctor. They are allowed no more than three visits to a practitioner who is not in the MHS. MHS covers both outpatient and inpatient care. Primary-care physicians are paid on a capitation basis. Fixed fees are negotiated with hospitals. As in other plans, members pay deductibles (S$5 for a primary-care visit, S$15 to see a specialist) and make co-payments (10 per cent for a CT scan, 10 per cent for hospital care, reimbursable through Medisave). Some HMOs in the United States are so large that they have their own hospitals. A Singaporean HMO might one day want to do the same. At present all MHS enrollees are free to select any hospital, restructured or private. MHS in 2008 ceased to admit new entrants. The door was closed to both individual applicants and to employment-based groups. Existing members continue to enjoy coverage (renewal of personal policies being guaranteed) so long as they pay up annually and are aged less than 80. The eclipse of MHS shows that Singaporeans have no real interest in a prepaid policy of this kind. They regard the closed panel as too restrictive. Perhaps they also regard MHS as rather expensive. MHS offers three plans. Premiums vary with age, sex and type of hospital ward. In the case of the cheapest plan (the plan that covers B2 beds), they lie, for example, in the range from S$183 (for a male aged 7–20) to S$1243 (for male renewals between 76 and 80). For women the equivalent figures are S$173 and S$1060. In the case of employment-based plans, the employer typically pays the premium as a fringe benefit. It is not uncommon for employers to offer medical insurance of various kinds to their staff. Often the employer will be a multinational that is accustomed to this perquisite in its country of origin. The occupational basis stems adverse selection. The law of large numbers cancels out any bias in the risks. The cost to the employer can be set against corporate tax. The tax allowance for private health insurance is capped at only 2 per cent of the total payroll. What this suggests is that the Government in Singapore has strong reservations about group plans. In America there is a history of taxable income wastefully transformed into tax-free fringe benefits. The result has been welfare loss, excessive utilisation and medical cost inflation. Company plans, moreover, can be an impediment to the occupational mobility that is essential in a dynamic economy. In a more volatile business environment, and in the light of shorter business cycles, job changes will become more frequent. Many employees will be part-time, on contract or

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temporary. There will be periods of frictional unemployment. Companybased insurance may not be a sensible choice in an era of entrepreneurship and globalisation. Medisave and MediShield are portable. Private entitlements, firm specific, can lead to job-lock. A chronic illness that would trigger an exclusion clause is a good reason in itself for employees to stay where they are. Such a deterrent to occupational mobility can never be in the public interest. The advantage of the State system in Singapore is that workers who change their job or retire do not have to change their policy. Perhaps the employers should limit their discretionary involvement in the payment for care. Some will want to sponsor a works clinic. Some will offer a token contribution of S$350 towards the cost of primary care. Beyond that, it might make sense for the employers not to pay for a group plan at all. It is the thrust of the Government’s non-binding Portable Medical Benefits Scheme that the bosses should simply put an equivalent sum into their employee’s own Medisave and MediShield.

6.2

MEDIFUND

Just outside the CPF system there is a third M. Class C wards receive an 80 per cent subsidy: the beds are means-tested to fine-tune the support. Senior citizens enjoy a 77 per cent discount on consultations at public polyclinics: they pay S$4.70 for a consultation when full-cost foreigners pay S$21 and local adults pay S$9. There are occasional top-ups to supplement Medisave. There are occasional transfers to purchase MediShield. Sometimes it is not enough. Despite Medisave and MediShield there is still a residuum of Singaporeans who cannot pay. The Government has committed itself to ‘good and affordable basic medical services’. Medifund is the last-ditch endowment that puts teeth into its promise. 6.2.1

The Safety Net

Medifund was established in 1993 with an initial capitalisation from the Government of S$200 million. Rapid economic growth and a dependable Government surplus have meant that its asset base has built up. Medifund currently holds underlying resources of S$1.5 billion. The sum, it is intended, will rise to S$2 billion. Medifund spends the interest (and only the interest) to assist the very poor with their medical bills. In 2006 the fund paid out S$40.7 million. This was comfortably less than the interest income that had accrued. In 2006 over 301,000 patients drew upon Medifund. In 2001 it had been 157,190. All of the payments were

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grants: Singapore has no State-sponsored system of health-related loans. About a quarter of the spending (S$10.4 million) went to long-stay psychiatric patients, often schizophrenic or senile, who were being treated at the Institute of Mental Health. About 300 out of 1600 patients have been in the IMH for 10 years or more. Some of them will have been discarded by family or relatives who are ashamed of the stigma, burnt out by the burden or ruined by the cost. A separate Medifund (‘Medifund Silver’), created in 2007, is aimed explicitly at the over-65s. The money is ring-fenced for the elderly but it is not new money. Its start-up capital of S$500 million creamed off about a third of the existing Medifund endowment. The percentage was not chosen at random. About a third of Medifund applicants in 2006 were over 65. As the country ages, the burden is bound to rise. Medifund is discretionary. It is not as of right. Cancer and renal cases are common. Grants are made directly to the public hospitals and to a small number of non-profit institutions such as nursing homes, homes for the elderly and long-stay community hospitals. Apart from the Institute of Mental Health, Tan Tock Seng and Singapore General Hospital share most heavily in the subsidy. The amount per institution is based on the previous year’s disbursements. It is adjusted annually. The money follows the institution and not the patient. There is no equivalent in Singapore of the subsidised health card programme in Thailand. In Thailand the less advantaged are given their own pass. They can select their own (State-sector) provider. In Singapore it is the institution that holds the kitty. Decisions are made by the institution’s Medifund Committee. The members of each committee have a background in community medicine and social work. They know the culture and prospects of the underprivileged. Active as well as passive, they make the needy aware that the fund exists. Since they often take the initiative in identifying eligible indigents, it is no surprise that the rejection rate is low. About 98 per cent of all applications are approved. Greater support is given to applicants who had contributed to Medisave and MediShield before they fell on hard times. This is to reward them for having taken responsibility for themselves while they could. Older people are an exception. There was, after all, no Medisave or MediShield when they were young. The help given will vary from case to case: not every bill is absorbed in full. The payouts will not always be large: the average amount was S$132 in 2006. The criteria will not always be revealed: the dispossessed do not have a need to know. Applicants must be Singapore citizens. They must be receiving care in B2- or C-class beds or in the outpatient clinics of the public hospitals.

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Medifund is not released without a careful inspection of the applicant’s financial circumstances. Only the absolutely deprived can expect to pass their means-test. Monthly income cannot exceed S$500 (S$700 for the over-65s). Those with savings, or able to pay by installments, or in touch with family members who are in work and able to contribute will normally be told that their condition is not desperate enough for the last resort. Middle-income groups do not qualify as needy. The result is that some cannot afford to pay for ruinously expensive procedures such as a bypass. Trapped between the high prices and the strict Medifund test, some of them die. 6.2.2

The Means-test

Measured ability to pay was discussed in Chapter 5 in connection with the subsidised hospital wards. This section asks what testing means really means. It says that it is never easy to define what people are worth. It says that it is even more difficult to shoehorn a multiplicity of variables into a single rubric, or to devise a single test that does not impose disproportionate administrative cost. Factored-down assessment is not a free good. Means-testing in Singapore is more common than is generally appreciated. Only the top 30 per cent of income earners pay income tax at all. Different income tranches are, above that threshold, taxed at different rates. Only households with a combined income of under S$8000 per month can purchase publicly subsidised housing. Only households with a combined monthly income of under S$3000 can purchase three-room flats from the Housing Development Board. Only individuals earning less than S$1500 can apply for public-sector rental units. The hospices, day-rehabilitation centres and old-people’s homes apply a sliding scale in setting their charges. Means-testing in Singapore is not new. It is all around. A means-test in the Singapore context is not as straightforward as it seems. As many as 5.8 per cent of the population are functionally illiterate (the figure was 31.1 per cent in 1968). An even greater percentage have had only a few years of schooling. Such persons might find it difficult to understand the leaflets, fill in the forms or make a statutory declaration. Since they do not complete an income tax assessment, they might not be able to document how much money is coming in. A pay-slip cannot always be produced where a worker is itinerant, has a number of employers, does not earn in a regular stream and is paid in cash. Social workers can ask to see a bank statement, inspect the CPF record or interview the boss. Relatives and friends might be able to fill in the gaps. Recurrent wages and one-off bonuses would have to be separated out. When all is said and done, however, where applicants do not keep good

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books, there is no easy way of knowing what they can afford. Good books in any case provide information only about the past. Once people fall ill, suffer wage cuts or lose their job, the previous year’s income will not be a reliable guide to their current financial status. Additional problems arise because spendable capacity is by no means easy to define. The income tested where the applicant has a family need not be the individual’s income in isolation. A choice might be made to meanstest the household income per capita. Such a test would have to identify and quantify the appropriate relatives. Some will be living at the same address. Some will be living elsewhere. Some will be living abroad. Some will be secretive and unforthcoming about money. Some will not know. Some will not cooperate. Some will not want their family members to find out how much they earn. Social workers are not detectives. It will be confusing for them to follow up the trail of blood. It will be time-consuming for them to work out what each family member is really worth. Nor should it be forgotten just how much of human life is borderline, ill-defined and sometimes sad. An adult child, even if on a very low income or severely disabled, counts as family. Although more like a dependant than a breadwinner, such a person’s earned contribution can make it difficult for his/her caregiver to qualify for assistance. An alternative would be to dispense with the web of kindred and to income-test the individual applicant alone. Given the emphasis on family in Singaporean social policy, it might be an admission of defeat to do this. There is also the problem that a retired person generously supported by top-decile children would in a single-person assessment be recorded as destitute and impoverished when in fact he/she is eating sharks’ fins and drinking wine. Yet the speedy turn-round makes a persuasive case. Singleperson assessment is less complicated than profiling a whole household. Patients are normally in hospital for a relatively short period of time. They are worried and afraid. They need their documents to be processed quickly so that they can have a good idea of the price. As with the receipts, so with the disbursements. The median individual income of S$2170 has a different meaning if it must support four than if it must support only one. A test would have to measure not just the individual or the household income per se but the number of young children, non-earning dependants and retired parents who are looking to that income for their next hot meal. Their health status is itself relevant. If a family member is chronically ill or if the earners themselves are on pricey medication, it is misleading to assess the income to the exclusion of the outgoings. Incurable conditions such as haemophilia are a leak that will never be plugged. Chronic or acute, medical bills can be a crippling drain even on a solidly middle-class salary.

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A further complication is the asset stock. The Government’s homeownership scheme has meant that Singaporeans have locked up their cash in valuable assets that they have no wish to realise. Over 92 per cent of resident households are owner-occupiers. Since the Singaporean meanstest is a total-wealth test, the letter of the law is that the despairing can reasonably be expected to sell their home to pay for surgery. It is a bit hard on owner-occupiers, HDB or condominium, who have used up their savings, have little in the way of a support system and are too ill to work. It is a long way down. Capital release might be a useful halfway house. The rule that real property must be liquidated first is applied with some flexibility. It would have to be if a three-generation family is living in the unit and has nowhere to go. A standard technique in means-testing is to proxy ability to pay by the home address and the type of dwelling. The assumption is made that a household living in a five-room HDB flat or an exclusive condominium is prima facie less in need of welfare. Statistically, it is known that the average monthly expenditure of households living in public-sector units in 2003 was S$2804 whereas the equivalent figure in private flats was $5846 and in private houses S$6958 (Department of Statistics, 2005: viii). Generalisations, however, can be misleading. Family size is relevant. A family of eight requires a five-room flat even if the household income is low. Household circumstances in any case will change over the tenure of the lease. A property may have been acquired 30 years earlier when combined earning power was high. Once people have retired, or gone through a divorce, or become medically unfit the roof over their head may be the same but their current income will have fallen. Unless it is sold, rented out or remortgaged, the home contributes nothing to disposable income or ability to pay. No one would deny that the residents of a one-room public rental unit have a problematic financial standing when it comes to paying even for a C-class bed. Their home writes their reference when they apply for Medifund or ComCare relief. Having successfully obtained their last-ditch refuge, they must previously have proven that they have a low monthly income of S$1500 or less. The problem is that the residents in a large owner-occupied flat might also be finding it difficult to keep their head above water. Medisave is not unlimited. MediShield does not pay for everything. Mandatory retirement means that the income stream dries up. Even in a decent-sized flat there will be people who are finding it a strain to pay for health out of resources that they do not have. It is not just the threadbare and the undernourished who have a right to affordable care. Means-testing can be a source of stigma. Free care in a C-class ward can mean a shaming loss of face to an elderly supplicant who sees free-gift treatment as an admission that he or she has failed to achieve the Singapore

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Dream. Bottom-end facilities can be an embarrassment to independent householders who have worked hard all their life and then ended up having to ask the outside community if distressed gentility genuinely warrants a bed. Declaring before complete strangers how much one has saved and in what form can feel like an inquisitorial invasion of privacy. A lack of transparency and an inadequate appeals mechanism leave the pauper with the feeling that he or she is being made to beg. A means-test can be a synonym for personal failure. Yet it need not be so. In Singapore the billing is confidential and the wards remain integrated. Affluent patients have long been trimming their outgoings by selecting C. There is no reason to think that the economical and the prudent will not continue to do so. Even if the charges are meanstested, it is impossible to tell by inspection if a given patient is in C because he/she wants to save money or because he/she has not much money left. The veil of ignorance is the mother of equal esteem. Stigma is less where no one knows who in the Comfort-class ward has not made the grade. Even if there does occur what Titmuss describes as a ‘humiliating loss of status, dignity or self-respect’ (Titmuss, 1968: 129), still there is no reason to think that it will be generally condemned. Singaporeans are closer in time to The Good Earth than the British are to Oliver Twist. Less sentimental and less accepting, they will often say of stigma that life itself can be a threat to self-respect. Policy-makers in meritocratic Singapore have never suggested that care must be delivered in citizenship-class wards or that access must necessarily be stigma free. Singapore is not Britain. Good health is not the national health. Opt-in could at least be made a safety-valve. If all patients were automatically charged the unsubsidised rate but the wretched had the chance to apply for a discount, the onus would then shift to the forlorn. They would have to decide if they wanted to put their financial status on display. It would be their own choice if the CPF Board and the Inland Revenue were to be allowed in to verify their personal details. A sliding scale might further attenuate the shame. Microelectronic data-processing provides the technological highway that protects the self. If there is not a single cut-off but a gradual and graduated progression, the deprived will be a range but still not a caste apart. Stigma aside, a sliding scale can deliver a financial benefit. If there is a single income cut-off, then success in the lottery can turn on one dollar more or one dollar less. This is already the case with the ComCare relief to be discussed in the next section. A family income of S$1499 is not very high if the children need books and clothes. The green light turns red at S$1500. A father would be well advised in the circumstances not to volunteer for an overtime shift.

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A means-test is a cause for anxiety. Policy, after all, is the language of precedent. Once means-testing has been adopted for hospital wards, there might be pressure for it to be extended to prescription charges, public transport or electricity bills. There is no end to the list. Equally, there is no end to the bureaucratic slippage, the form-filling, the transaction costs and the social divisions that the list will turn loose. It is the law of action and reaction. It is also a fact of life. Social policy exists to bring about change. One change leads to another change. That is the way it is. 6.2.3

The Welfare State

Singaporeans are strong on competition and individualism. Judgmental and achievement orientated, they believe that welfare should not be allowed to erode the work ethic: ‘If you are weak, vulnerable or poor, you may not only be in trouble but even be stigmatised for being so’ (White and Goodman, 1998: 18). It is not clear how to integrate this hardness of heart with Tan Ern Ser’s finding that altruism was strong and largely untapped. Fully 87 per cent of all Singaporeans in his survey (but, surprisingly, only 80 per cent of the very poor in one-room and two-room flats) agreed with the proposition that ‘people who are more successful have a responsibility to help the less successful ones’ (Tan, 2004: 27, 73). Be that as it may, the self-regarding sentiments are at least as strong. Charitable donations in 2007 were 0.34 per cent of the Singapore GDP. About 16.9 per cent of Singaporeans did voluntary work. As impressive as the S$820 million in donations and the 35 million hours of unpaid time are, the equivalent figures in the United States, at 2.2 per cent and 26.2 per cent respectively, were much higher. Singapore was built by immigrants who used the market matrix to survive. Its politicians argue that people still need economic incentives to work and save. Generous welfare would take away the need to take responsibility for oneself. Singaporeans also believe that the vulnerable wherever possible should be looked after by their family members. The dependent should benefit from an intergenerational transfer of Medisave, accommodation and cash. The wider community should only become involved where the left-behind are truly friendless, without family and alone. Even then, they should be given training and assistance to find work. They should not expect donations with no strings attached. Compassion must be kept within the limits set by affordability and the moral commitment to self-reliance. Singapore is not a handout State. The Government has argued strongly against the dependency mindset. That is one reason why there is no benchmark index of basic necessities (food, transport, medical expenses, utilities) that could be used professionally and impartially to calibrate public

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support. At the same time there is an awareness that there are as many as 100,000 households scraping by on S$1000 a month or less. Basic needs have to be met, and the cost of living is going up. Working extra shifts, buying cheaper food, eating at food court stalls since cooking for one costs more are all options that should be explored. When all else fails, however, the State increasingly shares the load. Rebates can be claimed for school fees, utilities and service (‘conservancy’) charges. The Workfare Income Supplement (WIS) tops up the income of the poor in work. Occasionally there have been ‘Singapore Shares’ and ‘Economic Restructuring Shares’ for all Singapore citizens. These are not real shares but ad hoc bonds. They can be held for income or converted into cash. Distribution has been tapered to favour the more deprived. It is a form of State welfare even without an ambitious welfare State. A variant has been the ‘Growth Dividend’, paid when the budget was in surplus. In the 2008 Budget the non-recurring bonus was S$400 for households in small public flats, S$300 for households in large public flats and small condominiums, and S$150 for households in more expensive private properties. The over-60s received an additional sum of S$200, S$150 and S$75, respectively, unless they were earning more than S$100,000 per annum. Then they received only S$100. Bonuses in Singapore vary with age, income and housing type. The intention is that the older and the less well-off should be given more. The poor are also entitled to a public-sector rental flat. Eligibility is strictly means-tested to ensure that only the genuinely needy will rent from the Board: persons able to afford maids and air conditioning have in the past managed to slip through the net. The HDB looks into the financial status (including private property) of children and siblings to confirm that the applicant has no alternative source of support: an elderly widow able to stay with her children has no claim on an HDB rental unit merely because she wants to be independent or doesn’t get on with her daughter-in-law. The family income must not exceed S$1500. A family with a household income of S$800 or less will pay between S$26 and S$33 per month (unchanged for 30 years) for one room, S$44 to S$75 for two. The charges are higher if the household income lies between S$801 and S$1500. The highest rentals are S$205 (one room) and S$275 (two rooms) (Housing and Develo pment Board, 2008). The HDB has the right to adjust them upwards (to as much as 70 per cent of the commercial rate) when the household’s income rises. Even so, they are much less than the market rental, which can be S$2000 or more. HDB rents are niche rents. Not intended to be market-clearing, they are a brick in the citizenship floor. Soaring rents in the private sector have meant that the poor very

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often cannot afford to rent privately at all. They stay with their relatives. In extreme cases they sleep on the beach. It was once the rule that applicants should be denied a rental flat if they had sold a property in the previous 30 months. The reason for the wait was to discourage families from cashing out at the height of a boom, repaying their debts and then insisting that they be rehoused by the State. The rule had to be scrapped: 2.5 years is a long time to wait if there has been divorce or bankruptcy, or if the family has had to sell up quickly to settle a medical bill, or because an incapacitating coronary has meant that they were repossessed when they could no longer keep up the loan repayments. Yet there can be a delay nonetheless. Pressure of demand can mean a wait of 9 to 18 months. In 2008 131 tenants gave up their flats each month but there were 382 applicants in the queue. Tenancies are for two years. It is hoped that the family will be able to move up and move on after that. Buying is what almost all people do in a country where the national ideology has invested so heavily in rootedness, deferred gratification and a stake in the nation. That is why only 5 per cent of the HDB’s total housing stock is made up of rental units. The HDB currently has 42,800 rental flats on its books. The number will rise to 49,860 by 2011. In Hong Kong the equivalent figure is 670,000. A single person, renting under the ‘joint singles scheme’ for the over-35s, will also pay a low rental. It will start from S$26 per month and will be means-tested. The HDB has a stock of 20,000 one-room flats, often quite small, that are suitable for singles. They are occupied by two flatmates who may never have met until they moved in together. Persons preferring to live alone would have to rent in the non-subsidised sector. The poor can also make a claim for public assistance. This relief is administered by the local authorities (the Community Development Councils). Set up in 1997, the (five) CDCs are tasked with grassroots support for the disadvantaged. Education, housing and employment as well as income maintenance fall within their remit. Each CDC is headed by a Government-appointed Mayor. They report to the Ministry of Community Development, Youth and Sports. One of their principal functions is to administer the ComCare scheme. ComCare is the core of income maintenance in Singapore. The payments are generated by interest accruing to the Community Care Endowment Fund. It received an initial grant of S$500 million when it was created in 2005. By 2008 the fund had become S$800 million. It should grow to S$1 billion through central Government grants made possible by the budget surplus. The capital cannot be touched. About 64,000 payouts to the needy were made in 2007 (15,000 in 2002) under the various ComCare schemes. Further payouts were made to grassroots groups, self-help groups and

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voluntary welfare organisations which work directly with the deprived. The intention is to lift the dependent out of the vicious circle of malnutrition and hardship, but to do so without weakening their determination to stand on their own two feet in the end. Some will not succeed. ComCare EnAble dispenses long-term public assistance (PA) to Singaporeans who, because of poor health, permanent disability or old age, will never work again. PA does no more than keep the wolf from the door. The target payout is currently S$330 a month for a single person living alone. For a family of four with two school-going children the support is S$1020. Sums are not pegged to inflation but are adjusted upwards as appropriate. The cash transfers are basic. A single person needs at least S$400 to get through the month. About 86 per cent of Singaporeans on assistance are old. In 2006 they were given a total of S$9.8 million from the fund. The conditions are strict. Incapacity to earn must be demonstrated. CPF, savings and assets must have been exhausted. Family support must not be an option: this is interpreted to mean that if there are adult children, their own household income should be no more than S$1000. The actual number of households receiving grants is small: 2867 in 1988, 2928 in 2008. Approximately 50 per cent of applications are rejected. Given the ageing population, the PA rolls are likely to swell. Ramesh calculates that the number of claimants drawing public assistance in Hong Kong (in 2000) was 11 per cent of the population. In Singapore (in 1998) it was 0.05 per cent (Ramesh, 2004: 74, 79). ComCare is charged not just with long-term maintenance but with shortrun relief. The ComCare Transitions Scheme exists to help the able-bodied who are going through a bad patch. Such persons, living from hand to mouth, might have lost their job through restructuring, been injured in an accident or been widowed with children and parents to support. Income cannot exceed S$1500 per household or S$450 per person. The cash will be for up to 12 months, to cover electricity bills, rent, subsistence food and the cost of transport to job interviews. It can be extended for up to two years, where recipients are in work but on low pay. The ComCare Self-Reliance Scheme adds on a training grant to help the lagging-behind move up to better jobs or an enterprise grant so that they can start their own business. In 2006 the CDCs through the ComCare Self-Reliance scheme paid out S$10.1 million to 4233 beneficiaries. There is also ComCare Grow. In 2006 it spent S$18.8 million to offset childcare fees before or after school. This allowed low-income parents to go out to earn a living. There is, finally, the ComCare Home Ownership plus Housing (HOPE) scheme. This plan gives young, poorly educated, low-income couples around S$100,000 worth of incentives, including support for housing, utilities, training and the education of their children.

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The condition is that the couple cannot have more than two children. Also, they cannot divorce while they are registered with HOPE. The restriction may be relaxed to allow single mothers, especially vulnerable to debt and poverty, on to the scheme. ComCare does not normally hand out large sums. Nor do all beneficiaries receive the maximum amount: the average ComCare subsidy is S$136. Only citizens are eligible: Permanent Residents are not. The dole is not meant to be generous. On the other hand, the recipients are entitled to some free food (including vouchers and bread donated by community-minded hotels), a contribution towards their children’s education and Medifund health care at government polyclinics and hospitals without any need to co-pay. This is a great benefit to the medically indigent who are poor precisely because they are ill. Save in the case of the permanently dependent, ComCare is about empowerment and eventual independence. The aim is to assist the unfortunate to escape from the poverty trap. It seeks to smooth out the vicissitudes of the cyclical ups and downs. A recession hits the marginal and the disposable most. In 1999, joblessness in the ‘Asian Crisis’ was 4.7 per cent overall, but 1.2 per cent for the top decile, 44.4 per cent for the lowest. The wages of the lowest decile were in the same downturn cut by 34 per cent. The less-intelligent and the less-educated will remain out of work longer in the knowledge-based ‘new economy’. They are the ones who are the most likely to need the help. Rapid growth, full employment, a willingness to match less-choosy foreigners in terms of pay and conditions are all important if the people at the bottom are to better their lot. ComCare is not about unlimited relief. It does, however, make life a bit easier for the labourer over 40 who cannot speak basic English and has no IT skills. In the long run the social compact dictates that such a person should fend for him/herself. In the short run the political compact says that he/she must not die without trace on the street. 6.2.4

The Voluntary Sector

On top of the State, on top of the family, there is a further support system. There are 250 voluntary bodies registered as private charities under the blanket supervision of the National Council of Social Service (NCSS: www. ncs.org.sg). Some are based in the ethnic communities: the most prominent are the Singapore Indian Development Association (SINDA), the Chinese Development Assistance Council (CDAC), the Eurasian Association (for Singaporeans of mixed ancestry) and Yayasan Mendaki (for the Malays). Some are intended to provide for a specific problem or state. Illustrations would be the Society against Family Violence, the Salvation Army and

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the Alzheimer’s Disease Association. The National Kidney Foundation provides low-cost kidney dialysis: this cannot be reclaimed from Medisave or MediShield. Despite the high level of probity in Singapore, things sometimes go wrong. Some charities have experienced malversation of funds. Controls on charities have had to be tightened up. There are many helping hands. Funds can be raised for the NCSS through the Community Chest (it collects at least S$40 million each year) and through charity-specific campaigns. The government also provides targeted subsidies to the voluntary welfare organisations (VWOs) to assist them in their work. A VWO that operates an old people’s home will, for example, receive 90 per cent of the capital cost and 50 per cent of the running cost of the facility. The State services and the private charities are there. Often, however, the take-up does not match the aspirations. Phua is right to observe that the system could do with a unified structure of information and referrals: ‘There is currently a proliferation of mismatched resources and programmes which are uncoordinated and sub-optimally utilized’ (Phua, 2000: 149). There is a need for a central database and trained advisers, professional and voluntary. The poor and the old, even in Singapore, do not know their way around the Internet. They have difficulty in making an application. They are not sure which services will satisfy which needs. They are not sure how to make contact with the many helping hands which are trying to help. They do not know where to turn or whom to ask. Even if social services are not nationalised, there is nonetheless a need for a central clearing-house. A one-stop centre would tell the uneducated who can barely read a newspaper and the isolated who have no family or friends precisely what is on offer. A ‘senior’s navigator’ would tell whitehaired heartlanders where they can go to make a claim. The same centre could offer them health checks, simple treatments, physiotherapy, keep-fit classes, opportunities to socialise and referrals where appropriate. Centres, now being developed, could draw upon existing volunteers and eldercare services. There is also a need for the different services to collaborate in order to produce a coordinated roadmap of support. A positive development is the Ministry of Health’s proposed Framework for Integrated Health Services for the Elderly. It links up the hospitals, the health visitors and other health-related services.

6.3

THE PRECONDITIONS FOR POLICY

Other jurisdictions have tried to copy the Singaporean system. South Africa introduced medical savings accounts (MSAs) after the deregulation of health insurance in 1994. By 2000, the MSAs had captured half of the

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private insurance market (Matisonn, 2000: 8–9). There are approximately 4.6 million South Africans with medical accounts. Impressed by Singapore’s Medisave since 1984, 50 urban centres in China have experimented with the scheme. Shanghai, in 2001, was the first to introduce accounts as an alternative to government-guaranteed protection (Dong, 2006: 209). The United States since 1996 has permitted private insurers to offer voluntary accounts. Hong Kong has been considering mandatory MSAs such as MEDISAGE for the retired at least since the visit of high-profile Harvard consultants in 1999 (Bauhinia Foundation, 2007: 26–9). Ageing nations are being forced to experiment with new mechanisms. Dong is not certain that they will succeed. She is sceptical about the attempt to clone the MSAs without duplicating the ceteris paribus which in Singapore is the sine qua non: Health care systems never work alone. . . . No matter how successful a health care financial model is, it is hard to replicate it in another society. Consequently, it is not rational merely to borrow a health care financing model from another nation, especially when they share few socioeconomic and cultural characteristics. (Dong, 2006: 213–4)

Great ideas can be mediocre transplants. Singapore’s MSAs might not travel well. Chris Ham writes that history, culture, politics and demography make each country unique: ‘Health care systems do not develop in isolation. They are products of the societies in which they are embedded and of the values held to be important in those societies’ (Ham, 2001: 739). China is China and Singapore is Singapore. Pluck-and-plant need not bear fruit. As Sartre observes: ‘It appears that bananas taste better when they are fresh from the tree. Intellectual constructs by the same token have to be consumed on the spot’ (Sartre, 1948: 96). There is no reason to think that MSAs can be packed up and moved across. The alternative hypothesis is, however, that they can. The possibility of replication depends on the extent to which 10 economic and social preconditions are met. 6.3.1

Ability to Pay

The ability to save is a function of the level of income. In Singapore the relatively high level of household earnings and the exceptionally rapid pace of economic growth have meant that an assiduous and determined citizenry has won itself a margin that can be spared for health. When it introduced its Medisave, Singapore had no rural hinterland, hardly any agriculture, and no low-productivity family farms. Dispersion and barter would have made the collection of subscriptions difficult. Abject

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poverty, subsistence wages, unrecorded payments, marginalised foreigners, and migration from the countryside, would have made payment impossible: ‘As many as half of the Chinese people in urban China do not seek necessary care’ (Dong, 2006: 212). MSAs make sense in Singapore where local people have a surplus to put by. They might not make sense in a poor country where per capita living standards are strictly hand to mouth. This is especially so since Singapore, unlike South Africa, insists on copayments. Households who have reached into their pockets for Medisave must reach into their pockets again even for essential medicines and nondiscretionary inpatient care. Such treatments, if skimped because they cost too much, could lead to more expensive care in later years (Matisonn, 2000: 2). Reasonable earnings are therefore a precondition. The Singapore system presupposes that most of the people most of the time are earning enough. 6.3.2

Macroeconomic Stability

Not only must incomes be adequate, they must also be stable. Because the build-up of medical accounts requires regular and continuing saving, the earnings stream itself must be predictable and reliable. Economic activity in peasant agriculture is seasonal and erratic. Droughts and floods interrupt the circular flow. Demand-deficient unemployment makes it impossible for the dispensable to save what they do not have. The cyclical and the seasonal travel on a prayer from boom to bust. The salaried and the tenured will be better placed to make the most of the system. MSAs are most likely to succeed in a relatively sophisticated economy. Such an economy should, like Singapore, have a developed formal sector, a sustainable level of investment and a near-full level of employment. Singapore, admittedly, is a highly open economy. It is forever at the mercy of world fluctuations in trade and credit. Its economic history shows, however, that its downturns seldom last very long. The sequence of its growth rates from 1997 to 2000 demonstrates just how quickly it bounced back from the trough of the ‘Asian crisis’: 8.3 per cent, –1.4 per cent, 7.2 per cent, 10.1 per cent. The rate of unemployment in the last quarter of 2008 was 3.1 per cent. Unemployment on average has been less than 2 per cent for the last quarter of a century. The Monetary Authority of Singapore may have been too pessimistic when it suggested that the ‘natural’ rate of unemployment might lie in the band from 3 per cent to 5 per cent (Monetary Authority of Singapore, 2004: 49). While there will always be frictional and structural unemployment, the Singapore experience is that there are normally more jobs than qualified applicants. Jobs are a precondition for employment-based savings accounts and for an

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uninterrupted contributions record. If there were prolonged slack, it would be difficult for the coverage to be either adequate or universal. 6.4.3

Low Inflation

A further precondition is that the consumer price index must not be trapped in an upward ratchet. Members at 55 take back their principal and collect their interest. The values are calculated in nominal and not in real terms. CPF and Medisave are not inflation-proofed. If prices have doubled, members take out only half the purchasing power that they put in. Some systems protect their pensioners through a cost-of-living adjustment. Singapore does not. Index linking would go against the core tenet of Singaporean political economy that the future must not be asked to crosssubsidise the present. Compensation would be a costly drain on public finance. New money would be a cause of further inflation. Adjustment would be an invitation to deficit finance. While deficits are themselves inflationary, politicians would know that inflation with compensation will be less unpopular than inflation without. In the absence of stable prices, long-term savings would lose too much of their value for them effectively to do their job. This means that countries which want to pay for health through Singapore-style accounts must be prepared to contain inflation through monetary and fiscal policy, the appreciation of the currency, a prices and incomes policy, diversified sourcing of food and fuel, and parastatal cooperatives that do what they can to keep down the price of essentials. The National Wages Council and the FairPrice supermarket chain are a part of the seamless web. So are the Industrial Relations (Amendment) Act and the Industrial Arbitration Court. Countries might have to prohibit cost-push and disruptive strikes where myopic unions might otherwise have forced through uneconomic wage settlements that made prices rise. Not all unions will be sympathetic to this redefinition of their role as service to the nation more than service to their members. Inflation in Singapore averaged 2.9 per cent per annum throughout the heroic years from 1961 to 2000 when Singapore developed from Third World into First. An oil price shock such as those in 1973 and 1974 when prices rose by 19.6 per cent and 22.3 per cent, respectively, wreaks havoc with people’s plans for illness and old age. Taking the post-spike period of 1981 to 2007, inflation averaged only 1.7 per cent. The figure for the 30 OECD countries was 5.5 per cent. The global surge in oil and food prices in 2007 and 2008 served as a reminder that no country is an island. Inflation in Singapore in late 2008 hit a 26-year high of 7.5 per cent. The precondition for the success of the MSAs is that prices should be as stable

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as possible. Medisave would be seriously at risk if 7.5 per cent became the norm. 6.3.4

Education

Educated people have higher and more stable incomes. Education, precisely because it inculcates skills and enhances productivity, makes it easier for better-paid citizens to spare their Medisave for health. Yet there is more. Education not only trains up the technical how tos that improve potential incomes, it also instils a means–ends appreciation of rationality, calculativeness, hard work, deferred gratification and the achievement ethic. These learned proclivities just as much as the betterpublicised proficiencies in computing and finance will lead in their turn to still more growth and still more affluence. They also have an unanticipated consequence. Educated people have a greater ability to manage the decisions that have to be made once they have opened their accounts. Medisave requires members to distribute their medical savings over the whole of their lifetime. The challenge of self-control in a fog of uncertainty must not be underestimated. Medisave presupposes a thinking person’s capacity to weigh an early intervention against a precautionary valuation of a future possibility. It assumes a disciplined (but discounted) willingness to postpone spending in case an even greater need should arise in old age. Education teaches the invisible curriculum. It conditions members to overcome their fleeting impulses and to make a calculated choice. It also teaches them the visible curriculum that they need to operate their Medisave account. Widespread illiteracy makes it difficult to fill in the forms. 6.3.5

Political Leadership

The fifth precondition is trusted leadership at the top. Hard-earned income is precommitted to the system: mandatory savings means that the disgruntled do not have the right to jump ship. Asset management is centralised in a risk-averting Board: gain-seekers must be contented with a portfolio sealed into low-yield Government bonds. Natural anarchists and libertarian maximisers will express their doubts about restrictions such as these. The important thing is that the median citizen should have no such doubts. The fifth precondition is a general acceptance that the State can be trusted to pilot and steer. It must do this in order to protect the higher Ulysses from his own corrupted weakness of will. Singaporeans have voiced only limited reservations about the leadership role of wise literati. Greatly respected Confucius made much of rightful

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place: ‘Let a ruler be a ruler and a subject a subject, a father a father and a son a son. . . . Few indeed are those who are naturally filial towards their parents and dutiful towards their elder brothers but are fond of opposing their superiors’ (Confucius, 1993: 3, 46). Confucian ethics, Asian customs, prestigious diplomas and democratic validation all suggest to the median Singaporean that the politicians do hold a legitimate mandate. There is no strong tradition of refutation, confrontation and demonstration. The success of the decision-makers in managing the market has given them a reputation for competence and performance. A Government which does not have a proven capacity to deliver the goods would find it that much more difficult to persuade its citizens to freeze their money for up to half a century. Yet there is something else. As valuable as a prudent use of scarce social resources will be, the Government must also be in touch with the reasonable expectations of ordinary people who rank, experience and perceive. Destinations count as well as the prudent use of fuel. Ordinary people feel slighted when their leaders become so aloof and distant that the protection, the exclusions, the doctor–patient ratio and the balance between the family and the State are at variance with the product that the median citizen would most like to see. Health is an emotive area. Even the apathetic become exercised when they learn that cardiac arrest can be contained if the ambulances and the doctors are there on time. Barr feels that multiparty politics is pivotal in harnessing the State to the consensus: ‘Perhaps if Singapore had a little more democracy and a little less “efficiency”, it might have an even better health system than it has now’ (Barr, 2008: 414). Others say that focus groups and opinion polls will be robust enough to calibrate the tastes and preferences in the street. Whichever mechanism is used, the point still stands. Trusted leadership is essential if people are to support a State-sponsored scheme. 6.3.6

Administrative Competence

The sixth precondition for the success of Singapore-style medical savings is a good filing system. Mandarins must have managerial flair and a determination to deliver. Departments must be given the budget they need to plan throughput and audit outcomes. Bureaucracies must be kept slim, well motivated and cost-effective. Organisations must be flexible enough to adapt but robust enough to make middle-range prediction possible. Weberian rationality, Schumpeterian initiative and Paretian efficiency must all be in the air. Investments must perform. Claims must be processed. Statistics must be tabulated. Feedback must be collected. Stakeholders must be consulted. Clinical efficacy must be analysed. Patients must be

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satisfied. All of this must be done, moreover, with minimum slippage, waste, fraud or bribery. A country with serious governance issues might prefer to go for privatisation and competition instead. Conduct must be audited rather than arbitrary. There must be no favouritism, nepotism or tribalism. A civil service that could not be trusted with other people’s money would bring the system into disrepute. A failure to enforce property rights would limit the inflow of capital and know-how that are needed to expand taxable capacity. The perceived success of the Singapore system is due in no small measure to the fact that its public service is acknowledged to be efficient and honest. Singapore is ranked fourth out of 180 countries by Transparency International in terms of its ability to root out public-sector graft and corruption: Malaysia is 43, Myanmar 178. On the World Economic Forum’s Global Competitiveness Index, Singapore is ranked seventh out of 131 economies. The United States is first. China is 34th. Burundi and Chad are at the bottom of the list. 6.3.7

Goal Attainment

Overall satisfaction is a further precondition. The system must be seen to be meeting reasonable expectations. Talking outcomes, the statistics on life expectancy and infant mortality must be at least as good as reliable health indicators in comparable societies. Talking inputs, there must be enough doctors and beds to make patient waits tolerably free of pain and anxiety but not so many doctors and beds as to breed excess capacity and invite superfluous services. Talking payment, the list of permitted entitlements must be broadly in line with the nature, quality and distribution of services that the representative subscriber takes to be appropriate and right. Talking complements, there must be elder-friendly housing, hygienic water, health education, preventive medicine, and public transport that makes possible easy access to treatment centres. Where required, there must also be trained social workers who can advise on services, provide counselling, conduct home visits and detect elder abuse. All of this must be refracted through regular elections, meet-thepeople sessions and the involvement of civil society groups. Issues of fairness, delivery, availability and affordability must be the focus for a robust exchange of views at all levels of society. Disclosure is essential. It is hard for people to make up their own mind if the facts and figures are not in the public domain. Transparency aids discussion. The condition was stated in Parliament by Siew Kum Hong in the following words: ‘Any official data that does not

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invoke national security or similar concerns should be made available . . . to the public as of right’ (Siew, 2008). No one would suggest that access codes to submarines and fighter-jets should be published in the tabloid press. Social policy in an ageing society is not, however, as strategic or as sensitive an area. The more people are told, the easier it will be for them to provide informed feedback and to complete the loop. Freedom of information, especially in a country like Singapore where the level of background education is high, can only enrich the quality of debate. It need not detract from the widely voiced opinion that leaders are in post to lead. In restricting the supply of treatments or relocating a convenient hospital, in promoting evidence-based medicine or encouraging prevention through a disciplined lifestyle, decision-makers know that effective stewardship will often be at variance with short-run popularity. What is important is that in the long run public opinion must come round to the view that the bedrock constitution augmented by flexible tinkering adds up to the kind of product that best meets their needs. 6.3.8

The Insurance Complement

The eighth precondition is the insurance complement. MSAs function best when they are not the only string to the bow. By themselves they are not a full solution but only a part. MediShield makes Medisave go further. Pooled risk-sharing gives members with medical savings the freedom to spend more than they have put aside. Because premiums must be affordable for all, the system functions best where the median citizen (as in Singapore) is relatively young and relatively healthy. The insurance component becomes more costly when the population grows old and the claims begin to multiply. Insurance itself can be a slippery slope. Care-cost inflation and supplier-induced demand can ride roughshod over medical outcomes and consumer satisfaction. Risk-sharing must be well managed lest it become a blank cheque. Once again, there is a need for a middle-ground solution. Insurance that is decentralised, comprehensive, first-dollar and uncapped debases the commons through moral hazard and the tyranny of small decisions. Insurance that is too limited, however, does not serve the agreed-upon purpose where discomfort, deductibles, disability and death are the medical translation of the economist’s value for money. It is the task of the system to find a middle way that incorporates gatekeeper referrals and nationally affordable ceilings but does not crowd out the access and the recovery that are the raison d’être for the shield.

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The Safety Net

The ninth precondition is that there must be provision for the poor and the disadvantaged. The system would be discredited if it restricted health care to only those sick people who had proof of effective demand. Medifund is the safety net that decent citizens believe should be put in place for the indigent, the isolated and the alone. Any quid without a quo must, of course, be carefully managed. The logic of Singapore’s Medifund is that the package should be no-frills and basic. Singapore is not the NHS. Strict means-testing may be necessary since unrestricted entry could weaken the supply-side incentives that in the Singapore-style system are the ultimate source of plus-sum prosperity for all. No one would deny that the first line of defence in the Singapore-style system should be Medisave and CPF, savings and property, relatives and friends. At the end of the day, however, if the destitute are in need, if there is nowhere else for them to turn, if the charities have used up their donations, if social exclusion is believed to be unacceptable, then the answer will have to be taxes and tax reliefs, subsidies and grants. It will have to be the State. 6.3.10

Social Values

The tenth and last precondition is cultural validation. Ordinary citizens must be ready and willing to play by the rules of the game. Without the requisite intellectual capital the system will founder and fail. Crucial for the success of any savings plan is telescopic vision. Members should see the logic of deferred gratification. Compulsory or voluntary, they should want to build up a long-term reserve. Singapore, an entrepôt and a commercial centre, is used to the language of abstention and return. It is a nation of immigrants who came because they wanted a better life and who have always had a high propensity to save. Singaporeans value the disciplined accumulation of a worthwhile capital. They recognise that early depletion would leave them worse off in their own eyes. A culture that is committed to mañana and live-for-today, to gambles and luck, to escalating personal debt because consumer credit is how we live would find squirrelling away more difficult to reconcile with the extravagant celebrations and the self-indulgent luxuries which are its expectation and its norm. The Singapore system has a factored-down bias. For it to be acceptable to the great mass of the people, there must be a general commitment to individual self-help and intra-family mutual aid: ‘Singaporeans are used to saving for all the major courses in their lives, such as housing, retirement and health care, but Shanghainese are used to relying on

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the government. . . . It takes time for them to adopt the culture of selfresponsibility’ (Dong, 2006: 212). Appropriate socialisation is an external economy which smoothes the way. Thus in a new country there will be a folk memory of poverty and hardship. Hungry people will be determined to better their lot, and not least in health. At the same time, they will have a social ethic which has taught them the importance of banding. The factoring down that is required is not the Byronic individualism of every man his own maker. Instead it is the collectivised individualism of family units and blood ties. People with a shared valuation of kith and kin will be the most open to the sharing of MSAs within the family. They will be quick to promise interpersonal support because to them the communism of kinship is a sacred trust. The congruence of values can be seen not only as what it is but, just as much, as what it is not. It is not in the spirit of the MSAs for citizens to have a primary commitment to non-judgmental social democracy: ‘Part of Lee Kuan Yew’s notion of “Asian values” . . . is the idea that Westernstyle welfare states are not only economically too expensive for Asian states to copy but also culturally inappropriate in that they foster laziness and dependency’ (White and Goodman, 1998: 11). People accustomed to early reliance on tripartite national insurance, equity as equality or a tax-funded National Health Service will feel ill at ease with the non-social nature of State-administered but quintessentially private accounts. People who have grown up with welfarist values will feel that the MSAs leave too little room for solidarity, community, redistribution, nationhood and common experience. Welfare in leads to welfare out. It is not easy to force personal accountability on a citizenry that is intellectually conditioned to turn first to the State. To do so is to invite resentment and possibly even total rejection. The followers of Beveridge would be sceptical. So, however, would the followers of Friedman. People who have grown up with excess-free cover, commercial insurance and the employer-funded fringe benefit will not be attracted by mandatory membership and a list of dos and don’ts. They will not see the need for State Medisave and State MediShield in a capitalist economy where rational shoppers normally buy what is right for themselves. Once again, the consensus is not the appropriate one. A groundswell that is the effect and cause of liberty is not a groundswell that is comfortable with top-down prescription. Free market in leads to free market out. Where cultural pluralism in a melting-pot society means that the only peak in the normative frequency is a commitment to difference, it would be a disaster to dragoon the disparate into a single-sized suit. To impose the MSAs despite the lack of intellectual receptiveness would be to scatter the seeds on stony ground.

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The Singapore system presupposes a consensus that is neither Beveridge nor Friedman. It presupposes a compromise groundswell that favours moderate liberty in combination with moderate constraint. Yet that does not mean that the attitudinal capital will have to be built up by the invisible hand. Social engineering may be in a position to bend and mould. Guided socialisation is the university that informs the vision. CPF is forced saving which teaches the value of self-protection. Co-payments are personal contributions which train the realistic to be prudent and search. The schools make sure that impressionable children grasp the moral primacy of kinsfolk and elders. The Maintenance of Parents Act puts the force of statute behind the social virtue of filial commitment. Singapore is sometimes described as an air-conditioned society. The comfort comes at the price of the thermostat. Be that as it may, without the moral capital, Singapore’s MSAs will become a house divided against itself that cannot stand.

6.4

THE BEST IN THE WORLD?

It is never easy to know which road to take. The Minister of Health believes that Singapore has done well: ‘Our 3M framework is far from perfect, but it is probably the best healthcare financing model in the world today’ (Khaw, 2004). The academics Asher and Nandy believe, however, that major surgery is called for if the patient is to survive: ‘Systemic reforms, which will bring Singapore into the mainstream of health financing arrangements found in the OECD countries, are urgently needed’ (Asher and Nandy, 2006: 75). On the one hand there is individual prepayment, deterrent charges, catastrophic hospitalisation and the family coalition. On the other hand there is national insurance, freedom of choice, the tax subsidy and the citizenship commitment. Can everyone win? Can everyone really be right? The answer, possibly, is that they can. No system of payment is good or bad in itself. Strengths and weaknesses can only be assessed in terms of the charter. Priorities will differ. Where, however, there is a mandate there will at least be less disagreement about the success indicators that responsible policy-makers must quantify and rank. Thus the system must be cost-conscious: there must not be excessive evaporation through make-work administration, underutilised duplication and suboptimal investment. It must be adequate: there must not be an unacceptable penumbra of unsatisfied clinical need. It must be equitable: there must not be an unseen underclass with a commonly accepted claim that is nonetheless not being met. It must be sustainable: there must not

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be a long-term drawdown of withdrawals relative to new subscriptions coming in. A good system must be medically successful: outcome indicators must match or better those of the international comparators. It must be economically successful: health-related projects must be in line with the relevant opportunity costs. It must be flexible: the system must move in step with new needs and cultural norms. It must be affordable: the share in the national and the household budget must not impose an intolerable strain. It must be broad based: it must protect against all major contingencies and not just a selective subset. It must be cost containing: overconsumption of luxuries and of low-probability discretionary tests must be discouraged in order to keep core care affordable. A good system must be humane: medical assistance must be available for all without excessive transaction costs or stigmatising loss of dignity. It must be transparent: the criteria should be in the public domain, piecemeal changes should not be so frequent as to cause confusion, and relevant statistics should be easy to access. It must avoid adverse selection: premiums must not be so high as to drive out the good risks. It must avoid moral hazard: reimbursement must not be so generous that it produces the ill health that it is intended to prevent. Above all, it must move with the times and fit in with the place: ‘Any applicable policies must be carefully adapted to suit local conditions’ (M.K. Lim, 2004: 91). Singapore’s savings accounts may or may not be the right answer for now. Yet the future need not mean more of the same. High-tech medicine, rising expectations, rising incomes, health tourism, social inequality, and the epidemiological transition, will all have an impact on the demand for and the delivery of care. The old and the ill will know that the life they save might be their own. They will make Singapore by 2030 a more anxious, a less confident place. And what will the right road be then? The answer is obvious. It all depends.

7.

Home and family

The economy is First World. The culture is Asian. Most people in Singapore generally believe in the time-honoured pattern of sequential responsibility. The parents look after their children when uneconomic infants are defenceless and weak. Later on the children look after their parents when the old people are too feeble to work. The Chinese have traditionally lived by the saying ‘Raise children to guard against old age’. Ethnic Indians and ethnic Malays are no less prone to make the network of kin their first port in a storm. In a sense they have no choice. In some countries there is a pooled, State-administered old-age pension. In Singapore there is CPF. If the annuity does not buy the rice, the family will have to look after its own. Section 1 of this chapter shows what it means to say that old people become the dependants of their caring children. Section 2 suggests that modernity and economics are leaving some old people precariously on their own. Section 3 examines the role of nursing homes when the family will not or cannot provide. Section 4 assesses ElderShield insurance which pays out for home nursing when an old person cannot dress or wash. ElderShield is not perfect. At least it is a stop-gap when the family is not enough.

7.1

THE FAMILY IN SINGAPORE

The national ideology teaches ‘many helping hands’ but also crossgenerational commitment. Lee Kuan Yew as the founding father laid down the fundamental principle that, while the West may be comfortable with the hedonism, promiscuity and long-haired males that President Sukarno of Indonesia once dismissed as the ‘mental disease’ of ‘Beatle-ism’, the East has traditionally believed in the duty of the child to return with interest the favour of care: ‘Eastern societies believe that the individual exists in the context of his family. He is not pristine and separate. The family is part of the extended family, and then friends and the wider society’ (Lee Kuan Yew, quoted in Barr, 2002: 18). Cultural conservatism and the primacy of blood have become a part of the moral capital of Singaporeans: ‘The family is the primary care-giving unit and the bedrock of support for seniors. . . . The family is the first line of care’ (Ministry of Community 162

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Development, Youth and Sports, 2006: 12). Roles come first. State welfare and private charity are the emergency reserve. Structures and strangers assist the family but do not take its place. The danger is that, even with the best will in the world, there is a limit to what the agnates and the cognates will be able to afford. The need to pay for an elderly relative’s bypass can leave adult children torn between their duties. Smaller families mean fewer offspring among whom the cost can be shared. Then there is the sheer length of time: since 1970 the life expectancy of old people over 65 has more than doubled. While 8.3 years might be affordable, 17.2 years can take adult children beyond the age at which they themselves will retire. The poor might have to borrow. Shifting the burden of deprivation within the pool of the deprived is, as Barr observes, not always a satisfactory solution to the ‘crippling combination of poorly paid jobs, poor aged parents, small Medisave accounts and no MediShield cover . . . This highlights a serious problem with the family-based self-help concept: it can, and does, result in calling on one disadvantaged group to subsidize another’ (Barr, 2005: 166). 7.1.1

Family and Welfare

Old people take and old people give. The contract between the generations is a lesson in reciprocity, consensus and financial support. Reciprocity Older relatives fill gaps in the seamless web. They hand on embedded customs and Chinese, Malay or Indian conventions. Long-lived traditions leaven the impact of global television and cinema culture. Old people cook, do housework, babysit their grandchildren. They make it possible for both parents to go out to work without the unattractive dystopia of childhood socialisation being entrusted to the maid, farmed out to daycare or made a costly charge on the State. The Committee on Ageing Issues said it would be an error to treat the elderly as bygones and memories, scrap and clutter: ‘It would be wrong to view seniors as a burden to society. They are not. Seniors, with their knowledge and experience, provide a vast potential of resources’ (Ministry of Community Development, Youth and Sports, 2006: 69). Recognising that active retired persons contribute even as they consume, the Government offers tax relief of S$3000 to working mothers where a grandparent serves as a daytime caregiver for a child under 12. The child under 12 must be a Singapore citizen. Since only the top third of Singapore income earners pay any income tax at all, the fiscal welfare does not bail out the deprived who most need the concession. The grandparent

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caregiver relief is de facto a baby bonus where it sways the marginal to start a family. It converts longer life expectancy into a productive asset. It is, of course, the working mother and not the grandparent who receives the benefit. Maids and childcare centres cost money. Granny knows that she is working for free. A sense of exploitation on her part contributes nothing to family bonding. Caregiver relief is not the only way in which public revenue is forgone in order to assist adult children who have a superannuated parent in tow. Parent relief of S$3500 may be claimed against income tax for each elderly dependant over-55 provided that his or her annual income does not exceed S$2000. At S$167 per month, the threshold is very low, especially since it includes interest earned on the parent’s savings. The condition for the relief is that the taxpayer must be contributing at least S$2000 a year towards the support of the parent. If the dependant resides in the same property as the taxpayer the tax relief is S$5000. If the elderly parent is both co-resident and handicapped, the relief rises to S$8000. The theory is harmony. The practice can be different. Lifestyles can clash. Childcare is problematic. The mother and the grandmother need not see eye to eye on what it means to bring up a child. Especially will this be so if the mother is a daughter-in-law and not blood kin. Malays when they are old prefer to be looked after by their daughters. The Chinese move in with their sons. A daughter-in-law is not, however, a daughter. The product of a different family as well as of a different generation, she will have her own view of the cultural values she wants her child to absorb. She and the grandmother might not share the same image of a job description that can never be precisely specified in advance. Sooner or later even robust grandparents will move from the active to the passive state. Not every daughter or daughter-in-law will want to sacrifice and nurse when there is so much else that she wants to do. Even if she were to be given a cash allowance and not just a tax deduction, she might still feel that she is being used. Feminists make the point that ‘daughters-in-law need liberation, not recognition’ (Campbell and Ikegami, 2003: 26). Nor is it obvious that the women in the family will be good at providing what the elderly require. Unskilled labour is not necessarily the best option. A hired assistant will be weaker on tender loving care but stronger on spotting the side-effects of ACE inhibitors or recognising when a headache is not what it seems. Formal caregiving by trained professionals might offer the elderly a better quality of life. No one has taught a daughter or a daughter-in-law what to do. Filial piety sends a mixed message where it is the generation above as well as the generation below that is being asked for the filial gift. For many, the childminding obligation will be an unpleasant chore, an alienation of

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free time at a stage in the life cycle when some retired people would prefer to relax, develop new interests, travel, do voluntary work and enjoy their leisure. Some grandparents have expressed the opinion that it is not their responsibility to wear themselves out looking after their children’s children. They say that they would much prefer to live their own lives. People in their 60s and 70s are young enough to be active and fit. Health policy encourages them to keep their health capital in good repair. The stereotype of an old person who never leaves the home and whose golden years have a zero opportunity cost is being left behind. Retired women will have had more schooling. They will have earned more and worked longer. They will have put aside more savings in their own name. They will have learned how to invest for return. They will have built up a social network outside the home. Childminding is not the only thing an old person can find to fill up the empty years at the end. Grandparental altruism may not be all that it seems. In many cases it will have the character of an investment backed up by an implicit threat: ‘The reciprocity engaged in the caring may strengthen the filial responsibility of the middle generation in taking care of the old in turn when they become frail’ (Teo et al., 2006: 124). It is possible that the old are being blackmailed into unwanted burdens because of the miserly commons that could be their fate should they refuse. Debt and debt repayment can be a very vicious circle. At least there is a more attractive side to cupboard love. Grandparents living with adult children know that their own living standards are better if a daughter or a daughter-in-law goes out to work. Market exchange is explicit. Domestic reciprocity is more subtle. Time transfer goes from the old to the young. Amenity transfer goes from the middle-aged to the old. Childminding has a visible payoff if the time invested makes possible a flat screen plasma TV. Consensus Intergenerationalism, altruism and filial piety are enshrined in law. Singaporeans aged 60 or above who are unable to support themselves may sue their children under the Maintenance of Parents Act. Since 1995 they have been able to approach the Tribunal for the Maintenance of Parents to get them their stipend. The Tribunal processes about 100 complaints a year. The bulk of the cases are settled out of court through counselling. It is unlikely that a binding judgment would do much for a parent–child relationship that is already on the skids. Parents may not want to press ungrateful children or get them into trouble with the law. Children might genuinely not have the resources to help. The right to refuse of children who have been abandoned, neglected or abused has not yet been tested in the courts.

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Public policy is necessary since duty by itself does not always meet the need. Normally, however, it does. Family law in Singapore does not so much create a new channel as reinforce an old one. Chan’s survey in 2001 confirmed that the bonds are already strong: Almost all Singaporeans agreed that individuals have a responsibility to provide financial support to their families, especially when one earns an income (98 per cent) and when family members are in need (99 per cent). Virtually all, regardless of demographics, agreed that children should provide financial support to and regularly spend time with their elderly parents (financial support: 98 per cent, spend time: 98 per cent). A large majority of Singaporeans indicated that their family members tell them their personal problems (88 per cent) and they would talk to their family members when troubled (88 per cent). (Chan, 2002: 10–11)

The vast majority of Singaporeans sampled – 97 per cent – told Chan that they had a closely-knit family network to which they looked for warmth, companionship, emotional support and, if need be, cash. The figure for singles was not much less than the average: 93 per cent. Statute in Singapore was able to build on existing practices and norms. Singaporeans already had a clear idea of what family members might reasonably expect. The 2005 Survey of Senior Citizens provided further proof that the elderly turn regularly to their children and to their extended web: ‘Among senior citizens aged 55 and above, 92.1 per cent depended on their family for help when they were ill, 87.5 per cent turned to family for financial help, and 91.4 per cent turned to family when they needed to talk to someone’ (Ministry of Community Development, Youth and Sports, 2007: 59). The downside is that 10.1 per cent of seniors reported in 2005 that they had no one at all to turn to for financial assistance. The minority could not rely on their family nucleus. The majority could. Singaporeans want to keep it that way. A survey conducted by the Hongkong and Shanghai Bank (HSBC) showed just how traditional their value system still is. When asked where the burden of support in retirement should lie, 64 per cent of Singaporeans said the individual and another 24 per cent said the family. Only 8 per cent suggested that the Government should bear the cost (and only 7 per cent predicted that the Government would actually be willing to do so). The figures for the world as a whole were, respectively, 43 per cent (the individual), 20 per cent (the family) and 30 per cent (the State). Asked how they would spend time in retirement, 90 per cent of Singaporeans stated that they would spend time with friends and family. The figure for the world as a whole was 70 per cent. For Asia as a whole it was 69 per cent. Singaporeans like their families (HSBC, 2006).

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Financial support The relationship between the generations is well documented through the decennial National Survey of Senior Citizens. Three sample studies have been conducted: in 1983 (5538 respondents), 1995 (4750 respondents) and 2005 (4591 respondents). All three defined the elderly to be 55+. The findings show just how dependent the elderly actually are on material support from their children. The 1995 Survey found that as many as 88 per cent of old people interviewed had not made financial provision for their old age. Yet 56 per cent also said that their Provident Fund savings would not be enough. It is surprising that more than half the old people surveyed were either not willing or not able to plan ahead. A decade later a study conducted at the Nanyang Technological University confirmed just how many Singaporeans remained uncharacteristically bo chap (indifferent) about Alfred Marshall’s deferred gratification and Adam Smith’s rational frugality. While 87.5 per cent of the graduates and 90 per cent of the non-graduates interviewed said that retirement planning was important, only 63 per cent of the graduates and 27 per cent of the non-graduates had taken any positive steps to save more than the State-mandated Minimum Sum (Chan et al., 2005: 30, 31). An important reason is likely to have been the belief that their children would provide. Only 7 per cent of older women and 30 per cent of older men in the 1995 National Survey of the over-55s felt that they could depend primarily on their own Medisave (Ministry of Health, 1996: 47). In the 2003 Housing and Development Board survey, the three most frequently mentioned sources of income in old age were Provident Fund balances/ pensions (20.3 per cent), savings (38.6 per cent) and, at the top of the list, money from children (47 per cent). About 69 per cent said that they would have sufficient money to see them through their old age. About 31 per cent said they would not (Housing and Development Board, 2005: 124). This result stands in sharp contrast to the situation in Japan, where 78 per cent of the income of the elderly comes from social security and pensions. Children in the 1995 Survey were found to have been paying a regular cash allowance to 75.9 per cent of the over-55s. This allowance was the old people’s principal source of financial support. Only 9.9 per cent of the elderly in 1995 were mainly dependent on income from work or business, only 8.05 per cent on savings and interest (Ministry of Health, 1996: 19). The Census of 2000 showed that 78 per cent (in their 60s) to 91 per cent (in their 80s) of old women, 51 per cent to 83 per cent of old men, were dependent on transfers from their adult children. The Committee on the Family in 2005 confirmed the result. At least 75 per cent of older persons said that their adult children were their principal means of financial support (Committee on the Family, 2005). The study

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by Teo and her associates showed that between 81.3 per cent and 83.7 per cent of older adults felt that they were being given enough. Only 16.3 per cent to 18.7 per cent of older Singaporeans said that their money fell short of their needs (not least of their medical needs). Even then, there was a fall-back plan. When asked how they would cope, most of the over-65s interviewed said that they would simply ask their adult children for more (Teo et al., 2006: 67, 68). The National Survey in 2005 suggested that the world had changed. Whereas in 1995, 75.9 per cent of all over-55s had been receiving a regular cash allowance from their children, in 2005 it was 66.0 per cent. Children were the principal source of income for 64.0 per cent of the elderly in 1995. By 2005 the figure had gone down to 44.7 per cent. Dependency increased with age. Children were the most important source of financial support for 31.9 per cent of old people aged between 55 and 64. The figure became 63.7 per cent beyond the age of 75. Only 2.8 per cent of men and 1.4 per cent of women with no income of their own did not receive cash transfers from their children or other relatives. There were percentagewise fewer old people without support in 2005 than there had been in 1995 (Ministry of Community Development, Youth and Sports, 2007: 4, 27). Women were more likely (77.3 per cent) than men (54.0 per cent) to require transfers from their relatives. One reason is that 79.4 per cent of older males had their own source of income whereas for females the figure was much less: 48.4 per cent. The figures had been 58.2 per cent and 28.9 per cent in 1995. The bulk of the income (which was therefore higher for the young elderly than the over-75s) was from employment or business. Only 2.5 per cent of the over-55s received income from assets (notably dividends or rent) (Ministry of Community Development, Youth and Sports, 2007: 4, 5, 26, 27). Cash transfers aside, adult children also transfer purchasing power to their aged parents through CPF top-ups. Sometimes they are putting money into the accounts of their grandparents, their siblings and their spouse as well. The top-up maximum is the current Minimum Sum. The payment can be made in cash. It can also be drawn from the donor’s own retirement savings. Genetic drift does not come cheap these days. One reason for the burden is that past conditions still weigh heavily upon present cohorts. The current generation of retired people never had much money. They were born when the roads flooded in the monsoon and a family of six lived in a small Chinatown cubicle separated from the next family of six only by a thin piece of frayed burlap. They grew up in a poor port settlement where few people could accumulate a capital for a leisured old age. Their personal history has not gone away.

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The future, however, will be different. Retired people will have had more education and more money. They will have invested in health capital through regular exercise and a balanced diet. They will have acquired the technological know-how to use the Internet for information and its applications. They may not desire or expect financial support from their adult children. They might even be ashamed to ask. Present-day old people were born too soon to be full citizens of the First World. Younger people still coming up will be a different breed of animal when they themselves become old. 7.1.2

The Japanese Experience

It is not just in Singapore that transfers are becoming a strain. The Mainichi newspaper in Japan carries out regular surveys. In 1950 it found that 67 per cent of married women in Japan expected to depend on their children in old age. In 1980 it was 30 per cent. In 2004 it was 11 per cent. As for the number of married women who said it was a ‘good custom’ or a ‘natural duty’ for children to look after the retired, the figure was 80 per cent in 1980 but only 45 per cent in 2004 (Ogawa, 2005: 401). A survey of secondary school students in three countries established that 84 per cent of 15-year-olds sampled in China said they would be willing to care for older parents suffering from ill health. The survey also found that 68 per cent of their American counterparts said they would be prepared to do so. The figure in Japan was only 43 per cent (ibid.: 402). Asian values or occidental values, Singaporeans who think with the former Malaysian Prime Minister Dr Mahatir that it is generally a safe bet to ‘look East’ (he also said ‘buy British last’) should take to heart the lessons of modernism in Japan. In a study conducted by the Cabinet Office in 2003, only 48.6 of respondents agreed with the statement that ‘it is natural to expect children to care for parents’: 57.3 per cent had agreed in 1995. As many as 80 per cent of the respondents told the interviewers that they personally were expecting to rely on publicly funded services when they could no longer care for themselves (Coulmas, 2007: 64). They were hoping for more income maintenance and more welfare in kind. They seemed not to appreciate that the pensions system is already facing a revenue shortfall and could even collapse. The Japanese had to introduce long-term care insurance. There were not many shots left in the locker. The proportion of people aged 65 and over had grown from 7 per cent in 1970 to 19 per cent in 2008. It was due to reach 29.6 per cent in 2030. This is the most rapid growth of the elderly population in the world: ‘The ageing society has been regarded as the number-one social policy issue (or perhaps any policy issue) in Japan’ (Campbell and Ikegami, 2003: 22). Singapore, of course, is not Japan. The

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writing need not be on the wall. Yet there are nonetheless important lessons that Singapore can learn from the Japanese experience. One lesson is that co-residence, in Japan as in Singapore, is on the decline. The proportion of elderly Japanese who lived with a child was 69 per cent in 1980 but only 48.4 per cent in 2001 (Coulmas, 2007: 24). The proportion of the over-60s living in a three-generation household was 22 per cent. While this is considerably more than in Western countries such as the USA (2 per cent), Germany (1 per cent) or Sweden (statistically, none at all), it is also well below the historical figures of 37 per cent in 1981 and 32 per cent in 1991 (Ogawa et al., 2006: 19). The proportion of the over-65s living with their spouse or living alone went up from 28 per cent to 46 per cent. Yet that figure need not be a cause for alarm. Sometimes, especially outside the big cities, old people reside in a second house in the same compound. In such a situation the conjugal unit and the multigenerational family will, quite literally, live side by side. Also, there has been a major and sustained build-up of wealth. The image of an impoverished old buffer with nowhere to go must in more and more cases give way to the new image of an alert and affluent older person who can afford his/her own home and has no particular wish to move in with anyone else. A second lesson is therefore that being old need not mean being dependent. It is estimated that Japanese born between 1947 and 1949 now, at the retirement age of 60, hold financial assets worth 130 trillion yen (US$1.3 trillion). This is nearly 10 per cent of the nation’s wealth. At age 60, the total assets that the average Japanese now holds is over 50 million yen (US$0.5 million). To that figure must be added private pensions and transfers from children to parents (Ogawa and Matsukura, 2007: 216, 217). Female customers aged 50 and above account for more than 70 per cent of the sales at the Keio Department Store, Shinjuku, Tokyo. While it is always a mistake to generalise, and while different age cohorts and different income groups might be having different experiences, still it would be unfair to assume that all the over-65s are financially dependent on others merely because they will never see 65 again. A third lesson relates to the availability of informal carers. Despite the social changes that have taken place, about 30 per cent of married Japanese women of reproductive age are still living with their husband’s parents. The main determinant is whether the husband is the eldest son. Due to the smaller family size, 72 per cent of new husbands now fall into this category (Ogawa et al., 2006: 20). Traditionally, and in all cultures, it is the daughter or the daughter-in-law who is expected to cope when an older person no longer can. The problem is that in Japan, reflecting the very low birth rate and the very long life expectancy, there is now a decreasing supply of such

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carers relative to the over-65s that might need their help. There were 22 million over-65s in 2000. It is projected that there will be 37.3 million over65s in 2025. There are already one million old-old Japanese over 90. How will two single children get through the week when they have four old-old parents on their hands? There are already 1.6 million elderly Japanese suffering from dementia. In 2025 it is expected that there will be 3.99 million. Who will keep track of their whereabouts when they become confused? About 14 per cent of the Japanese population is currently under 15: it will be 11.9 per cent in 2030. About 19 per cent of the population is over 65: it will rise to 29.6. The dependency ratio is currently 33 per cent. In 2030 it will be 42.3 per cent. About one non-working woman in seven aged between 40 and 49 in 2000 was caring for at least one infirm elderly person in the home. Projecting forward to 2025, the equivalent ratio would be one in two (Ogawa, 2005: 390). The gap is widening. The overextended family will not always be able to fill the void. The familial support ratio is a statistic which divides the female population aged 40 to 59 by the total population aged 65 to 84. The index in Japan was 1.30 in 1990. It is projected that it will be halved to 0.65 in 2010. This will be the lowest ratio of adult children to old and old-old relatives in the world. Only Greece and Italy will come close to it (ibid.: 31). About 20 per cent of marriages (more than in France, about the same as in Sweden) now end in divorce. About 12.6 per cent of men and 5.8 per cent of women are still single at age 45–54. About 59 per cent of women aged 40 to 59 were in paid employment (it had been 17 per cent in 1963) at a stage in the life cycle when the bedridden old – 1.25 million in 2000, 2.7 million in 2025 – will most need their support (Ogawa, 2005: 385, 389). Only 9 per cent of mothers with children under 14 stated in a survey in Japan that they were actually enjoying the experience of child-rearing. In other countries it was as much as 70 per cent (MacKellar et al., 2004: 52). Despite the disparaging reference to kurisumasu keki (‘Christmas cake’: it falls sharply in value after the 25th), the average age at first marriage was 27.8 for women (29.6 for men) in 2004. Later marriages mean fewer children. It all adds up to a deficit. The third lesson for Singapore is that in Japan there are no longer enough middle-aged women to go round.

7.2

OLD PEOPLE ON THEIR OWN

Family welfare in 2030 is unlikely to do what Confucian ethics did when colonial Singapore was young. The experience of the richer countries is that far-reaching family ties grow loose. Geographical mobility is less of a problem in a small city-State than it would be in a Continent-nation

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such as the United States; and pro-family public housing and tax policies in Singapore are doing what they can to contain the externality. Even so, Singaporeans cannot safely put all their eggs in one basket. Families can unravel. The world is flat. Singaporeans are taking advantage of globalisation, free-trade agreements and the international marketability of Singapore-earned qualifications to move away for work. About 153,000 Singaporeans are now based abroad: there are 40,000 each in the UK and Australia, 20,000 in China and the USA, the rest scattered from Qatar to Poland. About 1000 educated Singaporeans annually are giving up their citizenship to settle permanently abroad. This brain drain could mean a loss of up to 5 per cent of the top third of the population (Lee, 2008b: 20). New immigrants from India and China may flesh out the labour market. They will do nothing for lonely old people whose children do not pop in for a cup of tea. Divorce too is threatening the family. The stigma is less. Women have a greater chance of supporting themselves alone. Loveless marriages are more difficult to accept once one has watched the television soaps. The Internet has made it easier to make new friends. The statistics are not reassuring. As many as 7.9 out of 1000 resident marriages in 2007 (it had been 3.7 in 1980) ultimately ended in divorce. There were 5937 divorces in 2007. Two decades before it had been only 2608. The experience of other countries is not encouraging. Two out of 1000 residents in Singapore are divorced. In Hong Kong it is three and in Japan four. In the UK it is eight. Even people in their prime can die before they pay for their parents to coast through old age. Even the middle-aged can be restructured out of a job at the very time when both their child dependants and their old-age dependents most need their support. The young stay on longer in full-time education. The old have a longer life span in which to require expensive doctoring. Many in the age-group from 30 to 60 (those in the lower-income deciles most of all) complain that they are a sandwiched generation. They say that they are squeezed between their dependants, young and old. There were 22,490 such sandwiched caregivers in the 1990 Census. By 2000 the number had reached 30,530. Tan Ern Ser found that 17 per cent of middle-class Singaporeans and 27 per cent of working-class Singaporeans were feeling the strain of their three-generational overcommitment (Tan, 2004: 64). Such caregivers say that, irrespective of the pull of sentiment and the push of ideology, there is no way that they can do the impossible when household finances are tight. Nor, however, do they want to do what is morally wrong and default. It is not just money but time that imposes a strain. Uneducated parents have to be assisted to fill in forms. The forgetful have to be told to see a doctor. The ill-informed have to be stopped from eating fatty pork. It

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tends to be women who take on these responsibilities: Mehta found that women were twice as likely to be cast in the role (Mehta, 2005: 324). The sacrifice is disproportionately theirs. It is the daughters and wives who must take responsibility for the bathing and feeding when the old cannot execute their basic activities of daily life. It is they who have to change the nappies of a bedridden relative with bedsores who cannot speak or eat. It is they who have to educate themselves in giving injections, lifting the partly paralysed and resuscitating quickly when there has been a cardiac arrest. It is they who have to do the shopping and arrange the medical appointments. Some are stating openly that too much of a good thing is wearing them out. The 1995 Survey discovered that 21.2 per cent of caregivers had given up their job or had had to work part-time in order to look after the elderly. As many as a quarter of that number openly expressed feelings of hostility and depression at the burden that the old people had imposed on their living standards, their superannuation build-up, their social networks, their career prospects and even their health (Ministry of Health, 1996: 75, 76). Dementia is a serious problem. What happens when one infirm spouse must look after the other? Incontinence is a socially validated duty. Who cares for the unwaged offspring when they don’t want to cope? Elder abuse is one manifestation of the psychological stress, the physical exhaustion, the anger and the alienation. Role overload and role strain are taking a toll: 36 per cent of female caregivers in Mehta’s study stated that they were becoming irritated, bad-tempered, and unable to enjoy life, 47 per cent that they had difficulty sleeping, 60 per cent that they felt worn out. Fully 5 per cent – one in 20 – were so desperate that they had thought of suicide (Mehta, 2005: 328–9). By 2030 the sandwiched and the caring may feel that they have had enough. Furthermore, not all Singaporeans are expressing an interest in building up a family unit at all. In 1990 14.1 per cent of citizens and Permanent Residents aged between 35 and 44 were still unmarried. They were likely to remain single permanently. In 2005 the ratio was 15.9 per cent: 17.3 per cent of males, 14.6 per cent of females. In some social subsets the incidence of singlehood is even higher. Thus 26.4 per cent of graduate women (but 10.8 per cent of university men), 23.8 per cent of primary-only men (but 11.1 per cent of non-secondary women) are still on their own at the end of their childbearing years (Department of Statistics, 2006a). Hardly any of them will have had children out of wedlock. About 7.1 per cent of women who marry do not have children by the age of 49. Even if they do have children, Singaporean wives have only 2.12 children on average. The median age of marriage is 26.9 for women, 29.7 for men. It is not just in Japan that the Malthusian preventive check is in business. Delayed marriage reduces

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the number of childbearing years. The median age of citizen mothers at first birth in Singapore is 29.4. Singaporeans continue to value marriage and family life. A survey of social attitudes conducted in 2001 found that 84 per cent of Singaporeans aged 15 and above believed it is better to be married than to be single. As many as 89 per cent of the respondents felt that married couples should have children (Chan, 2002: 10). A study of single Singaporeans in 2007 reported a very similar result: 85 per cent of the respondents expressed a desire to marry. About 13 per cent ticked the box marked ‘depends on fate/God’. Only 2 per cent said they had no wish to marry at all. As for children, 77 per cent of the married respondents (there was little difference between men and women) said that they would like to have two or even three (Ministry of Community Development, Youth and Sports, 2008: Annex A). In spite of that the marriages and the babies are in restricted supply. To live well in Singapore costs money. Private condominiums are pricey. A new car looks good. A woman faces a high opportunity cost if she gives up her career. Long years spent acquiring educational qualifications accustom young people to a partnerless existence. Living with parents and siblings is socially accepted. Men still prefer younger women. Professional pressures limit the opportunity to socialise. The most frequently cited reason for being single in the 2007 survey was that one had not yet met a suitable partner (ibid.: Annex A). There is also an unexpected gender divide. Single women over 30 (under 30 the reactions were reversed) are less positive about marriage (48 per cent versus 87 per cent) and children (50 per cent versus 81 per cent) than are single men (Chan, 2002: 12). It all adds up. The net result of the singlehood and the childlessness is that there is an increasing number of Singaporeans who will not be able to live with or be supported by their children when their silver hair turns to dross. The elderly themselves might prefer to remain independent. A study in South Korea in 1997 found that only 8 per cent of older women actually wanted to live with their children, while 70 per cent said they wanted to live on their own (Hedrick-Wong, 2007: 15). In Singapore the desire among older people to live with one of their married children fell from 24.2 per cent in 1998 to 17.4 per cent in 2003 (Housing and Development Board, 2005: 15). They had to do it but they did not always want to do it. Growing affluence will mean that old people increasingly have the financial muscle to act on their choice. The 1995 Survey of Senior Citizens found that only 8.3 per cent of the over-55s lived alone or with their spouse. About 86.2 per cent lived with at least one of their children (Ministry of Health, 1996: 15). As for the

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children’s children, about 38 per cent of the over-60s were then living in the three-generation household that is approvingly eulogised in Chinese as ‘three generations under one roof’ (Chan, 1997: 42). By the time of the 2005 Survey the proportions had altered. Not 8.3 per cent but about 20.7 per cent of elderly Singaporeans and Permanent Residents were living with their spouse without children in the household. The great bulk – 73.7 per cent – were in households of at least three persons. On average, there were 3.73 persons living in households where there was a senior citizen of 55 and above (Ministry of Community Development, Youth and Sports, 2007: 23). The proportion of over-65s living with their spouse and (unmarried or married) children is now 36.5 per cent. A further 37.2 per cent (disproportionately widows) are living with their children without their spouse. The two ratios make up the 73.7 per cent. The equivalent figure for Taiwan is 66 per cent. For Japan it is 50 per cent. In Denmark it is 3.5 per cent and in the Netherlands 8 per cent. Southern (‘Catholic’) Europe is more family orientated than the North but still less family orientated than Singapore: 30 per cent of the over-65s live with blood relatives in Italy, 38 per cent in Spain. One consequence of the difference in living arrangements is that 5.5 per cent to 6.4 per cent of the over-65s in Denmark and 9 per cent in the Netherlands are in old-people’s homes. The figure is less than 4.5 per cent in Italy and Spain (Iacovou, 2000: 4, 11). As for single-person households, the number of Singaporean seniors living on their own increased by 47 per cent between 2000 and 2005. Children relocate to Perth for work. Apartments become overcrowded. There are arguments with offspring. Inlaws make their resentment clear. Retired people want an unencumbered lifestyle. At the current rate the number of single-pensioner households is doubling about every 10 years. About 10 per cent of all Singaporean households are now one-person households (Department of Statistics, 2006a: viii, 33). Old people on their own are making up more and more of those households. The InterMinisterial Committee on the Ageing Population predicted that it would not be long before one senior citizen in four would be living alone (Ministry of Community Development, 1999: 147). An unpublished study by the Tsao Foundation in 2008 found that 92 per cent of respondents aged between 21 and 55 did not expect to live with their children in their old age. The values of the younger generation might not be the values of their parents or their grandparents. They might not even be the values which legitimate Singapore’s current social policies. The Census of 2000 showed that about 15,000 elderly persons (6.6 per cent of the total) had their own front door. By the time of the General Household Survey in 2005 the 6.6 per cent had become 7.7 per cent

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– 20,907 seniors, 8020 of them over 75. In the HDB survey of 2003 (using a smaller sample and concentrating on public housing) the figure was 11 per cent (Housing and Development Board, 2005: 15). It must be recorded, however, that there was also an outlier in the samples. In the National Survey of Senior Citizens in 2005 the figure was 5.6 per cent (Ministry of Community Development, Youth and Sports, 2007: 3). Two-thirds of the single occupants were women. They were disproportionately widows. Longevity aside, women tend to marry men who are older than themselves. There are five times as many widows as widowers in Singapore in the 65+ age range. Among women over 70 years of age, 58.7 per cent are widows. Over the age of 80 the proportion approaches 80 per cent (Teo et al., 2006: 135). Debility is turning pink. There are 2.02 times as many semi-ambulant and 1.99 times as many non-ambulant women as men (AWARE/Tsao Foundation, 2005). Women live longer. They are more likely to be ill by the time they are old. The nuclear household is gradually taking the place of the extended household. The single-pensioner household is coming in. Yet the alarm bells should not be sounded too soon. The decline of cohabitation need not mean seclusion and loss of contact. Old people even if living apart do seem to receive regular visits from their married children. About 90 per cent of public housing residents in 2003 reported visits at least once a month. The percentage had not changed since 1993. Approximately 22 per cent said that they saw their parents every day. Often the reason was to leave their children with grandparents when they went out to work (Housing and Development Board, 2005: 21, 22). Approximately 73.7 per cent of senior citizens sampled in 2005 had contact with their adult children at least once a day, 94.8 per cent at least once a week, 97.8 per cent at least once a month. About one-third (34.4 per cent) of older people fulfil the childminding function on a regular basis. The percentage has almost doubled since 1995 when it was 19 per cent. There is no evidence that intergenerational interaction (through meals, discussions, outings) has become weaker since 1995 (Ministry of Community Development, Youth and Sports, 2007: 58). Housing policy favours such contacts. Singles above 35 who are buying a resale (already owner-occupied) flat to share with their parents can apply for a subsidy of S$20,000. They must promise to live with their parents for at least five years. The flat must be resale: singles still cannot buy a new flat directly from the Housing and Development Board. The single must be over 35: unmarried persons under the age of 35 are not allowed to buy in the HDB (public) sector. Social engineering lies at the heart of Singapore’s housing policy. State-subsidised units are for a family nucleus.

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As for married people, priority in the allocation of units is given to couples applying to buy in the neighbourhood of their parents (the Joint Selection Scheme) and to a three-generational family wishing to co-reside as a single unit (the Multi-Tier Family Housing Scheme). Such initiatives ensure that adult children will be better able to spend time with their elderly parents and to care for them when they are ill. About a third of old people live within walking distance of their married children. Even where they do not, Singapore is a small place with good roads and public transport. Actually finding a new flat in a mature estate where older parents are more likely to live will be more difficult. Mature estates are mainly made up of older blocks. Price as well as availability is a deterrent. Resale apartments cost 50 per cent to 100 per cent more than new ones: eligible Singaporeans can buy new flats directly from the HDB and do so at a discount. At least the income ceilings are more generous where the generations are buying as a unit. The household income ceiling for the purchase of a subsidised flat is S$8000 per month. Where an extended family is planning to live together the ceiling is S$12,000. About 80 per cent of Singaporeans have incomes that lie below the ceilings. Even, moreover, if the household has a combined monthly income of S$8000 or more, still it has the right to buy in the HDB resale market or to purchase a private condominium in the same locality. The well-to-do still have the option of living near their parents who are housed in HDB.

7.3

HOMES AND NURSING HOMES

In Singapore it is thought likely that 8 per cent of the elderly will require step-down geriatric care (Ministry of Community Development, 1999: 49). About 3 per cent of the total will have such severe disabilities that they will have to be accommodated in acute hospitals with geriatric units, community (non-acute) hospitals, hospices or old-people’s homes. The remaining 5 per cent will be able to age-in-place if they have domiciliary support in forms such as home nursing, doctor visits, rehabilitation centres and community-based social services (Ministry of Health, 2002a: 58). Some of these services could be provided through private entrepreneurship: US-based Comfort Keepers has already franchised its package of nonmedical in-home services such as companionship, homemaking and the preparation of a meal. Often this will take the form of short-term respite care. The cost is S$20 per hour. In all, the 8 per cent could mean 37,000 institutionalised or caredependent old people by 2030. Culturally, given ‘Asian values’, it will

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require a normative shift. No old person wants to be dumped or offloaded. Nor do children want the shame, the self-reproach, the loss of ‘face’ of having abandoned their nearest and dearest to strangers who don’t really care. That having been said, Chan and Yap found that only 37 per cent of today’s baby-boomers were planning to live with their children when they grew old. Many were planning to live on their own or with their spouse. As for institutional care, 25 per cent were open to the idea of a retirement village and 14 per cent had no objection to a nursing home: ‘This suggests a market for such institutions to cater to the changing expectations regarding living arrangement among the baby-boomers’ (Chan and Yap, 2009: 8, 69). There are currently about 6577 residents in (59) nursing homes. The homes are of two kinds: 31 (with 3282 beds) are private while 28 (with 5112 beds) are run by charities and voluntary welfare organisations (VWOs) (Ministry of Health, 2002b: 54; 2006: 3). It is estimated that Singapore will need 22,400 nursing-home beds by the year 2030 (Ministry of Community Development, 1999). Singapore will also need more dementia-care wards. Only 10 of the 59 homes currently offer such wards. Only one, with no more than 210 places, caters exclusively to dementia patients. As for the profile of the residents, a small-scale study in 2003 found that 46 per cent of the sample were suffering from hypertension, 37 per cent from mental problems and 17 per cent from diabetes. About 53 per cent of residents required assistance in their activities of daily living (ADLs) (Yap et al., 2003: 68). The high incidence of chronic medical conditions and physical or mental disabilities is a reminder that many if not most of the residents in homes have been placed there because they have a genuine need for expert attention. The reason is not simply the callousness of family carers who are suffering from welfare fatigue. All homes must be licensed by the Ministry of Health. The Ministry also sees to it that performance and accounts are properly audited. In the case of the VWOs, the Government initially contributes 90 per cent of the building and capital costs. Later on it covers 50 per cent of the current expenditures. The foreign worker levy is waived for auxiliaries recruited abroad. Donations to charities in Singapore are tax exempt. Government land is released on concessionary terms for VWO homes. In spite of all this the financial commitment can be a serious consideration. A single room at East Shore Residence (a private institution in the Parkway group) costs S$4988 per month. A place in an eight-bedded ward at Ren Ci (a community hospital) costs S$558. At All Saints (a VWO) a bed in a double room costs S$2000. Residents in nursing homes cannot use their Medisave accounts to pay. As for the patients themselves, the State subsidises VWO residents at the rate of 25 per cent (30th to 50th income percentile), 50 per cent (10th

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to 30th percentile) or 75 per cent (lowest-income decile). Step-down facilities were means-tested even before public hospitals in 2009 went over to such assessments. The income tested is that of the whole household, not the individual old person. There is no subsidy if the household’s monthly income is in excess of S$1000 per capita or if the family has savings totalling S$30,000 or more. Approximately 91.5 per cent of patients in VWO homes are eligible for public subsidy (Ministry of Health, 2002a: 60). In some cases, where the patient has genuinely hit rock bottom, even the final 25 per cent is waived. The Government in 2000 set up the Eldercare Fund. Payments to the VWOs come out of interest accruing to this endowment rather than being paid directly from tax. The Fund is augmented on an ad hoc basis whenever the Government has a budget surplus. It is intended that the Fund should reach S$2.5 billion by 2010 (Ministry of Health, 2002b: 26). In 2008 it stood at S$1.5 billion.

7.4

INSURANCE: THE OPTIONS FOR CARE

The bulk of old people will remain in their own homes. This is both a fact and a desideratum: ‘Community-based living is preferred over institutionalization as a familiar surrounding amongst loved ones and different age groups provides emotional and mental support to seniors’ (Ministry of Community Development, Youth and Sports, 2006: 13). Social services, meals-on-wheels, volunteers, relatives all make it possible for old people to remain where they are known and at ease. Independence gives old people a greater variety of roles and options. It gives them a sense of dignity. It also saves on scarce resources. Residential beds cost big money. A self-sacrificing daughter-in-law costs nothing at all. Care in the community is in-between. Life in the community is, however, a tactical minefield where an elderly person is function-impaired. A supportive spouse can fill the gap. So can kinsfolk who step in and cope. The question is whether public money should also change hands. An old-people’s home attracts a State subsidy: family caregivers could be paid an allowance equal to the public finance that is saved. A straightforward salary could be offered to family members who look after the dependent: in Britain a caregiver can claim up to £50.55 a week (the benefit cuts off at retirement) for spending up to 35 hours with a disabled relative. The State could pay the social contributions, the CPF forgone, when a dutiful daughter corrects a market failure. Even a dutiful daughter does not want to be poor when her turn comes to be old. Public money could change hands. It is not the Singaporean way. The altruists say that love must not, cannot have a price. The egoists say that

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it is not the function of the taxpayer to bankroll care for other people’s parents. Meanwhile, Singaporeans are all too aware of the problem. Even if old people live with their adult children, both husband and wife will frequently be out at work. Paid helpers will be needed if an old person cannot manage on his/her own. The cost will be a heavy burden. The less-well-off will be the hardest hit. Long-term care insurance as in Japan is one avenue that could be explored. Singapore’s own ElderShield is another. 7.4.1

Long-term Care Insurance

In recognition of the unsatisfied need, Japan in 2000 introduced its Long-Term Care Insurance Scheme. Membership in Kaigo Hoken is mandatory from age 40. To that extent the current 40-year-olds cross-subsidise the current seniors who may be twice their age. The contribution paid annually from age 40 to age 65 is about 0.9 per cent of income. It is in addition to the contribution paid for health insurance. The burden is divided equally between employer and employee. After age 65 the individual puts in a much smaller monthly premium. Also based on income, it is on average about US$30. Contributions and premiums cover 45 per cent of the scheme benefits. Co-payments amount to 10 per cent. The remaining 45 per cent is funded through general taxation (local and central). State involvement is a compromise, halfway between everything (as in classical welfarism) and nothing (as in Singapore). Administration is devolved. It is entrusted to Japan’s 3200 municipalities. They set premiums and oversee services within the framework of guidelines on cost-shares and eligibility that are formulated at the national level by the Ministry of Health, Labour and Welfare. Reimbursable fees are preannounced. Maximum disbursements are capped. Costs incurred above and beyond that ceiling must be met by the individual and the family. Only services can be claimed. Unlike France, Germany and the United Kingdom there is no cash benefit. The disabled in Japan are not allowed to claim before the age of 65. Germany’s system covers the disabled of all ages. The only exception that is made in Japan is for under-65s who are suffering from a condition (such as stroke or early-onset Alzheimer’s) which is normally a function of age: ‘It was not a major concession since less than 4 per cent of spending goes to this younger group although they contribute two-thirds of the premium revenue’ (Campbell and Ikegami, 2003: 25). Claimants must be suffering from a physical or mental disability that can be assessed by an objective test. There are would-be beneficiaries in all countries who exaggerate and misstate. The benefits, should they be required, include day-care centres, advice on nutrition, counselling on body-maintenance and home visits by

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professional carers. The plan also insures the elderly for long-term stays in nursing homes rather than hospitals. This gives the family some protection should the passing years leave its older members bedridden, disabled or senile. Services can be provided by social agencies or private-sector organisations. Some of the latter are explicitly for-profit. Japan has a comprehensive medical umbrella. That, before 2000, was part of the problem. In the absence of an alternative, doctors before 2000 often kept the elderly in hospital so as to give the caregivers an inexpensive break. Long-term care insurance (LTCI) in Japan is likely to reduce the length of non-medical hospital stays. Simultaneously, the sharing of the burden will increase the freedom of middle-aged women to reenter the labour force. Some, interestingly, have done this as paid LTCI caregivers outside the home. LTCI in Japan is complemented by a compulsory health insurance scheme. It covers the 13 million Japanese aged 75 and above. The lateelderly make up about 10 per cent of the population. Every over-75 without exception is expected to pay premiums. While these vary with the level of income or pension, and while an adjustment is made for the local costs of medical care, the average premium nationwide is about 72,000 yen (US$697). The national medical bill for the over-75s was 11 trillion yen in 2008. It is a heavy burden on the working-age population and the taxpayer. Higher premiums will allow the subsidies to be reduced. 7.4.2

ElderShield

Compulsory, wide-ranging and subsidised, Japanese LTCI is clearly more ambitious than its equivalent in Singapore. Its Singapore counterpart is ElderShield. Introduced in 2002, ElderShield is a severe (permanent) disability insurance scheme. It pays for nurses and attendants to visit the patient in the home. ElderShield from 2002 to 2007 was offered by only two insurance companies: NTUC Income and Great Eastern Life. The appointment is made in five-year blocs. All carriers are private: the CPF Board is not in the market. In 2007 the tender was reopened and Aviva joined the two incumbents. Competition and innovation, it was hoped, would lead to consumer-led diversity in the products supplied. Old people are not all the same. Variety would increase the old people’s well-being, self-perceived. The downside is adverse selection. Pluralism increases the risk that superscale policies might cream off the healthiest specimens. The higher risks would be consigned to residual clauses sold at a higher cost. In the limit they might end up on public assistance. MediShield is a national health insurance scheme in which the premiums and the payouts shadow the

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whole of the citizenship pool. ElderShield, as it becomes more diversified, could become a patchwork quilt of separate contingencies and stratified constituencies. Singaporeans and Permanent Residents aged 40–69 are automatically enrolled in ElderShield. They have the right to opt out. Their ElderShield premiums can be deducted from their Medisave accounts. No more than S$800 a year can be withdrawn for this purpose. Policies costing more must be part-paid in cash. Cover may be refused if the applicant is suffering from a preexistent condition that is deemed unacceptably severe. Entry ceases at age 69. Older entrants are thought to be too great a risk. Not eligible for ElderShield are new entrants over 70. Applicants are also excluded if they are already suffering from three or more of the six named disabilities. ElderShield targets six ADLs. These are the ability to wash or shower, transfer from bed to chair, move indoors from room to room, go to the toilet, feed oneself prepared food, dress or undress. Members who cannot perform any three of these functions are entitled to make a claim. The basic package entitles beneficiaries to up to S$400 per month for up to six years (or until the disabilities clear up, whichever is earlier). This means a maximum reimbursement, in effect, of S$28,800. Before 2007 the monthly limit had been S$300, the maximum period five years, the maximum cash-back therefore S$18,000. Those who upgrade to more comprehensive policies can insure themselves for something more. Repayment periods can be for 10 years or even life. A funeral benefit can be included. Monthly payouts can be as high as S$3500. Premiums can be age-banded or they can be independent of age. Choices are possible. The consumer can shop around. Applicants who select the enhanced product must, however, obtain the standard entitlement as well. This continues the pattern that was adopted in the case of MediShield. It is a hedge against underprovision but against self-selection as well. Different companies offer different packages. Aviva’s MyCare includes a rehabilitation clause: a monthly sum equal to half the normal payout will still be given if the policyholder recovers slightly but remains unable to perform two out of the six functions. Great Eastern’s ElderShield ValuePlus 300 pays a monthly S$300 for 10 years plus S$900 in the first month of payout: there is a further S$900 for the family if death occurs within the 10 years. Great Eastern’s ElderShield ValuePlus 400 uprates the values to S$400 and S$1200, respectively. Great Eastern’s ElderShield Comprehensive allows the policyholder to determine his/her own payout at age of entry. For S$55.90 per annum a 40-year old man (S$70.80 in the case of a 40-year-old woman) can buy an option on S$100 a month for 10 years. Subscribers wanting S$3000 (the maximum) should multiply the premium by 30.

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Choices are possible, but there is an exception. The Government will not allow a refund in the event of early surrender. Surrender value entitles policyholders to a lump sum if they stop the insurance before term. The Government insists that protection is protection. Lifetime cover cannot be terminated merely because the short-horizoned decide that they want cash instead. Money is always welcome when one cannot wash or eat. ElderShield premiums are set actuarially with reference to the claims that are likely to be made. ElderShield is not social insurance. Age and gender are both taken into account when the individual signs up. Once in, however, subscriptions are not subject to any further age adjustment. The annual premium for basic ElderShield issued by NTUC Income from 2002 to 2007 was S$151.67 for a man joining at age 40, S$194.24 for a woman. Since 2007 the sums have been S$174.96 and S$217.76, respectively. Members joining later pay more: S$1586.26 for a man coming in at age 63, S$2079.69 for a woman. The reason for the higher rates is that late entrants will pay fewer times before premiums cease at age 65. A male will pay approximately S$4374 over 25 years. A female will pay S$5444. Once members have fully paid all their premiums, they are covered for life. Premiums shadow the contingencies. In designing ElderShield, the insurers are estimating that approximately 8 to 9 per cent of the cohort (about one old person in 12) will need the support of the scheme (Ministry of Community Development, 1999: 100). The claim rate climbs from 1 per cent in the 40s to 12 per cent in the 60s and 16 per cent in the 70s. A recent study of pensioners aged from 70 to 84 in Berlin confirms that the figure of 8 to 9 per cent might not be unrealistic. Only 9.3 per cent of males (8.5 per cent of females) needed help with bathing, 5.4 per cent (3.1 per cent) with dressing, 5.4 per cent (6.2 per cent) with going for walks, and 3.1 per cent (8.5 per cent) with climbing stairs. In the 85–100 age-group the figures were higher: 31.8 per cent of males (60.5 per cent of females), 11.6 per cent (24 per cent), 27.1 per cent (42.6 per cent), 22.5 per cent (42.6 per cent), respectively (Steinhagen-Thiessen and Borchelt, 1999: 151). Simple extrapolation, however, does not tell the whole story. Allowance must be made for the trend decline in chronic morbidity among older people. They are living more healthily even as they are also living longer. In 2007, five years after ElderShield began, as many as 54 per cent of all policyholders were aged under 50. Only 15 per cent were in the at-risk 60-plus age group that notches up 62 per cent of the successful claims. Since the inception of the ElderShield scheme, about 3100 people have claimed successfully. Successful claims represent 84 per cent of total claims made. The monthly cash payout has been used for domiciliary nursing, a private nursing home, a day rehabilitation centre and other approved services.

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The ratio of successful claimants to the total membership is low. The situation is not sustainable. Costliness and claims will rise inexorably as younger cohorts opt in and work their way through the system. In 2005, although 92.2 per cent of the over-55s were fully ambulant and physically independent, approximately 8000 Singaporean seniors had the required dependency in three out of the six named activities. About 0.9 per cent of the over-55s required total physical assistance or were bedridden. This became 3.2 per cent over the age of 75. A further 6.2 per cent of the over-75s required ‘some assistance’ to move about but were not seriously dependent (Ministry of Community Development, Youth and Sports, 2006: 33; 2007, 49). Most of the over-75s were still uninsured. It is probable that future cohorts will be better protected. ElderShield is not compulsory. In terms of flow, the Ministry calculates that about 14 per cent of those turning 40 each year are now opting out (Wong, 2007: 2). A low figure means a more representative membership. The abstention rate for earlier cohorts had been as high as 38 per cent. Opt-outs can opt back in at any time up to age 69, but at a higher premium. There will also be a check on their health status. Despite the withdrawals, 790,000 people at the end of 2008 were insured by ElderShield (ibid.: 2). The opt-out rate of 14 per cent refers to the flow. The stock is different. There are 1.53 million Singaporeans and Permanent Residents in the 40-plus age range. The ratio of 790,000 to 1.53 million suggests that total opt-outs are nearer to 60 per cent than to 14 per cent. Whatever the rate, some Singaporeans are clearly thinking that the odds still favour the house. Some still regard the plan as a second-rate buy. Central Provident Medisave funds, for one thing, are invested at approximately 4 per cent, tax free. ElderShield, in contrast, is not an interest earner but a deduction from capital. Over 25 years of contributions (and over more than 25 years of returns on the capital tied up) the opportunity cost mounts up. For a man, S$4374 invested at 4 per cent compound interest for 25 years is worth S$11,660. For a woman, the S$5444 sunk could have been as much as S$14,512 by the end. Shares, unit trusts and gold would normally deliver an even better return if they could (and it is not allowed) be bought with the Medisave that can be released for ElderShield. The tax-free concession is not much of an incentive. Interest income from approved local banks is not taxed in Singapore. As much of a problem is the law of averages. ElderShield is a risk-pool on which only one in 12 will ever draw. The actuarial expectation of S$28,800 is therefore only S$2198 for a man: (S$28,800 – S$4374) × 0.09. For a woman the mathematical expectation is S$2102: (S$28,800 – S$5444) × 0.09. Meanwhile, the savings withdrawn from earmarked medical accounts are gone for ever. They cannot be spent on health care should the

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member need hospitalisation before or after he/she grows old. A certain premium is being exchanged for an uncertain payback. The game might not be worth the candle. The highest probability of a claim being made on ElderShield is 16 per cent when the claimant is in his/her 70s. Even this is less than the odds of 19 per cent for women and only just above the odds of 15 per cent for men that are encoded in the premium/payout ratios. The chance that a member will be struck by cancer is one in three. It would have made better sense for the gain-maximising to have retained the money in Medisave. The likelihood of medical care is greater than the chance that three ADLs will fail. There is also a doubt about the actuarial element. Leong has observed of the ElderShield plan that ‘this may be the most profitable insurance scheme in the history of insurance in any country’ (Leong, 2007: H13). He bases his assertion on the following calculation. The claims payout in 2006 was about S$8.5 million (2366 claims × S$300 monthly × 12 months). Yet the money paid in totalled at least S$127.3 million (747,868 members × male premiums of S$169.74 + female premiums of S$190.63 divided by 2). The ratio of claims to premiums by this calculation was only 6.7 per cent. Obviously, as the population ages, the claim rate will rise as well. Since 97 per cent of ElderShield policyholders are still below the age of 70, the 6.7 per cent of a relatively young population is not for all seasons. It must also be pointed out that the premiums do not rise with age after the point of entry. They are different in that respect from, say, MediShield. Also, the premiums paid in are not distributed as profits: the insurers must in fact retain the surplus against lifetime claims made later on by the older cohort. Furthermore, providers making payouts that are less than was projected for the time-frame must offer rebates to their customers. Leong may have overstated his case. The point is simply that he and other Singaporeans have arrived at the conclusion that the profits are excessive. One inference might be that some Singaporeans are reluctant to pay their premiums because they would like to be given benefits that are commensurate and fair. Even if a claim must be made, the maximum entitlement is not very great. The cost of care still remains a burden on the family. If an old person cannot feed him/herself or get out of bed, the occasional visits that S$400 can purchase will not do much more than provide an intermittent breather for an overloaded relative. One disability is not enough. It must be three. Six years is not for ever. Persons with three serious disabilities might not survive for six years to enjoy the ‘full buffet syndrome’ for which they had prepaid. ElderShield in any case does not deal with the most expensive burden of all. Care in a private nursing home costs between S$800 and S$4000 or

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more a month. ElderShield, refunding only S$400 a month for only six years, does not even scratch the surface of the problem. In Britain, where a residential place could cost £700 a week in 2009 and only those with less than £22,500 in assets could qualify for State support, the Government is considering a compulsory insurance scheme. Taxpayers while working would pay up to £1200 in premiums. The scheme would cover long-term residential stays should they be essential later on. Subscribers will not need to sell their home to pay. Not everyone will want to exchange a certain sum for a distant probability. An annual contribution of £1200 might be an intolerable burden on the poor. Private insurers might cream-skim the citizenship pool. British taxpayers already putting £110 billion a year into their National Health Service might feel that they are being asked to pay twice. Inflation, cutting into purchasing power, will mean that new entrants or the State will have to cross-subsidise the old. Actuarial extrapolation will fall victim to unknowledge and surprise. Singapore, clearly, has good reasons to be cautious about LTCI. It must also be realistic about what is to come. ElderShield disability benefits are not enough. There is a school of thought which says that LTCI is inevitable. If it is, then it should be adopted before the dam bursts rather than when it is too late. 7.4.3

A Maid Culture

Singapore has a maid culture. There are approximately 180,000 foreign domestic workers in Singapore. One in every six households employs a foreign maid. A maid can be a help in the domestic management of the old. She allows a female family member to go out to work. Studies show that in the neighbourhood of 19 per cent to 24.8 per cent of primary caregivers are foreign maids (Teo et al., 2006: 92). A Filipina now costs between S$330 to S$350 per month plus board and lodging. A live-in Singaporean would easily cost double that if one could be found at all. An Indonesian costs only S$280 and does not ask (the Employment Act exempts domestic helpers from the law on regular rest periods) for a weekly day off. This is less than the minimum wage for a maid of any nationality in Taiwan (S$750) or Hong Kong (S$690). Dubai pays even more. While the law protects maids against physical abuse, it cannot really ensure that uneducated servants are treated with respect or that their well-being is ensured. It is not clear what kind of personal relationships in the home would best accord with Asian (as opposed to Western) values. One result of the low level of pay is that there may in the near future be a shortage of experienced maids in Singapore. Increasing the wage is, however, easier said than done. Even S$280 can be a sizeable outlay for a

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family in the lowest quintile (average income S$795) or even the next quintile up (average income S$2059). Furthermore, the household employing a maid must pay a fee to the agency (S$700 is now the average) plus an additional charge or tax to the State. The Foreign Domestic Worker Levy (FDWL) now stands at S$265. The Treasury is earning almost as much as the maid. The levy is reduced to S$170 where there is a citizen-child under 12, a disabled family member needing help with at least one of the six ADLs, or an old person over 65 in the household. Low-income families would be better able to afford a maid if the FDWL were to be suspended altogether for households that have to care for dependants. Working women above the threshold income can claim tax relief for the FDWL. The maid is in effect taking over some of their duties. It is not very much. Some observers suggest that more-generous State benefits would be a suitable way of thanking the old for the sacrifices they made when Singapore was taking off. Other people say that, looking to the future, young people should plan ahead. They should invest in good health so that they will have fewer ADLs later on. They should set aside discretionary savings in case illness strikes and the State cannot provide. The other option is compulsory LTCI to which everyone, or perhaps everyone over 40, could be required to contribute. Japan has shown what it might all mean. The traditional sources of care were drying up. Social insurance with a State subsidy was the compromise. Sooner or later it will have to be rethought. Expenditures are going up. The public is opposed to higher taxes. Premiums may have to be income related. Benefits may have to be means-tested. New entrants may have to be risk related. The family as usual will be invited to do its share: ‘A major question facing policymakers is whether the widespread availability of insurance or government-funded care will drive out unpaid care by family members and increase the demand for paid care, forcing costs to unsustainable levels’ (Gleckman, 2007: 2). In Japan and in Singapore as everywhere else an appeal to duty puts the conscience back into Émile Durkheim’s conscience collective. Guilt is the cheapest way of getting things done. No doubt it is, but still the lesson is clear. The family is not enough.

8.

Assets: capital and property

The old and the ill can rely on their mandatory superannuation accounts and their compulsory health care savings. For some it will not be enough. Their lifestyle will exceed their annuity. Their health status will exhaust their prepayments. That is why it is desirable for them to have supplementary sources of revenue when CPF, Medisave, MediShield and the family all let them down. This chapter, together with the two following chapters, suggests that the factors of production will provide the key. Section 1, Savings, says that Singaporeans ought to save and invest. Section 2, Housing, shows that the retired in Singapore are able to monetise their homes into cash. This chapter anticipates the argument in Chapters 9 and 10 on labour. Those chapters reiterate that retirement can mean much-needed income forgone. They argue that sometimes later retirement will be the only game in town.

8.1

SAVINGS

The Central Provident Fund Board (CPF) is a strong advocate of supraCPF savings. It recommends that a couple retiring at age 60 and living in their own home should plan to have accumulated savings of S$513,000 in order to see them through an ‘adequate’ old age. For a ‘comfortable’ old age they should aim at S$817,000. The monthly income that they require (not all of it from capital) will be S$2200 and S$3500, respectively. They will need to save more if they are renting: S$747,000 and S$1,190,000 would be required. If they are renting, the monthly income will be S$3200 for an ‘adequate’ standard of living and S$5100 if they want to be ‘comfortable’ (CPF, www.cpf.gov.sg). Balances of this magnitude are considerably in excess of the Minimum Sum. Singaporeans should save when they are young in order to have a solid buffer of beyond-CPF resources when they move into their superannuation years. Some have done so. The over-65s in Singapore are believed to have spent US$3.6 billion in 2005 alone. The figure is likely to rise at an average annual rate of 11.6 per cent for the next 10 years at least (Hedrick-Wong, 2007: 86). As consumers, the old in Singapore have a considerable presence (US$1.2 188

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billion) in dining, entertainment and shopping. This is consistent with the city-State’s food culture and its easily accessible retail outlets. The old spend US$300 million each year on tourism and travel. They are well represented in the demand for cars, recreational education, cosmetic surgery, financial advice, computers, insurance and private health care. As the old become the old-old, they might also develop an interest in a wristwatch that monitors their blood pressure, an alarm that alerts a clinic when they fall, a smart-shelf system that tracks their supplies with the sell-by dates, a tap that switches itself off when the hand is removed, a pill-case that beeps and bleeps when it is time to take their pills, a cooker that makes a noise when they forget that the oven is on, a collar that informs relatives when an old person prone to wandering has left the house. Retirement in the Asia Pacific is not just the fag-end of a worthwhile existence once an active lifestyle has fallen victim to dodgy hips and afternoon naps. Far from it: the average age of a Harley-Davidson motorcycle rider in Australia is 52. Fifty is fun. Sixty is sexy. By 2015 the over-65s in Singapore, Japan, South Korea, Taiwan, Hong Kong and Australia are expected to be in command of purchasing power in excess of US$1535.4 billion. Singaporeans alone will be the masters of US$10.8 billion (ibid.: 86, 149). The silver dollar adds up to a considerable wall of money. By 2015 the elderly in Singapore may have three times the spending power of the young. The average Japanese over 60 years of age currently has net assets of about US$225,000. This is indeed triple the net assets of households in their 30s. In Britain in 2006 the combined personal wealth of the over-50s (£5.16 trillion) dwarfed the GDP of every nation except the USA (£6.6 trillion). The 50-plus segment, as estimated by Abbey Savings, holds 60 per cent of all savings in Britain. It accounts for 40 per cent of all consumer demand (Financial Advice, 2007). The evergreen class comprises 34 per cent of the population but owns 75 per cent of the wealth. Singapore has one of the highest savings ratios in the world. As much as 49 per cent of the GDP was saved in 2007 (Ministry of Trade and Industry, 2008: 1). The proportion was down from 58 per cent in 1999 but was well above the 10 per cent that it had been at the time of independence in 1965, the 19.5 per cent of 1970, the –2.4 per cent of Third World 1960. Singapore’s 49 per cent is a mixed bag. Three of its components are at once sizeable and exposed. National savings includes the huge current account surplus (28 per cent of GDP in 2006), the targeted budget surplus (10 per cent of GDP in 2006), and the mandatory savings that are held in CPF accounts (3.3 per cent of GDP in 2006) (Department of Statistics, www.singstat.gov.sg; CPF, www.mycpf.cpf.gov.sg). Not one of those elements comes with a guarantee. The current surplus can become a balance

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of payments deficit if growth slips so badly in the key markets of America, China and the EU that foreign consumers do not buy. The fiscal surplus of S$6.4 billion in 2007 suddenly became a budget deficit of S$8.7 billion in 2009 as the Government struggled to protect jobs and encourage bank lending. The demographic transformation is taking its toll. CPF will come under threat as ageing members take out more than new contributors put in. CPF will move from a plus to a minus: ‘The net contribution is projected to fall in an accelerating pace in the next 20 years. By 2025, the net contribution will be reversed to a net withdrawal. Thereafter, the net withdrawal will grow and reach its peak in 2035’ (Yip and Tan, 2008: 251). Withdrawals mean liquidity. Liquidity causes inflation. Inflation discourages savings. The 49 per cent may well be as good as it gets. The national savings ratio may well go down over time. Singaporeans hold considerable balances in CPF. Discretionary savings are a different matter. The personal savings rate was 11 per cent in 1988, 5 per cent in 1993, 7.2 per cent in 1997, 4 per cent in 1998 and 2.7 per cent in 2002 (Lee, 2003: 15). While the calculation can be done in different ways, a rough estimate would be that household saving in Singapore in 2006 was in the region of 5.5 per cent of the GDP: S$11.5 billion divided by S$210 billion (Department of Statistics, www.singstat.gov.sg). The personal savings rate in the USA was about 1.2 per cent of the GDP at the end of 2008. In the UK it was about 1.4 per cent. It had been 12.4 per cent in the UK in 1980. By that standard the ratio in Singapore is relatively good. The problem, however, is the dispersion. When 1000 Singaporeans were asked if they were financially prepared for retirement, 42 per cent conceded that they had not voluntarily set anything at all aside (HSBC, 2006). American International Assurance (AIA), surveying 1000 Singaporeans for its annual Life Matters Index, found in 2007 that 33 per cent were not doing any regular saving over and above their mandatory CPF. Asked about a critical illness, 38 per cent thought they would not have sufficient in reserve to sustain themselves over a 10-year period. About 37 per cent said that they would not be able to support a family member for the same length of time. In 2005, the AIA recalled, the 37 per cent had been 70 per cent: ‘Singaporeans realise that they must be more self-reliant to ensure financial security and to depend less on their families’ (American International Insurance Company, 2007). They realise it. About 55 per cent of Singaporeans told the AIA that they would not be able to survive for more than 12 months if their main source of income were suddenly to dry up. Only 27 per cent felt they would have enough savings for a decent retirement. They also thought, morally speaking, that they ought to be better prepared. Fully 74 per cent (as opposed to 37 per cent in Hong Kong and 48 per cent in Malaysia) agreed that

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individuals and families had to take primary responsibility for their own health and financial exposure. Singaporeans know what they ought to do. Actually doing it is more difficult. Even the better educated seem to be suffering from the same ostrich complex. Singaporeans are the proprietors of valuable Ordinary and Special Accounts. Perhaps the non-elective CPF, crowding out the voluntary overbuild, has taken the place of the prudent precautionary motive as a lifestyle choice. Perhaps a nouveau riche, occupationally mobile society will always make conspicuous consumption into its Veblenite trophy of personal success. Perhaps the heavy investment in owner-occupied accommodation has absorbed discretionary savings that could have gone towards a more comfortable retirement. Perhaps Singaporeans, despite the reservations that they sometimes express, are nonetheless expecting that their adult children will keep the old battleship afloat. Whatever the reasons, Singaporeans seem not to be sufficiently frugal when they budget for old age. As Andrew Kwok puts it, reporting on one study among many that has identified an unexpected myopia: Individuals tend to be poor long-term planners. While 61 per cent of working Singaporeans are seriously concerned that they might not have enough money to last them through their retirement years, only one in ten surveyed actively save for retirement. . . . Only four in ten Singaporeans aged 55 had the mandatory nest egg in their CPF accounts in 2005. (Kwok, 2006: 13–14)

In 2005 the principal sources of financial support for the over-55s were children (44.7 per cent) and salaries/business income (24.8 per cent). Personal savings were the main source of support for only 12.1 per cent. CPF headed the list for only 3.5 per cent (Ministry of Community Development, Youth and Sports, 2007: 28–9). The average Singaporean in 2005 held no more than S$60,000 in non-CPF liquid assets and investments when he/she hit age 55 (Overseas Chinese Banking Corporation, 2005). Singaporeans only turn abstemious in their 30s when they already have family commitments. It is too late. Singaporeans on average begin their retirement planning at 34. In the USA it is more likely to be 30. In the Philippines it is 28. The OCBC study revealed that 40 per cent of Singaporeans would face financial difficulties if they were to lose their job. About 16 per cent had put by so little that they would not last a month. The lower-income groups were the most exposed. Abnormally susceptible to structural unemployment, they were also the people least likely to take considered risks in planning a portfolio or to pay professional fees for quality financial advice. On lower incomes, their savings balances will in any case be low. The OCBC survey in 2005 found that the average savings balance of Singaporeans

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earning less than the average wage was only S$14,000. Life in Singapore is expensive. A capital of S$14,000 will not last long. Even where they do save, Singaporeans are often saving not so much for their children as to even out their own living standards through the ups and the downs. Asher expresses the opinion that economic evolution in Singapore has. contributed to an attitudinal shift from a dynastic to a life-cycle view of income and consumption under which a much greater proportion of accumulated savings is likely to be consumed during one’s life-time rather than bequeathed. As a result, life-time consumption-smoothing can be increasingly expected to become the primary motivation for saving. (Asher, 1996: 72)

Singaporeans increasingly save, Asher writes, in order to spend the money on themselves. The intergenerational imperative is becoming attenuated. It is a danger. If present gratification crowds out the older virtues of postponement and legacy, the result might be that superannuated Singaporeans find out too late that they have underestimated their requirements. Fewer children and growing singlehood simultaneously deprive the elderly of family support. Old people could end up with too little rice in the bowl. CPF will never be the pill for every ill. What this means is that an additional layer of fat will have to be built up. Singaporeans will have to acquire the savings habit early on in life. Only in that way will they have compound interest on their side when they turn 65. Singaporeans will have to become aware of their future requirements. They will have to learn how to plan ahead. They will have to learn how to select the products and instruments that best match their appetite for and their tolerance of risk. Financial literacy will have to be improved if households are to have the sophistication to venture out from low-return deposits that pay less than the rate of inflation. Even children at school must learn about investment analysis. They must also gain an early insight into what it means to be old. There is in short a good case for a Singapore equivalent of the National Strategy on Financial Literacy in the USA or the Personal Finance Education Group in the UK. Discretionary saving must become more lucrative. In order to encourage a better return, and all too conscious of what the old-age overhang will mean, the Government in 2001 introduced the Supplementary Retirement Scheme. SRS is privately administered through the three main local banks. Any amount, at any time, can be put into the SRS account. The total annual contribution cannot, however, exceed S$11,475 (for Singaporeans and Permanent Residents) or S$26,775 (for foreigners: the maximum is higher since they are not entitled to CPF or the tax subsidy that it attracts).

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The purpose of the ceiling is to prevent high-income savers from enjoying an unlimited tax advantage. An analogous cut-off exists in the CPF system. There the percentage contributions are capped at a salary of S$4500 per month. Once deposited, the funds can be used to buy approved investment products. These include unit trusts, bonds, life assurance, equities listed in Singapore and (subject to the consent of the bank operating the SRS) equities listed on an overseas Exchange. Fixed deposit is included. Real property is excluded. Health insurance is excluded. The tax exemptions are the lure. The whole of each year’s SRS savings may be deducted from the following year’s pre-tax income. Investment gains accumulate tax free so long as they remain sealed in the account. This is attractive to households that pay income tax, especially at the higher marginal rates. Tax forgone is the sum total of the fiscal subsidy. Unlike CPF (where savings are tax exempt), SRS is a tax deferral plan. Its aim is to cover supplementary retirement needs whereas CPF is targeted on the basics. In keeping with that charter, 50 per cent of SRS liquidations (but no more) are taxable at withdrawal. With careful planning, a retired person paying tax at a low marginal rate may end up paying little or no tax on his/her SRS. Balances can be withdrawn at one time or gradually over 10 years. The account must be closed no later than 10 years after the first penalty-free withdrawal. If this were made at 62, then the account would have to be wound up by 72 (Ministry of Finance, 2007). Since more Singaporeans are working beyond age 62, there is no terminal age limit. Contributions must, however, cease when account holders declare themselves to be retired. It is financially unattractive (although, unlike CPF, possible) to take back the funds before age 62. A 5 per cent penalty is charged. The quitter is required to pay income tax on the whole of the returns accruing to the sum withdrawn in the current tax year. Liability for income tax is capped at half of the returns where the reason for the withdrawal is medical. All approved local bank interest is tax free. For savers who want to put their SRS only in local bank accounts the incentive is therefore less. Even for the more adventurous, there are a wide range of other investments that could outperform. A diversified portfolio of equities could produce returns three times greater than bank or CPF interest. This is particularly so since Singapore has no capital gains tax. Non-SRS investments have the edge that, unlike SRS, they are not subject to withdrawal penalties before the age of 62. Also, in contrast to CPF, SRS is not sheltered from creditors. Despite those difficulties, the scheme grew between 2004 and 2007 by 25 per cent per annum. In 2007 there were over 41,000 SRS accounts in Singapore. They were worth in excess of S$1.44 billion. Age, however,

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remains a problem. Only 12 per cent of SRS savers are under 35. The 12 per cent is too low. Younger savers are the ones that stand to gain the most from long-term investment. Employers are encouraged to contribute directly to the SRS on behalf of their staff. Their contributions may be deducted in full from tax. Voluntary payments like these are an inexpensive way for employers to provide retirement benefits. A company pension plan could be cumbersome, costly and non-transferable. Employers are also encouraged to make voluntary contributions to their employees’ CPF Minimum Sum. CPF members themselves receive tax relief for doing this. They may set up to S$7000 against income tax in respect of their own accounts and a further S$7000 where they put money into the accounts of their family members. Tax rates are low and not everyone has assessable income. Even so, the modest relief makes discretionary saving that much more attractive.

8.2

HOUSING

What Singaporeans do have is homes. Even if their CPF is not enough and their discretionary savings are inadequate, Singaporeans are nonetheless the proprietors of a valuable asset worth six figures and above. Even the lowest 20 per cent of households have a positive equity of S$138,000 (Ng, 2007a). That valuable asset can serve as a source of income in their retirement years. It is also a hedge against inflation. If prices rise at 3 per cent for 20 years, S$100 invested at the beginning of the period will, in terms of purchasing power, be worth only S$55.3 at the end. The position is different with an asset such as a house. In March 2008 consumer prices were rising at an annual rate of 6.7 per cent. Resale public housing was going up by between 10 and 20 per cent. Private housing was going up by 31 per cent. At worst owner-occupiers would be insulated against a rise in rent. At best they would reap valuable asset appreciation which they could use to pay for being old. People often reason that a home is the best investment they can make. A population that has increased by 62 per cent since 1990 represents a major increase in demand relative to supply. Yet things can go wrong. The value of a flat can be realised only when the property is sold. Once the home is gone, however, even the sellers will need a place to stay. Furthermore, there are the speculative bubbles which unexpectedly burst. Lee Kuan Yew himself has said that an overgenerous public housing policy in the 1990s had been a ‘mistake’:

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200.0 180.0

Private

Index (4Q98 = 100)

160.0 140.0 120.0

Public

100.0 80.0 60.0 40.0 20.0 0.0

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Public

Private

Sources: Department of Statistics (2002, 2007d); Housing and Development Board (2007).

Figure 8.1 Property prices in Singapore, 1996–2007 As property prices rose, everybody wanted to make a profit on the sale of their old flat and then upgrade to a new one, the biggest they could afford. Instead of choking off demand by charging a levy to reduce their windfall profits, I agreed that we accommodate the voters by increasing the number of flats built. That aggravated the real estate bubble and made it more painful when the currency crisis struck in 1997. (Lee, 2000: 121)

Nothing in economics, business or even social policy is a one-way bet. Home-owners who expect to make their fortune should not count their chickens before they are hatched. Figure 8.1 shows that the old adage still holds true. Property prices can go down as well as up. 8.2.1

Housing as Wealth

Approximately 92.3 per cent of Singaporeans are owner-occupiers. Some own private apartments or landed properties. Most own flats supplied under the aegis of the HDB. Singaporeans think of their homes as wealth. As many as 68 per cent of senior citizens told the 2005 National Survey that their house was their most important financial asset. Only 17.4 per cent said the same about savings and fixed deposits. The 17.4 per cent had been 33.9 per cent in 1995. A relatively small proportion of Singaporeans mentioned that they held insurance policies, stocks, shares and bonds. A surprising result that

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emerged from the National Survey is that of Singaporeans who had withdrawn their CPF money at age 55, only 57.4 per cent had put the funds into a bank: 44.6 per cent had used the savings for household expenses and a further 12.0 per cent had used it to buy property. If their bank deposits were low, it was in a sense because they had made a conscious decision not to defer their gratification (Ministry of Community Development, Youth and Sports, 2007: 31). Residential property accounts for 51 per cent of the total assets of a typical Singaporean household: S$342,984 million. The equivalent figure for the United States is 28 per cent, for Japan 40 per cent (Department of Statistics, 2003a: 8). For the older age group the percentage is higher still. The typical Singaporean aged 50 and above holds 75 per cent of his/her total wealth in housing. For the typical American it is 20 per cent (McCarthy et al., 2002: 209, 213). About 70 per cent of all occupied housing units in the United States are owner-occupied. Despite their high propensity to buy homes, Americans nonetheless hold the bulk of their wealth in financial instruments such as insurance policies and unit trusts. Singaporeans are allowed to invest part of their compulsory savings in financial assets through the Central Provident Fund Investment Scheme (CPFIS). Selective withdrawal has made a difference but has not seriously challenged the over-commitment. Multitasked CPF still encourages disproportionate investment in owner-occupation. House-room is purchased at the cost of provision for the retirement years: ‘Many workers used nearly all of their savings towards the purchase of a property. . . . The outcome is that many people do not have adequate cash savings to live on after they retire from full-time employment’ (K.L. Tan, 2007: 21). Cardarelli, Gobat and Lee, studying superannuation for the International Monetary Fund, confirmed that home ownership was indeed forcing Singaporean pensioners to tighten their belt: ‘With no withdrawal for housing, the replacement ratio would more than double’ (Cardarelli et al., 2000: 62). There is no way to put back the clock. An overwhelming 95.6 per cent of Singaporeans say that they would prefer to own rather than rent (Housing and Development Board, 2005: 108). Rising house prices and pride of ownership have been the incentive to buy. So have ease of access to superannuation savings (Reisman, 2007a) and the relatively low rate of interest on CPF accounts. The calculation was explained in Chapter 3. Pegged to short-term rather than long-term returns, the rate, at present 3.5 per cent on the first S$20,000, 2.5 per cent after that, has forced cash-conscious Singaporeans to seek out more lucrative outlets for their Ordinary Account balances. Three-quarters of HDB dwellers are living in large four-room, five-room and condominium-like Executive properties. Smaller public housing units have been hard to find. Priority has been given to low-income households.

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Trading up has continued despite the decline in the average size of household. Co-resident membership shrank from 6.2 in 1968 to 3.5 in 2003 (Housing and Development Board, 2005: 11, 32). The downside is that Singaporeans are now overburdened and overhoused. Singaporeans enjoy on average 258 square feet of floor space each. This is considerably more than in Hong Kong (75), Seoul (140) or Tokyo (161). The upside is the capital appreciation that accrues when things go right. The rise in values is, on paper at least, a financial windfall. Unintended outcomes will help Singaporeans to pay for illness and old age. About 73.7 per cent of the over-55s are owners or co-owners of the homes in which they live. Among the over-75s the figure is less: 53.1 per cent. Just over half of older owner-occupiers are in public housing units of four rooms or more. (Ministry of Community Development, Youth and Sports, 2007: 3). Home ownership confers financial benefits in extreme old age. In that sense a home is an earning asset that helps an old person to have enough to spend. The contention that Singaporeans are ‘asset rich and cash poor’ must not be taken too literally. There are three ways in which bricks and mortar can be converted into pensions and medical bills. 8.2.2

Equity Release

The first is refinance. Reverse mortgages and other equity release schemes have the attraction that they unlock the value in property while allowing owners to remain in their home. The housing equity can be considerable: the HDB survey in 2003 found this to be S$154,000 for the average HDB household. Kutty, writing about the United States, estimates that 29 per cent of elderly home owners living below the poverty line (42 per cent where the old person is aged 90 and above) can be raised out of deprivation without social welfare through principal-residence equity conversion mortgages (Kutty, 1998: 113). Any proposal that rescues approaching a third of impoverished home owners from hunger and want must be given careful consideration. Equity release has been available in Singapore since 1994. The market is dominated by two organisations: NTUC Income and (entering in 2006) the Overseas Chinese Banking Corporation (OCBC). Since some property is private and some is HDB, the market in effect is dual. OCBC lends only against landed property or private condominiums. NTUC Income (since 2006) has offered to remortgage in the HDB sector as well. HDB units are less attractive to private lenders since there is no speculative gain to be made from an en bloc sale. Only the HDB itself can redevelop an estate. In the case of private property, NTUC Income expects the owner to be

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at least 55 years of age. It expects the original mortgage to be nearing its term. It specifies that the lease at the end of the new loan should be for a minimum of 60 years. Since the great majority of private flats (like all HDB units) are sold on a 99-year tenure, the tick-tock of the wasting asset inexorably restricts the scope for capital release. In respect of HDB units, NTUC Income requires the owner to be at least 62. It expects the lease to continue for at least 50 years beyond the term of the loan. The monthly cash payout depends on the age of the youngest borrower, the length of the agreement, the prevailing interest rate and the market value of the property. A lump sum is an alternative to the monthly stream. It cannot, however, exceed 10 per cent of the valuation of the property. OCBC concentrates on private houses and private flats. The borrower must be a Singapore citizen or Permanent Resident. He or she must be aged 65 and above. At least 90 per cent of the mortgage must already have been paid off. At least 45 years must be left on the lease once the 20 or 25 years of the loan have expired. The loan does not require monthly service. The debt is settled at death, repayment, maturity of the contract or the sale of the property. This might happen when the owner enters a nursing home. It can also happen (as specified in the agreement) when the youngest owner reaches 90. The rule is that accumulated borrowings plus interest should not exceed 70 per cent (NTUC) or 80 per cent (OCBC) of the value of the collateral. The valuation can take into account the appreciation expected by the time the asset reverts to the lender. It is a double-edged sword. Because of the 70 or 80 per cent maximum, the agreement can be terminated if the value of the property has depreciated significantly. As for the payout itself, there are two options. The first is an agreed-upon sum for a fixed period of time. Thus a 70-year-old who borrows against a property valued at S$300,000 will receive a monthly cash payout (compounded at 5 per cent and not inflation linked) of S$484 for 20 years. If the property is worth S$500,000, the monthly credit is S$823. Payouts are less for longer periods or where the property is HDB. NTUC Income will typically offer S$274 per month over 28 years for a five-room HDB. At least the owner-occupiers will be selling something which is fully their own. About 88 per cent of the over-65s in the HDB sector have paid off their mortgage. The alternative would be an annuity. This is especially attractive to sentimental or nervous pensioners who do not want to lose both their family home and their income stream should they outlive the 20 years. More and more of them will. Borrowing against a property worth S$300,000, OCBC pays S$410 per month for the first 10 years and thereafter S$328 for life.

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The interest rate applied in 2008 was 4.88 per cent. An annuity shifts the uncertainty associated with the length of life, together with the risks of poor maintenance, rises in interest rates and a depreciation in property values, from the household to the intermediary. A new development, implemented in 2009, has been the Lease Buyback scheme. It allows citizen home owners over the age of 62 to sell the remaining years of their lease directly to the Housing and Development Board. They will be granted a new 30-year lease (non-transferable) and paid the difference in a lump sum followed by monthly payments until the lease expires. The advantage is that they will be able to remain in the same flat rather than uprooting themselves to a studio unit, possibly in a different locale. The disadvantage is that the programme is only open to the owners of smaller (two-room or three-room) flats. Tail-end repurchase is skewed towards the relatively deprived: not only must the flat be small, the monthly household income cannot exceed S$3000. It is, moreover, restricted to householders who have bought only one (subsidised) flat from the HDB, and have lived there for at least five years. Many of those properties, being older flats, have a relatively low market value. It is not clear what will happen if the householder is still alive when the 30 years are up. The demand for reverse mortgages has not so far been very great. Commercial banks other than OCBC do not have a presence in the trade. If the reason is market failure, there may be an argument for a parastatal lender. Yet there is another reason, and it is on the side of demand. Singaporeans still believe in leaving real property to their children when they die. The Japanese have already shown the extent to which elderly Asians tend not to take advantage of accumulated wealth. They do not draw down their assets but instead leave behind assets equivalent to twenty years of consumption. This is in contrast to the elderly in the United States, who draw down not only their financial assets, but also their property assets, and move into smaller, owned or rented homes. (Chia et al., 2008: 2)

The Singaporeans, more like the Japanese than the Americans in that respect, are reluctant to dissipate their wealth. In an Asian society such as Singapore the intergenerational commitment can be a serious disincentive. Saving patterns, Asher asserts, are becoming decoupled from intergenerational altruism. Housing, however, is different. In the case of housing, the dynastic imperative seems still to be working against the life-cycle hypothesis. Parents are reluctant to mortgage or sell the family silver held in trust. Local banks fully understand the local mindset. Lenders expect the

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next of kin to be present at the borrower’s counselling session. They want to ensure that the family is properly consulted. Moreover, even if a reverse mortgage were to be taken out, still the financial burden on family members would not disappear. Chia and Tsui have calculated the returns at selected rates of interest. Their simulations indicate that re-mortgages are unlikely to support a replacement ratio of more than 54 per cent of final income earned. The exercise was based on the median income of the owner of a four-room HDB flat. About 39 per cent of HDB flats fall into the four-room category. (About 68 per cent are four rooms or more.) The replacement ratio of 54 per cent ‘may be moderately low compared to the recommended ratio of 70 per cent in most of the developed countries’ (Chia and Tsui, 2005: 29). Property owners who take out reverse mortgages might still have to rely on their children for top-up support. The inheritance goes. Current income is still encumbered. It is not easy to be a dutiful child. 8.2.3

Trading Down

The second way in which pensioners can use their homes to supplement their incomes is through selling and downgrading. They will do this once their family has grown up. Realising capital in a five-room flat and trading down to a much less costly two-room unit is an attractive option. The surplus can be used to buy a life annuity or put into income-generating assets such as shares or unit trusts. A sensible investment could hypothetically be a better-paying proposition even than a reverse mortgage. The returns could be used to pay for health care and the other supernormal costs of growing old. The HDB is now building for-sale studio flats to make possible the swap. Such flats, sold on 30-year leases, are available only to Singapore citizens over 55. Any other property must be sold. This means that, while CPF savings (above the Minimum Sum) can be drawn upon for the transaction, purchasers of a studio would normally have a positive balance from the sale of their larger unit. This they can put towards the purchase of their annuity. The occupant of a studio flat can be single. A family nucleus is not required. Applicants’ household income cannot exceed the standard HDB maximum of S$8000. HDB is preparing for the future by constructing mid-size units. Larger than a studio but smaller than a five-room, these flats will have an appeal to empty-nesters who want to downsize. The resale market for two-room and three-room flats is itself a useful resource. Yet the strategy only makes financial sense so long as the number of young people wishing to buy is at least the same as the number of old people wishing to sell. Otherwise

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there would be a long-term decline in the value of the larger units. Such a trend would have a damaging effect on net worth and psychic feel-good in a country which has sunk so much of its wealth into residential accommodation. Ageing leases can have the same negative impact on household portfolios. A comparison can be made with Japan. House prices have fallen by 32 per cent since 1998. While 32 per cent is much less than the drop in the Nikkei 225 stock index (40,000 in the late 1980s, 8065 in early 2009), it is nonetheless a bind if an old person is hard-pressed to sell. The number of children per woman has fallen from 4.32 in 1949 to 1.26 today. As a result, the population is projected to fall from 127 million in 2007 to only 90 million by 2055. It is hard to realise capital if the potential buyers are not being born. Singapore is having to cope with a similar dearth. Since birth rates are inadequate to produce the requisite take-up, in-migration might at least keep the property market in balance. In 2007 the expatriate population in Singapore increased by 14 per cent to 1,005,500. The total had been 750,000 in 2000. The increase in numbers boosts the demand for living space. In 2000, 77 per cent of all non-landed private homes in Singapore were bought by Singaporeans and 16 per cent by foreigners. In 2007 the proportions (the residual properties were those bought by businesses) were 63 per cent and 29 per cent, respectively. In the core central area the proportions were 47 per cent and 41 per cent (Rashiwala, 2008: 1). Higher prices and higher rents are one consequence of the influx. The rises feed through into a better-funded old age for the sitting sellers who bought when living space was cheap. Property values could also be supported by a policy of allowing Singaporeans and Permanent Residents to own more than one Housing Board flat. The second and subsequent flats could be rented out to students, work-permit holders, employment-pass holders and even to single Singaporeans. Such single Singaporeans could be old as well as young. There is another option. The Housing and Development Board could itself buy up resale flats and turn them into inexpensive rental units. About one-third of the population of Hong Kong is housed in the local equivalent of a HDB rental flat. In Singapore the figure is 1 per cent. The Singapore system is built around owner-occupancy. Perhaps public housing policy should be reorientated towards inexpensive rentals as a viable second string. Regular buying back would keep up the price of the apartments. It would also satisfy the preferences of those Singaporeans who want to stay liquid. Not everyone likes the roller-coaster of the property cycle. Not everyone wants a housing loan which ties them to one place. Many people are happy simply to earn, to buy and to spend. A revived rental market would give them a choice.

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8.2.4

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Renting

The third option, following on from the second, is selling and renting. Selling and downgrading means that the pensioner moves from an expensive unit to a less costly one. Substantial savings can clearly be made where an old person trades down from a five-room flat in Bukit Merah (current value: about S$518,000) or Marine Drive (current value: about S$695,000) into an HDB studio flat on a 30-year short lease (current value: as little as S$58,000). Selling and renting frees up even the S$58,000 upfront. Some Singaporeans buy private apartments explicitly for rental income and capital gain. Others live in their flat but rent out one or more rooms for income. Still others move in with relatives but retain their HDB apartment as an earning asset and a last resort if life with their children does not work out. Rooms rent for about S$400 to S$700 a month. A three-room flat (depending on the location) can bring in S$1600, a four-room flat S$2200 or more. Currently, 645,000 HDB flats qualify to be rented out. The rule (it was relaxed in 2007 to make it easier for owners to earn income from their home) is that the property must have been owner-occupied for at least five years if it was bought from the HDB using a CPF housing grant. The minimum occupancy is reduced to three years if the flat was purchased in the resale market without a CPF housing subsidy. Old people who have sold can rent in a private or an HDB block. They can even occupy a sublet room. The public gateway is narrow. No one can rent directly from the Board if their income is over S$1500 or if they have bought a sequence of two HDB flats in the past. The private sector is always there. It is a safety net, but an expensive one. Destitute old people are entitled to subsidised quarters at administered rents. The majority of old people are expected to look elsewhere. A healthy rental market gives older tenants (including those whose co-lessee has died or moved out) a broader range of choices. It allows them to remain in the same community or even the same block once they have sold up in order to spend. The elderly in that way remain integrated with a representative cross-section of their neighbours. There is no reason to think that all old people will want to move into retirement villages, sheltered housing or long-stay institutions. Most old people would like to remain in their familiar surroundings. High-rise, high-density living is not a problem for them. (The over-60s are, however, only half as willing as residents in their 20s and 30s to live on very high floors: fear of lift breakdown and fear of heights are the reasons most frequently cited; Housing and Development Board, 2005: 82–3.) The elderly would like to ‘age-in-place’. The proviso is that the HDB or a private freeholder can offer them the extras that older people require.

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These include lifts that stop at every floor, retrofitted bathrooms with grab-bars to hang on to, non-slip floor tiles, accessible public transport that is easy to board, barrier-free ramps that allow the wheelchair-bound to go up and down, emergency alarm systems and heat detectors, buildingto-building interconnectivity and infrastructure, outdoor benches and tables, and tactile and audible features that allow the visually impaired to find their way on their own. Additional services, commercial and voluntary, could make non-institutional life in the community more agreeable. Cooked meals could be delivered. Cleaners could tidy the home for a fee. Neighbourhood activity centres could organise computer lessons and a social programme. Voluntary services could provide a listening ear where sympathy and reassurance are required. Family doctors could ensure continuing care in the locality. Community clinics could reduce the need to travel distances to acute-service hospitals. Home nurses could visit. Ranging more widely, a VWO could acquire the lease and subsequently sublet. That would eliminate some of the search costs and associated frictions that many people, young as well as old, find particularly stressful when they are moving house. Cross-generational mixing is attractive in itself. So is the protection of old social networks even as new ones are being created through Third Age learning opportunities, community service and appropriate sporting activities: ‘Seniors with strong social networks are healthier and tend to live longer. These social networks also enable them to provide support to one another. Strong social bonds are also one of the foundations for a cohesive and resilient society’ (Ministry of Community Development, Youth and Sports, 2006: 59). Cross-generational mixing is a welcome development. It allows retired people to stay where they have roots rather than being segregated in ghettoes that to older Singaporeans will recall the ‘death houses’ of Chinatown’s Sago Lane, banned in 1961.

9.

Labour in the retirement years

There is income from savings and income from property. There is also income from work. The male life expectancy at age 65 is currently 17.1 years. For a woman it is 19.4 years (Ministry of Manpower, 2007a: 3). Soon the life expectancy at 65 will be two whole decades and more. It clearly reduces the old-age dependency burden if the over-55s, the over-62s and even the over-65s can continue to earn income for themselves. This chapter is about the hidden slack and the unnoticed potential. It is divided into four sections. The first section says that on current projections there will not be enough labour in Singapore to sustain the target rate of growth. The second section quantifies the participation rate to discover how many Singaporeans see themselves as available for work. The third section establishes how many of the job-seekers, self-defined, actually make their way into paid employment. The fourth section is concerned with the older worker. It attempts to gain a purchase on the characteristics of the over-55s and the over-62s in order to assess the contribution that they can make.

9.1

A MANPOWER SHORTFALL

The nation as a whole stands to benefit from the retention of the more mature. In 2003 the authoritative Economic Review Committee advised that if the Singapore economy is to grow by 3 to 5 per cent a year, and assuming an underlying improvement in productivity of 2 to 3 per cent, the labour force must expand each year by 1 to 2 per cent (Ministry of Trade and Industry, 2003: 69). The old can make a useful contribution by remaining longer in work. About 35 per cent of the local population will be 50 or above in 2020. About 20 per cent will be over 60. About 8 per cent will be over 70. It will be a great plus if the old can take over the jobs of the babies that are not being born. 9.1.1

Full Employment

Singapore’s economic expansion is constrained by the small size of its population. Global cities such as London (7.5 million), New York (8.3 204

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million) or Tokyo (12 million) have a population twice or more than twice that of Singapore. They also have a national hinterland on which they can fall back for a new injection of blood and bones. Singapore does not. Singapore is a cityState. Satellite suburbs have been built where the villages once stood. Its effective hinterland, both less than an hour away, is Malaysia across the Causeway and Indonesia across the Straits. Independent countries ought to think of each other as partners in a global enterprise. Iskandar Malaysia (the Iskandar Development Region) in Southern Malaysia is a step in the direction of cross-border cooperation. So was the dormant Sijori project which sought to marry up Singapore’s capital with abundant land and labour in nearby Johore (Malaysia) and Riau (Indonesia). Penetrating even further into the region, Singapore would be able to shift production to lower-wage economies as an alternative to importing the labourers themselves into its own overcrowded space. One hand ought to wash the other. Yet the results have been uneven. Nation-States do not always apply the same economic logic as would the butcher, the brewer and the baker when they rely on Adam Smithian self-interest to maximise their felt well-being. Singapore is a city-State in a difficult neighbourhood. Unlike London, New York or Tokyo, it does not have a domestic hinterland that it can call its own. A domestic hinterland is a source of home-grown blood and bones. It is a good thing but not a sine qua non. Small States can prosper. Singapore has done so. With the buoyancy, however, has come the tightness. The overall unemployment rate (seasonally adjusted) was only 3.1 per cent at the end of 2008. The average number of the resident unemployed in 2008 was 60,900. Of those, the long-term unemployed (those locals out of work for at least 25 weeks) stood at 13,500. This was a mere 0.07 per cent of the resident labour force. Workers with little training, obsolete skills or the handicap of age are the most likely to sink into structural unemployment. It is sometimes asserted, however, that some at least of the long-term unemployed are out of work because they choose to be. Unwilling to accept the jobs that are on offer, they are in effect contributing to the manpower shortfall. A labourer on a building site approximately S$800 per month. If the job goes to a Bangladeshi or an Indian, an important reason may be that unemployed Singaporeans have a reservation wage of at least S$1200 and prefer not to work in the sun. There is no peasant agriculture in Singapore that can absorb internal migrants who try and fail to enter the modern sector. Nor are there overpopulated family farms that can release surplus labour for the urban industrial jobs that are coming on-stream (Lewis, 1954).

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Unemployment in Singapore is not across the board. The three age-groups most likely to be out of work are, in order of probability, those aged 15–24, 25–29 and then 50 and above. The three percentages in June 2007 were 8.9 per cent, 4.7 per cent and 3.6 per cent, respectively (Ministry of Manpower, 2008a: 28). Younger people who are just starting work are more likely to be between jobs since they tend to change jobs more often. Even so, the median duration of resident unemployment in 2007 for all under-50s was only eight weeks. Perhaps surprisingly, educational attainment seems to have little explanatory power. The duration of eight weeks (age held constant) applies equally to degree holders and to those with secondary or below-secondary schooling (ibid.: 33) For the over-50s the median duration was nine weeks in 2007. This is the longest spell of unemployment among the various age cohorts. In fact, the difference at 8:9 weeks is small, and less than 8:12 weeks in 2006. In any case, even nine or 12 weeks is better than no job at all. Domestic labour is in bottleneck supply. In 2007 only 39 per cent of new jobs created went to locals. Six new jobs in 10 went to foreigners. In 2006 the figure was five in 10. Older citizens are, however, reducing the size of the shortfall. Between 1997 and 2007 the resident labour force in Singapore expanded by 2.2 per cent. The contribution of the 15–24s was –0.8 per cent, of the 25–29s –0.3 per cent, of the 30–39s 0.6 per cent, of the 40–49s 2.5 per cent, of the 50–59s 7.8 per cent. The contribution of the 60-plus group was 7.3 per cent (Ministry of Manpower, 2007g: 18). The number of young entrants was shrinking. Incumbent players were taking their place. Of 369,400 new residents who entered the Singapore labour force between 1997 and 2007, 244,900 – two-thirds – were aged 50 and above. However welcome, the friend in need will not be enough. Even if the elderly can be roped in, the net annual increase in available Singaporeans will inevitably slow down. About 44,000 per year will join the local labour force up to 2010. By 2015 the annual entry will have fallen to 24,000 (Ministry of Manpower, 2006a: 1). The most that can be said is that the fall will be even greater if the elderly decide to sit out the next match on the bench. Then the alternative would be either to grow more slowly or to rely more heavily on stranger labour from abroad. Underutilised potential is an economic waste in a country where (on the assumption of 4.5 to 6.5 per cent economic growth per annum) at least 450,000 to 500,000 new jobs will be created by 2012. Tay estimates that by 2030 the proportion of the Singapore labour force aged between 30 and 49 will have fallen by 25 per cent. The only increase in the domestic labour supply will have come from locals aged 50 to 64 (Tay, 2003: 89). Workers over the age of 50 make up 26 per cent of the resident labour force. Accompanying the participation is, however, the withdrawal. Approximately 52.8 per cent

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of the resident population over 50 is economically inactive (Ministry of Manpower, 2008d: 3). These older citizens and residents are not working and not seeking employment. There are currently about 220,000 economically inactive persons in Singapore in the high-potential age group from 50 to 65. There are just over one million economically inactive Singaporeans in all age groups over the age of 15. About 61,500 of the economically inactive have university degrees. About 275,000 are over 65. The inactive represent 34.9 per cent of the resident population over 15 (Ministry of Manpower, 2007g: 14; 2008a: 36). About one-third are still in formal education. The young at least will be seeking employment at a later stage. The figures do not pick up the discouraged workers who withdraw from the labour market altogether following job loss. They are most likely to be older workers. If this is the case, then the measured unemployment rate for older workers understates the involuntary idleness: ‘For older workers in all countries, the shift into inactivity is very much a one-way street. Once inactive, typically 5 per cent or less of older people move back into work’ (OECD, 2006b: 36). The proportion of Singaporeans in their prime working years is likely to decline by 16 per cent by 2050. The share of local 15–64-year-olds in the labour force will fall from 72 per cent to 56 per cent (Walter, 2006: 28). Singapore is not alone in that respect. In Germany, as in some other European countries, the population in the productive age range between 15 and 64 will shrink by 20 per cent by 2050. It could cut the German rate of growth by as much as half. Germany needs its old people. So does Singapore if its economic progress is not to slip. 9.1.2

Foreign Labour

The total labour force in Singapore in 2007 was 2,750,500. The resident labour force (citizens and Permanent Residents) was 1,918,100. About 832,400 employees (30 per cent of the total) were therefore on work permits (for manual grades earning less than S$2500 per month) or employment passes (for foreign professionals and executives, called ‘foreign talent’, with sound educational qualifications). Approximately one employed person in three in Singapore is neither a citizen nor a Permanent Resident. The rate of growth in the non-resident labour force between 2004 and 2006 was twice that of the resident labour force: 8.3 per cent as opposed to 4.2 per cent per annum. Over the decade 1996 to 2006 the figures had been 3.3 per cent and 2.2 per cent. In 2007 the figures were 16.7 per cent and 2.0 per cent, respectively (Ministry of Manpower, 2008a: 1). The fertility rate at 1.29 is half that (2.6) in the United States. It is little comfort to say that it is more than 1.13 in South Korea. Chapter 2 explained

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the problem. Whereas the challenge in the overpopulated 1950s and 1960s was to get the birth rate down, the challenge in the twenty-first century will be to return it at least to the replacement level. Baby bonuses and special concessions have had little effect. The births on strike, the present policy is to encourage foreign professionals to make their home in Singapore while also importing unskilled manuals on a contract basis to fill vacancies in construction, heavy industry and domestic service. The Government expects the population to rise from 4.8 million in 2008 to 6.5 million by 2030. Incomers and not parents are going to be the cutting-edge. There are obvious problems. In Western Europe and even melting-pot America, there is debate and anxiety about ethnic assimilation, normative attachment and perceived competition for jobs. Incomers are said to work for lower pay. Incomers are said to have no real attachment to the country. Incomers have not served national service. Incomers often send their children to international schools. Incomers, above all else, are here in force. The sheer numbers are enough to keep the nationalists and conservatives awake at night. Germany, other things being equal, would need a net influx of over 500,000 new immigrants a year to stabilise its labour force at its 2005 level (Walter, 2006: 30). In Japan, where cultural homogeneity is highly valued but the fertility rate in 2006 was only 1.32 (1.26 in 2005), resident foreigners make up a mere 1.63 per cent of the population. There are 2.1 million registered aliens in Japan. Of the 755,000 who are in the labour force, most are professionals. Unskilled foreigners (except for those of Japanese descent) are not admitted. Many think that bogus ‘traineeships’ are being used to bring in the low-paid despite the spirit of the law. A quarter of the registered aliens are mainland Chinese. Many are on short-term contracts. Only about 800,000 aliens are Permanent Residents. The Japanese capital market is just as exclusive: foreign direct investment in 2007 was only 3 per cent of the GDP. It was 4.5 per cent in Britain and 14 per cent in the USA. Where Japan is closed, however, Singapore is open. In 2007 in Singapore non-residents comprised not 1.63 per cent but 21.5 per cent of the total. The total had jumped by 14.9 per cent since 2006, which was itself 9.7 per cent higher than in 2005. The number of Singaporeans plus Permanent Residents grew in both years by 1.8 per cent. It is clearly the foreigners and not the locals who account for the lion’s share of the rise in total population. Population went up by 4.4 per cent between 2006 and 2007 (Department of Statistics, 2007a: 1). Foreign manpower makes up about a third of Singapore’s labour force. It contributes significantly to the high rate of growth. The phenomenon is worldwide. Over 191 million people now live outside their country of origin. In the UK, from 2001 to 2006, net immigration (now running at

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approximately 190,000 new arrivals per annum) added around 0.5 per cent per annum to the working-age population. More labour meant more wealth: ‘Average output growth over this period was around 2.7 per cent per annum and migration is estimated to have contributed around 15–20 per cent of this. On this basis, migration contributed around £6 billion to output growth in 2006’ (Home Office, 2007: 11). Summed up is not the same as per capita. Migrants may have added 3.1 per cent to Britain’s domestic product since 1998 but they have also added 3.8 per cent to its population. Put in that way, the rise may be seen as a fall. The Telegraph felt that ‘misleading statistics’ had done nothing for the quality of debate: ‘Denial, if not outright deception, has characterised almost all of the Government’s pronouncements on immigration’ (Weekly Telegraph, 2007: 23). The Home Office in the UK estimates that the net fiscal balance is in the black. Migrants put in 10 per cent of Government revenues but (partly because they are disproportionately of working age, neither old nor ill) take out only 9.1 per cent of Government spending. Migrants also raise the productivity of native workers. The spillovers are palpable: ‘A 1 per cent increase in the ratio of immigrants to natives would lead to a 0.3 per cent to 0.4 per cent increase in average earnings for natives’ (Home Office, 2007: 12). The unskilled and the unassimilated can undoubtedly depress the average value added; and 77 per cent of the East Europeans who entered Britain between 2004 and 2007 commanded only between £4.50 and £5.50 per hour. The Ernst & Young ITEM Club has estimated that immigrants from the newest European Union accession states are typically earning 40 per cent less than the average British worker. Pay increases are calculated to have been 0.4 percentage points lower than they would have been had labour remained scarce and British jobs gone to British workers (Ernst & Young, 2007). The price effect in Singapore is almost exactly the same: ‘Based on the recent strength of the foreign workforce, it is estimated that a 1 per cent increase in their numbers dampens average real wages by slightly less than one-third of a percent’ (Abeysinghe and Choy, 2007: 85). There is also the quantity effect. Between 2004 and 2008 the number of unemployed British citizens aged 18 to 24 increased by 100,000. This may suggest that the natives had been losing out to the incomers. Polish plumbers speak Polish when they fix your pipes. Britain has changed since the ‘happy breed’ of Noël Coward and the ‘common culture’ of R.H. Tawney. The overall picture suggests, however, that the economic benefit has been enormous. Inflation has been kept under control: interest rates would be up to 1.5 percentage points higher without the influx of manpower. Economic growth would be slower: it would be 0.8 per cent per annum less (knocking out £10 billion worth of value added) if there were no immigration at all. As for pay, and recognising that the recent influx

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of the young and unskilled may alter the figures, the existing averages are unanticipated and encouraging. The mean wage for the foreign-born in the UK is £424 per week. It is £395 for the UK-born. This can only mean that migrants on average have higher output per unit of input than does the local population whose skills they complement. No one should underestimate the economic contribution of the scientists, doctors, engineers, investment analysts, merchant bankers and other highly educated professionals. Of 75 billionaires in Britain in 2008, 40 were born abroad. Of the top 10, only three were born in Britain. According to the Sunday Times’s much-cited Rich List, the wealthiest person in Britain in 2008 was the steel tycoon Lakshmi Mittal. His fortune exceeded £27.7 billion. The second wealthiest was Roman Abramovich (£11.7 billion). The Duke of Westminster (£7 billion) was third. Singapore, like Britain and unlike Japan, has a history of immigration and multiculturalism. New people bring in new skills. New people are hungry, hard-working and ambitious. New people when they create more growth also create new jobs for the sons of the soil. The highly skilled are an external economy: countries such as India and China have already covered the cost of training. The unskilled come in on short-term permits. They cannot settle with their families. They cannot work part-time. They cannot remain in the country when they themselves become elderly, unproductive and dependent. Work permits are a safety-valve. They can be cancelled in a downturn or a crisis. The retrenched can be sent back home. The statistics on unemployment do not record the returnees who would have been out of work in Singapore if they had not ended up out of work in Chittagong or Davao. Even Permanent Residents cannot automatically renew their right of abode if they cannot find a job. Foreign labour is often brought in to do jobs that the locals do not want. While the Japanese share the Singaporeans’ aversion to a ‘three K’ job, that is, kitsui (hard), kitanai (dirty) and kiken (dangerous), it is nonetheless Japanese workers who go up the scaffolding and unload the ships. In Singapore it is more likely to be a Burmese, a Thai or a People’s Republic Chinese who takes on the ‘three D’ job that, demanding, dirty and dangerous, will so frequently be a threat to the health, status and spirits. Cultural differences in some countries are a problem. Quadricultural Singapore in that respect has an advantage over monocultural Japan. New immigrants in Singapore often come from traditional sources. Foreignborn Indians, Malays or Chinese are unlikely to introduce customs and practices that will radically challenge or even further pluralise the existing ways of doing things. It is easier for Singapore to find new Chinese, new Indians and new Malays than it would be for Japan to expand its population by recruiting ethnic Japanese, Japanese-speaking, from Brazil, Peru

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or the United States. Backing the same known horses, Singapore is hoping that cultural assimilation will not be a problem. In the short run, the transition probably will be smooth. In the long run, however, additional ethnicities are bound to come in. The whites are already becoming residents and even citizens. The blacks cannot be far behind. The local population has mixed feelings about the influx. Road congestion, overcrowding, competition for jobs, second-tier talent who could not make the grade at home, social tensions should the ethnic mix change, resentment towards outsiders who resist integration, downward pressure on wages and upward pressure on house prices are some of the reasons for the dissatisfaction. The Government’s reply is that the principles of secularism, tolerance and meritocracy together with the existing agencies of socialisation (national service, education, ethnically mixed housing, Group Representative Constituencies that must include a minority candidate) are robust enough to protect nationhood and ensure cohesion. Rationally speaking, there is no reason for the natives to fear the immigrants. Even so, Singapore is a small place. It cannot afford to rekindle the communal tensions that erupted into race riots in 1950, 1964 and 1969. There is also the long shadow of Colonel Blimp. Even in multiethnic Singapore there are many who are deeply suspicious of foreigners. Not exempt are bright foreigners from China who have been known to sweep the board of top prizes in the schools. Those prizes would have gone to bumiputra locals if Chinese children had stayed at home in their perfectly adequate PRC. At one point the Minister of Manpower had to call for a moratorium on xenophobic accusations to the effect that unwashed outsiders who should have brought in their own food were eating up the Singaporeans’ scarce rice instead. Such accusations he described as ‘irresponsible’ and even ‘inflammatory’. 9.1.3

Replacement Migration: The Three Scenarios

Yet the anxiety has not gone away. Perhaps the reason is that the numbers speak for themselves. The United Nations, concerned at how many countries are reporting deaths in excess of births, predicts that without replacement migration the population of those countries will decline. Between 2000 and 2050 the population will go down from 127 million to 105 million in Japan, 147 million to 121 million in Russia, 57 million to 41 million in Italy and 372 million to 311 million in the European Union as a whole. The median age is rising: in Japan from 41 to 49. The percentage of the population aged 65 and above is rising: in Japan from 17 per cent to 32 per cent (United Nations Population Division, 2001: 1). By 2055, 40 per cent of the Japanese population will be over 65. The population in countries such as

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Japan is becoming smaller and it is becoming older. Replacement migration might arrest a fall that could otherwise be as much as 25 per cent in less than half a century’s time. The population of Japan began to fall in December 2005. By 2030 it will have shrunk by 10 million to 117 million. By 2100 there will be only 64 million Japanese left. If the existing trends continue, the last Japanese in Japan will be born only 953 years from today. The United Nations has taken great care to model what a more-open door would mean for countries like Japan that are caught in the depopulation trap. The first scenario would be to maintain the total size of the population at its 1995 level by encouraging new people to come in. The European Union would require 47 million immigrants (949,000 a year) to make the strategy work. Russia would need 28 million. Japan would need 17 million (ibid.: 22). Entering Japan at the rate of 381,000 a year, by 2050 the immigrants and their descendants would total 22.5 million persons. They would make up 17.7 per cent of the population of the country. The second scenario would be to keep not the total population but the working-age population (the 15–64 age-group) constant at the 1995 level. The European Union would need 80 million immigrant workers by 2050. Britain (where the pensioners since 2007 have outnumbered the under-16s) would need six million. Japan would need 33.5 million new immigrants. Without 609,000 new workers a year, Japan would not be able to stabilise its labour force at the 1995 figure of 87.2 million. Under this scenario the population of the country is expected to be 150.7 million by 2050. The number of post-1995 immigrants and their descendants would be 46 million. They would account for 30 per cent of the total population of Japan in 2050. The third strategy would be to keep the ratio of the working-age population to the retired-age population at its 1995 level of 4.77. The support ratio in Japan is projected to fall by 2050 to 1.71 if no solution can be found. If, however, Japan targets a constant ratio through new arrivals, then it would have to import a total of 553 million immigrants. Half a billion averages out to 10 million a year. Choosing this route, the population of Japan would be 818 million in 2050. Of those 818 million, 87 per cent would be immigrants or the descendants of immigrants. The equivalent figures for the European Union are 700 million immigrants and 59 per cent of the population. For Korea the figures are 5 million and 99 per cent (ibid.: 22, 23, 53, 54). Korean old people will be looked after by Filipina caregivers who know very little Korean. Korean streets will be swept by Congolese who do not eat kimche and do not wear the hangbok. All things considered, 99 per cent would almost certainly alter the nature of the cultural baggage that marks the Koreans out from everyone else.

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So high a figure will never be acceptable to the Koreans, let alone to the Japanese. A quarter of Australians and a fifth of Canadians are already foreign-born. The Japanese, however, are less confident that dilution can proceed without debasement. As many as 95 per cent of the respondents to an attitude survey in 2003 replied that they could not imagine being anything other than Japanese or living anywhere else but Japan (Coulmas, 2007: 3). The Japanese have a strong sense of ethnic and national identity. Committed to the relentless shopping of Gin-za, they are at least as committed to the folk inheritance of Gin-kuji. Replacement migration beyond a point might cease to be an option in their wish to maintain a balance between the Japaneseness of Noh and the acquisitive individualism of the Shibuya mall on a Saturday afternoon. That is the attraction of age. If fertility rates cannot be made at least 2.1 and if outsiders are a Pandora’s Box, then healthy old people can usefully be recommissioned in order to keep the economy afloat. In the EU-15 countries, 50 per cent of people aged 60–64 and 14 per cent of those aged 55–59 have explicitly taken early retirement. The slippage is even greater when housewives and the moderately (but not seriously) disabled are factored in. A simulation exercise in Japan has shown how great an effect the reintegration of the early leavers might have on a supply-constrained economy: ‘If the labor force participation for those aged 60–64 is immediately raised to that for those aged 55–59, real GDP for 2025 is projected to be 11 per cent larger than otherwise’ (Ogawa, 2005: 397). Increasing the activity rate can lean against the prevailing shortfall. The United Nations is not, however, convinced that taking in the slack can ever be more than a partial palliative. In the absence of immigration, its figures show that the retirement age in Japan would have to go up to 77 in order to keep the support ratio in its third scenario constant at 4.77. The Koreans, whose support ratio is expected to drop from 12.62 to 2.40, would have to go on to 82 if there were to be no foreign blood. Even in Britain the retirement age would become 72, in France 73, in Germany 74. Increasing the participation rates in the 25–64 age band would not be enough. In Japan, assuming it were possible for the activity rates of all prime-age men and women to be increased to 100 per cent by 2050, the internally generated supply would make up for only 15 per cent of the loss expected from the ageing of the population (United Nations Population Division, 2001: 24, 54). It would make up for more if the workweek were not 40 hours but 44 hours as it was before 1993. Japan is in the ambiguous position of limiting the hours of its own people while also complaining that it will not have enough workers to provide the support and do the jobs. France is slightly different. Although it reduced its workweek to 35 hours in the 1990s in order to encourage new hires, unemployment

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remains at 7.5 per cent. In France the shorter workweek was a polite name for job-sharing. Eventually it had to be dropped: it was making French goods uncompetitive abroad. In Japan given the declining population the shorter workweek will deprive the nation of scarce worker-hours that it will increasingly need. 9.1.4

Productivity

As well as the foreign, as well as the slack, there is a final response to the manpower shortfall. Higher output per worker can fulfil the same function as an increase in numbers. There is scope for labour-saving automation: robots can drive trains, dispense cash through an automatic teller, sell tickets on a credit card, lift the elderly out of beds and baths, wash the clothes, clean the floors. There is a role for continuous upskilling: targeted training keeps people up to date with new technology that will allow them per hour to process more claims, diagnose more patients or teach more students. There is room for better health: since improved status will lengthen working lives and reduce working days lost to sickness, it is a vote for growth that the proportion of Americans aged 50–64 self-reporting either excellent or very good health went up from 45.6 per cent in 1982 to 54.5 per cent in 2001 (OECD, 2006b: 47). Physical capital, human capital or health capital, the innovative substitution of an input which is plentiful for one which is a bottleneck would allow rapid growth to continue without the same need for the foreigners and the babies who are thin on the ground. The bracing cold shower of international competition is the historic Adam Smithian means of encouraging employers to cut the waste and minimise the overstaffing. Potlucking lumps of standard labour is not the only way of shifting outward the production possibilities frontier. Mullan on that basis reasons that fewer producers relative to dependent seniors need not suggest a bus accident just round the bend: Assuming future productivity growth therefore obviates any need for real belt tightening to cope with ageing populations. . . . A modern society’s normal capacity to grow economically will provide more than sufficient resources to sustain an ageing society and allow continued increases in living standards for all. (Mullan, 2000: 131)

Canada proves the point: ‘The average annual growth rate required to maintain a constant social expenditure share in the face of demographic change between 1980 and 2040 is only 1.05 per cent’ (ibid.: 130). Free marketeers such as Adam Smith, moderate socialists like Anthony Crosland, have come down strongly in support of the wealth of nations. Mullan’s

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argument is that a country experiencing sufficient growth has no reason to fear that the old will become an unaffordable incubus. Productivity is essential. It is not just more pairs of hands but more imaginative entrepreneurs that a land-short, labour-short nation such as Singapore will require if it is to make the demographic transition into a time-bomb that was prudently defused in time. It is therefore unfortunate that productivity growth fell steadily from 4.4 per cent in 1980–85 to 2.5 per cent in 1995–2000. The percentage contribution of productivity to GDP growth fell at the same time from 71 per cent to a share of only 39.7 per cent (Hui and Hashmi, 2007: 64). In comparative terms 2.5 per cent is on a par with Australia and the USA. It is twice the rate in Canada and three times the rate in the Netherlands. Yet it is still falling: between 2000 and 2007 the annual rise in productivity per worker was only 2.1 per cent. A low figure such as 2.1 per cent or even 2.5 per cent is simply not enough: With a GDP growth target of 5 per cent, an increase in the productivity share of GDP growth to 60 per cent would imply a one-percentage point improvement in annualized productivity growth to 3 per cent. The simulation shows that this would consequently almost halve the demand for foreign labor from 2.78 million to 1.48 million in 2034. (Ibid.: 64–5)

9.2

THE PARTICIPATION RATE

The Labour Force Survey is conducted annually in June by the Ministry of Manpower. The exception to annual tabulation is in the years (ending in a 0) in which the Department of Statistics conducts the decennial Population Census or (ending in a 5) when the Ministry of Trade and Industry conducts the decennial General Household Survey. The most recent Labour Market Survey covered 27,214 households. The sample, intended to be representative, was grossed up to the whole of the resident population. It forms the basis for the statistic on participation. The labour force participation rate as identified by the Labour Force Survey was found in June 2007 to be 65.1 per cent. This represents 76.2 per cent of males and 54.3 per cent of females in the high-value working years of 25 to 55. The Census in 2000 arrived at broadly similar results: 63.2 per cent, 76.6 per cent and 50.2 per cent, respectively. Just as interesting as the snapshot still is the moving picture. The time trend can be seen by comparing the figures in the four most recent Census years. They are tabulated in Table 9.1 and graphed in Figure 9.1. There is a small drop in the participation rate for men. There is a major jump in the participation rate for women.

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Table 9.1

Participation rates in the Census years (%)

Year

Total

Males

Females

1970 1980 1990 2000

55.3 63.2 63.2 63.2

81.2 81.5 77.5 76.6

28.2 44.3 48.8 50.2

90 80

Percentage (%)

70 60 Total

50

Males 40

Females

30 20 10 0 1970

1980

1990

2000

Year Source: html.

Department of Statistics, www.singstat.gov.sg/stats/themes/economy/hist/labour.

Figure 9.1

Total participation rates over time, 1970–2000

Older workers were different. Table 9.2 and Figure 9.2 show the percentages for the 55–59 age-group, together with figures from selected other territories. What is clear is that less than half of the older women but over four-fifths of the older men were still active in the labour force. Moving up to the cohort aged 60 to 64, the drop for both men and women is palpable (Table 9.3 and Figure 9.3). Just over a quarter of women in their early 60s are still participating in the labour force. For men the figure is just over three-fifths. Taken together, only about 44 Singaporeans out of 100 in this age-group still see themselves as working or looking for work. The average participation rate for the whole of the 55–64 cohort was 56.5 per cent in 2007 (Ministry of Manpower, 2007g: 2). It fell to 25.3 per cent for the age-group between 65 and 69: 36 per cent of males and 15.6 per cent of females. From ages 70 to 74 the average was 13.2 per cent: 20 per cent of

Labour in the retirement years

Table 9.2

217

Comparative participation rates: age 55–59 (%) Total

Males

Females

2006 2006 2005 2006 2006 2005

63.5 76.5 56.0 64.7 72.0 65.2

81.9 93.2 76.0 79.9 77.7 76.9

44.7 60.3 35.5 49.7 66.7 54.1

(Singapore) (Japan) (Hong Kong) (South Korea) (USA) (Total OECD)

100 90 80 70 60 50 40 30 20 10 0

Total Males

05

06

20

20 EC

D

SA

lO ta

a re Ko

U To

g on H

S.

Ja

Ko

pa

ng

n

20

20

05

06 20

20 e or ap ng Si Source:

06

Females

06

Percentage (%)

Year

Ministry of Manpower (2007c: 3).

Figure 9.2

Participation rates in Singapore, 2006: age 55–59

males and 7.7 per cent of females. Over 75 it was 3.9 per cent: 6.8 per cent and 2.0 per cent, respectively. What this means is that approximately 22 per cent of Singaporeans over the age of 65 remain economically active. Younger people have a higher profile. Taking the prime working age to be 25 to 54, the Census in 2000 established that the participation rate was 76.6 per cent for males and 50.2 per cent for females (Department of Statistics, 2001: ix). The Labour Force Survey in 2007, defining the prime age to be 25 to 49, made the two figures 96.9 per cent and 73.5 per cent, respectively (Ministry of Manpower, 2007g: 2). Whether the 63.4 per cent of the Census or the 85.2 per cent of the Survey, what is clear is that both figures are considerably in excess of the 22 per cent of the present-day

218

Social policy in an ageing society

Table 9.3

Comparative participation rates: age 60–64 (%)

Year

Total

Males

Females

2006 2006 2005 2006 2006 2005

43.9 55.1 30.2 55.8 52.5 41.1

62.5 70.9 44.9 68.5 58.6 51.6

26.2 40.2 13.6 43.8 47.0 31.4

(Singapore) (Japan) (Hong Kong) (South Korea) (USA) (Total OECD)

80

Percentage (%)

70 60 50

Total

40

Males

30

Females

20 10

05

06

20 EC

D

SA To

ta

lO

U

20 a re Ko S.

Ko

20

06

05 20 ng

n on H

Si Source:

pa

g

ng

ap

Ja

or

e

20

20

06

06

0

Ministry of Manpower (2007c: 3).

Figure 9.3

Participation rates in Singapore, 2006: age 60–64

over-65s. At least the figures for both older males and older females are higher than they were in 1991 when men retired early and fewer women went out to work. In 1991 the participation rate among the over-65s was 21.5 per cent for men, 4.6 per cent for women. The average was 13.05 (ibid.: 2). The buoyant economy and the rising level of education have almost doubled the number of the over-65s still active in adding value. The labour force participation rates of older males in Singapore are higher than in most countries in the region. They are also higher than in some European countries. Singapore’s 62.5 per cent for the 60–64 cohort compares favourably with 19 per cent in France or 31 per cent in the Netherlands (even if less well with Sweden at 65.5). Germany makes the

Labour in the retirement years

219

Singapore experience look particularly good. There, early retirement is the norm and the late-life participation rate is only 45 per cent: ‘If Germany’s participation rate of the 55- to 64-year-olds matched the OECD average of 51.8 per cent, the size of the workforce could increase by 2.25 per cent or 800,000’ (Walter, 2006: 29). Germans opposed to immigration are used to saying ‘Kinder statt Inder’. It would be just as logical for them to say ‘Opa statt Goa’. 800,000 is a lot of Germans. The figures cited above show that the participation rate in Singapore is exceeded in East Asia only by Japan and South Korea. Even so, there are 44,000 economically inactive males (27.8 of the total cohort) in the just-post-prime cohort of 55 to 64. About 69 per cent of them, canvassed for the Labour Force Survey, gave retirement as the reason why they had decided to call it a day. Another 23 per cent cited poor health, disability or simply old age (Ministry of Manpower, 2007d: 41). Job-seekers with less than secondary education are especially likely to feel sidelined and to give up the search. It is tempting to say that these traditional breadwinners should reskill and upgrade. The problem is that some of the over-50s are showing little or no interest in a decent job. Women in particular are likely to say that they have no economic incentive to remain in work. They feel that they have enough financial support from their husband, their children or their own resources. About 11.6 per cent of women aged 55–64 have dropped out of the labour force specifically in order to care for their elderly relatives, spouse, children or grandchildren. Only 1.8 per cent of the men have done so. About 64.5 per cent of women in the 55–64 age group (71.2 per cent of all women over 55) regard themselves as economically inactive. For men the comparable figures are much less: 29.4 per cent and 50.8 per cent (Ministry of Community Development, Youth and Sports, 2007: 34, 38). The difference is striking. It is no less striking when put in an international context. Although the male participation rate is high relative to many other countries, the female participation rate is comparatively low. While gains have been made, the female participation rate for the 60–64 cohort in Singapore (26.2 per cent) lags behind Japan (40.2 per cent) and South Korea (43.8 per cent). It is far behind the USA (47.0 per cent) and Sweden (57.1 per cent). Singaporean women are ahead of Hong Kong (13.6 per cent), Taiwan (17.1 per cent), France (16.7 per cent) and the Netherlands (18.0 per cent). It is cold comfort. Women in Singapore hit the peak participation rate of 85 per cent when they are 25 to 29. Thereafter, when they are about 30, they quit their job to withdraw into marriage and childbirth, housework and family. The median age for brides in Singapore is 27, the peak years for childbearing, 29–34. The work role and the homemaking role are thus

220

Social policy in an ageing society

compartmentalised into different stages in the life cycle. By the time the housewives are free to take jobs outside the home they are held back by their relative lack of education and by the vintage of their yellowing qualifications. Until recently the low retirement age of 55 or 62 also worked against the returnee. Companies do not always provide mentoring to help them readjust. Teo and her colleagues conducted a survey of their own of economic activity on the part of the over-59s. They found the participation rates to be 60.6 per cent of males and 17 per cent of females aged 59–64, 14.6 per cent of males and 4 per cent of females over 65 (Teo et al., 2006: 49). The magnitudes are different from the Ministry’s Labour Force Survey. What is borne out by both surveys is, however, the comparatively low representation of more mature women. Whether the figures are taken as 17 per cent and 4 per cent (in the Teo study) or 26.2 per cent and 8 per cent (in the Ministry’s report), what is clear is that a relatively small number of older women are earning an income for themselves. It is a worryingly gender-specific black spot in an economy where there are more jobs than workers. The Government has supported the equality of women in respect of marriage, divorce, educational opportunities and the ownership of property. Women’s rights are enshrined in the Women’s Charter of 1961. Perhaps the under-representation of women will be corrected through more-flexible arrangements at work, better information on available jobs, and a wrap-around network of after-school childcare centres. Education will make a difference: 30 per cent of engineering students (double the proportion in the mid-1990s) are now women. In 2007 nearly two 50-plus women in three with tertiary qualifications were in employment. The figure for women without secondary qualifications was only one in four (Ministry of Manpower, 2008d: 4). Training will make a difference but there might be a need for a mindset shift as well. Singaporean feminists strongly recommend a reallocation of domestic responsibilities and commitments. Older women (mainly widows) make up a disproportionate percentage of the over-65s. Most of them, at least in the current cohort, have had less education than their male counterparts. They have built up less CPF and less discretionary savings. They still live in the long shadow of the traditional roles that were the norm in their core earning years: ‘Their work history will influence their wellbeing at old age largely through income availability upon reaching that point as well as determining their social status in later life’ (Teo et al., 2006: 42). By 2030 the gap will have narrowed. The share of resident females in the labour force has risen from 38 per cent in 1991 to 43 per cent in 2007. It is essential that the process of inclusion should continue. Women in Singapore live on average four years longer than men.

221

100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0

Singapore Japan

r

4 75

&

O

ve

0

–7

–7

70

4 65

–6

9 –5

60

–5

4 55

9 50

4

–4 45

9

–4 40

4

–3 35

9

–3 30

–2 25

–2 20

–1 15

4

USA

9

Participation rate (%)

Labour in the retirement years

Age-group

Figure 9.4a

Labour force participation rates: Singapore, Japan, USA (bar chart)

100.0 90.0 Participation rate (%)

80.0 70.0 60.0

Singapore Japan USA

USA

50.0 40.0 30.0 20.0

Japan

10.0

Singapore

15 –1 20 9 –2 25 4 –2 30 9 –3 35 4 –3 40 9 –4 45 4 –4 50 9 –5 55 4 –5 60 9 –6 65 4 –7 7 0 75 0–7 & 4 O ve r

0.0

Age-group

Sources: International Labour Organisation, LABORSTA Internet; Ministry of Manpower (2007a: 28).

Figure 9.4b

Labour force participation rates: Singapore, Japan, USA (line graph)

Figures 9.4a and 9.4b compare the experience of Singapore, the US and Japan. The solid line in Figure 9.4b is the one which tracks participation in Singapore. It is the highest of the three in the early 30s. Participation rates in Singapore peak between age 30 and age 34. Thereafter they decline.

Percentage (%)

222

Social policy in an ageing society 100 90 80 70 60 50 40 30 20 10 0

1996 2006

Total

20–24 30–34 40–44 50–54 55–64 65–74

75 & Over

Age (years) Source:

Ministry of Manpower (2007f: 12).

Figure 9.5

Age and participation rate, 1996 and 2006

Singapore’s solid line becomes the lowest of the three by age 40 and beyond. In Singapore, 56.5 per cent of the 55–64s are in the labour force. In Japan the figure is 65.8 per cent. In the United States it is 60 per cent. In Japan, 29 per cent of the over-65s remain economically active. In the United States, 6.4 per cent of the over-75s (approximately one million persons), 3.8 per cent of the over-80s (about 318,000 persons) still work. In Singapore only 22 per cent of the over-65s have not yet put their feet up. While no two countries are the same, the comparison with Japan and the United States suggests that older Singaporeans might be able to do more. Intertemporal comparisons do, of course, reveal an upward displacement. There has been an overall increase in labour force participation in Singapore. This is shown by the comparison of 1996 data (square indicators) with 2006 data (round indicators) in Figure 9.5. There was a big improvement in the 30–65 age-group: the 55–64 participation rate seems to have improved by about 15 per cent. On the other hand, the data on the 65–74 and the 75-plus cohorts is not encouraging. It suggests that little had changed over the decade.

9.3

THE EMPLOYMENT RATE

The employment rate is the proportion of the cohort that is not just seeking work but has actually found it. The participation rate is higher than the employment rate since the former includes the out-of-work while the

Labour in the retirement years

223

% 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0

78.0%

77.4%

71.1%

67.1%

62.4%

59.5%

60–64 81.6%

75.2%

66.6% 57.0%

SG ER (55–59)

62.9%

60.5%

SG ER (60–64)

44.5%

en Sw

ed

e

Un

ite

d

nc

at St

Ko h ut So

Fr a

es

a re

n pa Ja

ng Ko ng Ho

e Si ng

ap

or

e

(2

(2

00

00

6)

7)

18.3%

or ap Si ng

55–59

89.6% 80.8%

Source: Ministry of Manpower (2007g: 5).

Figure 9.6 Employment rate (%) of male resident population (55–64)

latter extends solely to the gainfully employed. In fact, the difference in Singapore is small since the labour market is tight. For the age-group 25 to 49, the participation rate in 2007 was 85.2 per cent and the employment rate 82.0 per cent. For the age-group 55–64, the figures were 56.5 per cent and 56.2 per cent (Ministry of Manpower, 2007g: 4). In June 2007, 62.6 per cent of the resident population aged 15 and above were in employment. Only 12.4 of the 15–19s and 60.6 of the 20–24s were in work: the rest were in school, national service or university. Only 25.7 per cent of the 65–69s and 7.9 per cent of the over-70s had jobs: most had already retired. Excluding the extreme values because the motivation is different, the employment rate for residents aged between 25 and 64 was 76.5 per cent. This is the highest proportion since the data were first compiled in 1991. The percentage in 1991 was 70.9 per cent. The evidence below tells the story. Figure 9.6 shows that 80.8 per cent of Singaporean males aged 55–59, 62.4 per cent aged 60–64, were in paid employment in June 2007. In Japan (for 2006) the percentages were 89.6 per cent and 67.1 per cent. In the US they were 75.2 per cent and 57 per cent. Broadly speaking, the employment rate of male residents aged 55 to 64 is in line with the profile of the developed countries. The employment rates of older males in Singapore are almost identical to those for Sweden: 81.6 per cent and 62.9 per cent (ibid.: 5). The figures for older women tell a slightly different story (Figure 9.7). Only 45.2 per cent of women aged 55–59 and only 28.6 per cent of women aged 60–64 were in paid employment. In Japan the proportions were 58.6 per cent and 39 per cent. In the USA they were 64.8 per cent and 16.7 per

224

Social policy in an ageing society

% 90.0

55–59

60–64

77.5%

80.0 64.8%

70.0 58.6%

60.0 50.0

42.9%

34.8%

40.0

45.6%

43.2%

39.0%

SG ER (55–59)

28.6%

25.2%

30.0

56.2%

52.7%

49.1%

45.2%

SG ER (60–64)

16.7%

14.3%

20.0 10.0

Source:

Sw ed en

Fr an ce

St at es

Un ite d

Ko re a So ut h

Ja pa n

Ko ng Ho ng

(2 00 7)

Si ng ap or e

Si ng ap or e

(2 00 6)

0.0

Ministry of Manpower (2007g: 5).

Figure 9.7

Employment rate (%) of female resident population (55–64)

cent. Singapore’s 42.2 and 28.6 are more than the equivalent proportions for Hong Kong or France but much less than the performance reported by the economic vanguard. In Sweden the rates were 77.5 per cent and 56.2 per cent. The Swedish experience suggests that Singapore does not need to go as far as South India to source new labour for its growing economy. Figure 9.8 graphs the percentages. Using data from June 2007, it confirms that the employment rate resembles the participation rate. For Singaporean women the employment rate begins to fall in their mid-to-late 20s. For Singaporean men it declines after about 50. Singapore has set itself a target rate of 65 per cent of residents aged 55–64 in paid employment. This target is approximately the same as current practice in Japan, Switzerland, the USA and Sweden. It is above the rate in the European Union as a whole. The EU is aiming at 50 per cent of the 55–64s by 2010. The proportion in Singapore is currently 54.25 per cent. Singapore, although above the EU, has some distance to make up. Approximately 80,000 more Singaporeans in the age cohort would have to remain economically active than is at present the case. At least the proportion for both women and men is going up. This is shown in Figure 9.9.

Labour in the retirement years

225

% 100.0

Total

Male

Total

80.0

Male

Female

Female

60.0 40.0 20.0 0.0

15– 20– 25– 30– 35– 40– 45– 50– 55– 60– 65– 70 & 19 24 29 34 39 44 49 54 59 64 69 Over Total

12.4 60.6 85.6 85.1 81.8 80.3 78.1 74.6 63.3 44.9 25.7 7.9%

Male

14.4 62.5 88.5 95.9 95.7 94.7 93.4 90.8 80.8 62.4 37.4 13.3

Female 10.1 58.6 83.0 75.5 68.6 66.4 63.4 58.4 45.2 28.6 15.0 4.1%

Source:

Ministry of Manpower (2007g: 5 and Appendix, Table 3).

Figure 9.8

Resident employment rate (%) by age and gender 55–59

60–64

65–69

70 & Over

70.0 Retirement age = 60

Retirement age = 62

55–59

Percentage (%)

60.0 50.0

60–64

40.0 30.0 65–69 20.0 70 & Over

10.0 0.0

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 55–59

45.6 46.3 46.2 48.8 52.7 51.6 50.0 51.8 51.8 48.9 53.6 55.4 54.5 55.9 53.8 60.6 63.3

60–64

29.5 30.1 29.9 30.2 30.3 30.6 31.6 30.3 33.2 30.1 34.8 33.8 33.1 33.6 34.1 41.9 44.9

65–69

17.4 20.4 18.8 20.3 18.5 20.6 20.5 18.0 19.5 17.2 20.4 18.8 18.8 18.1 15.9 24.2 25.7

70 & Over 7.3

8.0

8.0

8.8

6.6

7.5

6.5

6.3

7.3

5.8

6.8

6.6

6.2

5.3

*

7.7

7.9

Notes: Data on 1995, 2000, and 2005 were obtained from the General Household Survey 1995, Population Census 2000, and General Household Survey 2005, respectively. * The General Household Survey for 2005 aggregates the data on the 65–69 and the 70+ age-groups. Source:

Ministry of Manpower (2007g: Appendix, Table 3).

Figure 9.9

Employment rate of older workers, 1991–2007

226

9.4

Social policy in an ageing society

THE OLDER WORKER

Some older persons want to quit. Some, however, want to go on. In 2007 there were 487,100 Singaporeans and Permanent Residents over the age of 50 in the labour force. They made up 25.4 per cent of the total. Only 4.3 per cent of them were unemployed. Locals between 50 and 59 made up 11.4 per cent of the resident labour force in 1997, 19.4 per cent in 2006. For the cohort over 60 the figures were 3.7 per cent and 7.3 per cent, respectively. Between 1991 and 2006 the median age of the resident labour force rose from 34 to 40 (Ministry of Manpower, 2008a: 4). The median employee in Singapore already has grey hair. Today’s older people grew up in hard times. While the future may be different, the majority (68 per cent) of today’s resident employees aged 50-plus are in jobs that are commensurate with their comparatively low level of education and skill. About 18.2 per cent are classified as cleaners, labourers and related workers, 15.6 per cent as plant and machine operators and assemblers, 14.8 per cent as service and sales staff. Looking at the figures from the perspective of the occupation itself, the Labour Force Surveys reveal that as many as 53 per cent of cleaners, labourers and related staff are over 50. At the top of the scale the roles are reversed. Only 10 per cent of professionals, 11.1 per cent of clerical workers and 13.8 per cent of associate professionals and technicians were aged 50-plus in 2006. In terms of sectors, 14.6 per cent of older workers were in manufacturing, 6.2 per cent in construction and 77.4 per cent (83.7 per cent in the case of females) in services. Within the services sector the greatest concentrations were in wholesale and retail trade (17.4 per cent), transport and storage (14.0 per cent) and hotels and restaurants (11.1 per cent). Older workers make up 42.0 per cent of residents employed in administrative and support services, 37.7 per cent in hotels and restaurants. They make up 19.7 per cent in community, social and personal services. The disproportionate concentration in services confirms the intuition that personal maturity and life experience may make older people more patient, better able to manage face-to-face interaction and better equipped to deal with complaints. Older people can be better communicators. They will often have the advantage in interpersonal skills that will stand them in good stead as hospital receptionists, social workers, marriage-guidance counsellors and shop assistants. These soft or people-centred skills are less likely to become obsolete. Rather the opposite: the growing importance of the services sector suggests that tact and empathy, as opposed to sheer brute force, might have a high income elasticity. Meritocracy need not be a synonym for beardless youth. Older workers can be worth the money they are paid.

Labour in the retirement years

227

The services sector is less dependent than manufacturing on physical strength. Furthermore, it offers greater scope for part-time working. Data-entry clerks and receptionists do not need to be there all the time. Complaints officers can work on the telephone or the computer from home. Some older workers value this demand-led plasticity highly where they wish to phase themselves gradually into retirement. The services sector is already Singapore’s principal employer of labour. In 2008 about 20.6 per cent of all the 2.79 million employees in Singapore (resident and non-resident) were in manufacturing. A further 11 per cent were in construction. About 68 per cent of the workforce was employed in services. The figure for residents (at 76 per cent) is higher. Locals are less likely to be active in manufacturing or building. The services sector generates 66 per cent of the GDP (Ministry of Trade and Industry, 2008: 151; Ministry of Manpower, 2008c: 7). Advanced logistics, tourism and finance have been some of the major growth areas. The contribution of agriculture is negligible, both to the GDP and to employment. The services sector is on course to provide even more opportunities as Singapore opens new hotels, cultural facilities and integrated resorts with casinos. Restructuring may be on the side of the seasoned. There is also a possibility that the old can lead the old. Old greeters can welcome new patients who cannot find their way in a huge hospital. An old concierge can deal with shopping and laundry on behalf of an even older resident who cannot go out. The inference is that the prospects are good for the older worker. The exceptions would seem to be cutting-edge services such as information and communications where technology changes rapidly and employees must be state-of-the-art with the breaking news. In these sectors only 8.3 per cent of the labour force is currently over 50. The number of hours actually worked is almost the same for all agegroups. Older workers, however, are the exception. Contrary to expectations, they work slightly more. The national average for full-time employed residents is 48.4 hours per week. The figure is 47.6 for workers in their 30s but 49.5 for workers aged 50 and above. About 31.8 per cent of all full-time employed residents in Singapore worked 50 hours or more in June 2007. In the case of the over-50s it was 34.5 per cent. Overall, in Singapore, workers without secondary education and those in hotels and restaurants tend to work longer hours than the average. It is not clear whether this is a normal expectation or paid overtime. The elderly in Singapore fall disproportionately into both of the groups that are especially likely to come in early and go home late.

10.

Older workers: the policy options

The previous chapter presented the evidence. The present chapter assesses what can be done. It identifies seven policy instruments that can be mobilised by a proactive Government in order to make good use of the underutilised old. The retirement age can be raised. The withdrawal of the Minimum Sum can be delayed. Training and retraining can upgrade the human capital. Pay cuts can price the marginal into work. Technology and working practices can make it cost-effective to keep on the older workers. Income supplementation and compulsory reemployment can contribute to recruitment and retention. Tolerant meritocracy can take the place of stereotyping and prejudice. A nation with a low rate of natural increase must not assume that foreign talent is the only talent around. The chapter concludes that there is no single recommendation that will inevitably bend the labour market to the national interest. Sometimes the policy-makers will have to reshape laissez-faire in order to reverse a private shortfall. Sometimes the policy-makers will have to trust to the invisible hand to reopen a lode-bearing seam. Political economy is a movable feast. Time and place will decide.

10.1

THE RETIREMENT AGE

The idea that there is a single fixed date on which the productive life grinds to a halt is a relatively new one. It is not natural but man-made. In most of human history old people simply continued to work until they were too weak and helpless to carry on. In the new administrative culture, things are different. The turning-points are set out in the files. Incompetence does not need to be proven. The expectation of incompetence is all that is required to stream and scrap. 10.1.1

A Mandatory Transition

Government pension schemes are responsible for standardising the heterogeneous. The statisticians had to invent old age because without a declared cut-off they would not be able to do their sums: ‘Old age at sixty-five is a creation, pure and simple, of the welfare state. It is a form of welfare 228

Older workers: the policy options

229

dependency much more widespread than any of the dependencies noted by the rightist interpreters of the underclass’ (Giddens, 1994: 170). Bismarck in the 1880s and Clement Attlee in the 1940s had this in common, that they inputted the Biblical lifespan of ‘three score and ten’. They arbitrarily knocked off the last five years on the model of early release for good conduct. They came up with age 65 because the civil service was expecting them to come up with something. In East Asia five times round the Chinese zodiac has often been taken to mean the beginning of old age. If Bismarck had been counting five times round from the rat to the pig, he would have chosen age 60 instead. The State created the cut-off at which the seventh age of man begins. The State created the stigma of transitioning overnight from self-reliance into a public burden. The State has been reluctant to revise upwards its pension age in line with advances in geriatrics, the longer life expectancy and the improvement in health. It has been even more reluctant to let older people decide for themselves when their seventh age begins. Governments have difficulty in fine-tuning a kaleidoscope of ambiguities which the pigeonholes cannot spike. Markets, on the other hand, make their money out of quantifying the bottom line: ‘Laying off a worker adjusts his wage rate to zero. This is a poorer approximation of his true productivity decline than any smooth wage adjustment. . . . The firm will, in competition, pay the worker his marginal product, no matter how old he is’ (Lazear, 1979: 1262, 1263). The State wants one-size-fits-all. The market wants supply and demand. Old people who want to be judged on their manifest ability and not their birth certificate would be well advised to vote for Adam Smith in order to keep their welfare up. The single cut-off suggests that the dependency ratio might not mean what it says. It is only the ratio of the past-it to the with-it if the over-65s are actually dependent on someone else. Some over-65s are undeniably disabled and ill. They are the ones who need the residential places, the sheltered housing, the home helps and the health visitors. Yet the vast majority of the over-65s are able to look after themselves. They quietly get on with their life. No one can reasonably contend that they are imposing any strain on the working-age population. The exception is the pension which Bismarck and Attlee told them that they had to take when the clock struck 65. Semantics is elastic. An either/or is arbitrary. Old age all depends on where the line is drawn: ‘In the case of Japan, if the definition of the aged is gradually shifted from 65 years old in 2000 to 75 years old in 2025, the proportion of the elderly will remain around the 17 per cent level for the next 25 years’ (Ogawa et al., 2006: 37). In Britain in 1901 two-thirds of males aged 65 and above were working full-time. A hundred years later only 8 per cent of pensionable males were still available for work. It is hard

230

Social policy in an ageing society

to believe that mental and physical abilities have really degenerated so fast in only a hundred years that nowadays older males have no choice but to look to others for their food and drink. A number of pensioners refuse to accept that the gold watch tolls the end of the working day. Put out to stud and not to grass, they say that they do not see themselves as an inferior grade of input merely because the boss has opened a bottle of ageing champagne. People are as old as they feel. Some older people do not feel worn out. Yet the supply of labour does not create its own demand. Faced with conventions, biases and legal restrictions, even active older persons might find it difficult to dodge the dependent role. Their state of dependency is artificially created, unnecessary and involuntary. The fact that a fully employed economy needs their contribution and that they themselves want to work will not for all that prevent them from being crowded out. Some of the over-65s are still capable of winning their bread. Some of the under-65s by the same token can only be regarded as living from transfers. A non-working spouse is dependent on her husband. A university student is dependent on his grant. An unemployed youth is dependent on his dole. The early-retired are dependent on their pension pool. A part-time worker, statistically employed, can be economically dependent on a charitable supplement. Dependency, in other words, may be a function of age but it is also a reflection of other social facts. The trade cycle, macroeconomic policy, social norms and the willingness to work all have an impact on who turns to whom, how often and for what. 10.1.2

Old Age: The View from Singapore

The HSBC conducted an international investigation. As many as 78 per cent of employers in Singapore said that staff who were still performing well should be allowed to carry on to any age they wished. Four in 10 establishments (39.8 per cent) said that they had done away with mandatory retirement at age 62. Even more said they wanted to do so. They had vacancies which they could not fill. The Ministry of Manpower also carried out a study. About 54 per cent of the establishments it canvassed stated that they either allowed the over62s to continue as before or reemployed them on new contracts despite their age. Of the 54 per cent that saw no need for a ceiling, the majority (71 per cent) made no change to the job description or the wages and benefits (Ministry of Manpower, 2007b: 14). In 2006, 40 per cent of collective agreements (covering 40,000 workers) provided for work beyond age 62 by mutual consent and subject to medical fitness (Ministry of Manpower, 2007a: 10, 16).

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Larger organisations in particular are more likely to allow employees to continue beyond age 62: ‘Their larger employment base enables more of them to be inclusive of workers across the age groups’ (Ministry of Manpower, 2007b: 3). About 68 per cent of firms with 100–249 employees, 73 per cent of firms with 250 employees or more, raise no objections to wrinkles and thinning hair. Old is gold. Larger firms have multiple pathways. In larger firms at least the over-62s are less likely to be blocking the promotion prospects of the up-and-coming. Manpower Inc. in 2006 looked into the active recruitment of the 50-plus. It ranked Singapore first out of 25 countries. About 48 per cent of Singaporean firms were specifically targeting the more mature. The proportion was 24 per cent in Hong Kong and 18 per cent in the United States. The worldwide average was only 14 per cent. As for planned retention, Singapore at 53 per cent came second. Japan was first: 83 per cent of its firms were making a deliberate effort to keep on the tried and tested. The global mean was 21 per cent. In both recruitment and retention, the success rate was highest in finance, insurance, public administration and education. Transport and utilities were far below the average. Brawn goes off. Brain goes on (Manpower Inc., 2006: 1). Some 60-plus Singaporeans want to work normally as before. Some, on the other hand, prefer to call it a day. The multinational financial services group AXA conducted a survey of older people in 16 countries. It found that 72 per cent of retired people felt that the perceived quality of their life had either remained constant or gone up after they gave up work. In Singapore the figure was not 72 per cent but 77 per cent. In Australia it was 85 per cent. In Japan it was 56 per cent. The retired in Singapore are ‘an overwhelmingly happy bunch’ (AXA, 2007: 12). Clearly, there are many who are not afraid of a modest fall in their standard of living in exchange for a quieter and an easier life. The target was not constant income but merely sufficient income. There was, however, some variance between the genders. Retired women were often less enthusiastic about a life of leisure than were retired men. In Japan, 44 per cent of retired women reported that retirement had meant loneliness, sadness, boredom and uselessness. In the case of men, it was only 25 per cent (ibid.: 30). About 77 per cent of Singaporeans in the AXA study associated retirement with happiness. In spite of that they accepted that paradise would have to be postponed. When interviewed by the HSBC, Singaporeans stated that the ideal age for retirement was 63.5 for men and 60 for women. This was higher than both the regional and the global average (HSBC, 2006). Soh, interviewing 30 undergraduates, also came up with a mean age of 63. The sample initially quoted a mean figure of 59.8, with a standard

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deviation of 4.72. The most commonly cited figure was age 60. It was only when the respondents were told the true expected lifespan of the representative Singaporean that the figure went up. Almost half (46.7 per cent) of the respondents changed their mind. Living longer would have to mean working longer, but only to age 63. The Government is encouraging them to work to age 65. Later it will be age 67. As Soh observes: ‘This may be a future point of contention’ (Soh, 2008). In Britain the State retirement age by mid-century will be 68. Even 68 might not be high enough. The United Nations defines the old to be the 60-plus. The World Health Organisation takes the cut-off to be age 65. The AXA Retirement Scope survey, interviewing 11,590 people in 16 countries where the average age at retirement was 57.7, found that older working people (aged 55-plus) and older retired people (aged 65-plus) were in agreement that old age does not set in until 76.9. The ideal age for retirement was nonetheless felt to be 64 or younger. One third (many of them in Asian countries such as Japan) said 55 or less. Even in countries with an official retirement age, the effective age of retirement is less than the official age. Apart from Japan and Korea, it is below the level that obtained in the 1960s and 1970s. Yet people differ; and one inference is that the commitment to a single retirement age might usefully be dropped. Worldwide, only 22 per cent of respondents in the HSBC study felt that retirement should come at a prescribed age. In Singapore the figure was not 22 per cent but 10 per cent. Almost half – 49 per cent – opted for ‘when the time is right’. Asked by Teo if there should be a compulsory retirement age, 39.3 per cent of the early-60s picked ‘no’, 41.3 per cent said ‘don’t know’ and only 19.4 per cent chose ‘yes’ (Teo et al., 2006: 51). Asked the same question in the National Survey of Senior Citizens, only 16 per cent of Singaporeans over 55 could see the need for any mandatory retirement age at all (Ministry of Community Development, Youth and Sports, 2007: 7). Singaporeans, it would appear, are much in sympathy with the OECD’s recommendation that individuals themselves should make the call: ‘Mandatory retirement is incompatible with a general policy thrust towards removing age barriers to employment and to offering greater choice to workers over the work– retirement decision. In any case, it may not be sustainable as the workforce ages’ (OECD, 2006b: 9). Some want to work and some want to play. Whatever they want, what is striking is how many Singaporeans think that they will have to go on. About 60 per cent of the HSBC’s Singaporeans said they expected to remain in employment into their retirement years. The global average was 40 per cent. Early retirement was not frequently mentioned. The reason was probably the opportunity cost. Later retirement was regarded as the preferred means of paying for the golden years. About 41 per cent of

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Singaporeans mentioned this option (the world average was 24 per cent); only 7 per cent looked to an increase in tax (the world average was 13 per cent) (HSBC, 2006). Singaporeans are realistic people. They know that the Government is expecting them to make their own arrangements. Singaporeans earn for their own old age. That does not mean, however, that self-reliance is necessarily their first choice. Asked by AXA who should be responsible for the financing of the retirement years, three-quarters of the respondents in Singapore mentioned the State (AXA, 2007: 33). If the AXA study is right, then there is a collectivist undercurrent even in selfsupporting Singapore. It may be socialism but still it is moderate. AXA’s 75 per cent was a halfway station between the Catholic solidarism of organicist Spain (where 95 per cent turned to the Government) and the yes-but statism of individualist America (where a high but not an overwhelming 55 per cent of the respondents did so). Public pension spending as a percentage of the GDP is 5.2 per cent in the USA, 7.7 per cent in the UK, 10.8 per cent in Germany. In Singapore it is virtually zero. Perhaps surprisingly, the proportion of old people reporting sufficient income worldwide seems not to be correlated with the share of public pensions in the GDP. It should also be observed that not all people in the high-spending countries were confident that the familiar State pension would survive. Three-quarters of working-age respondents in the UK expected a reduction in public pension benefits. Half did not believe that the existing system would still be in place when they themselves reached the age of 75 (ibid.: 32, 49). It is easy to see why so many people think that the stream will run dry. A French male can expect to spend 21.4 years in retirement. A French female will go on for 26.6 years. It is more than a quarter of a century (OECD, 2006b: 33). Will the pension pot really be enough? Will retired people even in welfare-State France have in the end to take a job? Money matters. The HSBC study is an outlier in this respect. Singaporeans in the HSBC investigation were less likely than the global norm to say that they would continue to work because they needed the money. They were more likely than the global norm to say that they would do so in order to have something active or meaningful to occupy their time, or because they would miss their colleagues, or because they wanted a feeling of usefulness that voluntary work could not give them (HSBC, 2006). Work made them feel good. Old people who are physically and mentally active are likely to be healthier than old people whose greatest challenge is watching a video while opening a beer. Healthy old people will have fewer visits to the doctor. They will spend fewer days in hospital beds. The HSBC study found that money wasn’t everything. The National Survey of Senior Citizens found that money still mattered quite a lot.

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About 62 per cent of senior Singaporeans told the investigators that they were working beyond the retirement age because they needed an income. Only 14.1 per cent said they were doing so because they valued an active life for itself. Only 7 per cent said they were doing so because it filled up the day (Ministry of Community Development, Youth and Sports, 2007: 38). The Ministry of Manpower confirmed this result in 2008: 66 per cent of the over-50s said that they were in work to pay their bills, 12 per cent for future financial security, 6.1 per cent to lead an active life and 6.3 per cent to occupy their time (Ministry of Manpower, 2008d: 16). Even for old people the pecuniary incentive remains a strong reason to get out of bed. Earning money will become still more important if adult children became less generous with their support. The same will be true if old people have higher expectations of the target lifestyle they would like to enjoy. When asked if people over 65 make good workers, 77 per cent of the multinational pool told the AXA that they did. The percentage rises with age: positive responses from the over-55s reached 85 per cent. Speaking personally, however, the respondents predicted that they themselves would be fit to work only up to age 66.9. This is well below the red line at which they believed that debility and fragility will generally speaking set in. Fully 79 per cent of retired people in the study said that they would retire before age 65 if they had the chance to do it again. Only 14 per cent of retired people told the AXA that they still wanted to hold a job. Among the 45s to 65s the percentage was about half (AXA, 2007: 10, 11, 14, 25). It may be that younger people think they will need a later retirement age simply in order to make ends meet but that retired people reverse their preferences once they discover that they have enough money at long last to get a life.

10.2

RETIREMENT AGE AND MINIMUM SUM

Singapore is not sure about the law. What is called the retirement age is in effect the age at which residents can withdraw the CPF Minimum Sum. That age was raised from 55 to 60 in 1993 and then to 62 in 1999. It is because the Minimum Sum is currently being released at 62 that 83 per cent of economically active Singaporeans are currently expecting to retire at 62 (Ministry of Community Development, Youth and Sports, 2007: 41). The next step will be 63 (in 2012), 64 (in 2015) and 65 (in 2018). The Government through the Retirement Age Act has promised that the withdrawal age will be raised still further to 67. The date has not been announced. Singaporeans must move with the times. Average life expectancy was 61 when CPF was introduced in 1955. It is 20 years longer now. Average life expectancy was 61 in the USA when social security in 1935

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fixed the pension age at 65. Sixty-five was a safe bet when death came at 61. Since then it has become a gamble that could bankrupt the house. The AXA study, generalising from 16 countries, reported ‘a growing desire for relatively early retirement’ (AXA, 2007: 36). Singapore was the exception: Singaporeans want to retire early, so they can continue working. . . . Nearly four of every ten retirees hold a paying job and more than 70 per cent of working people said they intend to do the same after they officially leave the work force. No wonder two thirds of retirees and half of working Singaporeans are in favor of extending the minimum retirement age. (Ibid.: 47)

This is not to say that Singaporeans are averse to retirement. Nearly 80 per cent of retirees felt their quality of life had either improved or at least remained constant. What the survey showed is simply that many Singaporeans have no intention of jumping ship. The raising of the drawdown age will not force all of them or even many of them to do something they had not planned to do on their own. The withdrawal of the Minimum Sum is the symbolic counterpart of the State pension age in other countries. It is curious that two entirely separate thresholds should be so closely linked. The retirement age is the age at which people stop work. The drawdown age is the age at which forced savings are unlocked. The gateways are related: without their CPF most people cannot afford to retire. They are not, however, the same: even with their superannuation some people will not want to call it a day. Superannuation is superannuation. Work is work. The United States has a superannuation age but no mandatory retirement age. Decoupling has worked well in America. What it will mean for the supply of labour in Singapore is anyone’s guess. The employment rate for persons over 60 in the United States is 24.8 per cent. It is 27.3 per cent in Japan where a mandatory retirement age of 60 is the rule (Ministry of Manpower, 2007a: 64). A retirement age is useful in a country where redundancies and dismissals are difficult to bring about. It does not have the same function in a country such as Singapore where shedding labour is not a problem. The Industrial Relations (Amendment) Act of 1966 and the Employment Act of 1968 give the employer the final say on hiring, firing and promoting. The employer is not obliged to wait until the superfluous reach the maximum age. Singapore’s pro-market legislation frees up the economy. So long as staff want to work, so long as firms want to give them jobs, there would not seem to be any need for the State in Singapore to propound a universal on–off. No one has ever imposed a retirement age on the self-employed. Why should employees and employers, meritocratic and purposive, not enjoy the same freedom to choose? Singapore does not have a retirement age as such. Different firms make

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different arrangements. If anything, the policy is to encourage the retired to soldier on. Lee Kuan Yew, speaking while still in Cabinet at the age of 84, expressed his own personal belief that stimulus means life and retirement means death: ‘If you believe that at 55 you’re retiring, you’re going to read books, play golf and drink wine, then I think you’re done for. . . . You will just degrade, you’ll go to seed. . . . All the people who retire and lead sedentary lives, the pensioners die off very quickly’ (Lee, 2008a: H9). Singapore has a superannuation target but no retirement age. One problem which it faces is the tendency on the part of most Singaporeans to treat the two thresholds as if they were the same. The superannuation threshold is being raised. One consequence is that the Government from 2012 will make it compulsory for employers to rehire their over-62s. Employers in Singapore are seldom mandated to protect their staff. The new law will be an exception. It is, however, the necessary complement to the three-year deferral in the age at which the CPF Minimum Sum will be released. No old people want to be left without access either to their savings or to a job. Postponing the superannuation release is a risky strategy. Four out of five Singaporeans in a survey were opposed to it (Peh and Lin, 2007: 3). Some old people will need their Sum before age 65. Cut-price employment might not pay enough for a decent life. A job itself might be hard to find. Even if the target employment rate of 65 per cent in the 55–64 age cohort is achieved, there still remains a further 35 per cent of the cohort that will not have money coming in. The target rate of 65 per cent might not in any case be achieved. Employment in the 55–64 age cohort was only 56.2 per cent in 2007. Not all were full time. Some were working only a few hours a week. The assumption is that the over-62s will have invested in training and lifestyle in order to consolidate their market value; that only a small minority of the 62–65s will prove genuinely unemployable; and that the go–go economy will ensure an adequate supply of openings for all Singaporeans. It might be overoptimistic to assume that things will work out so well. If economic growth slows down, then job vacancies, tax revenues and public assistance will all be at risk. If economic growth speeds up, then structural unemployment and redundant expertise will strand pre-Sum workers without employment and without CPF. Either way, some players will end up with a busted flush. It is unlikely that the superannuation system will make many exceptions for exceptional need. Funds used up because members are poorly paid or out of work will not be there later on when they are permanently unable to earn an income for themselves. Furthermore, premature withdrawal may be seen as a reason not to work and save. Moral hazard is a threat to the responsible conduct that alone can lift the dependent out of the poverty

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trap. Singapore is unlikely to allow CPF savers to do what they like with their own. Only the hard cases with a medical condition so severe that they will never work again will have the right to unlock the locked box before they reach the age prescribed. It is a bit hard on members who are only moderately ill. They might die before they gain access to their time-bound deferrals.

10.3

TRAINING AND RETRAINING

The freedom to choose, even if necessary, is still not sufficient to induce rational organisations to take on the marginal and the fringe. Today’s over-55s will often have missed out on the educational opportunities that today’s teenagers, bilingual, numerate, literate and computer-literate, tend to take for granted. Older workers are more likely to be less skilled or unskilled. Life in the Third World was harder than it is in the First. 10.3.1

Formal Schooling

The more mature are held back by their relative lack of schooling. Approximately 27 per cent of economically active Singaporeans aged 50 and above have had no more than lower primary education. The equivalent figure for younger people now in their 20s is just under 0.01 per cent. In respect of polytechnic qualifications the proportions are 4 per cent for the group nearing retirement and 24.2 per cent for the 25–29 age cohort. For degree holders, the figures are 9.8 per cent and 38.7 per cent, respectively (Ministry of Manpower, 2007d: T15). The educational handicap is the single most important reason why the more mature lag behind in pay and security. Today’s older worker is at a disadvantage. Tomorrow’s older worker will be better placed to compete. The level of education is rising continuously. In 1985 the average Singaporean had only 5.7 years of schooling. In 2005 it was 9.3 years. In 1996, 15.1 per cent of the resident labour force had ended their formal education at the lower primary level. In 2006 only 10.6 per cent did so. In 1996, 38.8 per cent of the resident labour force had not completed secondary school. By 2007 the percentage had gone down to 28.3 per cent. The absolute numbers had gone down from 637,200 in 1991 to 531,300 in 2007 (Ministry of Manpower, 2007g: 17). Singaporeans value education. A survey in 2008 established that if they were to win a million dollars, 16 per cent would buy property, 24 per cent would save for their old age but 27 per cent would invest in their children’s education (D.W. Tan, 2008: 7). It is no cause for complacency. Some 531,300 Singaporeans

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are currently heading towards old age on low incomes because they do not have the skills. In 1996 only 11.5 per cent of the resident labour force held a university degree. In 1991 it had been 6.7 per cent. In 2007 it was 23.5 per cent (Ministry of Manpower, www.mom.gov.sg). Adding in the polytechnics, as many as 36 per cent had had tertiary education. Many had vocation-specific qualifications: 18 per cent of graduates in 2006 had studied business and accountancy, 37 per cent engineering, and 17 per cent humanities and social sciences (which includes economics) (Ministry of Education, 2007: 24). The target is for publicly funded university places in Singapore to increase to 30 per cent of the cohort by 2015. A fifth local university will be opened to accommodate the demand. A large number of Singaporean students go abroad or obtain qualifications through distance learning. About 47.4 per cent of all graduates in 2006 held degrees from overseas universities. At home, and for lower-income families, bursaries and loans are available to make tertiary education affordable. A student in the lowest quintile (below S$500) of per capita household incomes is eligible for a bursary of S$1600 a year from the Community Council plus a study loan of up to S$3600. The bursary falls away beyond the 66th percentile. At that level the household income is S$1700 and the bursary is S$800. The study loan can be claimed up to the 80th percentile. There the per capita household income is S$2400. The study loan as before is S$3600 a year but there is no bursary. The upgrading of qualifications is even now feeding through into the older cohorts. In 1995 only 12.7 per cent of all 55–64s (those working plus those retired) had secondary qualifications. In 2005 it was 19.4 per cent. Among older women the proportion, still less than the average, had doubled in the decade: 6.3 per cent had completed their secondary education in the earlier year, 12.4 per cent in the later one (Ministry of Community Development, Youth and Sports, 2007: 21). The future will be better still (Figure 10.1). In 1995 only 10.8 per cent of the over-65s had completed at least their secondary education. In 2030 the prediction is that it will be 63 per cent (Ministry of Community Development, Youth and Sports, 2006: 5) or even 72 per cent (Ministry of Manpower, 1999: 3). Approximately 13 per cent of retired people in 2030 will have a university degree. It was 2.3 per cent in 2005. It was 1.4 per cent in 1995 (Ministry of Community Development, Youth and Sports, 2006: 5). Already 61.1 per cent of the over-25s have secondary school or tertiary qualifications. The bulge over time will make its way through the population. The fact that upcoming cohorts are receiving more formal education means that they will have earned more and saved more by the time they reach their own retirement years.

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70 63

Percentage (%)

60 50

At least Secondary Education

40 30

University Education

28

20 10

13

13.6 1.8

0 1990

2000

4 2010

2020

2030

Year

Source:

Ministry of Community Development, Youth and Sports (2006: 5).

Figure 10.1 Projected educational profiles of the over-65s 10.3.2

Adult Training

Adult training, offered in 2006 to 31 per cent of the resident labour force aged 15 to 64, builds on formal education: ‘to him that hath shall be given’. It is a worrying result. Employment-related training such as on-the-job workshops, formal courses, role-play coaching and safety orientation lessons was more usually offered to the better-educated. While 47.6 per cent of degree holders in 2006 attended courses of some kind, only 13.2 per cent of residents with below secondary education did so. Since the bettereducated not only attended more courses but spent more days on each course, the dispersion in the training intensity was as much as 8:1. The pattern is shown in Figure 10.2. The profile in 2006 (circles) is below the profile in 2000 (diamonds) and 2002 (triangles), but above the profile in 2004 (crosses). It fell in the recession at the beginning of the decade. After a few years it began to rise again. Age is an explanatory variable on its own. Evidence collected through the Labour Force Surveys confirms that the incidence and duration of in-service training was biased away from the old. About 43.2 per cent of employees in their 20s received structured training in 2006. Only 20.6 per cent of employees in the 50–64 age cluster did so. Age is a vintage variable which picks up the educational experience of the past. The inverse relationship is demonstrated clearly in Figure 10.3.

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Percentage (%)

60 50 40 30 2000 2002 2004 2006

20 10 0

Source:

Below Secondary

Secondary

Upper Polytechnic Secondary Diploma

Degree

Ministry of Manpower (2007d: 8).

Figure 10.2

Participation in occupational training schemes

50 45

Percentage (%)

40 35 30 25 20 15

2000 2003 2006

10 5 0 20–29

Source:

30–39 40–49 Age (years)

50–64

Ministry of Manpower (2007d: 9).

Figure 10.3

Age and occupational training

One reason why the opportunity to upgrade falls steadily age cohort by age cohort is that older people have had fewer foundations years at school. There is less book-learning embodied upon which in-service incrementalism can build. The less-educated know this and do not raise their hand: ‘The higher educated have a more positive attitude towards training

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with 86 per cent of degree holders indicating their willingness compared to only 47 per cent for those with below secondary education’ (Ministry of Manpower, 2002: 21). Another reason is the perception (perhaps an unfounded stereotype) that old dogs cannot learn new tricks. The digital divide divides. A third reason is straightforward economics. Older employees have fewer years remaining over which the employer can depreciate the investment. New job skills and higher productivity are less likely to pay off if the worker is nearing the retirement age. That in itself is a good reason to avoid a mandatory ceiling. Singapore, a small open economy, is exposed to globalisation, outsourcing, rapid technological change and the obsolescence of expertise. It cannot allow the knowledge-based kaleidoscope to leave its human capital behind. Thus it is that the Government has invested heavily in supply-side initiatives such as the Skills Development Fund, the Employability Skills System, the Skills Redevelopment Programme, the Reemployment Assistance Programme, the Strategic Manpower Conversion Programme, the Workforce Skills Qualifications System, the Employability Skills System, the Place and Train Programme, the People-for-Jobs Traineeship Programme, the Skills Training and Employability Enhancement for the Retrenched Programme, the TOurism TALent (TOTAL) plan, the Professionals Conversion Programme, the Lifelong Learning Endowment Fund, and the National Continuing Education and Training Framework. The intention is that the out-of-date should not be excluded, neglected or left behind. Often the employer can claim reimbursement of as much as 90 per cent of the course fees plus an allowance towards the salary of mature absentees while they are away to attend their lessons. Some courses charge the over40s lower fees. Some courses can be set against tax. Some courses are virtually free. Some courses (consider the 40 per cent reduction for part-time university attendance) are heavily subsidised. In spite of that, the take-up has not always been high: ‘The receptiveness to training declined rapidly with age from 86 per cent of workers below 30 to only 44 per cent for those aged 50 and over’ (Ministry of Manpower, 2002: 21). Yet matter is in motion. The extension of formal education will make it easier for senior citizens to add on new skills. Whether they will want to do so is a different matter. In the European Union only 33 per cent of workers aged 40–64 now participate in lifelong learning. For the over-55s the figure is 14 per cent. 10.3.3

Education and Employment

Formal education augmented through lifetime updating rightly enjoys a high priority in Singapore. The country has advanced up the value chain. It has moved away from the labour-intensive production line in the direction

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of technologically sophisticated sunrise sectors such as petrochemicals, electronics, pharmaceuticals and biomedical research. Workers with relevant skills are in demand. Workers without relevant skills are more likely to be pushed aside. The job market favours the better-qualified. At the top the number of professionals, managers, executives and technicians (the ‘PMETs’) grew from 40.2 per cent of employed residents in 1997 to 48.9 per cent in 2007. Nine out of 10 new jobs taken up by residents in that decade went to PMETs. At the bottom the headcount of production workers, transport operators, cleaners and related manual trades had gone down from 30.8 per cent to 25.9 per cent. In the middle the share of clerical, sales and service workers had fallen from 28.9 per cent to 25.2 per cent in the same period (Ministry of Manpower, 2007g: 7). Workers without skills will not only lag behind in pay but might not find jobs at all. Especially will this be so if manufacturers (domestic and multinational) continue to shift their lower-end production to lower-rent, lower-wage economies abroad. PMETs whose jobs are lost to outsourcing or downsizing have a good chance of finding a new position. Both growth and restructuring mean that the upper white collar is more and more in demand. At the bottom of the pyramid, the absolute number of cleaners, labourers and related manual trades is also expanding. The category grew by 73 per cent from 86,600 employed residents in 1996 to 149,300 in 2006. Production workers and machine operators were not so fortunate. The number of residents employed in these two sectors went down from 330,000 to 268,300 (Ministry of Manpower, 2007d: 15). Without formal education, they were no match for their low-waged counterparts at home and abroad. 10.3.4

Countervailing Credentials

Older workers have a growing stock of formal education on which to build. They also have hands-on experience and practical know-how. Decades of learning by doing will often be as valuable to the firm as a paper certificate. Typically it is the unwritten we, encoded in routines, which makes the unique institution function as it does: ‘Business learning involves organizational rather than individual skills. While individual skills are of relevance, their value depends on their employment in particular organizational settings’ (Teece et al., 1994: 15). The add-on of small changes might therefore be more cost-effective than would the ab initio induction of an entirely fresh face. The new arrival, never schooled in the heuristic, is not in touch with the organisational memory. The experienced insider knows how things are done around here.

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Organisations ‘remember by doing’ (Nelson and Winter, 1982: 99). Yesterday is today since the procedures pay the rent. That being the case, the incumbent is in a strong position to mentor the novice. Seasoned insiders pass on the invisible curriculum of practical know-how. Older schoolmasters write the course outlines. Older administrators draft the manuals. Older bureaucrats manage the protocol. Natura non facit saltum. Precedent keeps us alive. Older workers know how things are done. Furthermore, older workers are less likely to change their job. About 71 per cent of the employers canvassed by the HSBC said that older workers were more productive, 93 per cent that they were more reliable and almost all – 97 per cent – that they were more loyal (HSBC, 2006). Older workers have the edge in commitment as well as assiduity. In a survey conducted by the Ministry of Manpower, 61.4 per cent of firms said that greater continuity of employment was the principal reason why they liked to have workers aged 60 and above on their staff. Employers put prospective tenure above relevant skills (52 per cent), above the willingness to work long hours (34 per cent). Loyalty was especially valued in estate agents and leasing services (70 per cent), administrative and support services (69 per cent) and hotels and restaurants (67 per cent). In those areas the retention of staff is a particular problem (Ministry of Manpower, 2007b: 5). Commitment has a link to training. Lower turnover means that sectorspecific investment is less likely to be lost in a job-hop. Workers in their prime are not as safe as houses. Employees on the way up are prone to temptation. When they sidestep into new opportunities, they carry away the benefits of their training. It is in the interest of employers to invest in the skills of their employees. Slippage, however, is a deterrent to internalising the externality. Often it will be a competitor who pockets the payback. Older workers may take longer to train but at least they are more likely to stay. Since what matters to the employer is not the worker’s expected remaining work life per se but rather the expected remaining time that the worker will stay with the firm, there is a sense in which the older worker might actually be the superior investment. Lower turnover seals in the training that would be lost through a quit (Becker, 1964). Occupational mobility declines with age. In 2007 about 21.4 per cent of employed residents over 15 had changed jobs in the previous two years. The figure for the under-30s was 35 per cent. In the 30s it was 25 per cent. In the 40s it was 17 per cent. For the over-50s it was only 14 per cent (Ministry of Manpower, 2008a: 23). Older workers seem to have more realistic expectations. They had learned in the school of hard knocks what they could achieve and what was beyond their grasp. They had in any case that much less to offer: degree holders are the most likely to change their

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job and older people have had relatively less education. Singapore has never had the job-for-life culture that used to be a commonplace in Japan. The share of employees with long service to a single employer is decreasing. Older workers lend an air of stability to a job market where moving about is not subject to real stigma. The shortening lifespan of narrow competence itself works to the advantage of the more mature: ‘The rapidly changing skill demands would reduce the relevance of a long payback period for training. The difference in the returns on training between older and younger workers would therefore be minimal’ (Ministry of Manpower, 1999: 8). There is no reason to think of the older worker as a beggar on the scrounge for a charitable donation. On the contrary: A blue collar worker needs physical dexterity and stamina, and so may reach his peak of productivity in his late 30s and early 40s. . . . The knowledge worker, however, is likely to reach the peak of his productivity only in his late 50s and into his 60s. The European policies of retiring workers in their late 50s and early 60s across the board means getting rid of some of their most creative workers just as they reach their peak productivity levels. . . . Such policies hurt economic growth. (Hedrick-Wong, 2007: 24)

10.4

PAY

If the over-65s are less productive than the under-65s, gain-seeking economics suggests that the second-best should sell at a discount. If, however, output does not fall per hour as men and women age, then a cut in remuneration cannot be defended on the grounds that otherwise they would be without a job. Older workers can be expensive. High pay is no barrier if they are also value for money. Evidence alone can say if productivity drops on the day that a man or a woman crosses the line. 10.4.1

Age and Productivity

Jackson surveys the findings on the biological clock. He concludes that institutionalised age discrimination has no grounding in effectiveness or achievement: ‘Empirical studies of work performance have suggested that old people can attain a productivity comparable with that of the young’ (Jackson, 1998: 98). Macular degeneration makes a difference to a pilot. Stiffening joints rule out an Olympic sprint. Overall, however, ‘true physical disabilities among the old are mainly irrelevant’ (ibid.: 99). Productivity in performing a familiar task might be unaffected irrespective

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of whether the capacity to assimilate a new and different task goes down. Even the much-cited memory loss need not be of concern. Older workers can compensate for diminished capacity through written notes and selfchecking systems. Most people in any case only use a limited proportion of their intellectual and physical capacity at work. Performing below their maximum need not mean performing any worse than before. Older people develop intellectual filters which help them to learn and recall. They fall back on hands-on familiarity to separate the crucial from the peripheral. Younger workers cannot do this. They must go the long way round: ‘Old people can draw selectively on their wider experience which enables them to interpret and simplify what younger people may perceive as a mass of unrelated and perhaps contradictory information. . . . It may be the wisdom that has traditionally been ascribed to the old’ (ibid.: 97). Wisdom is a valuable asset. The wheel as well as the cog loses out if it is not utilised to the full. Reassigning top-quality potential to lower-skilled work is not a good technique for maximising the profits of the firm. Age is not invariably a good predictor of throughput. In some cases it is: a recent study in Austria established that a rising share of older workers did indeed depress productivity in small firms in all sectors. In some cases it is not: While the share of older workers is negatively related to productivity in the sample of small firms, we found no significant age share effects for large firms in the sample of mining and manufacturing industries and a negative effect of the share of young employees in the sample of nonmanufacturing industries. (Prskawetz et al., 2007: 56)

Dexterity and speed might go down with age. Verbal ability and communication skills might go up. The a priori does not answer the question. The only way is to look and see. The effective age of retirement in Austria at the time of the study was 58.7 for men and 57.3 for women. The labour force participation rate among the 55–64s was only 31.8 per cent. Early retirement did not make economic sense. In mining and manufacturing the productivity of labour did not fall. In the non-manufacturing sector it actually rose. In the small firms, of course, the superannuated were clearly pulling down the average. In their case at least, the theory of diminishing returns does suggest that they were substandard stock that deserved to be marked down for a sale. 10.4.2

Age and Pay in Singapore

Expectations must be realistic if the slowing-down are to price themselves into work. Maybe they already are, as a sample survey carried out by the

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Ministry of Manpower has confirmed: ‘Generally, the older job seekers were willing to take larger pay cuts. . . . The median pay cut that job seekers aged 30 & below were willing to accept was 17 per cent, compared to 36 per cent for those aged 50 & over’ (Ministry of Manpower, 2002: 7). The National Survey of Senior Citizens in 2005 reported that more than nine job-seekers out of 10 were prepared to accept a lower salary once they hit the age of 55. Over two-thirds – 70.8 per cent – were willing to accept a reduction of as much as 50 per cent (Ministry of Community Development, Youth and Sports, 2007: 41). They seemed to think that their most-productive days were behind them. They seemed to believe that young people and foreigners could do the same for less. Piecework solves the problem: workers, young or old, are paid for what they do. Wages and salaries are more difficult to calibrate. Annual appraisals seek to measure the employee’s own value added. Job evaluation quantifies the contribution made by each process. Fair procedures and transparent recommendations are the precondition for results-based remuneration. As of December 2007, 84 per cent of the workforce in the private sector was on some kind of flexible wage system. The Government, its National Wages Council and the National Trades Union Congress have advised that pay in Singapore should move in step with performance rather than seniority. What this means is not that old people should always and everywhere be assumed to be a waste of space. What it means, keeping an open mind, is that the wages of older workers, like the wages of younger workers, should be carefully proportioned to the extra contribution that they make. In Singapore, about 70 per cent of older employees are doing the same job but with lower pay (Phan, 2007). It is important for morale that moneygrubbers should not be suspected of turning a common prejudice into a milk cow. Employers who use the working hypothesis of age to cut the pay of the more mature may be taking advantage of the conventional wisdom to exploit employees who could not legally be exploited in the same way if they were from an ethnic minority. Quantification and assessment put the success indicators in the public domain. They protect the worker against pay cuts where his/her productivity has not gone down. They protect the employer against unrealistic claims where output per hour is in truth falling off. Competence works both ways. Where the high-flyers are in their 70s and the out-to-lunch are dozy at 29, it is the deal-clinchers and not the time-servers who ought to receive the greatest rewards. Even so, many in Singapore are persuaded that human beings wear out. The generalisation is encoded in the Retirement Age Act: it authorises a reduction in pay of up to 10 per cent from age 60 to age 62 exclusively on the grounds of age. The conviction is also behind the guarded welcome that is extended to the narrowing of the distance. The difference between the

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pay of a young worker and that of an older worker (both of them doing the same job) was 1:1.85 in 1997. It had fallen to a ratio of 1:1.68 by 2007. This statistic is taken to be an indication that the old uncles and aunties are at last getting what they deserve. Some economists believe that the proportion should be reduced still further. It has been suggested that 1:1.50 would be a reasonable target if the firm and the nation are to remain competitive. As of December 2006, 60 per cent of employees were in establishments that were narrowing the wage ratio for the same job to 1:1.50 or less. Where the output is less but the pay is more, the career structure is de facto a tax on jobs. It is an incentive to retrench the old in favour of the young. Performance-based pay would be more likely to keep the older cohorts in work. The assumption is that the net participation rate will not suffer once the opportunity cost of idleness goes down. Maybe the assumption is a fair one. If the substitution effect encourages early withdrawal, the income effect suggests that old people will grit their teeth and work even more. 10.4.3

Diagrams and Inferences

Looking at the data, it is not easy to generalise about pay. Figures 10.4 and 10.5 show the pattern as between the different occupational groups. Figure 10.4 shows the ratio of median pay per month in June 2006. Figure 10.5 puts in actual figures per month for June 2005. Managers

Index (20–24 yrs' wage = 1)

Professionals Technicians & Associate Professionals Service & Sales Workers Production Craftsmen & Related Workers

20–24 25–29 30–34 35–39 40–44 45–49 50–54 55–59 Age (years) Source:

Ministry of Manpower (2006b: 53).

Figure 10.4

Trends in relative median monthly wage

Cleaners, Labourers & Related Workers

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8000

Managers

7000

Professionals

6000

Technicians & Associate Professionals

Wage ($)

5000 Service & Sales Workers

4000 3000

Production Craftsmen & Related Workers

2000

Cleaners, Labourers & Related Workers

1000 0

20–24 25–29 30–34 35–39 40–44 45–49 50–54 55–59 60–64

Age (years)

Source:

Ministry of Manpower (2007c: 11).

Figure 10.5

Trends in absolute median monthly wage

Both figures demonstrate that remuneration rises with age for occupations that require an above-average element of scarce skill, formal knowledge and hands-on experience. Such employees become more productive over time. They therefore become more valuable to their firm. This growth in human capital must not be confused with the seniority system. Kneejerk progression is a different and a less acceptable reason for differentials to rise with age for the managerial and professional groups. The opposite tendency is observed among manual and lower-skilled workers. The pay of cleaners and labourers peaked in 2006 at age 30 to 34. It was 1.19 times that of the pay of the 20–24 age cohort. Thereafter it declined steadily to an index of 0.92 by age 55–59. The wage gap between the young and the elderly is exacerbated by the relatively higher levels of education currently enjoyed by the younger agegroups. In 2008 the median income for the over-50s was S$1690. For the under-50s it was S$2500. About 35 per cent of the older cohort earned S$1200 or less per month. For the younger cohort it was 15 per cent (Ministry of Manpower, 2008d: 12). Ageism aside, an important reason is the training differential. Wages of degree and diploma holders increase as they age. Yet only a small proportion of older workers currently in post have received higher education. The disparity holds for both males and females. Females overall receive lower wages as compared to males with equivalent education and of the same age.

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8000

No Formal Education/ Lower Primary

7000 6000

Income ($)

Primary

5000

Lower Secondary

4000

Secondary

3000

Upper Secondary Polytechnic Diploma Degree

2000 1000 0 15–19

20–29

30–39

40–49

50–59

60 & Over

Age (years)

Source:

Ministry of Manpower (2007d: T17).

Figure 10.6

Median monthly income by age and qualification No Formal Education/ Lower Primary

8000 7000

Primary

Income ($)

6000 5000

Lower Secondary

4000

Secondary

3000

Upper Secondary

2000

Polytechnic Diploma

1000 0

15–19

20–29

30–39

40–49

50–59

60 & Over

Degree

Age (years)

Source:

Ministry of Manpower (2007d: T17).

Figure 10.7

Median monthly income by age and qualification (males)

In Figure 10.6, reading horizontally, income increases with age; while, reading vertically, income increases with level of education. Figures 10.7 and 10.8 subdivide the sample into males and females to show the similarity in the general pattern but also the lower level of pay still earned by women.

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Income ($)

7000 6000

No Formal Education/Lower Primary

5000

Primary

4000

Lower Secondary

3000

Secondary

2000

Upper Secondary

1000

Polytechnic Diploma

0 15–19

20–29

30–39

40–49

50–59

Age (years) Source:

60 & Over

Degree

Ministry of Manpower (2007d: T17).

Figure 10.8

Median monthly income by age and qualification (females)

In Figure 10.8, wages for female diploma and degree holders were extrapolated for the 50–59 and 60-plus age-groups due to the lack of data.

10.5

A REAPPRAISAL OF WORK

The Tripartite Committee on the Employability of Older Workers was set up in 2005 to ensure that the scarce resource should not slip into the sand. In its report, published in 2007, it said the attack would have to be on three fronts. There was a need, first, to recruit more employees over the age of 40, second, to retain existing workers aged 55 to 61, and, third, to facilitate the reemployment of displaced labour aged 62 and above. Economic policy, it recommended, should be imaginative and far-reaching. Lifetime learning, flexible remuneration and the time-honoured nine-to-five are useful tools. They are not the only ones. Not everyone works for Mr Gradgrind. About 13.9 per cent of employed residents are working for themselves. For employed residents aged 50 and above the figure rises to 26 per cent. This is more than double the rate of selfemployment – 11.6 per cent – in the 15–49 age group. The most likely occupations would be hawkers, stall holders, taxi drivers, insurance representatives, private tutors, estate agents, business consultants, and small businessmen. There may be a correlation with education. Architects train in London and financial analysts have an MBA. A chicken-rice man is less likely to be

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au fait with cash flow, accelerated depreciation, bank credit, remittances and tax. In Singapore, about 21 per cent of employed labour without secondary qualifications is self-employed. If the aim is to use owner-operation to retain older people in the workforce, then professional advice and walk-in centres would be of particular value to less-educated entrepreneurs like these. Own-account proprietors create employment for themselves and others. They deserve a helping hand. Money can also be a problem. Not all employees who want their own business have saved enough capital. Grants and loans will help older people to take the first step. So will venture-capital microfinance, a supportive development bank and start-up tax exemptions. Tax relief for research and development provides some encouragement to high-tech innovators. Business premises in Singapore are often let by statutory boards. Deferred rentals and concessionary services help older workers to weather the first few months before their ship comes in. A minority of older employees will start out on their own. The great majority will continue to fill in the application forms. Rejection is common since many employers have a preference for the young. There is in the circumstances a need for dedicated agencies that have specialist knowledge of the older-age market niche. Placement centres would conduct aptitude tests. They would advise on jobs and pay. They would explain about dress-codes and interviews. They would offer face-to-face assistance in tracking down vacancies. They would ensure that openings were posted on local websites similar to the Mature Age Toolbox in Australia or the Job Accommodation Network in the USA. An example would be the Older Worker Database that is operated by the civil service in Singapore. Its aim is to facilitate the easy reemployment of public-sector retirees. Not all older applicants are, however, comfortable with an Internet search. Placement agencies might adopt the model of Japan’s Silver Human Resources Centres. Public service organisations first established in Tokyo in 1974, there are currently such centres in 1600 municipalities nationwide. They have a registered membership of 790,000. In Singapore the Community Development Councils have attempted to take on this matchmaking function. Their success has been more limited. In 2007, despite the buoyant economy, they found work for only one in four of the 36,000 jobseekers who came to them. Perhaps the old people were being too difficult about shift-work or too rigid about their expectations. Jobs must be found. They must also be good-quality jobs. An economy is satisfying neither its economic nor its social objectives if the best it can do is to dump its low-throughput rejects in a low-pay, low-status dead end. A more sensible option would be for cost-conscious management to retard and reverse the decline in productivity. Keeping older workers on,

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such employers will also be using innovation to boost their returns. Labour wins. Capital wins. It is a plus-sum game. One example of job redesign in Singapore would be the provision of a battery-driven trolley: without mechanisation the porter would have to manhandle a heavy sack or lift a delicate post-operative. Another example would be a cash register with colour-coded icons: pictures of chickens and pies demystify the task of electronic ordering. A kitchen resited near the dining area makes it easier for older waiters to transport the food. Bigger wheels make it less troublesome for an older postman to manipulate a cart. Larger font sizes and built-in magnifiers make it less challenging for an older warehouseman to find the product. Power steering and automatic transmission mean that a driver does not need to depress a heavy clutch. Microfibre mops are lighter and do not require a full bucket. Tractors and dump bins enable the staff of the Bukit Timah Saddle Club (one in five of whom is over 55) to distribute bulky hay, transport heavy feeds and remove soiled sawdust. Such technology builds on the strengths of older workers while compensating for secondary weaknesses such as aching knees or shortness of breath. There is no reason why such shortcomings should disqualify them for the job. Even twentysomethings wear glasses. Even teenagers take the lift. Older people want status as well as pay. ‘Face’ has the attraction that it costs less than a microfibre mop. In Singapore as in other countries one technique that has been used has been to rename the function in order to enhance its prestige. A bus captain, a senior security consultant or, most prestigious of all, a Water Catchment Surveillance Officer commands respect. A bus driver, a resident caretaker or a reservoir technician is just another nameless bee in the swarm. Employers have an economic incentive to upgrade and retain. It is no surprise that the private sector has done what was required. Thus Yusen Air and Sea Service has not sacked older staff merely because loading and unloading have become physically too demanding. Instead it has transferred them to storekeeping, coaching and desk jobs. Their continued service ensures that Yusen’s tacit knowledge will not be lost. Again, S-Team Switchgear has introduced bar-coding in place of data-sheets to track the stages in its production process. Less time will be invested in ticking the components in and out. Fewer errors will be made by workers in any age-group. The mind wanders when the pattern is always the same. Tetra Pak Asia has introduced machines to identify defects. A worker whose eyesight is poor might have missed the faults. United Overseas Bank has recruited and trained older staff to serve as Customer Service Assistants. Although they might not have had previous experience in

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banking they have the interpersonal skills that direct contact in a bank branch will require. The public sector, too, is active in retaining its older clerical officers, its immigration officers and its school teachers. Extending beyond the retirement age, it has used flexible hours and short-term contracts to hold on to experienced over-62s. In the civil service the reemployment rate rose from 22 per cent in 2004 to 57 per cent in 2007. In the statutory boards it went up to 96 per cent in 2006. An open recruitment exercise is not required if the public sector is rehiring its retired officers within six months of severance. The State has been active in the promotion of age-friendly practices (Ministry of Manpower, 2007e). Firms have access to advice from the Ministry of Manpower and the Workplace Development Agency which reports to it. Since 2006 there has also been the Tripartite Action Group. Led by the Singapore National Employers’ Federation (SNEF), but with membership from the unions and the Government, it exists to encourage the employment and reemployment of older staff. Financial aid may also be claimed. The ADVANTAGE! scheme, introduced in 2005, provides funding in the range of S$300,000 to S$400,000 per firm to cover the cost of new equipment and new methods of staff appraisal. ADVANTAGE! also contributes to the overhead of retraining older workers in the use of new technology. As of March 2007, about 411 companies had drawn a total of approximately S$9 million. They will employ 3100 mature workers not previously on their payroll. They will rehire an additional 3900 workers who are over the age of 62. More than 8500 mature workers will benefit from job redesign or redeployment to lessdemanding tasks. Intended in 2005 to last only until 2010, there are many in Singapore who would like it to become a permanent source of support. Jobs can be redesigned. In doing this, the hours as well as the equipment must be seen as a policy tool. A day does not have to mean a full day. A day can be redefined to fit in with the employee’s needs and wants. Some older workers are ready to transit overnight from full-time work to full-time rest. Others, seeing no need for the cliff-edge either–or, will prefer a more gradual fade. Since there is no final-salary pension scheme in Singapore, there is no financial disincentive to down-shift into a lowerpaid job towards the end. Only 6.2 per cent of the Singapore labour force in 2006 was part-time. In other developed countries it can be as much as 30 per cent. Even so, the share of part-timers in Singapore had been only 3.4 per cent in 1997. The numbers doubled in a decade, from 51,200 to 114,700 (Ministry of Manpower, 2007g: 11). Part-timers in Singapore are defined in the Employment Act as those working less than 35 hours a week. Before the law changed in 2009 it had been 30 hours a week.

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Older workers are more likely to be part-time. In 2007, 10.6 per cent of residents over 50 worked less than a full 44-hour week. For the 15–49s the figure was only 4.9 per cent. The number of part-time employees is on a rising curve. If the percentages mean what they say, then the increase is disproportionately among the old. It will accommodate the requirements of employees who can live on a lower income once their adult children are off their hands and once they are able to access a part of their compulsory savings at age 55. If half of Singaporeans over 55 do not work, the reason might be that they no longer have a financial need. Yet a word of caution is in order. About half the part-timers in Singapore (46 per cent) have indicated that they are involuntarily underemployed. They state that they want more hours but cannot get them. As with teenage school-leavers, also underemployed, it is often low educational attainment that is holding them back. Degree holders experience only one-third the rate of underemployment that is reported by workers who did not complete their secondary education (Ministry of Manpower, 2007d: 18; 2008a: 19). Another reason for underemployment might be that unskilled foreigners who live in dormitories rather than homes are willing to work full-time, to work overtime, and to work for wages which Singaporeans would not consider. Singapore has made extensive use of work permits. The criticism sometimes voiced is that the reliance on strangers has meant lower wages for competing Singaporeans and fewer opportunities for ageing locals. Pragmatism is problematic where there is a conflict of goals. In desperation, one wonders if the Government should pay a subsidy to firms which do not use up their foreign worker quota but hire resident part-timers instead. The smaller picture is attractive: more housewives and more old people would find their way into jobs. The bigger picture is less attractive. It could mean a slower rate of economic growth. As with part-time work, so with contract employment: the older worker is disproportionately represented. About 11.6 per cent of resident employees are on fixed-term contracts. In the case of the over-50s the figure is 14 per cent. Contract employment is expanding rapidly. The pool of resident employees on specified tenures of less than a year grew by 14 per cent in 2007. In the case of regular staff the change was only 2 per cent (Ministry of Manpower, 2007g: 10). Managers and professionals (the PMETs) are more likely to be put on the permanent staff. Occasional cleaners, on-call repairmen and New Year lion-dancers are more likely to be employed ad hoc or for short spells such as a weekend upsurge or an end-of-season sale. Even so, it is increasingly common for white collar as well as blue to be offered a one-year trial or a three-year renewal. Construction supervisors, university teachers and members of the Singapore Symphony Orchestra are frequently hired on closed-ended terms.

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Flexible hours, job shares, compressed work-weeks, and fixed-term contracts are already being offered by at least one-third of firms in Singapore. The competition for talent and the high rate of turnover is forcing businesses to experiment with more departures still. One of these is telecommuting. Technologies such as e-mail, fax and phone potentially increase the participation of non-traditional groups such as housewives, the disabled and the elderly who might prefer to work from home. At 5 per cent, Singapore has one of the lowest percentages of employees who fall into this category. The Internet in that sense is on the side both of paid employment and of the family. Electronic decentralisation (a topic in work–life balance) is a way of retaining mothers and even fathers who might otherwise be lost to the labour force. The high level of computer literacy in Singapore makes such outworking a practical proposition. Offshoring is Bangalore. Homeshoring is the spare room. Not only is there less congestion on the roads and less time wasted in crowded buses, parents and grandparents would also more easily be able to combine their paid and their unpaid roles. About 7.5 per cent of the British workforce now bases itself at home at least one day a week. Such elasticity makes employment more attractive to older people who might otherwise have decided to drop out. Broadband is as revolutionary as contraception. Both de facto alter the magnitude and the distribution of the household’s income. Providing options is important. So, however, is the removal of obstacles. A significant obstacle to the employment of older people can be the differential cost of health insurance. Young people are good risks. Older staff put up the premiums. Occupational cover in that way prices older people out of work. In Singapore small firms offer little beyond the standard workmen’s compensation: S$30 a month for medical costs is a commonly cited figure. Only basic medical benefits for outpatient consultation are required by law. Many employers nonetheless provide a company-based hospitalisation package. Larger firms are more likely to offer such insurance. They are the ones most vulnerable to the additional premiums for the at-risk old. The Ministry of Manpower has put a figure on it: ‘On average, the average medical cost per worker above age 50 is more than twice that for a worker aged 30 and below’ (Ministry of Manpower, 2007e: 3). Twice as much is a considerable differential. In 2007 the Ministry of Manpower, sampling 2900 businesses, found that 9.7 per cent of companies did not hire workers in their 50s, 15.3 per cent did not hire the 60s and above, expressly because of costly insurance in a market economy where each firm must compete to survive. The 15.3 per cent became 34.2 per cent in the case of hotels and restaurants. Some firms did not reduce the wages of their older

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workers but capped their medical benefits instead (Ministry of Manpower, 2007b: 8, 9). In Singapore the government-sponsored ‘three Ms’ do not at least throw up so age-specific an obstacle. They insulate the employer from the burden of unaffordable premiums in an occupational plan. Furthermore, the government system is across the board. It gives Singaporeans the freedom to dip into several jobs without imperilling their cover. It continues protection even if the member is out of work. Stressing the advantages, the Government has therefore introduced the Portable Medical Benefits Scheme (PMBS). It gives employers the opportunity to contribute a further 1 per cent to their employees’ Medisave accounts in lieu of providing an expensive inpatient insurance policy. The result is that the old, because they do not impose a deterrent burden, are less likely to be denied employment because of the cost of health. The same benefit would be conferred, retaining occupational cover, if older workers were to agree to a higher co-payment rate or a ceiling limit to their medical claims. Such measures would mean that the company’s premiums would not escalate as its workers age. Otherwise medical insurance as a fringe benefit could become prohibitively expensive. As always, there has to be a balance between jobs and coverage. Older workers need work. Older workers need doctors. It is important to get-the countervailing forces right.

10.6

LAWS

Portability assists the market to function efficiently. Laws guide the market in order to ensure that social priorities are not sacrificed to gain-seeking economics. One law that would help the elderly would be a legislated quota for older workers or the reservation of listed jobs. The model would be the Employment Promotion Law in Korea. Enacted in 1991 at a time when the debate about age was still in its infancy, the Law names 160 occupations for which older applicants should be given priority. Suitable jobs in Singapore could be park staff, commercial translators, pump attendants, museum guides, complaints officers and childcare aides. There is little support for such directives in Singapore. It is not the Singapore way for the deployment of labour to be micromanaged by the State. Discrimination can be made compulsory. It can also be banned. There are laws in the United States, the European Union and Australia which prohibit hiring, dismissal, promotion or training on the basis of age alone. It would be in keeping with Singapore’s meritocratic ethos for such laws to

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be introduced in order to make good on the promise of an open road. Once again, however, Singapore has been reluctant to use statute first. Singapore is a young country with a young population. Until recently there have never been enough old people for ageist discrimination to be perceived as a serious problem. Furthermore, Singapore does not have a dense thicket of non-governmental organisations. There is as yet no local equivalent of the American Association of Retired Persons or the Campaign Against Age Discrimination in Employment in the UK. It is probable that as the aged grow in numbers and self-confidence, comparable nodes and lobbies will develop. Such coalitions and pressure groups will use their influence within civil society to bring about changes in social usages. A law to prohibit ageism may be one result. Physical handicaps will strengthen the case for a law. Disability increases with age. In that sense the protection of one minority will imply the protection of another minority as well. A country that has invested so much in the containment of racism might wish to invest something more to eliminate continuing ageism as well. In spite of that, Singapore is not at the stage where legislation to tear down ascriptive barriers is seriously being considered. The Singapore way, persuasion rather than coercion, remains upgrading, upskilling, careers guidance and retraining allowances. With all of that, the law already does play a role. Statute may not directly outlaw discrimination but it does give targeted support to the old who want to work. Section 10.6.1 is about subsidies. Section 10.6.2 is about reemployment. 10.6.1

The Workfare Income Supplement

The Government does not give tax incentives to firms that hire older workers. Its aim is not to subsidise the job but to augment the earnings. The Workfare Income Supplement (WIS) is a means-tested State top-up that is doled out to the low-paid. Many of the low-paid happen also to be old. The WIS is paid to full-time employees over the age of 35. Their monthly earnings must be S$1500 or less. Recipients of the WIS must have been in work for at least three months in any six-month period or for six months in the previous 12. They must be living in owner-occupied public housing with a rental value of under S$11,000 a year (Ministry of Manpower, 2007a: 32). The figure of S$1500 was chosen in order to focus the allowance on the bottom 30 per cent of all wage earners. Older workers can claim more than those aged 35 to 45. The grant stands at S$100 per month for claimants aged 45–55. Thereafter it rises to S$150 (for age-group 55–60) and S$200 (over 60). Self-employed and casual workers receive two-thirds of the standard stipend.

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The payout is at once an incentive to hire and a reason to work. Singapore has no statutory minimum wage. The State allows the firm to pay the value of the marginal product even if it is not very much. What the WIS does is to augment the market-determined wage in order to ensure that lower-income staff will be able to have a decent life. The WIS makes up the difference between market-clearing efficiency and the citizenship floor. Because it keeps wages down, the subsidy protects both the employability of marginal workers and the cost-competitiveness of the organisation which takes them on. Wages in China are a fifth of the level in Singapore. Textile workers in Bangladesh take home US$1 a day. Globalisation focuses the mind. The actual amount of the WIS is not in practice very great. An annual sum of S$1200, S$1800 or even S$2400 is not going to lift the low-paid very far above basic subsistence or provide much margin for investment in human capital. Even so, Yeoh writes, ‘Workfare remains the fastest way to get there without compromising the work ethic’ (Yeoh, 2007: 42). As many as 438,000 low-waged Singaporeans may eventually benefit. More than half of older workers are expected to be eligible for WIS. For workers earning S$1000, the monthly top-up of S$200 is equal to 20 per cent of their pay. Japan (as do Austria, Belgium, Denmark, France and other developed countries) has a similar system. In Japan the Employment Continuation Benefit (ECB) augments by 15 per cent the income from work of low-paid 60–64s who have experienced a fall in their wages of at least 25 per cent. The supplement is paid for a maximum of two years. In contrast to the New Deal 50 Plus in the UK, the Return-to-Work Supplement in Austria and the Alternative Trade Adjustment Assistance Program in the USA, no record of previous unemployment on welfare benefits is expected. The ECB consciously separates the problem of low pay from the different problem of no pay. In spite of that, the OECD has expressed serious reservations about the Japanese top-up: The Employment Continuation Benefit for the Aged (introduced 1995) may work as a kind of wage subsidy to employers. In theory, it allows employers to reduce the wage level of their older workers by up to the maximum amount of the benefit without lowering the overall income from work of older workers. Thus, this benefit faces the same problem as other wage subsidies, such as stigmatisation (by suggesting that all older workers require protection), substitution effects (i.e. older persons may be hired at the cost of other age groups) and large deadweight loss (i.e. most of the subsidised workers would have been hired anyway. (OECD, 2004: 15)

Unearned income is shaming. The young are pushed out. The old would have been hired even without the allowance. It is not exactly a

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ringing endorsement. If tax incentives distort market signals, so too do subsidies. The marginal loss of income is high if the worker moves to a better-paid job or acquires a valuable new skill. The ECB has a disincentive effect that distorts the supply curve of labour. The grant is not targeted at the subset that is most in need. The top-up is the same for an older employee who had earlier done well under the seniority system as it is for an unskilled reentrant who had previously been long-term unemployed. Last but not least, the ECB is expensive. Payments made to the expendable cost money. Governments do not have money to spare. The total cost of WIS in Singapore will probably be over S$400 million (Ng, 2007c). Singapore to that extent does have a handout State. WIS is paid partly in cash but mainly in CPF credits. For every S$1 in cash, S$2.50 is deposited into the beneficiary’s Ordinary Account. This means that the beneficiary must have a CPF account. Many informal, casual and occasional workers (perhaps as many as 200,000) do not. In-country outsourcing will cause the numbers of low-waged workers without a CPF account to increase. A large group is already falling through the cracks. It could be as much as two-thirds of the eligible pool. Looking on the brighter side, about 300,000 Singaporeans received WIS payouts in 2007. The average sum received was S$1000. The WIS recipient must be in paid employment. An old person would have to take a job in a fast-food restaurant to qualify. The retrenched and the unemployed are not eligible. Family caregivers are excluded. Since they do not receive a wage, they are not entitled to a gift. 10.6.2 The Reemployment Law In 2012 there will be a Japanese-inspired reemployment law. The firm will be obliged to rehire existing staff from age 62 until they reach 65. Later it will be 67. Since there will be an expectation of medical fitness and since there can be new terms and conditions, the law might not represent a major seachange. The Ministry of Manpower found that 54 per cent of the firms it surveyed in 2007 were already retaining staff beyond the official retirement age. Only 25 per cent of establishments were actually requiring employees to pack up at 62. Even waning strength was being overlooked. Only 38.4 per cent of all firms in the survey reported that physical deficiency was likely to mean an early bath for a serving 60-plus. Only 25.4 per cent said the same about a disappointing might-have-been still in his 40s. Young or old, if one task is not possible another will be found. The job, however, seems to be more secure than the cash. The Ministry found that about

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80 per cent of firms retaining older workers beyond 62 made a significant change to their job description or remuneration package. The remaining 20 per cent left things as they were. The replies were not evenly distributed across all industries. About 51.1 per cent of firms in manufacturing, 47.5 per cent in construction, told the Ministry that inability to meet the physical demands of the job was a convincing reason not to employ workers in their 60s. In financial services the figure was 11.4 per cent. In hotel and catering it was surprisingly high, 49.6 per cent (Ministry of Manpower, 2007b: 8, 9, 11, 14). Fire-fighters have to be fit and soldiers have to move fast. Financial, information and professional services were less likely to put the body above the mind. Much depends on the nature of the job. Buffers and safeguards exist. The employer can suggest different work or an inferior pay-grade. The employee can be given half pay with the same or even a heavier workload. The employer can take into account the older person’s health and performance. The employee can be denied an annual bonus. The employer can shunt old dogs on to a siding in order to spare young lions the long wait for ‘dead men’s shoes’. Employers, in other words, have considerable freedom to protect their own interest. All that will be guaranteed from 2012 is some kind of job at some kind of pay. A step down does, however, presuppose that the employer has an adequate supply of lower-level openings. Large corporations might be able to find the placements. A miner can be shifted into quality control. A blaster can help out with supplies. Small and medium enterprises might not have any give. Perhaps firms unable to rehire their own staff could at least work with recruitment agencies to source appropriate vacancies outside. Human resources departments could assist and advise when all the old doors are shut. Career guidance is a valuable new role for Personnel. Adequate leadtime will be required. Some firms in Japan begin the consultation process as much as five years in advance of retirement. Full employment is the precondition for successful reemployment. If older people are to remain in the labour force, then the economy will have to be generating sufficient jobs for them. Singapore for three decades has been experiencing a manpower shortfall. Job-seekers have been securing the ultimate growth bonus. Yet nothing is guaranteed in a small, open economy that is forever exposed to surprise. A cyclical recession or, worse still, a secular downturn, would present organisations with a real dilemma. If the local over-62s must by law be rehired even when the firm has excess and slack, then foreigners and the resident under-62s will presumably have to bear the brunt of the retrenchments. Reemployment can be a nuisance for an organisation that wants to keep its options open. Employers might be reluctant to take on older workers for

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fear of the new responsibilities that imminent 62 will entail. Permit holders might be substituted for locals since only Singaporeans and Permanent Residents are sheltered by the law. Organisations might be tempted to go in for gentle harassment. The accounts executive might be put in the postroom. It might be the only way for the company to rid itself of a fixed cost that it does not want. The right to a rehire is not transferable. It is liquidated if the alienated, the powerless, the unappreciated and the exploited decide to move on. Retention is not assured where the employer says that the staff member is a liability. The law is a paper tiger where the onus of proof is on employees to show that they are not lazy, late or rude. The same is true where genuine overmanning is seriously threatening the firm’s competitive advantage: how can the law be enforced if employers prove they cannot afford to do what is being asked? No law is ever cast-iron, set in stone. The Government can demand disclosure and transparency. It can publish league tables that name and shame. It can lead by example in the ministries, the schools and the Government-linked companies. At the end of the day, however, Singapore is a market economy. No captain of industry is going to be fined or sent to prison for getting rid of employees who are not pulling their weight.

10.7

A NEW CONSENSUS

Public policy presupposes public opinion. A campaign to employ and reemploy cannot succeed if ordinary men and women believe that grandfather has definitively cashed in his chips. The economic base is contributing to the required evolution. If labour is scarce, then even grandfather will have to be considered for the shortlist. Employers’ attitudes are changing, but still the invisible hand is too slow. Needed is ‘to further change the mindsets of employers, employees and the customer public’ (Ministry of Manpower, 2007a: iv). Here the public sector can take a lead. Dentured immigration officers, lived-in education inspectors and saggy Council supervisors will demonstrate face to face that they know what to do. Crow’s-footed wheeler-dealers and botoxed secret agents will show on public television that a no-nonsense pensioner needs an Uzi and not a Zimmer frame to get by. Older activists and older politicians will educate the community in the expediency of turning to the old to get things done. In Japan the Respect for the Aged Day is a national holiday. It would do more good if it were celebrated not as a day of rest but as a day of hard work to honour the farmers aged 100 and above who still live independently and still grow their crops. Public information campaigns have sought to tackle ageism in the

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workplace. The Finnish National Programme on Ageing Workers fights negative attitudes. It makes use of the slogan ‘Experience is a national asset’. In the United States the Government raises awareness through a National Employ Older Workers Week. It gives annual awards for the best employer of older people. In Korea the Government sponsors a Day of the Elderly to spread the message that not all older people have one foot in the grave. It rewards filial relatives and members of the public who have contributed to the well-being of the elderly. Singapore itself holds a Grandparents’ Day and a Senior Citizens’ Week. Events like these are about more than giving prizes. They are also about showcasing success. Role models are walking proof that old people can be able-bodied and alert. Exemplary elders put flesh on the assertion that not everyone over 55 is doddery and infirm. Publicity counts. Images can change. Images can also be changed over time. The public sector through its own employment practices should set a good example. It should make clear that it hires the best man or woman for the job and does so age-cohort blind. If the policy delivers the goods then the private sector might decide to emulate its success. There is not much that can be done to reverse a rational business calculation. If the customers in an edgy bar prefer to be served by trendy youth rather than grizzled gravitas, then age is part of the differentiated product that the customer would like to buy. In general, however, stereotyping is a lose–lose game. Prejudice, as Milton Friedman warns, can be a deadweight that drains away the profits: There is an economic incentive in a free market to separate economic efficiency from other characteristics of the individual. A businessman or an entrepreneur who expresses preferences in his business activities that are not related to productive efficiency is at a disadvantage compared to other individuals who do not. (Friedman, 1962: 109)

Grandfather can be an asset who moves the business back into the black. Profit and fairness need not be polar opposites. They should not be seen as substitutes that never meet. The Ministry of Manpower, working with the Singapore National Employers’ Federation and the National Trades Union Congress, has issued guidelines on non-discriminatory job advertisements and application forms. Words such as ‘youthful’ should not be used: if the worker is expected to unload heavy sacks of rice, this should be clearly specified instead. Applicants should not be required to send in a photograph. A photograph is not necessary to determine if the applicant can do the job. Older workers are often taken to be slower, less energetic, less adaptable. They are often believed to be out of touch with new technologies,

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new products and new managerial departures. They are often thought to be unimaginative, rigid, inflexible and risk-averse. Some, no doubt, are. Only 38 per cent of Singaporean employers in the HSBC Survey reported that older workers were technically more proficient than younger ones. The figure for Asia as a whole was 55 per cent. In that respect the pro-youth bias of Singaporean employers is closer to the mindset in the USA or Western Europe than it is to the way the old are venerated in the surrounding AsiaPacific. Microelectronics is not, however, the whole of the story. Older people can be more punctual, more conscientious, more understanding. They have more practice. Practice makes perfect. Alternative qualities make an alternative contribution that might be at least as good. Worldwide, 16 per cent of the over-70s say that they are not in good health. In Singapore the figure is 9 per cent (HSBC, 2006). A healthy lifestyle combined with rapidly rising standards of living is reducing the pool of the chronically sick who cannot work. About 7 per cent of the 65–74s in Singapore are weak and shaky. They are medically unfit. This means that 93 per cent (it falls to 78 per cent from age 75) are ‘ambulant and physically independent’. Of the 7 per cent, all but 2 per cent count as ‘ambulant and physically independent but require walking aid’ (Ministry of Community Development, Youth and Sports, 2006: 4). About 98 per cent of Singaporeans below 74, 91 per cent above 75, do not require assistance in moving about, except possibly from a stick. Because they are in good health, they will not impose a cost. Because they are able to work, they can create a benefit. Because they are keeping active, they are investing in their own physical and mental health. It would make sense for Singapore to think of the over-55s and the over-65s as inputs into the wealth of the nation. It should not be assumed that they are merely over-the-hill dependants who sponge up a disproportionate amount of costly medical attention: Such an assumption is inaccurate. The combined projected picture . . . is one of an assertive, educated, independent, and articulate generation of seniors. . . . Future generations of seniors are likely to be healthier, more autonomous and more actively involved in their own family life as well as in their communities. (Quah, 2003: 92)

Older people will be active and they will be dynamic. The conventional definition of ‘old’ does not keep pace with changes in medicine and culture. Although older people are the fastest-growing segment of the Singapore population, it must not be assumed that all older people will be postproductive pariahs when 2030 sounds its knell. Whether old people will want to spend their twilight years as hotel receptionists, supply teachers, minders of bicycles, distributors of flyers

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or part-time bookkeepers is a different matter. It is always a good idea to find out what the people directly affected by a proposed reform would actually like. Tastes and preferences are a great nuisance to policy-makers who think they have found out how to relieve the manpower shortage and the dependency burden at a stroke. The most that can be said is that if old people have enough money to spend their time with their grandchildren or in the park, there is nothing in the Singapore system to stop them from calling it a day at 62 or 60 or even at 55.

11.

Conclusion

On the one hand there is automaticity, gravity, social evolution, kaleidoscopic mutation and the invisible hand. On the other hand there is direction, plan, social engineering, visionary leadership and the philosopher king. In the middle there is social policy. Purposive, open-minded and adaptable, its function is to bridge the gap between freedom from and freedom to. Its task is to bring about a mixed society in which there is a socially acceptable balance between efficiency and equity, economic expediency and moral values. We do not need social policy if the natural order is the better way to put a chicken in every pot: ‘Little else is required to carry a state to the highest degree of affluence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice’ (Adam Smith, quoted in Rae, 1895: 62). Nor do we need social policy if there is not a lot that even the wellintentioned and the well-educated, the omniscient and the beneficent can do to bend back the bent rod: ‘We do not have policies about the weather because, as yet, we are powerless to do anything about the weather’ (Titmuss, 1974: 24). We do, however, need social policy where real-world outcomes are falling short of our reasonable expectations and where we are as confident as human beings can ever be that skilled plumbers will successfully plug the leak. Social policy in an ageing society is no different from social policy anywhere else. There is a problem. The elderly need access to basic amenities such as medical care. They require a decent income if they are to enjoy the necessities and luxuries of life. There is a hands-off solution: it invites the individual and the family to take control of their private and personal destiny. That way lies Medisave and medical insurance, fully funded CPF and discretionary savings, reverse mortgages and later retirement. There is a hands-on solution: it looks to the State to throw money at the market failure. Regulation with support is the world of subsidised wards and CPF top-ups, training grants and the Workfare Supplement, public assistance and the Medifund fall-back. Sensible policy-makers will make use of both sets of policy options. A shovel is selected to dig a trench. A pot is more appropriate to cook a stew. Ideology is not enough to distinguish the shovels from the pots. Sometimes even the wise and the good must use their common sense. 265

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Social policy in ageing Singapore faces the same challenges as does social policy in any other greying nation. There must be sustainable economic growth. There must be adequate support for the needy dependent. The constraints and the instruments are the same. Grants improve access. Taxes raise money. What is different is the mix. Fairness must be mixed with prosperity. Authority must be mixed with exchange. The combinations will not be the same. There is no reason why they should be. Each collectivity must grind out its own mix. All countries must arrive at the combination of good things that best reflects ‘the dominant cultural and political characteristics of their societies’ (ibid.: 22). The case study in this book has examined the road that Singapore has travelled. It has sought to understand the logic behind the decisions that have been made in a young country that, like so many other nations worldwide, is rapidly growing old. The constraints and the instruments are everywhere the same. Social policy in ageing Singapore is nonetheless uniquely itself. Social policy must be seen ‘in the context of a particular set of circumstances, a given society and culture, and a more or less specified period of historical time’ (ibid.: 16). Social policy is local conditions. Singapore starts from here. Its social policies do not follow in the footsteps of British social interventionists such as Tawney, Beveridge, Titmuss, Crosland and T.H. Marshall (Reisman, 2005). Its attitude to social policy is that welfare operates best where it operates through ‘non-state agencies – community, firm and family. . . . Self/mutual help is encouraged and dependence on the state discouraged, indeed stigmatized. . . . East Asian governments are relatively low spenders on social welfare’ (White and Goodman, 1998: 13, 14). White and Goodman say that East Asians prefer the diffuse networks of ‘welfare orientalism’ to the technocratic top-down of the Western central planners. Democracy means that East Asians should have what they want. Welfare spending is not easy to measure. What can be measured are selected components. This chapter singles out health spending. Treating it as a sensitive welfare indicator, it contrasts the balance between public and private in Singapore with the equivalent balance in other countries where mind or matter, basis or superstructure, have pointed to a different path. Section 1 explains that there are three ratios which provide the key. These are the share of health care in the GDP, the share of the State in health care and the share of health care in the national budget. Section 1 shows that in Singapore all three ratios are low by international standards. Singapore has a young population. It has a teach-a-man-to-fish ideology. It has a tradition of ‘welfare orientalism’. The ratios in Singapore are what one might expect.

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Section 2 argues that the future need not be like the present. Matter is in motion. Singaporeans might be satisfied for now with their ‘welfare orientalism’. The old and the ill, however, may force them to think again. Singaporeans look to order, consistency, savings, education and family to raise their standard of living. Singaporeans trust to enterprise, opportunity, mobility, ambition and achievement to reintegrate the deprived. Singaporeans, not without compassion, expect their State to be the provider of last resort when all the normal support mechanisms have failed. What Singaporeans do not want is for their State to be the provider of first, second or even third resort because the feckless are too tightfisted to privatise their responsibilities. Welfare should be the exception. Self-reliance should be the norm. The ethically charged invocation that strangers’ children should ‘pay as you go’ for strangers’ parents evokes few resonances in Singapore save in a minority of university people who discovered statist Fabianism when they were at Nuffield or the London School of Economics. The tradition is the last resort. Yet no tradition can be insured against change; and in Singapore the old and the ill are on the loose. Ramesh, guessing at the long-term future in cautious polities such as Singapore and Hong Kong, is convinced that governments in the end will have to open the flood gates. They will have no choice: ‘Over time, quite probably the city states will resemble the austere Liberal welfare states found in the English-speaking world’ (Ramesh, 2004: 17). Singapore starts from here. Here will not be here for ever. Over time, Ramesh predicts, Singapore will travel upward with history in the direction of austere Liberal welfare that will become the new Singaporean way.

11.1

THE THREE RATIOS

Proportions and not only absolutes give an idea of the significance. They also permit comparisons to be made between countries. Even if ‘best practice’ is notoriously difficult to define, still such comparisons throw light on differences in structural imperatives and social values. They show what can be done. They do not say that one point on the map is better or that another point is crying out for reform. 11.1.1

The Share in the GDP

Health care in 2007 accounted for 3.6 per cent of Singapore’s gross domestic expenditure. The equivalent share in the United States was 15.3 per cent, in Germany 10.7 per cent, in Belgium 10.3 per cent, in Australia 9.5

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% 20.0 15.0 10.0 5.0

Source:

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World Health Organisation (2007a).

Figure 11.1

Share of health care in the GDP

per cent, in the UK 8.3 per cent and in Japan 7.7 per cent (World Health Organisation, 2007a). Even poorer countries such as Burkina Faso (6.0 per cent) or Togo (5.6 per cent) spent percentagewise more than Singapore at 3.6. For a comparable share it is necessary to turn to Azerbaijan (3.8 per cent), Kazakhstan (3.9 per cent) or neighbouring Malaysia (3.5 per cent). The OECD average is currently in the range of 8 to 10 per cent. (See Figure 11.1.) As for the absolute amounts, Figure 11.2 confirms that Singapore was towards the bottom of the league. Total expenditure on health care per capita in Singapore in 2005 was US$983. In the UK it was US$2718, in Australia US$3232, in the United States US$6401. In Malaysia it was US$409. In Madagascar it was US$32 (ibid.) Since health status outcomes are not proportional to health care inputs, too much should not be read into the numbers. It is hard in any case to be precise. Nominal values must be corrected for variations in purchasing power. Cross-country statistics do not necessarily capture an identical bundle of services. Recorded information is seldom if ever comprehensive. The data in Singapore do not include non-Western medical treatments, Singaporeans’ medical expenditures abroad or the services of maids when they feed an old person his pills. It is not clear if the figures include the works clinics that treat foreign workers on the building-sites or in the plants. Yet there is an even more important point about the share. Singapore has invested heavily in public housing, public health, health education, general education, control of infectious diseases, clean drinking water and

Conclusion US$ 7000

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6401

6000 5000 3596

4000

2803

3000 2000

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World Health Organisation (2007a).

Figure 11.2

Total national expenditure per capita on health care

effective sanitation. Full employment and rapid growth have meant rising living standards, arguably the single most important cause of the improvement in health outcomes. As seriously as the share of medical care in the GDP must be taken, it should not be forgotten that nutritious food, good sewers, workplace safety regulations and the eradication of malaria have made a contribution of their own that is not picked up by the statistic on medical inputs alone. 11.1.2

The Share of the State

The first ratio is the share of health in the GDP. The second ratio is the share of the State in health. In 1984 the State budget covered approximately 75 per cent of the cost of health. Singapore had, after all, been a British colony and the mother country had gone NHS. The pattern changed dramatically when the Government introduced the medical savings accounts. Only 34.7 per cent of health care in Singapore is now paid for by the State (World Health Organisation, 2007a). The principal clients are the B2- and the C-class wards. About 65.3 per cent of health care spending is now individual and private. The figure rises to 75 per cent if the data are recalculated to shift mandatory medical savings from the public to the private sector. It is correct to make this adjustment: Medisave balances are legally the account

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Social policy in an ageing society 80.0 % Out of pocket

Percentage

70.0

(Out of pocket + social security)/total expenditure *100

60.0 50.0 40.0

(Govt expenditure– social security)/total expenditure *100

30.0 2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

20.0

Years Source:

Calculated from World Health Organisation, www.who.int/nha/country/sgp/en/.

Figure 11.3

Private and public expenditure on health care, 1996–2005

holder’s own. About 25.9 per cent of what is called government spending on health is in fact an internal transfer from the social security system. This is about the same as in the United States (28 per cent) (World Health Organisation, 2007b). (See Figure 11.3.) In the OECD countries the proportions are reversed. Not 25 per cent or even 35 per cent but as much as 70 per cent of health care spending is public. The figure is 84.6 per cent for Sweden, 87.1 per cent for the UK, 81.1 per cent for Japan, 45.1 per cent for the USA. The percentage of health care that is covered by public spending in Singapore is about the same as in Indonesia (34.7 per cent), Morocco (35.8 per cent) and the Central African Republic (37.7 per cent). It is more than Vietnam (22.6 per cent), more than India (17.6 per cent) and much more than Myanmar (10.6 per cent). Figure 11.4 graphs the relationship between total health expenditure as a percentage of the GDP and the GDP itself per capita. Figure 11.5 plots public health expenditure as a percentage of the GDP against, as before, the GDP per capita. Casual inspection suggests that Singapore falls far below the trend line in both cross-sections. Wealthier countries tend to spend percentagewise more on health. Riches mean more State spending and rags mean less. Singapore in both respects would seem to be the odd man out. Developed status seems not to be the precondition for a high level of State commitment. In Tonga the figure is 79.2 per cent of the total, in Lesotho 83.4 per cent, in Cuba 88.5 per cent (World Health Organisation, 2007a). By the same token most of the East Asian countries are near the line or even

Conclusion

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Total expenditure on health as % of GDP

18.0 United States of America

16.0 14.0 12.0

Switzerland France Australia

10.0 8.0

Brazil

6.0

Japan Republic of Korea

China Laos Malaysia

4.0

Singapore

2.0 0.0 0

10,000

20,000

30,000

40,000

50,000

60,000

GDP per capita (US$)

Source:

World Health Organisation (2007a).

Government expenditure on health as % of GDP

Figure 11.4 Total expenditure on health as a proportion of GDP, 2005

10.00 9.00

France

8.00

United States of America Switzerland

7.00

Australia

6.00

Japan

5.00 4.00 Brazil 3.00

Republic of Korea

Malaysia China

2.00 1.00

Singapore

Laos

0.00 0

10,000

20,000

30,000

40,000

50,000

60,000

GDP per capita (US$)

Source:

World Health Organisation (2007a).

Figure 11.5 Public expenditure on health as a percentage of GDP, 2005

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% 100.0 80.0 60.0 40.0 20.0

si a R us

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0.0

Source: World Health Organisation (2007a).

Figure 11.6 State health care spending as a proportion of the total below it. It is ‘welfare orientalism’ again. East Asians, White and Goodman suggest, have a cultural resistance to public spending on private health. Singapore is at once East Asian and pragmatic. The evidence suggests that it has made a decision to opt for a compromise level. Public spending on health care is low in comparison to Guyana but high in comparison to Afghanistan. At 34.7 per cent, the proportion is the same as the average for the world as a whole (Figure 11.6). Absolute values reinforce the message of the percentages. Sixty-five dollars out of every hundred spent on health care in Singapore comes out of private pockets. Per capita State expenditure on health care in Singapore in 2005 was US$341. In Malaysia it was US$98. In Japan it was US$2272, in Australia US$2307, in the UK US$2668, in the USA US$2884. In Myanmar it was US$0.40 (ibid.). Figure 11.7 compares the respective amounts. In each case it juxtaposes the private payment that individuals had to make. In Singapore the amount was US$642. In Japan it was US$531. In the UK it was US$397. In the USA it was US$3517. 11.1.3

Public Spending

The third ratio is the ratio of public spending on health care to public spending as a whole (Figure 11.8). In 2007 the figure in Singapore was 6.3 per cent. It was less than public spending on defence (25 per cent) or

Conclusion 4000 3500 3000 2500 2000 1500 1000 500 0

273

3517 3043

2884

Public

2272

Private 531

R

us

bw

si

e

R PD o

Zi

La

222 123

11 9

a

4 14

ia

na In d

C

In d

Ja

Sw

hi

ia

n pa

en ed

U SA

re po ga Si n Source:

12 22

m ba

31 48

6 30

es

553

on

642 341

World Health Organisation (2007a).

Figure 11.7

Public and private spending on health care per capita, 2005

% 20.00 15.00 10.00 5.00

Source:

a si us R

bw

e

R

ba

Zi

m

PD o

La

In

do

ne

si

a

na hi C

In

di

a

n pa Ja

en ed

Sw

U SA

Si

ng

ap

or

e

0.00

World Health Organisation, (2007a).

Figure 11.8

The share of health care in the national budget, 2007

education (19 per cent). Public spending on health was 13.6 per cent of total public spending in Sweden, 16.2 per cent in the UK, 18.8 per cent in the USA. Singapore’s percentage is dwarfed by that of Albania (9.3 per cent), Turkmenistan (14.9 per cent) and El Salvador (21.2 per cent) (World Health Organisation, 2007a). The total Government budget in Singapore is itself low by international standards. It is approximately 20 per cent of the GDP. As is illustrated in Figure 11.9, this is half or less than half the proportion in many other countries, both developed and less developed.

274

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% 60.00 50.00 40.00 30.00 20.00 10.00

Source:

World Health Organisation (2007a).

Figure 11.9

11.2

C hi na In do ne si a La o PD R Zi m ba bw e R us si a

In di a

Sw ed en Ja pa n

U SA

Si

ng ap or e

0.00

The share of the national budget in the GDP in 2007

A SHARE IN THE FUTURE

The Singapore of 2030 will be a different place from the Singapore of 1965. The over-65s will increase by 372 per cent between 2000 and 2030. In Japan they will increase by 54 per cent, in Germany by 63 per cent, in China by 170 per cent. By 2050, 38 per cent of all Singaporeans will be 60 years of age or older. The old and the ill will have an itinerary of their own. Their swing votes will turn even safe constituencies into marginal ones. 11.2.1

Intergenerational Conflict

The Communist insurgency in the 1940s and 1950s failed to transform Singapore into a Maoist people’s republic. Revolution, however, need not be at the point of a gun. A militant Pensioners’ Party such as Israel’s Gil or Japan’s Rōjintō can be more successful in shunting the nation into tax and transfer. A strong and well-focused special-interest lobby such as Britain’s Age Concern can be the mother of social services and the father of spend. Political parties and non-governmental organisations can coordinate discontentment and mobilise support. Even without the focus that they provide, votes themselves can bring about change. Votes are effective demand. Citizens who spend votes are buying the policies that they prefer. In Japan in 2005, the 65-plus represented 25.3 per cent of the voting-age

Conclusion

275

population. The percentage is increasing rapidly in a country where by 2010 half the population will be aged over 50. The electoral impact will be even greater than the Census numbers suggest. Voting in Japan (unlike Singapore) is not compulsory. About 83.7 per cent of voters aged 65 and above turn out to vote. Only 43.3 of voters in their 20s actually do so. It is possible that each working person should be given two votes, each retired person only one, in order to correct the bias in the abstention rate. Working people have to go to work. Retired people have a lower opportunity cost. Retired people have the leisure to make a revolution. Working people are too busy earning money for their dependants. Politicians in Japan are themselves not a representative cross-section of the age-groups. The mean age of Japanese Prime Ministers since 1946 has been 63.5 at the time of their appointment. The equivalent mean for Prime Ministers in Singapore has been only 45.5. While political gerontocracy is in keeping with the Japanese tradition of reverence and respect, there must also be a fear that elders will empathise with elders when difficult tradeoffs must be made. In Japan in 2004 public spending on health care for the retired was 12 times more than public spending on child and family allowances (Coulmas, 2007: 97, 101). Conspiracy theorists will be quick to see in this the propter hoc. The State, they will say, is becoming the executive committee of the white-whiskered class. The interests and demands of the old and the ill can cause a radical rupture in the way things are done. Representative democracy can degenerate into grab. That is just the problem. The retired in Singapore need not be any less venal than the rest. In a sense the new venality is inevitable. The legitimacy of the Singapore system has come from its economic success. Rising living standards have validated paternalistic authority. Good pay and good shopping have guaranteed the predictable reelection of seasoned leadership that has reliably brought home the bacon. The elderly, however, may end up on the fringes of that success. For them, individual prosperity may at some stage be bound up not so much with wealth creation per se as with the redistribution, the alienation of the working generation’s surplus value. Thus the retired and the bedridden might demand that they be given more home helps, more domiciliary nursing, more social work support, more day-rehabilitation centres, more senior citizens’ clubs, more old people’s homes. They might call for a national pension plan because their CPF is not enough, for income maintenance because no one wants to live below the median, for index linking because inflation is eating away at their savings. They might say that the public sector should become a third and equal contributor to the CPF scheme because the fully funded bipartism

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of save-as-you-earn is giving them chicken rice without any chicken. They might insist that well-subsidised dementia beds should be provided in the Institute of Mental Health because the family is too busy to care. They might insist that deductibles and cost-sharing should be phased out for the retired. They might insist that the package of reimbursable conditions be made more generous. They might insist that the American system of free Medicare for old people be introduced. Free Medicare would be a fourth ‘M’. It would transform health care into a proper citizen’s wage. The cultural baggage has long been accomplishment and kinship. The old and the ill might be the gravediggers of that ‘welfare orientalism’. They might be the radical vanguard who put paid to the concentric circles of self-help, then family, then clan, then ethnic association, then voluntary organisation, then locality. The basic safety net might not satisfy their aspirations. The old and the ill might become the harbingers of cradle-tothe-grave statism precisely because no other form of Good Samaritanism suits them so well. Older people already have privileges. Off-peak concessions on public transport are on offer to the old. Lifts in underground stations make the platforms more accessible. The Workfare Income Supplement means that employers can offer older people lower pay. Tapered superannuation contributions mean that an older worker costs less. After 2012 there will be a guaranteed job up to age 65. Privileges such as these give the elderly a head start. Putting it the other way round, the non-elderly are being asked to play at a handicap. There might be consensus and there might not be. At some stage the young might complain that even the filial deserve a level playing field. As long as there is full employment the young might not take to the streets. In private, however, they might be giving voice to a certain anxiety. About 40 per cent of young Singaporeans in a small-sample survey expressed negative feelings about the WIS. About 36.7 per cent said they felt threatened by the cut-rate CPF. The young people sampled were neutral (43.3 per cent) or positive (46.7 per cent) towards the economic potential of the elderly. Only 10 per cent said that old people were slower, more rigid, difficult to work with, set in their ways. Most took the view that older people were nicer and less competitive than the young (Soh, 2008). The problem was not the competence but the opportunities. The old when still in work are being given a hand up. The old when finally retired are demanding kindness in kind and cash. Infinite tolerance is not guaranteed. At some stage the black-haired may feel that the white-haired have gone too far. Ubasuteyama may stage a comeback. Ubasuteyama is the ancient Japanese practice of abandoning the old to die of starvation or exposure when there is not enough food to go round. Imamura’s classic film The

Conclusion

277

Ballad of Narayama shows precisely what it meant in those days to be one mouth too many when the harvest was thin. An alternative scenario would, however, be the emergence of an intergenerational coalition. Adult children are already harassed, overworked and sandwiched. It is possible that the vocal greybeards will enjoy the full backing of their middle-aged children when the time comes for a joint effort to shift the burden on to the State. The income elasticity of medical attention is high and rising. The technological revolution is putting up the cost of care. The black-haired and the white-haired might jointly demand that, because the parts cannot pay, therefore the whole must do what is right. The Government is already conceding that by 2030 the share of health care in the domestic product could hit 7 per cent (Ministry of Community Development, Youth and Sports, 2006: 36). This is in line with the calculation of 7.3 per cent made a decade earlier by Low and others (Low et al., 1996). There is no strong disagreement with the prediction of 7 to 8 per cent. In Hong Kong, where the proportion of the over-65s in the total population will rise from 12 per cent in 2007 to 26 per cent in 2030, the range will be broadly the same: from 5.5 to 9.3 per cent. In Hong Kong, the share of public expenditure on health is expected to increase from 3.1 per cent of the GDP in 2007 to 5.3 per cent in 2030. The share of health in the Government’s budget is expected to go from 14.5 per cent to 26.5 per cent. The assumption is made that existing institutions and arrangements will survive without change. It is an unrealistic assumption. In Hong Kong at least, the loss of red ink is already causing a haemorrhage in the system: ‘These percentages will mean cuts into other areas by a wide margin which is not likely to be acceptable to the community. This suggests that Government cannot afford to continue with the present system: it is not going to be sustainable in the future’ (Bauhinia Foundation, 2007: 10, 12, 13). Hong Kong is studying Singapore’s ‘Ms’. It wants to know if Singapore’s package of savings, insurance and relief would be a viable alternative in its own special circumstances. Singapore, meanwhile, is already under pressure to boost the share of health care in the GDP and to increase the contribution that is made by tax-based public funding. The trend scatter and the OECD experience suggest that social democracy might be all but inevitable. A new Singapore might want to nationalise its Confucianism. It might want to make its seamless web fill up its cruse. The State in Singapore is honest and efficient. It has attracted international investment, promoted high-quality education, built well-focused infrastructure. Its track record in areas such as CPF, Medisave and MediShield is a liability as well as an asset. Satisfactory performance will suggest to the wider welfare lobby that the Government can be trusted to intervene still more ambitiously in the field of social policy. The Government

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may not want to be forced down that road. Ironically, however, its wellpublicised successes will inspire confidence. They will strengthen the hand of collectivists who are convinced that family networks and ‘many helping hands’ should give way to social security because even ‘welfare orientalism’ has got to keep up. 11.2.2

Public Finance

There is going to be pressure from the old and the ill. Their hard-pressed family members, unable or unwilling to help, will make common cause. The Government will be expected to match supply to demand. Realistically, it will have to give some ground. It must not, however, promise too much: ‘The avoidance of fiscally unsustainable schemes is politically difficult but crucial’ (Holzmann et al., 2000: 11). It is crucial because public finance is never enough. Rapid economic growth has generated a fiscal dividend. That natural expansion in tax revenues has made possible ambitious public projects while protecting the budget surplus and keeping tax rates low. Growth in the GDP is the principal reason why the ratio of health to the GDP was 4.5 per cent in the 1960s but is only 3.6 per cent today. Singapore is one of the few countries in the world to have experienced a decline in the share at the same time as a rise in the numerator. History suggests that economic adolescence will not last for ever. Slower growth in a mature economy will mean that a rise in welfare spending is not likely to be possible unless the tax rates go up. In a closed economy it might be possible to soak the rich and bash the businesses. In an open economy the strategy is tantamount to killing the golden goose. Tax rates in Singapore must be competitive in order to attract the multinational investment and the mobile talent that create so many jobs, including jobs for the over-62s. Foreign direct investment in Singapore accounts for 71 per cent of net fixed assets, 73 per cent of net value added and 44 per cent of employment opportunities in the manufacturing sector (Abeysinghe and Choy, 2007: 2). High taxes could drive out rootless capital. Corporate income tax is 17 per cent. In Ireland it is 12.5 per cent. In Australia it is 30 per cent. In China it is 25 per cent. The highest rate of personal income tax is 20 per cent. In Hong Kong it is 15 per cent. In Australia and in China it is 45 per cent. In Sweden it is 56 per cent. Globally informed taxation and an incentive to work hard are sine qua non in a small city-State that does not have a natural resource base or a significant domestic market of its own. Direct taxes are disincentives. Indirect taxes, while not popular, are less likely to stifle effort. The GST, introduced at 3 per cent in 1994, was raised

Conclusion

279

to 5 per cent in 2004 and 7 per cent in 2007. Although higher than 5 per cent in Japan and Taiwan, Singapore’s 7 per cent is still comparatively low. The average indirect tax rate world-wide is 15.7 percent. Value-added tax in India is 12.5 per cent. In China it is 17 per cent. In the UK it is 17.5 per cent. In Germany it is 19 per cent. In Sweden, Denmark and Norway it is 25 per cent. In 2008, GST accounted for 15 per cent of Singapore’s total tax take. This was more than personal income tax (14 per cent) but less than company tax (22 per cent). There is room to increase the GST still further. Yet the revenue base is not infinitely elastic. GST is a regressive tax which falls most heavily on the old, the ill and the poor. In contrast to the UK, there is no zero rating in Singapore for basic staples such as food or merit goods such as medical care. GST is levied at the point of sale. When tax rates go up, prices go up too. As for other indirect taxes, Singapore has a long tradition of free trade. Only a few imports (notably alcohol, tobacco, cigarettes, motor vehicles) are subject to customs duties. These duties bring in only 5 per cent of total public revenue. Singapore does not have a capital gains tax. Although such a tax was in use in the 1990s to discourage speculative flipping in an overheated housing market, the public finance that it raised was never enough to justify the transaction costs or the interference with market pricing. What this means is that support to the old and the ill, desirable or not in itself, is subject to a fiscal constraint. No Government can afford to lose sight of fiscal sustainability simply because decency and fairness demand more and more. The national ideology imposes limits of its own. The defence budget could be reallocated to the hospitals – but Singapore is situated in a volatile region. A budget deficit would permit spending out of borrowing – but Singapore is unwilling to make the future pay for the present. Running down the reserves would free up money – but Singapore is reluctant to dissipate national savings that are its buffer against emergencies such as capital flight or a natural disaster. An ideological revolution would generate resourcing without the need for tax. The real question is whether Singaporeans would want to pay the price. The constraints are palpable. Yet public opinion does not always pay attention to the hidden shoals. Shopping is in the air. Singaporeans do not want to lose out merely because they are old and ill. They do not want to be written off merely because they have reached the end of their earning lives. They do not want to be relegated to the back bedroom where no one ever goes. What it all adds up to is choppy waters and future imperfect. The best-case scenario is that sensible leaders will steer a middle course. The

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worst-case scenario is that the old and the ill will cudgel wiser counsels with their walking sticks and have things all their own way. The Hobbesian bellum of children against their parents and parents against their children may yet take the place of the Marxian class struggle of the post-war emergency that in a materialistic society such as Singapore never stood a chance.

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Index Abeysinghe, T. 209, 278 activities of daily life (ADLs) 33, 178, 182 adult mortality 5, 7 adult training 239–41 ADVANTAGE! 253 affluence through growth 85 The Affluent Society (Galbraith) 89 Affordable Health Care (Ministry of Health) 73, 106, 121 age-related macular degeneration (ARMD) 29 ageing society, definition 9 ageism 256–7, 261–2 AIA (American International Assurance) 136, 190 AIDS 133–4 air pollution 77 All Saints (VWO home) 178 altruism 145, 165 Alzheimer’s Disease 29–30, 94–5 America see United States American International Assurance (AIA) 136, 190 annuities 58, 59–63 Asher, M.G. 40, 97, 124–5, 160, 192, 199 Asian financial crisis (1997–98) 49, 149 assets housing 194–203 equity release 197–200 renting 202–3 trading down 200–201 as wealth 195–7 savings 188–94 Australia elderly population 10 elderly suicides 30 health care spending 267, 271 labour, female participation 55 Austria, public health spending 23–4

Aviva 136, 137, 181, 182 AXA 22, 56, 231, 232, 233, 234, 235 Baby Bonus 13–14 The Ballad of Narayama (film) 276–7 Barr, M.D. 9, 32, 134, 155, 162, 163 Bauhinia Foundation 116, 151, 277 Becker, G.S. 243 Belgium, health care spending 267 Blair, S. 125 Borchelt, M. 183 Boseley, S. 67 brain drain 172 Britain see United Kingdom Buchanan, J.M. 112 California Public Employees’ Retirement System (CalPERS) 47–8 Campbell, J.C. 164, 169, 180 cancer 25–6, 73–4, 75 treatment costs 124 Cardarelli, R. 196 caregiver relief 163–4 caregivers 56–7, 170–71, 172–3 casual workers 54, 257 CDAC (Chinese Development Assistance Council) 149 CDCs (Community Development Councils) 70, 147, 251 Central Provident Fund (CPF) 34–9, 70–71, 190 annuities 59–63 contributions 34, 35–6, 38, 43, 54 drawdown age 58 Housing Top-Up Grant Scheme 14 income streams 58–63, 71 interest rates 41–3 Life 59–63, 64, 65, 66, 68, 69, 71 Medisave 101, 110, 111–12, 114–18, 127, 135

295

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average balance 122–3 Contribution Ceiling (MCC) 115–16 contributions 36, 37, 115, 118 and education 154 exclusions 76, 119–22 family transfers 116–17 limits 118–22 Minimum Sum (MMS) 52, 115, 122–3 Required Amount (MRA) 115 and self-employment 55, 101 top-ups 117–18 withdrawals 124–5 as microeconomic tool 35 Minimum Sum 39, 50–58, 60, 62, 64, 194 adequacy 71 median balance 51–4 and retirement age 234–7 modifications and extensions 63–70 choice 63–5 CPF without Life 67–70 inflation 65–6 redistribution 66–7 Ordinary Account 36, 37, 39–42, 46, 115 portfolio flexibility 47–50 refund options 60–62, 64–5 Retirement Account 39, 50, 53, 58, 59, 60, 61–2, 70 sovereign wealth funds and reserves 43–7 Special Account 36, 37, 41, 42 superannuation accounts 39–41 tax relief on contributions 36–7 top-ups 168 without CPF 54–8 Central Provident Fund Investment Scheme (CPFIS) 40, 46, 48, 196 Chan, A. 72, 175, 178 Chan, D. 166, 174 Chan, K.Y. 72, 167 Changi General Hospital 104 charities 70, 104, 145, 149–50, 178 Chen, G. 94 Chia, N.C. 25, 41, 71, 199, 200 child tax relief 14 childcare 15 Children Development Account 14

China dependency 20 elderly population 10, 11, 17 fertility rate 12 health care spending 268, 269, 271–2, 273 health indicators 5, 6, 7, 8 medical savings accounts (MSAs) 115, 151 Chinese Development Assistance Council (CDAC) 149 cholesterol, high 29, 75 Choy, K.M. 209, 278 chronic conditions 25–9, 73–4 Chua, M.H. 80 Cichon, M. 23 class 85–6 ComCare 147–9 ComCare Home Ownership plus Housing (HOPE) scheme 148–9 Comfort Keepers 177 Community Care Endowment Fund 147 Community Chest 150 Community Development Councils (CDCs) 70, 147, 251 Community Health Screening Programme 76 community hospitals 104, 178 company-based health insurance 138–9, 255–6 competition in health care 95–6 Confucius 154–5 contract employment 54, 254 Coulmas, F. 169, 170, 213, 275 CPF (Central Provident Fund) 34–9, 70–71, 190 annuities 59–63 contributions 34, 35–6, 38, 43, 54 drawdown age 58 Housing Top-Up Grant Scheme 14 income streams 58–63, 71 interest rates 41–3 Life 59–63, 64, 65, 66, 68, 69, 71 Medisave 101, 110, 111–12, 114–18, 127, 135 average balance 122–3 Contribution Ceiling (MCC) 115–16 contributions 36, 37, 115, 118

Index and education 154 exclusions 76, 119–22 family transfers 116–17 limits 118–22 Minimum Sum (MMS) 52, 115, 122–3 Required Amount (MRA) 115 and self-employment 55, 101 top-ups 117–18 withdrawals 124–5 as microeconomic tool 35 Minimum Sum 39, 50–58, 60, 62, 64, 194 adequacy 71 median balance 51–4 and retirement age 234–7 modifications and extensions 63–70 choice 63–5 CPF without Life 67–70 inflation 65–6 redistribution 66–7 Ordinary Account 36, 37, 39–42, 46, 115 portfolio flexibility 47–50 refund options 60–62, 64–5 Retirement Account 39, 50, 53, 58, 59, 60, 61–2, 70 sovereign wealth funds and reserves 43–7 Special Account 36, 37, 41, 42 superannuation accounts 39–41 tax relief on contributions 36–7 top-ups 168 without CPF 54–8 CPF Life 59–63, 64, 65, 66, 68, 69, 71 CPFIS (CPF Investment Scheme) 40, 46, 48, 196 day surgery 119 death, causes of 25–9 dementia 29–30, 173, 178 demographic changes 9–22 dependency 16–20 elderly population 10–11 fertility rate 12–16 migration 19–22 Denmark elderly living with children 175 fertility rate 15

297

health care spending 23–4 IVF 14 dentistry 94 dependency 16–20 depression 30–31 diabetes 29 disability 33 discretionary savings 190–94 discrimination 256–7, 262 disease prevention 73–8 divorce 57, 172 DJI (Dow Jones Industrial Average) 49 doctors 6–9, 96, 99, 102, 138, 156 fees 95–6 Dong, W.Z. 151, 152, 159 Dow Jones Industrial Average (DJI) 49 early retirement 213, 219, 235 earnings 55–6, 244 and age 245–7 occupational groups 247–8 qualifications 248–50 East Asia, fertility rates 15 East Shore Residence 178 ECB (Employment Continuation Benefit) 258–9 economic growth 1–2, 21, 89–92, 278 Economic Restructuring Shares 146 economically inactive people 21–2, 56, 207, 219 education 85, 87, 89, 154, 237–9 and employment 241–2 and health 76–7 and women 220 Eldercare Fund 179 elderly population 10–11 ElderShield 135, 162, 181–6 emigration 172 employment and education 241–2 employment rate 222–5 foreign labour 207–11 full employment 204–7 older workers 226–7 participation rate 215–22 female 16, 55, 219–20 older workers 216–17, 218 younger workers 217 productivity 214–18 services sector 227

298

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employment-based health insurance 138–9, 255–6 Employment Continuation Benefit (ECB) 258–9 epidemics 76 equity release 197–200 Estate Duty 111 ethnic groups 1, 210–11 Eurasian Association 149 European Union dependency 18 foreign labour 209 lifelong learning 241 population decline 211 replacement migration 212 exercise 74–5 fairness of financing in health care 5 family 162–3 caregivers 172–3 consensus 165–6 financial support 145, 167–9 Japanese experience 169–71 reciprocity 163–5 three-generation household 164–5, 172, 175, 177 welfare 163–9 family planning 12–13 FDWL (Foreign Domestic Worker Levy) 14, 187 Feldstein, M.S. 108 females CPF membership 55–8 earnings 55–6 economically inactive 22, 56–7, 132, 219 education 220 financial support 168 labour participation rate 16, 219–20 MediShield cover 132 smokers 74 working mothers 14–15, 56 feminisation of poverty 56–8 fertility rate 12–16 filial piety 164, 165–6 financial support from adult children 167–9 Finland fertility rate 15 health care spending 23–4

food standards 77 foreign direct investment 278 Foreign Domestic Worker Levy (FDWL) 14, 187 foreign labour 19–20, 207–11, 254 foreign patients 104–5 formal schooling 237–9 France employment rate 224 health indicators 5–6 unemployment 213–14 Friedman, M. 262 Fuchs, V.R. 93 functional disability 33 Galbraith, J.K. 89–90, 91–2 General Household Survey 108, 175–6, 225 general practitioners 9, 95, 99, 102, 138 geriatric medicine 9 Germany health care spending 23–4, 267 labour force 207, 208, 218–19 long-term care insurance 180–81 public pension spending 233 Giannakouris, K. 18 GIC (Government of Singapore Investment Corporation) 43–4, 48, 49 Giddens, A. 229 Gleckman, H. 187 Gobat, J. 196 GOF (Guidelines on Fees) 95 Goh Chok Tong 111 Goodman, R. 145, 159, 266, 272 Goods and Services Tax (GST) 81, 108, 278–9 Government bonds 40, 41, 42, 43 Government of Singapore Investment Corporation (GIC) 43–4, 48, 49 Graduate Medical School 7–8 Grandparent Caregiver Tax Relief 14 Great Eastern Life 136, 137, 181, 182 growing old, cost of 22–33 Growth Dividend 146 GST (Goods and Services Tax) 81, 108, 278–9 Guidelines on Fees (GOF) 95

Index Ham, C. 81, 151 Hang Seng Index 48–9 Hanvoravongchai, Piya 101, 116, 125 Hashmi, A.R. 215 Hateley, L. 70–71 HDB (Housing and Development Board) 77, 146, 199 health care affordable access 78–81, 93–5, 124 basic provision 79, 80–81 competition 95–6 cost 22, 25–32 other countries 22–5 cost containment 96–100, 108 delivery private sector 101, 102, 104–6 public sector 101–2, 103–4 expenditure 22–32 funding share in GDP 267–9 share of public spending 272–3 share of the State 269–72 income inequality 92–5 means-testing 106, 107, 108–9, 111, 135, 141–5 payment for see medical savings accounts (MSAs); Medifund; Medisave; MediShield personal responsibility 78 prevention 73–8 promotion 73–8 subsidies for beds 106–9 for patients 109–11 health indicators and inputs 5–9 adult mortality 5, 7 fairness of financing 5 health professionals 6–9 healthy life expectancy at birth 5, 7 hospital beds 5–6, 8 infant mortality rate 5, 6 life expectancy 5, 6, 7 health insurance 114, 135–9, 255–6 health maintenance organisations (HMOs) 138 health professionals 6–9, 99 health promotion 73–8 Health Promotion Board 73 health screening 76 healthy eating 75

299

healthy life expectancy at birth 5, 7 heart attacks 75 heart disease 26, 132 Heart Foundation 94 heart surgery 103, 104–5, 124 Hedrick-Wong, Y.W. 174, 188, 244 Heller, P.S. 22 Heston, A. 1 high cholesterol 75 hip fractures 29 HIV/AIDS 133–4 HMOs (health maintenance organisations) 138 Ho, K.W. 85 Holzmann, R. 70–71, 278 home ownership 40, 66, 109, 143, 194, 195, 196–7 HOPE scheme 148–9 homes/nursing homes 177–9, 185–6 Hong Kong death, causes of 74–5 dependency 17–18 elderly population 10 employment rate 224 health care 112 health care spending 277 labour, female participation 55 medical savings accounts (MSAs) 151 private hospitals 104 Hong Kong and Shanghai Bank (HSBC) 166, 190, 230, 231, 232–3, 243, 263 HOPE scheme 148–9 hospitals 102, 103–6 admission rates 32 bed numbers 5–6, 8 bed occupancy rate 103–4 community hospitals 104, 178 length of stay 31–2, 102 private hospitals 104–6 house purchase 40, 46, 52–3, 141 household expenditure 72, 100 health care 25, 28, 100 Household Expenditure Survey 25, 82, 83, 93, 94, 108 household income 72, 82–4, 86–9, 92, 93, 108–9 and hospital services 109–10 and welfare 146, 148

300

Social policy in an ageing society

housing 77, 194–203 equity release 197–200 Lease Buyback 199 renting 146–7, 202–3 reverse mortgages 199–200 trading down 200–201 as wealth 195–7 Housing and Development Board (HDB) 77, 146, 199 Housing Top-Up Grant Scheme 14 Hsaio, W.C. 100, 115, 134 HSBC 166, 190, 230, 231, 232–3, 243, 263 Hui, W.T. 215 hypertension 29 Iacovou, M. 175 Ikegami, N. 32, 164, 169, 180 IMH (Institute of Mental Health) 140 immigration 21, 210 immunisation 76 in vitro fertilisation (IVF) 14 income inequality 81–4, 86, 89–90 and health care 92–5 income tax 81 incomers 208 IncomeShield 128, 135, 136 India dependency 20 elderly population 10, 11 fertility rate 12 health care spending 268, 269, 272, 273 health indicators 5, 6, 7, 8 Indonesia dependency 20 elderly population 11 fertility rate 12 health care spending 268, 269, 270, 272, 273 health indicators 5, 6, 7, 8 industrial action 84 industrial and occupational health 78 inequality 81–5, 86, 89–92 and health care 92–5 infant mortality rate 5, 6 inflation 65–6, 97, 153 Institute of Mental Health (IMH) 140 Insurance Experiment Group 99 insurance for care 179–80

ElderShield 181–6 long-term care insurance (LTCI) 180–81, 186 Integrated Screening Programme 76 intergenerational coalition 277–8 intergenerational conflict 274–7 intergenerational support 145, 165, 199–200 investments 43–4, 45–50 Italy elderly living with children 175 fertility rate 12 IVF 14 Jackson, W.A. 244 Japan assets 170 carers 170–71 dementia 30 dependency 16–17, 18, 19, 20 elderly living with children 170, 175 elderly population 10, 11, 17, 171 Employment Continuation Benefit (ECB) 258–9 employment participation rate 221 employment rate 223, 224 family 169–71 fertility rate 12, 15 foreign labour 208 health care spending 23, 25, 268, 269, 270, 271–2, 273, 275 health indicators 5, 6, 7, 8 hospital inpatients 32, 102–3 house prices 201 Long-Term Care Insurance Scheme 169, 180–81 personal savings 190 population 211–12 replacement migration 213 Silver Human Resources Centres 251 smoking trends 74 State pensions 38, 59, 167 job redesign 252, 253 job status 252 joint singles rental scheme 147 Kavenagh, S. 22 Khaw, B.W. 63, 80, 108, 160 Korea Employment Promotion Law 256

Index health expenditure for old people 22 hospitals 104 replacement migration 212–13 Kutty, N. 197 Kwok, A. 191 labour force 204 employment rate 222–5 foreign labour 207–11 full employment 204–7 participation rate 215–22 female 16, 55, 219–20 older workers 216–17, 218 younger workers 217 productivity 214–15 replacement migration 211–14 shortage 20, 21, 204, 206–7 see also older workers Lam, T.H. 75 Laos dependency 19, 20 elderly population 11 fertility rate 12 health care spending 268, 269, 271–2, 273 health indicators 5, 6, 7, 8 laws for older workers 256–61 reemployment law 259–61 Workfare Income Supplement (WIS) 257–8, 259 Lazear, E. 229 Lease Buyback scheme 199 Lee, E. 190 Lee, E.M. 103, 110 Lee, J. 196 Lee, K.Y. 2, 21, 85, 90–91, 162, 172, 194–5, 236 Lee, W.L. 95, 96 Leong, S.H. 185 Lewis, W.A. 205 Life (CPF Life) 59–63, 64, 65, 66, 68, 69, 71 life expectancy 5, 6, 7, 17, 58 lifelong learning 241 Lim, J. 122, 123 Lim, K.L. 70 Lim, M.K. 97, 125, 161 Lim, P.S. 33 Lin, K. 236 literacy rate 87

301

long-term care insurance (LTCI) 180–81, 186 longevity and social origin correlation 66–7 Longevity Committee 59, 60, 62, 69 Low, A. 87 Low, L. 277 LTCI (long-term care insurance) 180–81, 186 MacArthur, I.W. 70 MacKellar, L. 23, 171 macroeconomic stability 152–3 maid culture 186–7 Maintenance of Parents Act 165 Malaysia elderly population 10 smoking 74 malnutrition 75 Managed Health System (MHS) 138 Manpower Inc. 231 manpower shortfall 20–21, 204–15 foreign labour 207–11 full employment 204–7 productivity 214–15 replacement migration 211–14 marriage 16, 173–4 maternity leave 14 Matisonn, S. 151, 152 Matsukura, R. 170 MCC (Medisave Contribution Ceiling) 115–16 McCarthy, D. 17, 196 means-testing 106, 107, 108–9, 111, 135, 141–5, 178–9 medical care see health care medical professionals 6–9 medical savings accounts (MSAs) 80–81, 101, 116, 118, 150–51 preconditions 150–60 ability to pay 151–2 administrative competence 155–6 education 154 goal attainment 156–7 insurance complement 157 low inflation 153 macroeconomic stability 152–3 political leadership 154–5 safety net 158 social values 158–60

302

Social policy in an ageing society

see also Medifund; Medisave; MediShield medical schools 7–8 medical tourism 104–5 Medifund 3, 79, 125, 139–41 means-testing 141–5 Medifund Silver 140 Medisave 101, 110, 111–12, 114–18, 127, 135 average balance 122–3 Contribution Ceiling (MCC) 115–16 contributions 36, 37, 115, 118 and education 154 exclusions 76, 119–22 family transfers 116–17 limits 118–22 Minimum Sum (MMS) 52, 115, 122–3 Required Amount (MRA) 115 and self-employment 55, 101 top-ups 117–18 withdrawals 124–5 Medisave Contribution Ceiling (MCC) 115–16 Medisave Minimum Sum (MMS) 52, 115, 122–3 Medisave Required Amount (MRA) 115 MediShield 123, 125, 126–39 children’s cover 132 exclusions and restrictions 132, 133–5 national pool 127–30 people without cover 130–32 premiums 129, 130 private sector 135–9 MediShield Plus 135 Mehta, K.K. 173 MHS (Managed Health System) 138 migration 19–22 Minimum Sum 39, 42, 50–58, 60, 62, 64, 194 adequacy 71 median balance 51–4 and retirement age 234–7 Ministry of Health 76 MMS (Medisave Minimum Sum) 52, 115, 122–3 Monetary Authority of Singapore 44, 135, 152

MRA (Medisave Required Amount) 115 MSAs (medical savings accounts) 80–81, 101, 116, 118, 150–51 preconditions 150–60 ability to pay 151–2 administrative competence 155–6 education 154 goal attainment 156–7 insurance complement 157 low inflation 153 macroeconomic stability 152–3 political leadership 154–5 safety net 158 social values 158–60 see also Medifund; Medisave; MediShield Mullan, P. 22, 32, 39, 214–15 Nandy, A. 97, 124–5, 160 Nanyang Technological University 8, 72, 120, 167 National Child Immunisation Programme 76 National Council of Social Services (NCSS) 149, 150 National Health Survey 74, 94 National Healthcare Group (NHG) 103 National Healthy Lifestyle Programme 73 National Kidney Foundation 149–50 National Longevity Insurance Committee 59, 60, 62, 69 National Smoking Control Programme 74 National Survey of Senior Citizens 29, 31, 72, 116, 117, 166, 167, 168, 174, 176, 195–6, 232, 233–4, 246 National Trades Union Congress (NTUC) 78 NCSS (National Council of Social Services) 140, 150 Nelson, R.R. 243 Net Investment Income (NNI) 45 Net Investment Returns (NIR) 45 Netherlands elderly living with children 175 health care spending 23, 24 Newhouse, J.P. 99

Index Ng, E.H. 17, 40, 51, 53, 194, 259 Ng, G. 52 Ng, T.P. 33 NHG (National Healthcare Group) 103 NIR (Net Investment Returns) 45 NNI (Net Investment Income) 45 NTUC 78 NTUC Income 135, 136, 138, 181, 197–8 nurses 6–7 nursing homes 108, 177–9, 185–6 obesity 75, 76–7 OCBC (Overseas Chinese Banking Corporation) 191, 197, 198 occupational health insurance 138–9, 255–6 occupational mobility 243–4 occupational training 239–41 OECD countries dependency 19 health care spending 22, 270 inflation 153 Ogawa, N. 17, 38, 74, 169, 170, 171, 213, 229 old-dependency ratio 17–18, 19, 20 Older Worker Database 251 older workers 226–7 laws 256–61 reemployment law 259–61 Workfare Income Supplement (WIS) 257–8, 259 obstacles to employment 255–6 participation rate 216–17, 218 pay 244, 245–7 occupational groups 247–8 qualifications 248–50 productivity 244–5 retirement age 228–34 mandatory transition 228–30 and Minimum Sum 234–7 old age, view of 230–34 training and retraining 237 adult training 239–41 countervailing credentials 242–4 education and employment 241–2 formal schooling 237–9 occupational training 239–41 work reappraisal 250–56

303

job redesign 252, 253 part-time work 253–4 Olsen, E. 68 Ong, K.M. 45, 46 Ordinary Account 36, 37, 39–42, 46, 115 Oregon, health care 80 outpatient care 119, 120 Overseas Chinese Banking Corporation (OCBC) 191, 197, 198 Ow, L.S. 33 owner-occupiers 66, 109, 143, 194, 195, 196, 197 parent relief 164 parental leave 15 Parenthood Tax Rebate 14 Parkway Group Healthcare 104, 105 part-time workers 54, 253–4 paternity leave 16 Pauly, M.V. 81 pay 55–6, 244 and age 245–7 occupational groups 247–8 qualifications 248–50 pay-as-you-go (PAYGO) 34–5, 38 Peh, S.H. 236 People’s Action Party 84 Permanent Residents 20, 21, 175 ComCare ineligibility 149 ElderShield 181 equity release 198 MediShield 127, 130, 132 patient subsidies 109 and unemployment 210 personal responsibility 45, 100, 159 health care 78 Phan, M. 246 Phua, K.H. 150 physical activity 74–5 placement agencies 251 PMBS (Portable Medical Benefits Scheme) 256 PMIS (Private Medical Insurance Scheme) 135, 136 political leadership 154–5 population 1, 20 Portable Medical Benefits Scheme (PMBS) 256

304

Social policy in an ageing society

poverty 58, 68, 91 feminisation of 56–8 private health insurance 114, 135–9, 255–6 private health sector 102, 104 private hospitals 104–6 Private Integrated Plans (PIPs) 135, 136 productivity 214–15, 244–5 property prices 195 Provident Fund see Central Provident Fund (CPF) Prskawetz, A. 245 Prudential Assurance 136, 137 psychological problems 31 public assistance 147–8 public finance 278–80 public health sector 102, 104 public hospitals 103 see also hospitals public pension spending 233 public-sector housing 146–7 Quah, S.R. 263 Rae, J. 265 Raffles Hospital 104, 105 Raffles Medical Group 104 Ramesh, M. 41, 148, 267 Rashiwala, K. 201 reciprocity 163–5 recruitment of older workers 231 reemployment law 259–61 Reisman, D.A. 40, 66–7, 79, 107, 113, 196, 266 Ren Ci community hospital 178 renting 202–3 replacement migration 211–14 residential care 71, 177–9 respiratory diseases 25–6 Retirement Account 39, 50, 53, 58, 59, 60, 61–2, 70 retirement age mandatory transition 228–30 and Minimum Sum 234–7 view of old age 230–34 Retirement Age Act 246 retirement, standard of life 70–71 retraining adult training 239–41

education and employment 241–2 occupational training 239–41 reverse mortgages 197, 199–200 road deaths 31 Russia dependency 20 elderly population 11 fertility rate 12 health care spending 268, 269, 272, 273 health indicators 6, 7, 8 S-Team Switchgear 252 Sakellariou, C. 87 salary 55–6, 244 and age 245–7 occupational groups 247–8 qualifications 248–50 sandwiched caregivers 172–3 sanitation 77 Sartre, J.-P. 151 savings 188–94 Schmidt, V. 118 SDHF (Singapore Dental Health Foundation) 94 self-employment 250–51 and CPF 54–5 and Medisave 55, 101 MediShield 127 Workfare Income Supplement 257 sequential responsibility 162 services sector 227 Shortt, S.E.D. 125 Siew, K.H. 157 Sin, Y. 70 Singapore 1–2 Singapore Dental Health Foundation (SDHF) 94 Singapore General Hospital 102, 103, 140 Singapore Government bonds 40, 41, 42, 43 Singapore Health Services (Singhealth) 103 Singapore Indian Development Association (SINDA) 149 Singapore Medical Association, Guidelines on Fees (GOF) 95 Singapore Medical Council 76 Singapore Medical Journal 93

Index Singapore National Employers’ Federation (SNEF) 78, 253 Singapore Shares 146 single-pensioner household 175, 176 single-person household 175 singlehood 173, 174 Smith, Adam 265 smoking control programmes 74 SNEF (Singapore National Employers’ Federation) 78, 253 social class 85–6 social exclusion 91 social-funded health care insurance 112–14 social networks 203 social origin and longevity correlation 66–7 social policy 265–6 social services 150 social values 158–60, 166 Soh, N.E. Christabelle 72, 232, 276 South Africa, medical savings accounts (MSAs) 150–51 South Korea elderly population 10 employment rate 224 fertility rate 15 sovereign wealth funds (SWFs) 43–7 Spain elderly living with children 175 elderly population 10 smoking trends 74 Special Account 36, 37, 41, 42 SRS (Supplementary Retirement Scheme) 192–4 State pensions 34–5, 38, 57, 59, 233 State welfare 86, 146–9 Steinhagen-Thiessen, E. 183 sterilisation 13 ‘Stop at Two’ policy 12, 13 Straits Times Index (STI) 49–50 suicide 30, 31, 173 Supplementary Retirement Scheme (SRS) 192–4 Sweden dependency 19, 20 elderly population 11, 17 employment rate 224 fertility rate 12, 15

305

health care spending 268, 269, 270, 272, 273 health indicators 5, 6, 7, 8 parental leave 15 smoking trends 74 SWFs (sovereign wealth funds) 43–7 Taiwan elderly living with children 175 fertility rate 15 hospitals 104 Tan, D.W. 83, 237 Tan, E.S. 86, 145, 172 Tan, G. 70–71 Tan, H.L. 30 Tan, J. 94, 121 Tan, K.C. 190 Tan, K.L. 196 Tan, L. 48 Tan, L.L. 110, 125 Tan Tock Seng 102, 140 Tawney, R.H. 4 tax-funded health care 112 tax relief 14, 36–7 taxation 278–9 Goods and Services Tax (GST) 81, 108, 278–9 income tax 81 taxidrivers and Medisave 55 Tay, B.N. 32, 206 Taylor, R. 125 TCM (traditional Chinese medicine) 120, 137 Teece, D.J. 242 telecommuting 255 Temasek Holdings 43, 44, 48, 49 Teo, D. 129, 130 Teo, P. 52, 165, 168, 176, 186, 220, 232 tertiary education 40, 238 Tetra Pak Asia 252 Thailand, subsidised health card programme 140 three-generation household 164–5, 172, 175, 177 Titmuss, R.M. 4, 79, 144, 265 trading down 200–201 traditional Chinese medicine (TCM) 120, 137 traditional values 158–60, 166 training/retraining 237–44

306

Social policy in an ageing society

adult training 239–41 countervailing credentials 242–4 education and employment 241–2 formal schooling 237–9 occupational training 239–41 Tran, P.N. 33 transparency 156–7 Tripartite Committee on the Employability of Older Workers 250 Tsui, A.K.C. 41, 71, 200 Tucci, J. 125 Turner, B.S. 102 underemployment 254 unemployment 205, 206 unhealthy eating 75 United Kingdom Alzheimer’s Disease 94–5 caregiver allowance 179 dependency 19 elderly population 10, 17 fertility rate 12, 15 foreign labour 208–10 health care spending 22, 268, 270, 273 health indicators 5, 6 IVF 14 longevity and social origin correlation 66–7 migrants 209 National Health Service 79, 94–5, 113, 186 obesity 77 personal assets 188, 190 population growth 20–21 smoking rates 74 State pensions 57, 59, 233 United Overseas Bank 252–3 United States California Public Employees’ Retirement System (CalPERS) 47–8 dementia 30 dependency 19, 20 elderly population 10, 11, 17 elderly suicides 30 employment rate 223–4 fertility rate 12 geriatricians 9

health care spending 267, 268, 269, 270, 271–2, 273 health indicators 5, 6, 7, 8 health insurance 114 home ownership 196 labour, female participation 55 labour participation rates 221 medical savings accounts (MSAs) 151 Oregon, health care 80 personal savings 190 public pension spending 233 smoking rates 74 university education 238 Van Ewijk, C. 24 voluntary sector 149–50 voluntary welfare organisations (VWOs) 150, 178 VWO homes 178–9 wages 55–6, 244 and age 245–7 occupational groups 247–8 qualifications 248–50 Walter, N. 208, 219 Wang, Q. 94 welfare 145–9 welfare orientalism 266, 276 White, G. 145, 159, 266, 272 widows 57–8, 176 Winter, S.G. 243 WIS (Workfare Income Supplement) 35, 57, 137, 146, 257–8, 259, 276 women CPF membership 55–8 earnings 55–6 economically inactive 22, 56–7, 132, 219 education 220 financial support 168 labour participation rate 16, 219–20 MediShield cover 132 smokers 74 working mothers 14–15, 56 Wong, H. 184 Woodman, J. 105 work permits 210, 254 Workfare Income Supplement (WIS) 35, 57, 137, 146, 257–8, 259, 276

Index working mothers 14–15, 56 Working Mother’s Child Relief 14 Workplace Health Promotion Programme 78 World Health Organisation 5, 76, 232 Yadav, S.S. 33 Yap, L.K.P. 178 Yap, M.T. 17, 72, 178 Yayasan Mendaki 149 Yeoh, L.K. 82, 83, 91, 92, 258

307

Yip, P.S.L. 190 young-dependency ratio 18 Yusen Air and Sea Service 252 Zimbabwe dependency 20 elderly population 11 fertility rate 12 health care spending 268, 269, 272, 273 health indicators 6, 7, 8