Singapore’s ageing dilemma

Poverty increasing under PAP’s economic strategy
AHDS Greenway
22 Feb 07

Singapore has been energetic and resourceful in managing globalisation. But like many other countries it is also faced with difficult policy choices as the rich-poor divide has become a serious political issue. Between 2000 and 2005, the real wages of the bottom 40 per cent of households declined. Unless this gap and sense of insecurity is managed with sensitivity, there is potential for undermining Singapore’s current social and political arrangements.

Singapore’s globalisation strategy is based on high growth, encouraging a large number of foreigners to work and settle here, and minimal social safety nets. Singapore’s 2007 budget presented last week reaffirms the government’s determination to continue the current strategy.

Singapore has experienced below-replacement fertility since 1975. For a stable population, the mean number of children per woman must be 2.15. But in 2005, its fertility rate was only 1.25. If the rate stays below 1.5 for several years, it will be difficult to increase it significantly through public policies.

The long period of low fertility, combined with increasing life expectancy, will make for a rapidly ageing society. By 2030, more than one out of four persons in Singapore will be elderly ie above 65.

There will be only 2.2 workers to support each elderly person, compared to 10 workers in 2000. In spite of the rapid increase in the elderly population, the government has relied primarily on the mandatory savings system to finance pensions and health care. Studies have shown that this system, administered by the Central Provident Fund (CPF), is likely to provide 15-25 per cent of pre-retirement income. This is far lower than the two-thirds to three-fourths recommended by experts.

In Japan, Korea and Taiwan, a contested political space and higher priority for social issues have brought multi-tier pension and health care systems, with an important role for social risk-pooling arrangements. No such progress is evident in Singapore. So, the current arrangements, which place a disproportionate burden on individuals, will be felt after the full impact of ageing around 2010.

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About soci
Lived in Singapore for 6 wonderful years and has been blogging since 2003, under various names but always on Singaporean issues.

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