All projections into the future depend on assumptions. The same is true of the Population White Paper just released. It is one that has provoked a huge outcry with its estimate that Singapore will have as many as 6.9 million on this island by 2030, just 17 years away.
However, among the many assumptions used, one stood out to my eyes. It is there in the executive summary, speaking of getting “3% to 5% Gross Domestic Product (GDP) growth on average” between now and 2020, and 2% to 3% thereafter. Strictly speaking, these were not assumptions. They were arbitrarily laid down targets, but once laid down, they effectively determined the result — which is that population has to rise to as many as 6.9 million.
We can see the problem straight away: why is GDP growth rate the driver of any population policy?
In what way did this target drive the conclusions? It’s like this: GDP growth comes from two broad elements: productivity growth and an increase in labour force. That is: existing hands creating more output by working more efficiently and productively, plus more hands coming on deck.
It is a known fact that over the longish term, productivity growth rarely exceeds 2 percent per annum. Especially for a developed economy, even 2% might be a struggle; it could be 1%. Hence, if the laid-down target is 3 – 5% GDP growth, inescapably it must mean more hands on deck.
The choice Singaporeans should be asked to consider is this: Do we prefer to have a more slowly-growing economy (1 to 2 % a year) with no further increase in population or do we prefer a faster-growing one with more foreigners in our midst? The White Paper does not give Singaporeans this choice.
Ageing, shrinking citizen workforce
That said, it isn’t as straightforward as that. The existing trends with respect to the native citizen population (a term that I am using to mean those who are citizens as at end 2012 and their future children) present additional complications.
Because our total fertility rate has been below replacement level for the past 30 years, the numbers in the younger generation are fewer than in the older generation. Thus, between now and 2030, about 900,000 older citizens will be expected to leave the working age range (roughly age 25 to 65), but a smaller number of younger ones will be entering it. For some strange reason, the White Paper does not provide any figure with respect to the deficit, but from looking at the diagram provided, my rough guess is that about 700,000 to 800,000 younger citizens will enter the working age range in the same period. This implies that the citizen workforce will shrink by about 100,000 to 200,000 by 2030 — one must also make allowance for people who are in the working age range, but choose not to be in the workforce.
This short video describes a similar problem faced by Germany:
How many citizens are there in Singapore’s workforce currently? I can’t find the latest figure, but here are the figures for mid-2010:
There were 1,712,600 Singapore citizens in the labour force in June 2010, making up the majority or 58.3% of the labour force (excluding foreign domestic workers). Permanent residents and non-residents formed the rest of the labour force at 11.4% and 30.3% respectively.
– Dept of Statistics
http://www.singstat.gov.sg/pubn/papers/people/op-s17.pdf, page 2.
With only about 1.8 million citizens in the workforce currently, a reduction of 100,000 to 200,000 by 2030 is significant. It represents around 10% decrease, counteracting any productivity gains we may obtain along the way.
In other words, if we relied only on productivity improvements to grow our economy, and no further new citizens nor increases in permanent resident and foreigner numbers here, we’d probably see GDP growth settle around 0.5% to 1% per annum between now and 2030.
Is this acceptable to Singaporeans?
Bear in mind that total population might not fall despite this reduction in workforce. This is because retirees aren’t going to die anytime soon. With extended lifespans, they will still be around.
Alternatively, we could say let’s take in a few more people as new citizens to make up the native citizen shortfall in the ageing workforce. This means we will need 100,000 to 200,000 new citizens in the workforce, which in turn means naturalising 200,000 to 300,000 new citizens between now and 2030, or about 15,000 to 20,000 a year (here again, we need to make the allowance that not all new citizens will join the workforce).
The overall effect would be to permit a gradually increasing total population, reaching perhaps 5.5 or 5.6 million by 2030.
Is this acceptable?
Cap on foreigners?
The above two scenarios are going to cause a lot of pain to businesses which expect to grow by increasing their employee numbers. Where hitherto they might have relied on being able to bring in more foreigners, the two scenarios will impose a rigid cap on them — exactly as existing numbers are: about 1.5 million foreigners, of which about
- 1.0 million working (other than domestic work)
- 0.2 million in domestic work
- 0.3 million dependants and students
On the one hand, some of us may think such a rigid cap is too drastic and too disruptive to our economy. On the other hand, some may think that it is precisely this kind of shock therapy that is needed to drive productivity improvement. There is no way to answer this question without actually trying one route or the other.
Total Fertility Rate
The problem that must be confronted is that of the total fertility rate (TFR). It is currently 1.2, a figure that means that each woman is likely to bear 1.2 children. For a population to replace itself, a TFR of 2.1 is needed. The White Paper tell us that roughly 20% do not ever get married, another 20% get married but have either zero or just one child, and about 60% have two or more children (mostly just two). This pattern does account for a TFR of 1.2
This level of TFR is a very serious demographic problem, for it means that our citizen population will decline by 40% within a generation.
We’ve been using immigration to top up the population, but with such a low TFR, a high rate of immigration is needed. Moreover, it is a never-ending problem. So long as TFR remains this low, a high intake will be needed indefinitely. Such a prospect is virtually impossible to sell politically.
The White Paper also mentions something else that may further complicate the TFR. It says that a high percentage of marriages are now between Singapore citizens and foreigners. This is supported by a figure from the Department of Statistics:
Marriages between citizens and non-citizens made up 39.4% of all marriages involving citizens in 2011
– Dept of Statistics,
http://www.singstat.gov.sg/stats/themes/people/popinbrief2012a.pdf, page 14
How many of the offspring of such marriages are citizens? Moreover, there are about 200,000 Singaporeans now living abroad. How many never come back?
I found it very frustrating that the White Paper does not discuss the effect of these two factors on TFR. Is the TFR figure of 1.2 nett of foreigner marriages, or inclusive of them? Given that many such couples will want their children to adopt the nationality of the foreign country, I suspect there is a considerable leakage.
The point here is that we have to do something — and drastic — about TFR.
Starting NOW, we have to insist that every adult citizen (male and female) reaching age 30, raise 1.5 children before age 40. Marriage should not be a pre-condition. Married or single, everybody has to raise 1.5 children. We may have to re-shape our taxation policies to ensure that taxes are so heavy that it becomes plain that the only way to neutralise the penalty is to have children and claw back the tax and subsidy incentives related to child-rearing. Make it obvious that it is better to raise children and take the incentives than to do without kids and pay the penalties.
Of course, it is easier said than done. It means a massive reshaping of values and economic expectations.
It’s time we recognise that to expect a two-parent household to raise 3 children, one parent shouldn’t be expected to work in the formal sector for about ten years. That means the family has to be able to live on only one income for ten years.
A one-parent household, expected to raise 1.5 children, has to be allowed to opt out of the workforce for about five to six years.
Either we chop down the cost of living to allow this to happen or the state therefore has to come in with a replacement income stream to keep all these families afloat. Alas, I do not see the government willing to confront this reality.
Quite the opposite: Page 38 of the White Paper still speaks of “helping more Singaporeans join the workforce”. No, that’s the opposite of what should be done.
If we do what is needed — i.e. at any given time, a number of people leave the workforce temporarily to raise children — then our citizen workforce between now and 2030 will fall even more than the 100,000 to 200,000 mentioned at the start of the essay. A “child-raising sabbatical” of ten years per couple, equivalent to five years per person, is approximately 15% of one’s working life. This means a further reduction of about 150,000 in the citizen workforce.
It will have a huge effect on our economy. Whereas I spoke above of settling for 1% GDP growth over the next half-generation, if we want also to fix the TFR, it really means negative GDP growth.
But if for our long-term good, we make rectifying the TFR the top priority, then we have little choice. We must (a) pull people out from the formal workforce to do child rearing, and (b) completely restructure or taxes and incentives. If we, at the same time, cannot stomach more immigration to make up the shortfall in the workforce that results, then Singaporeans should be told that we have to pay the price of economic shrinkage for say 10 – 15 years while we re-adjust the moorings and foundations of our economy and society.
* * * * *
In short, the White Paper is totally misguided. It fixes a GDP growth target of 3 – 4 percent per annum, and then tells us we need so many more foreigners to get there. But the root problem of low TFR is not prioritised for fixing, which then means that importing foreigners becomes an indefinite scheme that will go far beyond 6.9 million after 2030. To 9 million within another generation?
It should have used fixing the TFR the key driver for population policy. Then the conclusions become vastly different. We have to rethink our values, our consumerist aspirations, and be prepared to live with a smaller economy for our long-term good.