Population: Elemental considerations 1

pic_201302_07Several things in the Population White Paper annoy me. Many of them are in the form of unexamined assumptions. The purpose of this article is to take a closer look at one of them.

I feel it is important to take the White Paper apart element by element. As it is, the outrage we see in social media is over the top-line figure of 6.9 million on this island by 2030. However, unless we pick apart the assumptions that the White paper uses, we can’t analytically say what’s so flawed about the 6.9 figure; we can only say we don’t want it.

The element I wish to examine in this essay is the old-age dependency ratio.

Page 13 of the White Paper contains this graphic:

pic_201302_06

It’s trying to tell us that currently we have 5.9 citizens of working age (20 – 64 years) for every citizen aged 65 and above. By 2030, it is projected that there will only be 2.1 citizens of working age for every senior citizen. The burden on the working adult in trying to support older folks will be three times heavier.

This projection is used as a scare tactic to soften up the reader’s opposition to immigration. It aims to say that if we don’t agree to more immigration, we will go broke trying to support old folks.

Because I thought the statistic is poorly presented — not that I am saying it is wrong — I came up with a better graphical way to show you the situation. But first, I had to trawl through the Department of Statistics and Ministry of Manpower websites to get the source data. Another annoying thing about the White Paper is that it had no statistical appendix to support its graphs — almost like it had something to hide.

I found a table of Resident Population by Age Group in http://www.singstat.gov.sg/pubn/popn/population2012b.pdf. It gave figures for June 2012. Unfortunately, it lumped citizens and Permanent Residents together and there is no way I can tease out citizens alone, in order to match the graphic shown above.

I also found a table for labour force participation rate at http://www.mom.gov.sg/Documents/statistics-publications/Statistical-Charts/mrsd_AgeSpecificResLFParticiRate_Ct_310113.pdf. It too gave June 2012 figures for citizens and Permanent Residents lumped together. There were separate figures for males and females, but for my purposes, I averaged them together otherwise this exercise would be hopelessly complicated.

The result of this search is Table 1 below, which shows you cohort by cohort how many are working and how many are not.

pic_201302_04

To check that my calculations aren’t too far off reality, I compared the total number of working residents that I obtained (2.149 million) with the total number in the labour force as published by the Ministry of Manpower (2.119 million), which you can see at http://www.mom.gov.sg/statistics-publications/national-labour-market-information/statistics/Pages/labourforce.aspx

It’s not a perfect match, but close enough. Rounding errors probably caused the difference.

I then drew a graph to represent the above data. In Figure 1, the lighter blue represents the non-working persons, the darker blue the working ones:

pic_201302_03a

Certain features will strike you about the graph

  1. About one in eight late-teens are already working; not in school, not under training.
  2. In the prime years of 25 – 45, over 85 percent of each cohort is working (or looking for work). In my view, this is too high, which I will explain later.
  3. After age 60, the bars shorten rapidly. This is not because people are dying off quickly, but because there were just fewer of them born during their time.

The third point is what makes the low old-age dependency ratio. There is indeed a lot of dark blue (i.e. working people) compared to senior age light blue.

Twenty years later

Based on the above graph, I can roughly sketch one for twenty years later. I just move each light blue bar twenty years to the right. Because I can’t be too sure how many of the older ones will die off or how many new babies will be born, the two ends of the time-shifted graph are fuzzy. Figure 2 shows you what the Resident population in 2032 may look like if we do not take in lots more naturalised citizens or Permanent Residents.

pic_201302_03b

From this graph, you can see that in this future, we will have many more older folks to support.

In other words, this graph supports the Population White Paper’s warning that by 2030 there will only be 2.1 adults of working age for every senior citizen.

Looking at the problem differently

However, before we turn white in the face, terrified of the future, we might want to ask ourselves: In a demographically healthy society, what should the graph look like? What kind of old-age dependency ratio results?

Wait a minute — what is a “demographically healthy” society?

Well, it is a sort of idealised society that has a stable population from generation to generation; it is sustainable. It is not lumpy and schizoid like Singapore’s population, bursting upwards in one generation followed by a baby-bust in the next. This stable-state society will be like this:

pic_201302_05

I need to explain a few assumptions I have used in Table 3 above.

  1. No teenagers work. In fact, only a minority of early-twenties work. In a future society, they will need to stay in school or be under apprenticeship longer.
  2. Even in their prime years, only 80 percent of adults work, unlike the present peak of 88-90%. I think it is unhealthy that so many adults are in the formal work sector, because it means that not enough are devoting time to child-raising — thus our present baby-bust. A stable-state, healthy-demography society will need more adults as home-makers.
  3. I assume an average life expectancy of 85 years.
  4. I have matched the total population of 3.8 million to something similar to the existing total population of citizens and Permanent Residents in 2012/3.

Table 3 produces a graph that looks like Figure 3 below:

pic_201302_03c

The old-age dependency ratio in this idealised society is 2.25. There are 2.025 million persons in the working age range of 20 to 64 years compared to 900,000 persons aged 65 and older. You can check the calculation from Table 3 yourself.

What does this tell us? It tells us that there is something wrong with the White Paper’s interpretation of good and bad. Our idealised ratio of 2.25, which is compatible with a demographically healthy society, is a lot closer to their “shock-horror” 2.1 than to the current 5.9, let alone the nostalgic 13.5 of 1970.

In other words, 5.9 is not sustainable. It comes about only as a result of a “demographic sweet spot” — when a baby boom generation moves into working age. Alternatively, it’s the result of heavy immigration of working-age adults — ruthless population engineering. It is not sustainable in either case because both imply relentless increases in population.

We’ve got to learn to live with 2.25.

This thought experiment shows that if we’re going to be at peace with ourselves, we’ll need social safety nets compatible with a dependency ratio of 2.25. The future is only scary because our government has refused to countenance a better social safety net.

Working longer

Another simple way to deal with the ratios coming out of such a healthy-demography scenario is to have people working longer. Figure 4 is obvious:

pic_201302_03d

I know what many of my readers will say about pushing retirement age till later: it’s impossible! Cannot be done! Political suicide!

But let me share with you some small insight from my own long life: When my grandmothers were my age today, they were beginning to slide into senility and ill health, but my parents were still economically active at the same age, albeit at the cusp of retirement. I expect myself to be active for ten to fifteen years more.

Benefitting from better nutrition and science, every generation can expect a longer active life-span. Those in their twenties today are not going to look like those in the seventies today fifty years on. Staying active gets easier.

But it also points to us what needs to be done by way of policy in order to ensure we reap these demographic benefits: greater attention to public health, especially chronic debilitating diseases. We’ve got to fight hard against smoking, excess weight, diabetes and cardiovascular disease, for example. If we do this right, the need for immigration will be much reduced.

90 Responses to “Population: Elemental considerations 1”


  1. 1 ricardo 4 February 2013 at 07:28

    Somehow, no one seems to ask what the PAP’s cunning plan is meant to achieve.

    Is it to reduce Singapore’s sky high GINI, the measure of disparity between Rich & Poor? Is it to achieve a sustainable population growth?

    Somehow attempting to ‘cure’ a low TFR by immigration to reduce the tax burden of supporting an aging population sounds like Dignity for me today and to hell with future generations”.

    Has the PAP looked at what can be done to improve the quality of life for ALL Singaporeans, especially the poor & disadvantaged? This CAN be done and a smaller population will HELP not hinder this.

    I wonder where on their list of priorities do the PAP have “reducing GINI”. Or is this another buzzword of which they have no understanding or even inclination to understand, let alone address … to be used only for electoral purposes and then promptly forgotten.
    _____________

    Just a comment on one of Mr Au’s points. More than half of the teenagers I know in Oz, work.

    They work as maids, in supermarket checkouts, McDonalds, … even building trades as apprentices. In effect, they fill the low paid jobs that in Singapore are done by immigrant or indentured workers.

    Their future employers look at this with favour as it is evidence of a good work ethic and maturity. I wonder when the Education rat race in Singapore will faciiltate something like this.

    • 2 Biffer 4 February 2013 at 14:15

      Australians do the jobs you have mentioned because Australia has a minimum wage and immigration is restricted to highly-skilled workers who don’t compete for those jobs.

      Singapore is the exact opposite. There is no minimum wage and many immigrants are brought in BECAUSE they are cheap, so they force down the salaries of citizens and compete for the jobs.

      Now ask yourself for whose benefit is Singapore being managed?

      • 3 Anon m5FF 16 February 2013 at 16:56

        i agree with you biffer, i do not see any benefit to singaporeans like me in my age group(early fifties),i have been relieved of jobs that i once did to FTs,it is not due to my lack of skill but because they have to pay me more.Employers employ cheap labours from phillipines and india. Most mid level IT workers are Filipinos and the higher grade IT workers are Indians.There is no jobs in those sectors for local like me anymore.Now I am forced to take any job that comes along coz I still need to support my teenage child through college, mortgage to pay and bills too.Its very tiring at this age..sigh…

    • 4 ricardo 4 February 2013 at 16:34

      I should point out that among those I know who who worked as teenagers are ALL of Cooktown’s scholarship winners in the last 12 yrs.

  2. 5 John 4 February 2013 at 07:37

    Also technology advancements would aid in the dependency ratio. If 2.25 is ideal now, this ideal ratio would shift over time with tech improvement. Thanks for the analysis, reasoning trumps fear

    • 6 George 4 February 2013 at 15:02

      While we should strive for a replacement level TFR (unless we want to shrink the population) dependency ratio can be modified by better universal education and training, higher productivity and the upping of the ‘expertise or technical content’ of the economy so that a 2.25 ratio is actually a 4.50, for example. The nostalgic DR was from a combination of an ‘agrarian’ culture and when infant mortality was high. With the huge advances in health care in the modern age, such ratios may not be as meaningful or helpful for planning. IMO, if there is concerted and coordinated synergistic govt and private capital efforts to raise the technical skill and expertise of Singaporeans and the technical content and component of local industries, DR is secondary. I sometimes wondered at how a united Germany was able to come when the Berlin wall came down. One aspect I noted was how well known and respected West German brands branched out to include the manufacture of products previously not within its stable. This is a clever way of expanding the job market and help create jobs to cope with a suddenly expanded population of a unified Germany.

      I wonder if our political leaders, bureaucrats and technocrats are capable of some such equivalent creative strategic lateral thinking within the local context? Or, are they all waiting as usual for the Oracle to open its mouth?

  3. 7 Worst Singaporean 4 February 2013 at 07:45

    It will be good if we have the figures that breakdown citizens and PR, as there will be a certain % of PR who will return to their home town for retirement. The past 20 years trend of PR leaving by age group wil provide some insight for analysis as well.

  4. 8 Sashaqueenie 4 February 2013 at 07:50

    Am I the only person who cannot click on the graphs?

  5. 9 descended 4 February 2013 at 08:30

    The dependency ratio of 2+ to 1 old adult makes common sense. I have 3 adult children. My wife and I are confident that they can take care of us when the time comes. Together with my wife, we would have therefore a dependency ratio of 1.5 and its OK. To have a dependency ratio of 5 or 6, wew would needed to have 10 to 12 children. Crazy right?

    • 10 eremarf 5 February 2013 at 18:22

      I found this quite amusing. This is an image I think nobody will have a problem relating to. Good one, descended! :-D

  6. 11 Yeoh Lian Chuan 4 February 2013 at 09:04

    Alex – Good analysis.

    However, what does having 1m (or 2m, or however many) foreign workers do to the support ratios. It seems to me they must lift the support ratio because foreign workers are neither children nor old people.

    This is one of the Government’s main rationales for having a significant foreign worker population, in addition to the disamenities like crowding.

    The question which arises is how many immigrants we should can/take and for how long is this *sustainable*.

    Even Dr Joseph Chamie (he’s the chap who wrote the article on “ponzi demography”) has said that “Singapore is in many ways blessed because you have a large pool of potential migrants from which to draw. The question is how you will proceed …”

    So I think we can and should top up local populations with foreign labour – how many is the question. It may be ‘demographic dividend’ of sorts and perhaps its not part of the steady state. But it is still around and will be for some time, unlike the baby-boomer dividend which has come and gone.

    • 12 yawningbread 4 February 2013 at 10:32

      You are right in that having a add-on padding of transient workers will increase the working population, and lower the old-age dependency ratio. You are also right in that for at least the medium term, Singapore is likely to have this add-on. However, the article aimed at getting down to the elements for better understanding of each element; I decided against talking about foreign population as it would complicate the discussion, esp when there is no easy way to project forward the future foreign population. It is a factor that is highly dependent on administrative decisions, unlike natural populations.

    • 13 alex toh 4 February 2013 at 11:10

      The government should focus on the core population first before taking into account of foreign population. Bare in mind that 1 million if them are low income foreign workers that do not contribute income tax. Instead of them supporting us, we are spending more on infrastructure supporting them. The only beneficiary is the business owners. Our own people suffer from stagnant income as a consequence.

      • 14 eremarf 5 February 2013 at 18:53

        What I’m curious about is whether transient foreign workers (E, S passes, Work Permit), as well as PRs and new citizens (some who put down roots, some who are sort of transient) – whether they are net contributors after we account for all the various costs and benefits associated with their presence.

        Like alex toh and many others have mentioned before, they impose costs such as infrastructure loading, receiving public services e.g. subsidized education/healthcare/defence (esp. “transient” PRs and NCs), disincentivizing productivity investments by businesses, putting downward pressure on wages and hence driving wealth inequality and its attendant problems, contributing to property price maybe-bubbles, generate social tensions due to differing cultural practices, etc.

        (Though to be fair, in addition to just improving the dependency ratio, having foreign labour has benefits such as making up skill shortfalls in the local labour pool, transference of skills and technology (maybe not?) perhaps, promoting a cosmopolitan/open environment/culture, etc – I’m not being exhaustive – not an expert on this.)

        Sure – as Lian Chuan mentions – dependency ratio improves when we have transient foreign workers. But dependency ratio is just one aspect of a complex cost-benefit analysis. The thing is – there’re still no very good “big picture” perspectives of what the net actual benefit is, of bringing in so many people.

        Which makes me think that – the deep problem is the lack of democratic features such as – freely available public information, a free(er) press and academy and political climate, citizens who actively participate in democracy (recognise that they are responsible for the government they get, are willing and able to engage in debate and exchange of ideas to become informed, and then finally able and willing to exert influence to elect representatives to Parliament – i.e. take the time to DO politics).

        Some people will say this is too idealistic – but if we don’t aim for this – we won’t get a strong democracy. We will just have a democracy in name like the Americans today, while we surrender actual power to the elites.

      • 15 Alvin Wee 5 February 2013 at 21:13

        I think the crux of the issue here is the huge INCOME GAP between the haves and the have-nots. Maybe the higher dependency ratio did benefit a few, i.e. the business owners, but on the overall, it failed to raise the living standards of the rest of the people. Without tackling this high Gini coefficient, the influx of foreign workers is not going to be palatable to most. This is the reality on the ground that PAP refuses to see.

  7. 16 What About National Service? 4 February 2013 at 10:48

    How about decreasing the need for imported labour by eliminating National Service?
    Straight away we release more Singapore manpower into the economy.

    • 17 George 5 February 2013 at 14:01

      Very good suggestion.
      I myself served 3 years NS in the early day. I think the SAF wallah should earn their keeps by coming up with a solution to a shortened NS, first by studying how other countries do it?

  8. 18 alex toh 4 February 2013 at 10:57

    This is the kind of analysis we would expect from the people at NTPD. What they give us instead is a white piece of paper fit only to be used for wiping off brown residue around the anus.

  9. 19 Fox 4 February 2013 at 10:59

    Actually, you don’t need to do all that demographic number crunching to get the old age dependency ratio of 2.25 to 1 in a stable population.

    The key is to look at the number of year you spend working to the number of years as a retiree.

    Assume that you start work at 25, retire at 65 and die at 80. Then, you would have worked for 40 years and lived 15 years as a retiree. Therefore, for every year you live as a retiree, you spend 40/15 = 2.67 years as a worker. This gives you a dependency ratio of 2.67:1 in a population where there is no growth and the death rate is equal to the birth rate. Assuming that 50 percent of women do not work at any one time (as they are taking care of children), the actual ratio would be closer to 2:1 since the average number of working years would be 30 (assuming 100 percent employment for men and 50 percent for women).

    This method of calculation also highlights how sensitive the dependency ratio is to longevity and the retirement age.

    1. In the past when people died at 75, the ratio would have been 3:1.
    2. If we raise the retirement age by just 3 years to 68, the ratio would increase dramatically from 2:1 to 2.75:1.

    As you have pointed out, the key is to enable people to work as long as possible but the purpose of such a move is not to increase the pool of workers but to reduce the retiree population.

    • 20 eremarf 5 February 2013 at 19:04

      @Fox – when you say “enable people to work as long as possible”, what are you thinking of?

      Improving people’s health, so they remain productive for longer? Keeping their skills updated and relevant, so they can continue to contribute as they age? To educate (in a broad sense) our young people to be adaptive enough to stay relevant as they age? Investment in these things often require the state to act, but it’s so hard to quantify these benefits (or at least I don’t see them quantified for SG – though I sometimes come across analyses for US and Europe), so it’s hard to justify their cost, or compare them to other policies (e.g. importing transient labour).

      (Or Khaw Boon Wan’s solution to export the retiree population e.g. to JB would work too? Which actually is something many of my friends are thinking of – as in – we would retire elsewhere in the world if we could – because it’ll be cheaper than retiring here? But I wonder whether we can really bear to leave “home”. Yes – in spite of how hard the PAP tries to alienate us – it’s still where we grew up.)

      • 21 Fox 5 February 2013 at 23:18

        I am thinking of redesigning the workplace, having sustainable working hours, etc. People don’t become totally useless once they reach 65. I think if they are hale and hearty, they can still work part-time. For example, my mum taught Chinese and could still do so if the principal of the local primary school, which is much nearer to her home than her previous school, were willing to hire her to teach one or two classes every day. Even if they don’t work, they can help to take care of their grandkids or do volunteer work. To many senior citizens, meaningful work can help maintain their sense of identity.

        I am not in favor of retraining retirees. At their age, they can’t learn fast enough. It is better to utilize their rich vein of experience. Moreover, at that age, they would have developed certain skills (communication, language, etc) that are difficult to pick up quickly by most young people.

        KBW’s solution could work but it would be very hard for many people to take. Emotionally, it is painful even for the world’s most emotionless people. .

  10. 22 Nerdybeng 4 February 2013 at 11:19

    As you and others have argued, population ratio is likely not the sole reason for this “worst-case scenario projection”. But add on a shrinking / static economy that is almost inevitable with reduced cheap manpower import – without substantial productivity increase – and the catastrophe they fear becomes more evident. The sudden explosion in the economy in the last two decades could also implode even more rapidly. It is a potential catastrophe that they foresee, but have no ways of preventing. I suspect the real purpose of this 2030 projection is to buy time while they crack their skulls – pushing population expansion to its limits – while they try ways and means to stabilize the economy to minimize the chances and impact of an impending implosion. Whither that salvation will – or can – be found… Meanwhile, it is a message they deem too dire for the world or our population to hear.

    • 23 Biffer 4 February 2013 at 14:10

      Exactly. Many are speculating that HDBs and condos are so overvalued the only way to maintain their value (and economic stability since so many have invested in property) is to bring in more and more buyers from overseas. Ditto CPF.
      So the situation is like hamsters on a wheel, running ever faster to avoid the inevitable crash.

    • 24 Sgcynic 4 February 2013 at 17:41

      Simply put, *they* are kicking the can further down the road to avoid the bubbles that were caused by the excesses of the past decade from bursting in the near term.

  11. 25 Chanel 4 February 2013 at 11:28

    With intense criticisms of the population white paper, our ministers are now singing a different tune. They are now claiming that the 6.9m figure is “not a target”, a “worse case” scenario, just a planning parameter.

    This is so PAP. If the white paper is not about population, why is it called the Population White Paper??!! Why didn’t they name it Infrastructure White Paper?

    Will the govt build all these additional HDB flats, MRT lines, roads, put more buses on the road to cater to an accidental surge in population?? Immigrants don’t land here by accident. The govt knows exactly how many foreigners would be here because it is the party that issues PRs and new citizenships.

    The reality is that this govt is notorious for under-providing in terms of infrastructure. When the infrastructure is built, you can bet your ass that foreigners would be imported to reach 6.9m or more.

    One thing that infuriates me is that the PAP is rushing this half-baked white paper through Parliament. PAP is giving MPs and the people less than 1 week to study and understand the white paper. For such an extremely important issue, we should take the time to debate and even do a public referendum. So, PAP, please do the responsible thing and give the people time to deliberate. When Khaw Boon Wan said “don’t worry too much”, I am REALLY worried. PAP has betrayed the trust of the people many times. It is sad to say that I don’t trust the party anymore.

    • 26 Duh 4 February 2013 at 12:16

      I agree, they are now engaging in damage control mode. I don’t think the citizens are buying it – too much bullsh*t from the PAP already.

      • 27 Alan 4 February 2013 at 18:50

        Of all people, the Law Minister reiterated that the Govt is a responsible one by putting forward the White Paper for further discussion & debate.

        But how can the same Govt be responsible one when they never put up any White Paper in the past to result in the so many of the current problems associated with overcrowding

      • 28 eremarf 5 February 2013 at 19:18

        @Alan – Priest lah, Shanmugam is the most [insert non-libelous adjective here] of them all. It really disgusts me the way he tries to get WP MPs to say incriminating things in Parliament, e.g. at Parliament right after GE2011, Pritam was mooting a Freedom of Information Act, citing Singaporeans’ distrust of the media as one factor, and Shanmugam endlessly tried to ask Pritam’s own opinion of whether the media was deceptive or state-controlled or something. (Pritam said his own opinion isn’t relevant – it’s what citizens think that’s relevant.) Which ended with Palmer saying – if Pritam will not clarify his position, then we can’t discuss this further. Let’s move on. Like – WTF?!!?! Okay sorry to digress with a grandfather story – but Shanmugam is that kind of guy.

        @Chanel – well spotted! “…the PAP is rushing this half-baked white paper through Parliament. PAP is giving MPs and the people less than 1 week to study and understand the white paper. For such an extremely important issue, we should take the time to debate…”

        This kind of behaviour undermines Singapore’s democracy and long term welfare. The PAP never welcomes debate from other political parties, input from Singapore citizens, etc. All their talk during election time is just lip service. It’s good you’re reminding people how hypocritical they still are.

    • 29 LazyCat 4 February 2013 at 14:57

      When the infrastructure is built, you can bet your ass that foreigners would be imported to reach 6.9m or more — I disagree completely. The govt doesn’t build in advance anymore.

      They have long not gotten projections right, because they ignore basic human factors. When the first MRT lines were ready, they were shocked tt ridership was so Much higher than what they projected. They had completely overlooked that if travelling is a lot easier and less time consuming, more people will travel, and get out and about!

      Going by their timelines, infrastructure for the planned 1.7m can only start Earliest 2020, becos they are busy scrambling to provide catch-up infrastructure for 5.3m now. (unbelieveable how one can simply not see the needs for two MIILION!)

      By the time they start on infrastructure for the 1.7m, at least Half the planned number will Already be here. The crush will continue.

      Besides what Alex has outlined, their White Paper overlooks that they are dealing with a bulge in the population, the baby boomers – a speed bump of about 25 years. Once you’re over that, they will find they have to deal with the humongous speed bump they are trying to build now. One would have thought we have enough savings to deal with the current bump, seeing as how our welfare plans are Extremely Miserly.

      • 30 eremarf 5 February 2013 at 19:24

        @Lazycat – “One would have thought we have enough savings to deal with the current bump, seeing as how our welfare plans are Extremely Miserly.”

        You know, I’m half worried about these so-called savings we always hear about but never get to see. I’m scared it will one day be a big surprise for Singaporeans, like AIM. So many surprises – living with the PAP is never dull.

    • 31 Sgcynic 4 February 2013 at 17:46

      If we were to harp solely on best/worst case scenarios during board meetings, the chairperson would say “so, what is the probable/optimal scenario and what the hell are you doing to make that a reality?”

      • 32 Saycheese 6 February 2013 at 13:10

        If you are on board receiving a director’s fee, you will have to dignify with a reply.
        My dignity has been robbed when I could not do anything to their paying themselves multimillion dignities, my reply to “so, what is the probable/optimal …” should be a non answer with my middle finger.
        What do you think?

    • 33 Fox 5 February 2013 at 23:38

      I personally don’t think that the white paper was rushed. Demography and the labour force composition was something that was not really touched on in the Economic Strategies Committee report in 2010. I found that puzzling because anyone with half a brain knows that demography has to be a key issue in Singapore’s economic restructuring.

      I think it is clearer now that the government must have realized that it was a political hot potato even back in 2010. It must have ordered a deeper and larger scale study of the issue.

  12. 34 Rogueeconomist 4 February 2013 at 12:07

    The old-age dependency ratio is a somewhat misleading indicator of the actual impact an aging population will have on society. Most people think instinctively that an increasing ratio (more elderly) will severely harm the active working population. However, that conclusion doesn’t necessarily hold up.

    First, let’s consider the impact on the working population during a demographic transition towards an aging population. It is true that there will be fewer active workers and more dependents in society. What does this imply for workers? It implies substantially higher demand for their services, and hence higher wages. There could be labor shortages, which while some people will say is ‘bad for the economy’, imply that those who are working will be earning more money than they would otherwise.

    Before you consider any possible impact from, say, having to personally support one’s aging relatives, or the possible tax burden, the first impact of an aging population simply is: It is good for the earnings of the active workers.

    The obvious problem then is the support issue. In principle given the CPF compulsory-savings system the elderly are not meant to require support through tax transfers from active workers, unlike the pension systems in most other countries. However, CPF savings may not be adequate for a substantial proportion of the population.

    There is a secondary CPF-related concern which is that the bulk of retirement assets are currently in housing for many Singaporeans. It is the value of housing that will fall dramatically if the population declines in Singapore, and that will substantially reduce retirement wealth.

    So before we discuss the potential problem of an aging population it seems to me that we should first be having a ‘national conversation’ about the the retirement finance system. An aging population, under a functioning compulsory savings system, wouldn’t necessarily hurt either the aged, or younger workers. That we are so concerned about demographic change suggests that our retirement finance system isn’t functioning well after all, and we need to clarify what we intend to do to fix that first, I think.

    • 35 Rogueeconomist 4 February 2013 at 12:16

      Oh, I thought I should also add that the ‘sky is falling’ thought of housing values crashing due to a declining population, again, wouldn’t necessarily hurt the active workers. After all, extremely high property prices are a major concern today.

      In short, before we start talking about support issues, it should be clear that active workers in an aging society can look forward to high wages and low property prices (and likely low prices of any other capital goods). Is that so bad?

      The question really is whether the costs of supporting the aging population are larger or smaller than the benefits to the future workers in such a society. But the right approach is to consider those costs and benefits (and the potential future reforms to the retirement finance system) rather than plunging straight into a discussion of the dependency ratio. I think it’s rather strange of the NPTD not to do this, but I think I know why – most people are just scared of the idea of an aging and declining population, without really stopping to think about how and why it would be bad for society, if it even is.

      • 36 eremarf 5 February 2013 at 19:44

        @Rogueeconomist: I didn’t think of it this way before, thanks for pointing this out! Reminds me of the impact of the Black Death on Middle Ages Europe – with so many people dying, there was a labour shortage and land surplus. Those fortunate ones to survive the plague enjoyed cheap land and high wages – quality of life for labourers improved tremendously. Labour productivity improved too (something we can look forward to in Singapore as well?). I can’t substantiate this with academic papers but some quick Googling produces hits like this:
        http://unenumerated.blogspot.sg/2011/06/agricultural-consequences-of-black.html

        Of course, we would lose certain kinds of productivity (much cheaper transport and infrastructure costs per capita, plus other efficiencies) gained from living in a dense city (but then again – an ill-prepared city with a dense population doesn’t seem very efficient right now!).

        So again – we need the cost-benefit analyses, instead of propaganda like this white paper.

  13. 37 Duh 4 February 2013 at 12:14

    Importing foreign labour sources cannot be reasonably argued to aid in the old-age dependency ratio – the govt is erroneously arguing that foreign workers come here to work to support aged Singaporeans!! The only way this works is if the govt ALREADY has increased social spending for the elderly (i.e., tax foreign workers more and use those taxes on aged Singaporeans), which even at present with the increased foreign resident population in Singapore – it does NOT. This reveals the inconsistency in PAP’s reasoning – their plan is not even implemented now, and they are proposing that it will be implemented in the future. All they did was to paint their untrustworthiness in the White Paper.

  14. 38 NSP Supporter 4 February 2013 at 12:25

    Alex,

    You missed the biggest hole in the numbers.
    1. 40% of workforce are foreigners.
    2. This section of the workforce is “perpetually young” because they go back home and the next youngster takes their place.
    3. The support ratio today if you include the non-resident workfoce is 9+.
    4. If we maintain the same level of non-resident workforce by 2030 it just falls to 7.

    The NSP paper has a good write up on this.

  15. 39 Eiden 4 February 2013 at 12:34

    Like you, I am of the view that the population should have a prolonged retirement age. Personally, I expect to work till 80 yrs old, so extending retirement age to say, 75 yrs old is not unthinkable for me. However, the question to most working adults of 40-60 today is – where are the jobs for them?

    The experienced PMETs are increasingly being edged and wedged out by the time they reached 40s, by the cheaper import of talents. This is the reality that MOM/government is not interested to tackle, intervene or look at. Especially when the White Paper has indicated more PMETs jobs will be created and available, and the reality on the ground is, these are going to the foreigners. Until there is a stipulation of employment laws in place to tell companies that they cannot hire FT without proving they have exhausted the local search, or some sort of quota ratio that x% of senior/mid management levels should comprise of local PMETs (qualified of course), then all the empty promises of “quality of life /jobs” are just that – promises.

    The per capita of working adult supporting an aged elderly should be used, instead of the number of working adults, due to inflation and higher salaries adjustment. So 2:1 is not necessarily worse off than 6:1.

    • 40 Fox 4 February 2013 at 23:58

      You’ve pointed out a contradiction in the PAP’s labour policy. A open door labour policy cancels out the intended benefits of raising the retirement age. The PAP government is trying to have its cake and eat it too.

  16. 41 You Think PAP Can Create So Many Jobs? 4 February 2013 at 12:50

    Does anybody seriously think the PAP is able to create additional high quality jobs to support all the new immigrants they want to bring in?

    If your answer is no.
    Then it would follow that the new immigrants will have to compete with you & your children for the existing jobs in Singapore.

    • 42 yawningbread 4 February 2013 at 13:39

      Their argument is that without foreign TALENT creating high quality jobs, there’d be no jobs for Singaporeans, high quality or otherwise, so it is necessary to bring in foreigners.

      • 43 Chope 4 February 2013 at 15:41

        Why are you repeating their shallow arguments here?
        If so, why is Minister of Manpowder Tan Chuan Jin relying on TODAY and Lianhe Zaobao to account to parliament for the percentages of local workers employed by the two Integrated Resorts (IRs)? Where is the MOM data to justify such claims??

      • 44 You Think PAP Can Create So Many Jobs? 4 February 2013 at 16:45

        Dear Alex
        I know that you know this. But just to belabour the point for the politically naive of which I was once a member.

        I see no proof that the aliens, PAP is importing, is of “high quality”.
        Heck. Unless citizenship is issued conditionally upon creation of high quality jobs, what guarantee is there?

        And respectfully, how does an imported road sweeper create high quality jobs for Singaporeans?

        SIA can’t even find enough work for 76 SIA pilots.
        Does anybody seriously think PAP can do better?

        Sorry to rant. But a man can only stomach so much bull shit in one lifetime.

        Singaporeans.
        Your children & grand children’s future is in your hands when you vote in GE 2016.

      • 45 Chanel 4 February 2013 at 17:30

        The foreign talent policy first started in the late 1990s. Back then, the govt took in foreigners (in small numbers) that were really talented, such as John Olds (formerly from JP Morgan), etc. However, a few years later, the standards dropped dramatically, with the govt bringing in any Tom, Muthu or Xiao Zhiang.

      • 46 Fox 5 February 2013 at 00:04

        Their argument is not particularly convincing. Who created the high quality jobs in entertainment, semiconductors, auto manufacturing, etc in South Korea and Germany? It merely shows how wedded the PAP govt. is to the idea of an MNC-driven economy.

      • 47 eremarf 5 February 2013 at 19:56

        Argument without evidence just doesn’t go very far (specifically referring to PAP’s arguments).

        All discussions end in data roadblocks, it seems. It’s really tragic we can’t move past this data roadblock.

        I’m hoping to see some academic perspectives on this but I can’t find it. People I talk to tell me it doesn’t exist. Is that really true? Why are we in this state?

      • 48 Zen Wish 11 February 2013 at 09:26

        Foreign Talent is but a sublimal marketing phrase to deceive people into accepting any foreigners since they are all Talents. No other country calls its foreigners population Foreign Talent, as if being foreign is inherently talent. Does anyone notice that our locals with the same level of skills are never refereed to as Local Talents? Can you blame people for perceiving that foreigners have preferential treatment/ esteem?
        To say that foreigners create job is just illogical. How would they end up here in the first place if we did not create jobs for them? It is another false argument to deceive people into accepting foreigners.
        So much smoke & mirror & yet the government apologists say that the white people is good, just not communicated well.

    • 49 Biffer 4 February 2013 at 14:24

      It isn’t only high-quality jobs they are bringing people to fill: it is also food courts, McDonalds, construction etc. Since there is no minimum wage in Singapore, this will force incomes down at the lower end.

      In most countries this would result in a new government being elected, but for some reason in Singapore (at the last election at least) the ruling party still won with a small majority.

      But after the AIM scandal and now the white paper I think the next election will be very interesting.

  17. 50 What is the Meaning of a White Paper ? 4 February 2013 at 12:58

    @ Chanel @ 4 Feb 11.28

    “White Papers are used as a means of presenting government policy preferences prior to the introduction of legislation”; as such, the “publication of a White Paper serves to test the climate of public opinion regarding a controversial policy issue and enables the government to gauge its probable impact”.
    Source:
    http://en.wikipedia.org/wiki/White_paper

    “White papers are documents produced by the Government setting out details of future policy on a particular subject. A White Paper will often be the basis for a Bill to be put before Parliament. The White Paper allows the Government an opportunity to gather feedback before it formally presents the policies as a Bill.”
    Source:
    http://www.parliament.uk/site-information/glossary/white-paper/

    So a White Paper represents firm government policy.
    The 6.9 million is government policy.

    It is not a “worse case scenario”.
    And it certainly is not a planning parameter.

    • 51 Chanel 4 February 2013 at 17:27

      Khaw Boon Wan tells us that the 6.9 million population figure is a merely “worse case” scenario.

      May I ask the learned Mr Khaw to enlighten us what is the “best” or “base” case scenarios. Given that the government is in FULL control of the number of PR status, new citizenships, employment passes being issued, how can the government claims that it cannot know how big the population will get by 2030 (with a reasonable margin for error to account for changing TFR)??

      PAP should stop beating around the bush. Stop the twisting the words and tell us their full intention.

  18. 52 Celest 4 February 2013 at 13:00

    Is there any way we can bring ur analysis to the attention of the ruling party?

    • 53 JG 4 February 2013 at 13:50

      Trust me .. they read Alex’s blog. Probably from President Tony Tan all the way down.

      But the White Paper wasn’t meant to be an analytical document in the first place. All the analysis had been done in the backroom by the civil servants. The White Paper is essentially a PR document, using bits and pieces of existing facts to support a pre-determined conclusion. It was supposed to be that proclaimations of “the population is aging”, “we are not pre-creating enough” are enough to justify that pre-determined conclusion.

      • 54 eremarf 5 February 2013 at 20:07

        @JG: From what I hear from an ex-senior civil servant, analysis isn’t done in the backroom by civil servants to FORMULATE policy. It’s only done to JUSTIFY premeditated ideologically-founded policy choices made by ministers. (Essentially – the ex-civil servant is saying – the civil service has been cognitively captured by the political party.) But since I’m not naming names, maybe I’m just BSing you. :-)

        And re: reading YB? I think their Corp Comms guys probably do a summary of the piece, and it gets a paragraph maybe? I doubt they read and summarise our comments at all.

        @Celest: Why don’t you try going to MPS to give your MP a piece of your mind? (I used to bug Cynthia Phua and Lim Hwee Hua over here in Aljunied but now we’ve “sacked” them I’m wondering who to bother next. Talking to Chen Show Mao or Sylvia is like preaching to the choir right?) That’s the rightful use of MPS anyway. I don’t how Singapore has allowed it to devolve to doing social services functions (probably by underfunding social services for the longest time). It should be used for political work instead.

    • 55 Biffer 4 February 2013 at 14:26

      You can be sure they read this blog every day.

  19. 56 Capitalist PAP 4 February 2013 at 14:11

    It took the government 1 year to come up with such poor quality white paper, which fails to articulate well the why, what, when and how to achieve the population target. This is really unacceptable as it is a complete waste of public resources to address something not what the public is interested in.
    In actual fact, when compared to the population density of other major cities in the world, I thought there is still room to grow the population in Singapore. But it needs to be well supported by changes in how we do things. As a matter of fact, the government needs to realise that the current state in Singapore is not acceptable and sustainable.

    One of the things that need to change is how we plan the provision of basic public services. I feel crowded when I visit orchard road or malls such as Junction 8, Nex during wkends. Current way of centralizing all services in city area or individual town centres is limiting options for the people to obtain such services. People do not have many options if they want to buy groceries, watch movies, eat out etc. Open up and provide low rentals in more spaces for business in residential area to provided services at competitive prices. Example is convenience stores in Taiwan – numerous everywhere in Taiwan, they provide many services (ATM, postal, printing etc) that are restricted in few companies in Singapore. Taiwan 7-11 are also very competitively priced, unlike in Singapore which I find is actually more expensive than other places.
    I suspect that one of the reason (not sure whether it is intentional) is that the government is involved in most of the Singapore’s economy. Think of NTUC Capitaland malls, Singapore Post. Singapore business environment is too monopolistic, and does not provide incentives for other small businesses to break into at competitive prices. Spaces are not planned to allow businesses to set up in other neighbourhood areas. Remember Low Thia Kiang mentioned about PAP is more interested to setup RC centres rather than amnenities such as coffee shops, childcare centres? Well most HDB estates should have more mini supermarkets, or convenience store which provide services to residents within close walking distance. Why restrict the commercial space to town centres? To protect the major players who are Temasek owned in the market?
    Another thing is transportation. The current SBS, SMRT domination in the market is unhealthy. Why not open up and encourage other private companies to participate in providing alternatives to people. Let small companies to provide feeder service to connect people from housing estates to nearest MRT. Allow various provision of alternate bus services that run parallel to MRT lines, can be normal or express services priced accordingly to cater for different needs. Market should be opened to allow such companies to come in and compete, and prices will be sustained at a level for this companies to earn a reasonable margin but provide much more options for commuters. The current way of only limiting SMRT and SBS to provide such services is not fair to commuters. The aim should be to provide enough comfortable and reasonable priced public tranport options for commuters so that people are willing to give up cars (for those who can afford but avoid public transport) and hence reduce traffic on the roads.
    I think a major flaw in our Singapore setup is the government is too involved in the capitalist business world. Temasek owned companies in Singapore businesses, MPs and PAP related people involved in these private companies. There is clearly concerns on conflict of interest in how the government plans out its policies. When they think of some policies, are they concerned more on different classes of Singaporeans or more on the businesses? They keep mentioning the theory of economy trickle down effects and government handouts when certain groups are affected – it is not working well from what I have observed.
    Well, saying so, I think the current PAP govenment is in a fix. They may or may not know what is the problem, but I am quite certain they do not have the political will to understand the problem better and they would rather believe that what they have done is good and will continue doing so if some minor tweeks and more communication to the peasants.
    Good luck Singapore.

    • 57 4eyes 6 February 2013 at 11:34

      You hit the nail right on the head. The PAP government is only interested in protecting their business monopolies/interests. The electorate is just a convenience for them to increase their profit margins. They still refuse to implement a minimum wage because business owners and employers are more important to them, not the citizens.

  20. 58 Ray Tanlee 4 February 2013 at 14:54

    Another way of thinking about it? Imagine a country with 80 people, life expectancy is 80 and a baby is born every year. Population is thus stable with a TFR of 2. In this stable state, assuming a working age of 20-60, there would be 2 workers for each retired person. Right?

    • 59 Fox 5 February 2013 at 01:33

      Yes but your retirement age is too low. Do you really expect to work for 40 years and live in retirement for 20?

      • 60 eremarf 5 February 2013 at 20:24

        @Fox – that’s an attractive idea, actually. If anyone comes up with a feasible plan to achieve that, he gets my vote! I mean Keynes predicted we would be facing the problem of too much leisure time, but unequal distribution of resources means 0.01% of people have a severe case of excess leisure time, while the rest of us continue drudging away being wage slaves. (Okay, I know I can choose not to be a wage slave and accept a lower standard of living – I’ve kindof done that already. But I’m single and lucky enough to be able to find work at decent wages in SG – which we know lots of SGeans don’t enjoy.)

  21. 61 patriot 4 February 2013 at 15:52

    1. Why is everyone talking about the dependency ratio in terms of number of persons? How about looking at this ratio in terms of assets owned and resources consumed? If I have enough liquid assets and savings, I wouldn’t worry too much about having a 2.1 persons having to support me.

    2. It will be great if children and other dependents such as “stable unemployed” persons can be factored into the dependency ratio.

    • 62 Fox 4 February 2013 at 23:55

      Your assets would not be liquid if there is not enough demand for them from people in the workforce.

      Consider a large work force with a lot of young people. Then your house would be worth a lot of money and you can afford more medical services since there are plenty of young people willing to be doctors and nurses. In the opposite scenario, you have many old people with houses and very few young people. In that case, your house would be worth a lot less and it will cost more to see a doctor.

      The takeaway message is that you need young working people to make your assets liquid. Money, stocks and other financial assets are merely IOUs that allow you to make a demand on other people’s services.

      • 63 patriot 5 February 2013 at 13:51

        You have a valid point about young people providing the demand for housing (but you need to explain your assumptions about the structure of the market, if young people includes or excludes non-citizens etc.). However I think housing should be excluded initially, and I repeat initially, from the discussion and my point about the alternative computation of the dependency ratio.

        For example, if we can compute the liquid assets of retirees relative to the retirement costs, wouldn’t this give a clearer measurement to discuss the supposed problems of an ageing citizen population, instead of making assertions such as (as quoted from the white paper) “a declining old-age support ratio would mean rising taxes and a heavier economic load on a smaller base of working-age Singaporeans”?

        As to your point about needing young working people to make assets liquid, I think you have to explain your assumptions behind it. I don’t see much liquidity problems (other than those of temporary nature, like price shocks, collapse of companies etc) for stocks and financial assets given (1) the foreign participation in Singapore’s financial markets and industry and (2) globalised nature of companies and Singapore’s business environment. As for S$ cash, isn’t it more dependent on foreign currencies and thus market confidence in S$ currency than domestic demand and circulation?

        Even if we take the white paper’s core assumption that dependency ratio of 2:1 is bad and scary, why is this ratio restricted to citizens? And why does the paper assume the “top up” of working adults must be converted to citizens?

        One can easily envision a sustainable population and liveable environment made up of ageing citizens, working citizens, foreign workers and young citizens with focus on (1) growing the proportion of the latter to allow a natural rejuvenation of the citizen population in the next one or two generations, (2) being ready to dip into the reserve (if Singapore’s reserves cannot be used for such rainy days, then what good does having the reserve do for its people) to support the ageing citizens, (3) lowering the cost of living to ease retirement costs and child-rearing costs.

      • 64 yawningbread 5 February 2013 at 17:22

        You asked: “And why does the paper assume the ‘top up’ of working adults must be converted to citizens?”

        So that the govt can claim that ‘Singaporeans’ will remain the ‘core’ of the population even in 2030. This claim will prove false if we only think of native-born Singaporeans — we will be a minority among the 6.9 million. ‘Singaporeans’ will only constitute a majority if the term includes newly-naturalised citizens.

        Sylvia Lim of WP made this point in parliament Monday afternoon.

      • 65 Fox 5 February 2013 at 23:27

        @ patriot,

        One problem that I foresee is that the liquid value of the assets is likely to drop when the demographic structure of the population changes. Hence, computing the value of liquid assets of retirees relative to retirement costs is not so straightforward. One immediate consequence of labour tightening is that wages would rise (good for young people who do most of the working) and company profits would fall (bad for old people who own more financial assets such as stocks).

        The other thing is that it has been remarked (not by the govt but by some economists in ADB) that the participation of foreign companies in Singapore’s financial market is somewhat dependent on Singapore’s demography. I do not know enough about this though to say anything more.

        I’ll respond to the rest of your questions later. Please bear with me.

      • 66 patriot 7 February 2013 at 09:43

        @yawning

        Alex, thank you for pointing out the conversion of foreigners to citizens to maintain a majority or higher proportion of Singaporeans. My question was to question the assumptions of this white paper, especially what we as a people want in our country vs what the pap wants. I think it is not worthwhile to pursue the path of discussing and classifying “true blue” Singapore citizens and newly minted citizens. This path is fraught with semantics, word smithing, petty arguments which will divert our attention from what I think is the crux of the matter – (1) that a dependency ratio of 2 working adults to 1 ageing citizen represents a demographic challenge, and (2) what are our guiding principles and values in our population policy.

        Debunking or proving (1) enable us to reject or affirm the basis of pap rationale for population planning. Questioning (and agreeing) on (2) will direct our attitude and actions on population.

      • 67 patriot 7 February 2013 at 10:13

        @ Fox

        Thank you taking time to respond to and discuss this.

        Re your first paragraph, may I know (1) what are the assets which will fall in value, (2) what do you mean by liquid value? Low prices due to lack of liquidity? (3) your assumptions behind your example of labour tightening? If it is a closed labour market and economy, yes wages will go up and business will suffer due to undersupply of labour and underproduction. But Singapore is not a closed market, listed Singapore companies are not restricted to this market and country, and our stock investments extend beyond local companies.

        Re your para 2, I’m interested to learn about such relationship between demographics and foreign participation in markets. Please share it with us if you can recall the source.

      • 68 Fox 12 February 2013 at 23:46

        @patriot: “Thank you taking time to respond to and discuss this.

        Re your first paragraph, may I know (1) what are the assets which will fall in value, (2) what do you mean by liquid value? Low prices due to lack of liquidity? (3) your assumptions behind your example of labour tightening? If it is a closed labour market and economy, yes wages will go up and business will suffer due to undersupply of labour and underproduction. But Singapore is not a closed market, listed Singapore companies are not restricted to this market and country, and our stock investments extend beyond local companies.”

        (1) The most obvious one would be property. The second would be stocks.
        (2) Liquid value refers to the value at which the asset can be converted to cash.
        (3) The long term trend in global demography also shows a decline in the dependency ratio. There aren’t really many places in the world now to invest where the fertility rate is not falling. When you invest in a country, you contribute to its economic development which in turn triggers a demographic transition to a low/lower-fertility stage. Just look at Mexico, India and China. Their birthrates have declined since 2000.

        You are probably thinking of a scenario where Singaporean elders can live off their investments. That is not likely in the future.

  22. 69 LYH 4 February 2013 at 21:10

    Well done. Answering this question of what is the tolerable dependency ratio with robust analysis will be a big first step in making a convincing argument.

  23. 70 Kim Lee 4 February 2013 at 22:24

    Calling all patriotic Singaporens here! Please get everybody you know to log on to Facebook page “Say no to an overpopulated Singapore” and give your support there. It is time Singaporeans stand up for their rights! Spread the word!

  24. 71 Kong Lu-ze 4 February 2013 at 23:55

    [Bamboozling the Singapore Populace - Old Age Support Ratio]

    One of the key argument to support the White Paper is the “Old Age Support Ratio”.

    Giving the impression that there will be fewer working citizens to support inactive seniors citizens and thereby burdening the working citizens as well as the Government (in terms of Health-care provision).

    First the definition as espoused in the White Paper is vastly different from those used in all other standard International usage.

    In the White Paper “Old Age Support Ratio” is defined as citizen above 65 over citizen working age 20-64

    In standard International definition, “Old Age Support Ratio or Rate” is the defined as ratio of economically inactive older persons over “working population”, instead of “working citizens” …

    By one change of terms from “population” to “citizens” the PAP has perverted the use of this indicator significantly !

    The “Old Age Support Ratio” supposedly “provides an insight into the potential future financial burden of care for the elderly, and especially pensions.”

    Singapore DOES NOT have a pension or social security system akin to the West – where citizens’ taxes contribute towards a pool of funds meant to be disperse back to citizens after old-age.

    In countries where there is a pension or social security system, as the Old Age Support Ratio gets smaller – it means less people to contribute towards the taxes (but more retirees to support) and therefore the greater burden on the government to provide and service the pensions to retirees.

    Singapore practices a citizens’ self-funded system for old age (CPF).

    The State does not need to provide or dispense any Government or State Funds to service pensions for retired Singapore citizens.

    Using the “Old Age Support Ratio” to hoodwink Singaporeans into believing that there will be less active population to support retirees is a FALSE STATEMENT!

    We DO NOT need to have a high Old Age Support Ratio because simply we DO NOT have a Pension or Social Security System that draws Government Funds to dispenses pensions to retirees.

    Singaporean saves and fund their own retirement through their own CPF contributions!

    • 72 Eiden 5 February 2013 at 18:45

      It may be true today that most Singaporean saves and fund their own retirement through CPF, the older generation such as our parents however may not have sufficient and need to be supported by us today. Not forgetting the non-working housewives.

      We have been constantly reminded by PAP that ‘someone has to bear and support the retired elderlies, and not enough people are doing this’ . So what I would like to know is this.

      Where is the evidence that these payments have gone into supporting them, particularly of the “singaporeans’ kinds? We have had additional 2 million + people admitted onto this tiny shore in the past decades, and without a cost-benefit analysis that these foreign workers payments are contributing to our elderly’s “longevity” or “better health”, their point simply doesn’t hold up. And as far as most can see, PAP only started scrambling to do more after the last GE 2011.

  25. 73 Pat Khaw 5 February 2013 at 09:26

    An insightful analysis. Here’s an article that more people should also read.
    http://www.theglobalist.com/storyid.aspx?StoryId=8321

    • 74 4eyes 6 February 2013 at 14:23

      Thank you for that link. Like you say, more people should read. “Ponzi Demographics”… lovely term for those con men, you know who I mean.

  26. 75 2CentsWorth 5 February 2013 at 10:21

    Kong Lu-Ze- While Singapore does practice a self funded CPF, a majority will not have sufficient CPF to last them through their retirement. there are other segments of the elderly that also do not have CPF, such as housewives. It would require prudent retirement planning for them to be self sufficient. Someone must then step in to provide essential support and services for the elderly. I am sure fingers will then be pointed to the Government to provide for such. question is where will the funds come from? For the medical infrastructure and services that are subsidized to the provision of elderly care centers and to many other services, funding needs to be provided. I think these are factors that need to be considered when we talk about Old Age support ratio.

    With CPF also linked back to assets, one also needs a healthy economy in order to translate these assets back to usable income for retirement. I am not sure about others but I am not comfortable with the notion of dipping into our reserves to serve the present needs. I support a nett neutral budget where expenditure is met by revenue. How long can we dip into our reserves? 10 years? 20 years? What happens after that? Are we kicking the can down the road for future generations to solve? I support the use of the reserves to develop our infrastructure but not to serve recurrent costs.

    The issues raised by the White Paper are real and should be of great concern to all. I do not agree with all parts of the White paper but I also feel that sometimes the conversation seems to be centered around the wrong focus. the figure of 6.9 mil seems to be the only thing that everyone is focused on. i would like to see more robust debate about what are the trade offs involved. What are the implications if we do not increase the population whether it is by raising the TFR or immigration. What then is the magic figure that we are talking about. If we settle for less foreigners, can we accept lower growth or is that always true? What else can be done? If lower growth translates to lower real income and wealth for all (an assumption?) can we live with it. With every other country striving for growth, is there a danger we as a nation become irrelevant and by-passed by others?

    I am a father of four kids. I have vested interest in Singapore as I am sure many of us in this forum have too. I am deeply concerned about what will happen to this country of mine. I hope to see constructive conversations and it is not about bringing down one political party or another or to engage in a blame game but I hope conversations will help address some of the concerns I have and help me understand what are the trades offs and what are the risks in a balanced way so that we can come to a consensus on how to bring Singapore forward. I visit Alex’s blog as I feel that this is one where considered views are given instead of vitriolic rantings. The conversations that goes on in parliament may be too limited. This is something that needs consensus from the nation in many areas and I do hope that the paper is not rushed through in 5 days and that’s it. It can and it should form the basis of the Singapore Conversation and policy makers can take the sensing from there to formulate future policies.

    • 76 CC 5 February 2013 at 18:50

      //I visit Alex’s blog as I feel that this is one where considered views are given instead of vitriolic rantings.//

      Counting on things going wrong makes it easier to count your blessings when they don’t ;-) But rest assured, after several letter of demands and retracted apologies, those MIW do keep a close eyes on this blog!

    • 77 eremarf 5 February 2013 at 21:08

      @2CentsWorth:

      Re: elderly retirement and CPF, but these elderly lived through decades of net surplus budgets. From a fairness perspective, why shouldn’t the surplus earned by their generation be used to support them in their old age? (As for budgets being balanced – Modern Monetary Theory argues against always having balanced budgets. Fiscal policy i.e. gov’t spending can be used as a tool to influence the economy, rather than just reacting to the economy.)

      Re: “I hope to see constructive conversations and it is not about bringing down one political party or another or to engage in a blame game”. It’s impossible to avoid being critical of a party that actively OBSTRUCTS constructive conversation. To the extent that the PAP obstructs constructive conversation – I must blame them. When they change, I will stop blaming them.

      Re: “i would like to see more robust debate about what are the trade offs involved…. etc etc”, “I hope conversations will help address some of the concerns I have and help me understand what are the trades offs and what are the risks in a balanced way so that we can come to a consensus on how to bring Singapore forward”…

      So would I. And some people have raised some of these here, e.g. YB himself, Rogueeconomist, Fox, and others, but only in general terms without much good data to substantiate things.

      What I find lacking is good evidence. People talk about general ideas, e.g. if population goes down, growth slows down. But how slow? Nobody ventures to support with case studies from similar countries, with analyses of historical Singapore data, with economic models, etc. (Incidentally, Scandinavia has posted pretty comparable rates of growth compared to the US, post WW2 to today – Acemoglu et al mentioned this when discussing cuddly vs cutthroat capitalism.)

      So long as the PAP does not release data, so long as they stifle academic and press freedom, we will not get good arguments and good evidence. How then can we understand the the true extents of the trade-offs?

      But then again – I think some things, we don’t need to approach from a cost-benefit, economics perspective. What about our value systems? What is fair and right for our elderly? For our children? For our working adults? Should these notions of fairness be tempered by economic/pragmatic considerations? Some of them. But surely there is a non-negotiable lower bound, some minimum standard?

      Also, like your comment: “If lower growth translates to lower real income and wealth for all (an assumption?) can we live with it” – this is perhaps a discussion about our values, our consumerism and materialism, rather than our policies. It’s more about articulating what we want for ourselves and our children. (BTW, given the drastic wealth inequality in Singapore – I think improvements in equality will improve more (low-mid-end) incomes than declines in growth rates will hurt (high-end) incomes, if we reduce foreign influx – but that’s a hunch again – no hard figures.)

      And also, things like open space, nature, Singapore culture, etc. These are hard to put a value to. These are the hard-to-value opportunity costs to the easy-to-value benefits of foreign influx.

      In case it helps, let me declare here that I want to live in a fair society. I want equal opportunities for my fellow man. I don’t want to see people’s (especially children’s) potentials crippled by lack of access to resources when others are drowning in wealth. I want people to be able to lead dignified lives. I want people to have access to leisure time, not be wage slaves. I want nature in Singapore. I want fresh, unpolluted air. I want to live in a less materialistic, less consumerist, more caring community. I want people to judge others based on things other than their ability to earn money. I want Singapore culture. I want to speak Singlish. I want to preserve heritage practices, architecture, art, food, etc.

  27. 78 Crap 5 February 2013 at 11:07

    Funny that finance minister Tharman boasted that S’poreans will have sufficient CPF funds for retirement, but now PAP is saying that we need more foreigners to fund our retirement.

    PAP, you can’t have your cake and eat it. Please stop dishing contradictory statements just to justify the issue of the day.

    • 79 yawningbread 5 February 2013 at 11:41

      To be fair, it’s not so black and white. Many services needed for the elderly are govt-subsidised, e.g. Class C and Class B hospital beds. As the numbers of elderly expand, the subsidy bill expands too.

      • 80 George 5 February 2013 at 14:43

        ” The obvious problem then is the support issue. In principle given the CPF compulsory-savings system the elderly are not meant to require support through tax transfers from active workers, unlike the pension systems in most other countries. However, CPF savings may not be adequate for a substantial proportion of the population.”

        Alex,
        the above quote from rogueeconomist provoked me to ask why can’t the govt use the collective CPF funds to build medical and other geriatric facilities for senior citizens? As you are aware all the various ‘deductions’ from our CPF are held back ostensibly to the day we (individually) would need it (if we are still around, that is, to ‘enjoy them’). In this sense, this is a passive and static approach, with the downside that our money loses value over time and the govt’s no-brainer solution (or was it a Machiavellian plot?) is to up the amount annually!

        Using lateral thinking, let me ask why can’t the govt instead use a portion of the sum, which would be a very significant sum collectively, to set up and run medical and other geriatric facilities for the seniors? Since it would in effect be paid for by the CPF members themselves, treatment can be heavily subsidised and the collection for treatment returned back to either run the system even more cheaply for users or credit back to the CPF members. There are many possible variations along this line, e.g. CPF members can be grouped by age group to determine their levels of contribution or a common deduction which means minimum possible cost per person.

        This is streets ahead of the current system where a member’s held-back money is totally kept in cold storage until ‘D’ day which some might never even see because they didn’t have the money for treatment to survive till that day arrived!

        The govt unwillingness to explore such possibilities says a lot about its lack of creativity or willingness to really try to solve the people’s problem. There certainly would be a host of operational and other issues to iron out, but not impossible, given the will and sincerity. Right now, there is too much of an impression that the govt is only reactive and not PROACTIVE to creatively problem-solve relevant issues or simply not sincere or interested to do this. The onus is on govt to show that the ministers and top civil servants are indeed earning their keeps.

  28. 81 Income levels and dependency ratio 5 February 2013 at 15:24

    There seemed to be another assumption at work in the White Paper that is worthwhile teasing out, I think. How does average income level affect the ‘ideal’ dependency ratio, if there is one?

    If the workforce earns a higher average real income over time, does it mean we can rely on fewer in the workforce and hence not be so ‘worried’ over a declining workforce, within limits?

    Of course the government knows it is far easier and quicker to import workers than to invest in education, workforce innovation and productivity improvements of its own citizens to enable the existing workforce to earn more.

    And if they can get away with it, as they have done so all along, why bother?

    • 82 eremarf 5 February 2013 at 21:21

      @ Income levels dude:

      Maybe a better way to put it is purchasing power.

      Like Rogueeconomist points out, declining population means that some things like housing gets more affordable – thus leading to an increase in purchasing power.

      You mention labour productivity too (and don’t forget – labour scarcity, e.g. from population decline, drives labour productivity) – and here is the discussion on the same issue in the US (dependency ratio vs labour productivity):
      http://www.cepr.net/index.php/blogs/beat-the-press/ezra-klein-srikes-out-big-on-immigration-and-demographics

      Also, wealth distribution matters. If wealth was more evenly distributed, we would see more retirees supporting themselves than relying on state support.

  29. 83 LKY 5 February 2013 at 19:00

    Excellent analysis! If the baby boom is an anomaly in sustainable demographics, then this white paper and the current govt is leading us deeper and deeper into a quagmire with no end in sight.

  30. 84 What's Khaw's Best Case Scenario ? 5 February 2013 at 23:59

    If 6.9 million is Khaw’s worst case scenario.
    Knowing these “people”.
    14 million is probably their best case scenario.

  31. 85 fpc 6 February 2013 at 07:36

    rubbish.

    so based on your logic, adding more adults will make dependancy ratio between now but it is already very high with non residents factored in.

    • 86 4eyes 6 February 2013 at 15:04

      Unlike some contributors here, I am not going to be able to dazzle you with data and statistics to back up my ‘claims’, but over the last few decades I’ve “grown up” with the distinct and bitter impression that the government is running the country as their private profit machine. Everything is to done their advantage, to promote and ensure the view that they are right, only they gain and everyone else should toe their line. They, the government, has inculcated and entrenched a mindset, which employers as a whole seem to have adopted, that only employers’ profits are important. Our so-called tripartite unions have hardly any say in employee benefits beyond very basic rights, the employers’ federation has more say and sway on policies. Anything that ‘threatens’ their profits is forbidden, for example, a basic minimum wage. The way I see it, the country is being run as the government’s private business. If you want numbers, look up Roy Ngerng’s well-researched article at either TheHeartTruths or therealsingapore on his “Last ditch attempt…”.

  32. 87 Hui Jin 7 February 2013 at 06:58

    Mr. Au, to grade this blog on scientific grounds, I have to give you “D” at best… let me explain …

    The white paper uses a concept “old-age support ratio”, aka “elderly support ratio”, it is measured by dividing the number of people between the age of 15-64 by that of those who are 65 or older. This doesn’t give you the exact ratio between those who work and those who don’t, but simple ratio allows for apples-to-apples comparisons between different countries and/or different periods of time.

    You calculated something totally different, plunging yourself into more details beyond a simple measurement is admirable, your calculation though changed the numerator and the denominator of the ratio so significantly, the comparison of your finding with government’s data is – pardon me – nonsensical. I love numbers but it’s painful to read through your blog and follow how you arrived at your numbers by devoting half of your blog to make assumptions with literally zero substantiation,it turns my stomach and I’m sure yours as well … On the contrary, you have to admire the simplicity of the definition of elderly support ratio, there’s no assumptions to be made, you can not spin it in any way, it’s a simple fact that no-one can argue with … but I digress

    Now it’s perfectly reasonable to doubt the whitepaper’s projected numbers and to reason that there might be a different way to solve the problem, this is what an intelligent and caring person like yourself should do, and I will always salute a concerned citizen. But instead you seemed to assert that even if the numbers were true, it would be no big deal, let’s instead get used to it. I think you’re very wrong and you are doing your readers a disservice – an elderly support ratio of 2.1 is indeed very troublesome.

    Population Reference Bureau’s 2010 world population datasheet put elderly support ratio at 9 worldwide, with Japan, Germany, and Italy (that group brought out a big wow from a history buff) at the lowest end of the spectrum at 3. To quote PRB’s president Bill Butz, one of the two major population trends is that “chronically low birth rates in developed countries are beginning to challenge the health and financial security of their elderly.”. With that, I guess you will agree that the whitepaper posed a valid concern.

    I don’t know enough to argue how the problem can be solved, I’m just a foreigner in this wonderful country for a company assignment. Like yourself I love numbers, that’s where your argument started on the wrong footing and fell way short logically, and that’s why this paper will not receive a passing grade in my class …

    • 88 yawningbread 7 February 2013 at 12:39

      I believe that you are referring to http://prb.org

      The first thing to note about PRB’s measure of “elderly support ratio” is that it too uses ‘people of working age’ to compare with ‘people of retirement age’. It does not use ‘people who are actually working’ against ‘people of retirement age’. You said that the latter is a more meaningful measure; I agree. That is why graphically, I wanted my readers to visually compare dark blue versus light blue.

      Unfortunately, the White Paper uses the former measure, and to be consistent, I should use the same. How have I changed the numerator and denominator?

      You refer to PRB. You might want to note that PRB’s numerator is ‘people aged 15 to 64′ as ‘working age’. The White Paper uses ‘people aged 20 to 64′ as ‘working age’, which in the Singapore context is closer to reality. I have followed the White Paper’s basis. So, it is the PRB that is the odd one out. By using ’15 to 64 years’ as ‘people of working age’ it overstates the number of people of working age; in the process it raises the elderly support ratio. In other words all ratios provided by PRB are optimistic by this degree.

      I invite you to look at PRB again.

      If you look at PRB’s data for Singapore. The elderly support ratio in 2010 is stated as 7 (which is somewhere in the same ballpark as the White Paper’s 2012 ratio of 5.9, allowing for optimism on the PRB side as mentioned above), while PRB’s 2050 projection for Singapore is 2.

      So, tell me how have I produced numbers that are “totally different”?

      Perhaps you’re saying that my Figure 3 is not based on real population data but totally hypothetical. Indeed the numbers used there were, and they were intended to be. I also said it very clearly that they were for a hypothetical steady-state population of 3.8 million. I wanted to show readers that their desire for a more stable population would entail a dependency ratio of 2.25. Perhaps you didn’t understand the inductive and theoretical nature of my argument?

      You made the argument that since no country in PRB’s list has a ratio below 3, my inductive/theoretical model that shows 2.25 can’t possbibly be right.

      If you look at data for 2010, indeed, three countries have the lowest ratio, at 3. They are: Japan, Germany, and Italy.But if you look at PRB’s projection for 2050 for these countries — unfortunately, they don’t have a 2030 projection — they are 1, 2 and 2 respectively. In fact, its projection for 2050 has 42 countries with a ratio of 2. Singapore is among them.

      Is my inductive result of 2.25 for a steady-state population absurd? So absurd that the inductive process should be junked?

      The second point you’re making is that I was wrong to make a value judgement that a resulting ratio of 2.1 (actually I said 2.25) is in your words, “no big deal”. You argue that it is going to be a big problem and the govt is right in saying so. You cited PRB’s president Bill Butz too.

      Did I say it was ‘no big deal’? I merely said its a reality we’re going to have to provide for. My exact words were: “We’ve got to learn to live with 2.25.” If anything I suggested that it would take herculean efforts to even get up to 2.25 — e.g. my suggestion that every adult be mandated to raise 1.5 children or pay heavy taxes. I am not dismissing the problems that come with a dependency ratio in the region of 2, but I am suggesting that if 2 is hard enough, aiming to maintain an even higher ratio (through huge immigration while allowing TFR to fall further) is to chase the rainbow.

      Much of the discussion by other comment-makers dealt precisely with how we’re going to deal with a steady-state or declining population. Some good points have been made about work-life balance and effect on property prices, etc.

    • 89 eremarf 10 February 2013 at 04:00

      Re: the numbers, it’s not complex mathematics at all. I’m not good at math and I can follow Alex Au’s reasoning and I find his assumptions okay.

      “On the contrary, you have to admire the simplicity of the definition of elderly support ratio, there’s no assumptions to be made, you can not spin it in any way, it’s a simple fact that no-one can argue with”
      >> Er… dude, any ratio or formula is very clearly defined and can’t be spun. That’s the nature of ratios and formulae. But a simple value for elderly support ratio (or values for Alex’s ratios/formulae) on its own doesn’t say very much. Such numbers are almost always employed as part of a narrative. And narratives (not ratio values!) are where the spin is.

      And Hui Jin, what do you really think the problem is? I mean, you say you have no solution, but I don’t even know what problem you don’t have a solution to. Maybe the first step is to identify the problem?

      I am thinking of some problems:

      1. One problem is fairness to the baby boomer generation. People produce and consume over the course of their lifetime, usually being net consumers in childhood and youth, net producers as adults, and net consumers again in retirement. It seems fair to help the elderly in Singapore in proportion to their level of contribution when they were productive. After all – Singapore’s economic boom must to some extent be credited to these baby boomers when they were working adults – so I wonder why the PAP takes credit for the economic boom years, but now doesn’t want to fork out more to support the old folks in retirement. Maybe we weren’t prudent as a society – not setting aside money in reserves, pensions funds, etc when we were booming. Or did we? How much reserves does Singapore have? Do we have CPF? Are they well-spent, in terms of maximising health outcomes per dollar (which brings up an efficiency problem – how to optimise outcomes)? (Not letting old folks use CPF to see doctors earlier sounds like forgetting “prevention is better than cure”, or are PAP thinking “but death is even better – then we won’t have to pay out the pensions”.)

      To sum up – the old folks contributed in the past. If they need support subsequently, it should have been covered from their contributions in their productive years. If their prior contributions can’t cover the cost of their future maintenance – why is that?

      2. We live in a world of wealth inequality. We have global and local problems with resource allocation. There are enough resources in Singapore to give every citizen good health, a good education, to take up jobs with good work-life balance, etc, but most of these resources are instead in private hands, and are not spent on productive investments (e.g. high tech manufacturing, start-up enterprises, etc), but instead on consumption of luxuries (Ferraris, etc) or on unproductive (zero-sum) investments, such as securing rentier rights (e.g. lobby groups of businesses protesting “labour crunches”, rich investors buying over commercial or residential properties to subsequently rent out, GLCs monopolising local markets), or leave the economy altogether (untaxed profits to MNCs). In such a world, the problem of efficient and fair distribution of resources is overwhelming, and its solution would more than solve the ageing population problem.

      3. We live in a world of declining energy resources and global warming. As oil becomes scarce, our time of plenty might be a thing of the past (unless we develop alternative energy sources comparable or superior to oil). Global warming will also be costly. Given such a situation, we should ask ourselves how we can lead fulfilling lives even as our ability to consume goes down. Why should a good life be tied to consumption? Why is consumption an indicator of status? Why is even having highly stratified levels of status in society good? So we can frame this as a cultural problem – we currently have a culture that leads to poor mental and physical health outcomes, that is wasteful of resources (we consume a lot of resources to derive little happiness), etc. Why not a cultural solution (change people’s attitudes, etc)?

  33. 90 R 12 February 2013 at 09:46

    http://sgratrace.appspot.com/household.html

    In Parliament, Acting Minister Chan Chun Sing defended the population paper by saying that slower growth will hurt the poor. Well, at least we don’t need 20/20 foresight on this one, because it has already happened. Despite the heady economic growth of the past decade, the data clearly shows the incomes of the poor have been suppressed for a long time. If you look at the actual numbers from 2000 – 2011, the average monthly income of the bottom 10% households rose by $175 compared to a whopping $12,000 for the richest 10%!

    It is meaningless to say that the poor enjoyed good income growth in percentage terms because their base denominator is very small.

    An interesting observation: a great income gap exists within the *top 20%* income group. You can see the gap is $12,000 in 2011 by comparing the “81st – 90th percentile” versus “91st – 100th percentile”. The gap was smaller at $6,000 in 2000. This shows how lopsided the economic growth pie is.


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