By Alisha Gill and Donald Low
The 2013 Budget points to a slowly changing governmental approach to Singapore’s social compact. More than anything else, it shows a government that is trying to find a new balance between its long-standing emphasis on individual responsibility and incentives with a greater willingness to expand social protection and increase the progressivity of the fiscal system.
The budgets of the last two years have seen the government increase funding for pre-school education, commit to a significant expansion in the country’s health and long-term care infrastructure, extend financial help to middle-income households who were previously excluded from most means-tested benefits, increase pay-outs under the Workfare Income Supplement (WIS) scheme, and subsidise wage increases for up to half the workforce over the next three years under the Wage Credit Scheme (WCS). In Budget 2013, the Finance Minister also promised that the ongoing review on healthcare financing would reduce Singaporeans’ out-of-pocket share of healthcare costs as these costs rise. There will also be more risk-pooling through Medishield and an expansion in the uses of Medifund. Apart from the shift towards more social protection, the introduction of the GST Voucher Scheme in Budget 2012 also demonstrates that the Government has overcome its long-standing bias against having permanent schemes which subsidise consumption.
Most Members of Parliament have praised these shifts. For example, People’s Action Party (PAP) MP Denise Phua described Budget 2013 as “the coming of age of a government that used to be wary of measures that smack of welfarism.” WP MP Pritam Singh commended the leftward shift that the Government has taken in Budget 2013, observing that for the longest time the state’s discourse has eschewed any positive reference to welfare. In the language of the Establishment, and by extension, Singapore society, “welfare” is usually used in negative and pejorative terms.
Nonetheless, in view of increasingly broad-based support for the Government’s efforts to strengthen and expand our social safety nets, it may be timely to ask what we are rejecting by the hollowing out of any positive content and associations from the word “welfare”, and examine how a persistently negative and pejorative use of the term may distort our thinking and limit our creativity in addressing inequality. As linguists and cognitive psychologists have shown, language shapes our thinking and channels it in particular directions. Language can also become a self-fulfilling prophesy. For instance, the frequent reminders of how the ageing population is an economic and fiscal burden, combined with forecasts of the rising old age dependency ratio and projections based on how the future old are much like today’s old, reinforce existing attitudes towards ageing and older people. Left unchecked, these images and projections will indeed materialise as people conform to these socially constructed roles. This essay explores how the Singapore government’s aversion to welfare, and much of what is associated with it, might have unintended consequences in terms of constraining our thinking and limiting our policy options in addressing the challenges of inequality, poverty and social exclusion.
What are we rejecting?
The welfare state combines the roles of a piggy bank and Robin Hood. The former implies collective insurance against social risks (such as unemployment, illness, old age and disability) and does not explicitly aim to reduce inequality; the latter aims to ameliorate need and poverty, and is therefore more explicitly egalitarian in terms of reducing disparities across income groups. Social insurance is designed for horizontal redistribution, seeking to reallocate income across the life course. There’s no explicit attempt to redistribute between rich and poor, although in practice social insurance often has the effect of equalising access to opportunities. Instead, the explicit goal of social insurance is to smooth an individual’s lifetime income and support individual well-being in the face of bad luck.
The Robin Hood dimension, on the other hand, exemplifies vertical redistribution. Equalisation, which is the explicit aim, will depend on how progressive the tax system is as well as the degree to which social benefits go mainly to the poor and middle-income groups.
Singapore does not reject all forms of redistribution. This is an important point to highlight because a redistributive system of taxes and transfers, which Singapore has always had in some rudimentary form, is the lifeblood of all welfare states and policies. The durability of this system and the enhancements that the Government has made to it over time suggests that the Government embraces this crucial feature of the welfare state. Singaporeans also support redistribution and this is signaled by their desire, expressed in the national conversation, for a society that helps the disadvantaged by maintaining a strong social safety net. The widespread support for redistribution hence raises the question of what we are rejecting through the pejorative use of “welfare”.
One answer to this question is to examine the aversions of Singapore’s founding fathers. Before that, it bears repeating that the first generation of PAP leaders was not against redistribution as such. In From First World to Third, Mr Lee Kuan Yew explains that a purely market-driven mechanism for distributing economic desserts was untenable. If performance and rewards were left entirely to the market, they would result in a competitive, winner-take-all society “[t]hat would make for social tensions because a society’s sense of fairness is offended”. Note that this defence of redistribution is exactly the same as that used in most western countries after the Great Depression and the Second World War to justify the expansion of welfare provision: that the welfare state is necessary to save capitalism from itself.
In practice, Mr Lee’s government did not shy away from taking unprecedented steps to redistribute incomes and wealth. Perhaps the boldest was the passing of the Land Acquisition Act, which gave the government far-reaching powers to seize privately owned land for public use at below market prices. In doing so, the PAP turned the government’s role as a protector of private property rights on its head. The Act made the Government the greatest threat to those rights. Importantly, through the Land Acquisition Act, the Government demonstrated that it had the will to use strong but legal measures to redistribute wealth; low-income families benefitted from the public flats that were built on the land sites that were seized from landowners. These families also reaped the gains from the increase in land value when they subsequently sold their flats.
So what did the first generation of leaders reject when they railed against welfare? We contend that they rejected redistributive policies which distorted or undermined economic incentives. This arose from their observation that the generous western welfare systems of the 1970s discouraged work, dampened productivity and economic growth, and were consequently unsustainable. Mr Lee Kuan Yew’s government thus preferred to “redistribute wealth by asset enhancement (e.g. public housing or the discounted sale of shares from the privatisation of state-owned entities) and not by subsidies on consumption”. Where subsidies were given on consumption, such as on healthcare, the Government insisted on co-payment to mitigate the risks of overconsumption. The wastage and abuse that arose out of poorly designed redistributive policies soured the concept of welfare.
The greatest blow to the word “welfare” was probably the narrative regarding the poor in society. Mr Lee Kuan Yew wrote in 2000:
“There will always be the irresponsible or the incapable, some 5 percent of our population. They will run through any asset, whether a house or shares. We try hard to make them as independent as possible and not end up in welfare homes. More important, we try to rescue their children from repeating the feckless ways of their parents. We have arranged help but in such a way that only those who have no other choice will seek it. This is the opposite of the attitudes in the west, where the liberals actively encourage people to demand their entitlements with no sense of shame, causing an explosion of welfare costs.” – From Third World to First, emphasis added.
The portrayal of the poor as irresponsible and incapable of helping themselves in spite of the government’s efforts to help them achieve self-reliance had two important consequences in terms of hollowing out positive content and meanings in the word “welfare”. First, the narrative presented poverty as caused not by external circumstances or forces often beyond the poor’s control, but by the poor’s individual failings. This is the “cultural deficit” argument that is often invoked against any expansion of welfare provision for the poor. Second, this description of poverty invited censure instead of empathy from the rest of society. It is hardly surprising then that welfare policies which have to be financed by the rest of society might offend the sense of fairness of many middle- and higher-income Singaporeans.
Distortionary effects of the pejorative use of welfare
Budget 2013 was self-described as a budget for “an economy and society in transition”. DPM Tharman said that during this transition, “we need to shift our thinking”, and that this shift must occur in individuals, the community, businesses, and in government. NMP Laurence Lien agreed but went further by calling for a more fundamental rethink of both Singapore’s economic and social policies. He argued that “[our] ingrained stereotypes and assumptions of economic and social problems can limit our ability to surface more creative ways of dealing with the challenges faced.” The pejorative use of welfare could be a mechanism by which the state has transmitted and entrenched stereotypes about the lower-income, and limits our thinking on what constitutes effective redistributive policies. This narrowing of our perspectives could also hamper our understanding of social problems, constrain our creativity in developing viable solutions to them, and undermine our efforts to learn from other countries that have constructed sustainable welfare regimes. As the forces of language are often hidden, it is well worth the effort to make our inherent assumptions explicit as part of this rethinking process.
Comprehension
First, the use of the word “welfare” frames the welfare recipient as someone who is irresponsible and incapable. As long as we accept this construct unquestioningly, we will remain blind to the other (more likely) causes of poverty and the poor will continue to offend the sense of fairness of the rest of society. In a recent book, So Rich, So Poor, on the intractability of poverty in America, Peter Edelman argues that many factors “cause poverty, are a result of it, exacerbate it, or all three, and the effects of many of these forces have increased over time”. In America, these factors include the rise in single parent households, poor education, involvement in the criminal justice system or foster care system, disability, poor physical and mental health, substance abuse, child abuse and domestic violence. These factors could be causing, results of, and/or exacerbating poverty in Singapore too. The failure to identify the multiple factors leading to poverty could result in policy interventions that might suffice for tackling one aspect of poverty but not the others.
Second, the use of the word “welfare” could also prime policymakers to instinctively and prematurely reject redistributive policies that seem to go against the grain of incentives. While policymakers ought to be wary of policies that clearly create the wrong incentives, they should also be wary of rejecting policies solely on the basis that these policies might distort incentives. For instance, it is often argued that higher marginal rates for personal income taxes would discourage work or undermine incentives for individuals to increase productivity and pay. Would they really? Economics says that it all depends. As the marginal tax rate on incomes is increased, the substitution effect predicts that people would substitute leisure for labour as the price of labour increases and that of leisure falls. But the income effect says that people would work harder to maintain their previous incomes and standards of living. Which effect prevails is entirely an empirical question, one that cannot be determined from first principles alone.
If the policymakers instinctively reject policies that appear to be economically inefficient simply because they are “welfarist”, the government’s range of options for addressing rising income inequality shrinks. Rather, policymakers should actively consider if the gains in equity outweigh or justify the losses in efficiency. The role of public policy should be to find an optimal balance between efficiency and equity, all the while informed by what society accepts as just and fair.
Learning
As Singapore grapples with the challenges of a maturing economy, slower growth and rising inequality, its social policies have to rapidly evolve to match the new social realities. DPM Tharman said as much in his round-up speech. This makes the task of learning from the experiences of others that have dealt with similar challenges all the more critical. Ideally, policymakers should approach this task with an open mind, and with a readiness to question existing assumptions and to shift the current balance between individual responsibility and social protection. Ideally, they should also be willing to learn from the successes and failures of systems different from ours. It will be most unfortunate if our long-standing bias against “welfare” primes policymakers to conclude that there is nothing to learn from systems that are more redistributive than ours. There are two ways in which this can happen.
First, policymakers may fail to identify the countries we can learn from. This may be the consequence of ignoring or failing to consider countries that pursue more liberal and progressive policies than Singapore. For instance, policymakers might instinctively rule out countries where public spending is much higher than ours on grounds that these systems are “too expensive.” Or they may hastily conclude that these countries are ethnically more homogenous and are therefore not relevant to Singapore’s context. This selection bias, or the instinct to only learn from countries much like Singapore, needs to be resisted. There is no necessary reason why we cannot learn from countries with a much larger public sector, or with more homogenous populations.
Second, policymakers may approach the task of learning from others with a naturally defensive mindset. For instance, they may begin their inquiry with a strong presumption that our system is basically sound. This assumption already constrains their ability to learn from other systems as they will be keener to find evidence that ours is a superior system. This confirmation bias – the very human tendency of seeking only evidence that confirms and reinforces our existing beliefs – explains why successful organisations often fail to change even when there is compelling evidence for them to do so.
Alternatively, policymakers may construct simplifying stories about particular countries or systems. For instance, they may look at the US’ fiscal woes and conclude that there is nothing worth learning about its fiscal system, even though there are some aspects of it – such as the independent Congressional Budget Office (CBO) – that offer useful lessons. Just because American politicians choose to ignore the CBO’s projections and dire warnings about the US’ fiscal position does not mean that the CBO and the values it embraces (e.g. fiscal transparency, non-partisanship) are not worthy of our emulation.
There is nothing intrinsically wrong with measuring the performance of our system against that of others. But the exercise becomes self-justifying, and ultimately self-defeating, if we choose to focus only on the dimensions that we do better in and not on others. Such a distorted exercise in “learning from others” makes us even more assured about our own policies. It gives us a false sense of security; focusing on the metrics in which we do comparatively well in allows us to construct a consistent story about how well things are working here. This assurance rests on false assumptions because it is based only on information that confirms our prevailing orthodoxies on “welfare”.
Conclusion
Language is not static because the narratives that underpin it may vary over time. The perspectives emerging from the ongoing national conversation, which includes a desire for a society that takes care of its disadvantaged, could be a force that alters and reshapes the thinking about welfare – both in government and in society. The government’s rhetoric too has shifted somewhat since GE-2011; it now places greater emphasis on inclusive growth. But its underlying assumptions, beliefs and world-views on welfare have remained mostly unchanged. This is probably because the pull of ideology, the drag of existing institutions, and old ways of thinking and doing things often exert a stronger hold on our minds than the less salient (and hence more easily ignored) needs of the future.
We will also not be well-served if the policy discourse were to shift so radically such that welfare comes to connote only positive things. That would be to trade one form of extremism for another. Instead, policymakers should be amenable to the flourishing of diverse views on welfare. They should neither shy away from disagreements nor should they be afraid to embrace a constant contest of ideas, even if this slows or lengthens the policy making process. Indeed, policymakers who wish to critically examine their notions on welfare can only do so if they operate in environments that do not put undue pressure on them to conform to a worldview which sees welfare largely in pejorative terms.
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Alisha Gill is a researcher and case writer at the Lee Kuan Yew School of Public Policy.
Donald Low is Senior Fellow and Assistant Dean (Research Centres) at the School.
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