Ethos Issue 3, Oct 2007

Security with Self-Reliance: The Argument for the Singapore Model
Lim Xiuhui

Singapore's system of social security is based on enabling self-reliance, supported by strong family and social networks.

While the concept of social insurance is never used to describe Singapore’s social safety net, it is often used to describe those of welfare states. The term “insurance” is evocative. Insurance is typically taken out against high impact, low probability events over which the individual has relatively little control. Hence, there is no insurance against suicide, but there is insurance against falling ill.

In a welfare state, it is often taken for granted that no one would choose to do anything that they knew would lead them to become destitute. Hence, anyone in that situation must have come to be so due to forces beyond his control or knowledge and, in a compassionate society, would be entitled to a relatively good standard of living, supported by the more fortunate members of society.

However, just as there are certainly things we can do to make it much more likely that we will fall ill (such as smoking or not exercising), so the Singapore model is based on the premise that people can often take steps to avoid the need for public assistance, for instance by saving in their earlier years, or relying on family and community support.

PRINCIPLES OF THE SINGAPORE MODEL OF SOCIAL ASSISTANCE
It is because we believe incentives towards self-reliance matter that Singapore’s social assistance policies require people to exhaust their own resources, those of their families, and those of the community, before turning to the Government for help. This belief is often presented as the three principles of our social safety net, namely:
• Self-reliance: Assistance, not welfare; mutual obligation, not entitlement
• Family as the first line of support
• Many helping hands

Put together, these three principles are actually part of a single over-arching principle—that government help must be the last resort.

If we do not uphold this principle, we believe that people will modify their behaviour to become more reliant on the state than would otherwise be the case. This would reduce the incentive for the low-income group to provide for themselves and improve their lot.

Hence, Singapore’s Public Assistance Scheme,¹ which can be seen as social insurance against becoming destitute, has eligibility criteria more stringent than those of most welfare states, and gives a lower amount of benefits.

KEEPING THE TAX BURDEN LOW
In order to fund welfare payments and social assistance services for lower income groups, welfare states impose high taxes on the higher-income group. Singapore, too, has a progressive regime of taxation: roughly only the top third of workers pay income taxes. However, while the distribution of taxation is progressive, the absolute amount of taxes is low. For example, income tax revenue is 7% of Gross Domestic Product (GDP) in Singapore,² compared to 29% in Denmark.³

Again, the underlying assumption in Singapore is that incentives matter. Not only might high taxes induce a brain drain of talent in the higher brackets, the lower-income group would have less incentive to upgrade their skills and work hard, particularly if they knew they would be well taken care of by the state. This would reduce the competitiveness of Singapore’s economy overall.

CHILDREN IN THE NON-WELFARE STATE
To a large extent, the Singapore Model adopts the philosophy that more generous social assistance should be extended to children, who cannot be expected to exercise full self-reliance. Spending on children’s education is the one area in which Singapore most resembles a welfare state: Education is of high quality and very low cost, and primary school education for citizen children is not only an entitlement, but also compulsory.

However, there are differences. While children cannot control their destinies, parents are expected to exercise responsibility for their families. For instance, whatever social assistance we provide for children should not translate into incentives for parents to have more children than they can provide well for. Otherwise, we risk doing more harm to future generations who may become caught in a vicious cycle of poverty and reliance.

Hence, while children’s kindergarten and primary education are heavily subsidised by the Government, regardless of the number of children a family has, childcare is not. Additional childcare assistance for the low-income working mother is available only for the 1st to 4th child, and rates are lower for the 3rd and 4th child. The Baby Bonus is likewise available only up to the 4th child. Unlike in other states with a more liberal welfare system, we do not give parents a yearly cash grant per child they have.