National Solidarity Party

Singaporeans: Bold & Beautiful

Population Plan for Singapore: Pausing the Growth in Foreign Workforce & Improving Fertility Rate
By

National Solidarity Party

Bryan Long Hazel Poa Ravi Philemon Tony Tan

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Executive Summary 1 This Paper seeks to: i. Point out that population density adversely affects fertility rate. Looking at the data both internationally and domestically, we can see that when population density increases, fertility decreases. This is supported by independent research in Austria. Increasing our population to 6.9 million by 2030 is therefore likely to further depress our fertility rate, creating a vicious cycle. We need to focus on improving our fertility rate if we want to continue growing our economy with minimal social problems. Point out that the declining old age support ratio (OASR) in 2030 does not justify bringing in new citizens now. Firstly, economic support of the aged is shared by the whole labour force including citizens and non-citizens. Granting citizenship is not necessary. Secondly, if the low old age support ratio is a concern, then the foreign labour force should only be increased when OASR (calculated using the whole labour force, not just citizens) falls too low, not now, when our OASR is very high by international standards. In fact, bringing in adult new citizens now further add to the size of our aged population beyond 2030. Conclude that low fertility rate and declining OASR are not the reasons for the liberal immigration and population growth plan. Point out that our foreign labour policies is depressing the wages of lower skilled Singaporeans and driving up income inequality

ii.

iii. iv.

NSP proposes to: i. Focus on improving fertility rate by addressing families needs on housing, education and cost of living: HDB: (a) HDB housing for joint selection by first timers and parents, i.e. young couples and their parents select their flats together so that they can choose separate units close to each other (e.g. within the same block but at different levels), for easier child care arrangements and future eldercare arrangements. (b) Remove resale levy for parents to move near their child (c) Stop shrinking HDB flats (d) Free upgrade to larger flats (upgrade by one room, max 5 room flat) with 3 or more children Education (e) Primary 1 registration priority for children in families with 2 or more children (f) Further subsidies for tertiary education: 2nd child to enrol in local tertiary education institutions pay half the fees, 3rdand subsequent child free (g) Abolish PSLE to reduce stress, and the need to pay for supplementary classes for parents who can ill afford them

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Others (h) Free delivery and hospitalisation for 3rd and subsequent child (i) All benefits for children to similarly apply to single parents, not for economic reasons, but because we empathise and we care ii. Focus more on wage growth and overall quality of life rather than immediate economic growth: (a) New citizens limited to under 10,000 per year (b) Pause the growth in foreign workforce until productivity grows at more than 1.5% and public infrastructure has been expanded (c) Uniform quota of 33% for S Pass and E Pass (d) Higher Development Expenditure for Densely Populated Singapore 3 PAPs population plan places at its core immediate economic growth. It continues to believe that economic growth, however derived, will lead to better lives for the people. Their proposal is a continuation of current policies, but with added promises that infrastructure will be built up quickly to accommodate the larger population, one that grows at about 94,000 per year on average. 4 The trade-off will therefore continue to be the same: higher population density, overcrowded public spaces and infrastructure (which may be relieved if the government can keep to its development plans and schedule), unequal distribution of income, limited resources being shared by more people, higher asset prices, higher COE, and higher cost of living. 5 Contrary to its claim, there is no sustainability in this plan. Even if we accept the PAPs assurance that growing the population to 6.9m by 2030 will bring about greater prosperity for many Singaporeans, what happens after 2030? Grow the population some more? 6 Over the longer term, seeking productivity growth is still what we will have to come back to. We need to stop kicking the can further down the road. 7 NSP would like to offer Singaporeans an alternative plan, one which is more sustainable, focusing more on wage growth and overall quality of life rather than immediate economic growth. We therefore propose to pause the relentless rapid growth in population, give time for Singaporeans to raise their fertility rate, a chance for lower income Singaporeans to level up their wages, and create the necessity for companies to innovate and to raise productivity, ultimately lifting everybodys wages over the longer term.

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Part 1: Population Density and Fertility Rate 1. Singapore has been inducting new citizens at a rate of 16,000-20,000 per year in 2009 to 20111. We have been told this is due to our low fertility rate and ageing population. 2. The National Population and Talent Division did a projection of our citizen population and presented 5 scenarios as shown in figure 1 below to justify an annual intake of about 15,00025,000 new citizens.

Figure 1 Citizen population under 5 scenarios

Source: Straits Times, 25 April 2012

3. Since the governments solution to our low fertility rates involves massive increase in foreigners, as high as 19% in 2008, and Permanent Residents (PRs), as high as 11.5% in 2009, it is appropriate to examine how population density and the percentage of foreigners in the population may affect fertility rate. Figure 2 below shows the fertility rate of various countries.

Figure 2 Fertility Rate vs Year (1995-2010)

Source: http://www.worldbank.org/

Population in Brief 2012, 2011 and 2010, NTPD

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4. For comparison purposes, we look at the fertility rates of a few European countries, USA, Japan, South Korea, Hong Kong, Macau and Singapore. Of these countries, all except Singapore has seen an improvement in their fertility rates over the last decade. Macau, Hong Kong and Singapore shared one of the lowest fertility rates. 5. By examining the population density graph in figure 3, it is observed that the regions with the highest population density also have the lowest fertility rate. The correlation is even stronger when considering Singapores fertility rate from 1995 to 2010 (See Figure 3c).

Figure 3a Population Density vs Year (1995-2010)

Source: http://www.worldbank.org/

Figure 3b:2010 Fertility Rate vs Population Density (International)

2.5 2 fertility Rate 1.5 1 0.5 0 0 5000 10000 15000 20000 25000

Population Density

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Figure 3c: Singapore Fertility Rate from 1995 to 2010 vs Population Density
1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 5000 5500 6000 6500 7000 7500

Fertility Rate

Population Density

6. The graph in figure 4a quantifies the percentage of foreigners in a country and it suggests that regions with the highest percentage of migrants in its population also have the lowest fertility.

Figure 4a Percentage of Immigrants vs Total Population versus Year (1995-2010)

Source: http://www.worldbank.org/

7. Figure 4b examines the correlation between the percentage of foreigners in a country and fertility rate. The correlation is weaker.

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Figure 4b: 2010 Fertility Rate vs Migrant Population (International)

2.5

Fertility Rate

1.5

0.5

0 0 10 20 30 40 50 60

% Migrant Population

8. A study by researchers working in 3 research institutions in Austria also reached the conclusion that population density is a key factor in declining human fertility. Their report is available at http://link.springer.com/article/10.1007/s11111-007-0037-6.

9. Increasing our population to 6.9 million by 2030 is therefore likely to further depress our fertility rate, creating a vicious cycle. We need to focus on improving our fertility rate if we want to continue growing our economy with minimal social problems.

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Part 2: Old Age Support Ratio (OASR) 10. The government has also used the declining old-age support ratio (number of those aged 2064 for each aged 65 & above) as the reason for bringing in hordes of new citizens each year. This is shown in figure 5 below. Why is this argument spurious?

Figure 5 Old Age Support Ratio for Singapore

Source: Straits Times, 25 April 2012

11. The economic support of the aged is shared by both citizens and non-citizens in the workforce. The above OASR is calculated using only citizens, thus making the burden appear heavier than it actually is. While OASR in other countries is also generally calculated using only citizens, few countries in the world has such a high percentage of foreign workforce as Singapore (as shown in figure 4a). 12. Figure 6 shows the various OASR, calculated using (i) citizens only, (ii) residents only, and (iii) residents and non-residents. Our current old age support ratio (OASR) is 5.9 when we only consider citizens, 6.7 when we include PRs, and 9.8 if we include both residents and nonresidents.
2001 Citizens Only Residents (Citizens &PRs) Residents and Non-Residents 8.2 8.8 11.6 2006 6.9 7.8 10.2 2011 6.3 7.2 10.5 2012 5.9 6.7 9.8

Figure 6 Old Age Support Ratio for Singapore 2001 2012 (See Annex A for details.)

13. An OASR of 9.8 makes us one of the highest in the world. Annex B shows the OASR around the world in 2008. Turkey had the highest OASR of 9.9 in OECD in 2008. China had an OASR of 7.9 in 2008. The OASRs of US, UK, Germany and Japan in 2008 were 4.7, 3.7, 3.0 and 2.8 respectively.

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14. The OASR is especially important to countries with a pension system as their working population need to generate sufficient tax revenue to pay the pensions. In Singapore, however, most of our working population have moved away from the pension system into the CPF system, with the exception of Ministers. 15. Given that our OASR is currently high, there is no reason to bring in new citizens now. This is because when we bring in new citizens of working age now, they become part of our aged 20 30 years later, contributing further to our aged population in 2030 and beyond. 16. If low OASR is the reason for immigration, we should only start to take in people of working age when the OASR has fallen below a comfortable level. In addition, we challenge the necessity to do so by granting citizenships instead of merely granting work permits or employment passes. If the intention is to attain the economic contributions of foreigners, the same can be achieved by granting them the necessary permits to work in Singapore. Upon retirement, they can return to their home country. 17. Conversely, if we grant citizenship, we also take on the responsibility of taking care of them after retirement, and they will also contribute to our aged population thirty years later. In this day and age of global mobility, the granting of citizenship also does not ensure that the new citizens will continue to work in Singapore. It is also foreseeable, and understandable, that new citizens would wish to bring in their parents, further adding to our aged population.

18. Therefore, declining OASR cannot be the reason to justify liberal immigration. Citizenships should not be granted liberally in order to maintain a citizen population number. It should be granted where individuals have contributed to the nation, and are able to fit well into local culture and values.

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Part 3: Negative Productivity Growth & Suppressed Wage Growth for Lower-income Singaporeans 19. While NSP acknowledges that the increase in new citizens and non-citizens will lead to growth in the workforce and in turn, contributes to Growth in GDP (see figure 7), excessive growth in non-citizens will bring about 2 ills: negative productivity growth and suppressed wage growth for the lower income Singaporeans.

Figure 7 Growth in GDP

Source: MTI

20. Though our government has set a target growth of 2-3% productivity growth target, our current 2012 negative quarterly productivity growth (see figure 8) looks worrying, and it indicates that we are growing our labour force faster than the growth in goods and services produced. 2008 Total Labour Productivity -7.3% 2009 -3.6% 2010 11.1% 2011 1.0% Qtr 1 -2.2% 2012 Qtr 2 -1.5% Qtr 3 -3.5%

Figure 8 Total Labour Productivity

Source: Singapore Department of Statistics and Manpower Research & Statistics Department, Ministry of Manpower

21. A breakdown of the foreigners in 2012 in Singapore is as shown overleaf in figure 9. Nearly half (46%) of the foreigners in Singapore are Work Permit Holders excluding foreign domestic workers (WP will henceforth be used to represent this category of foreigners working in Singapore) and more than half of the WP is employed in the manufacturing and construction sectors. As Singapore strives to move up the higher value added industries, it makes sense for Singapore to limit the number of WP. 22. Furthermore, the ease of access to cheap labour through WP further depresses the wages of the lower income Singaporeans and creates an income divide. An extract from Paper by MOM and Singapore Department of Statistics titled: Singaporeans in the Workforce confirmed that lower income Singaporeans did not enjoy any real income growth (i.e. growth in earning merely keep pace with inflation) from 2001 to 2010, even while real economic growth for Singapore increased by 75% over the same period. Extract from Paper:

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Figure 9 Breakdown of Population in Singapore in 2012

23. The government should continue to restructure the economy, moving Singapore towards higher value-added industries. In the long run we can no longer be cheaper and faster, or cheaper and better. We need to be better and faster, and accept the fact that we will be more expensive. Singapore should limit the number of foreign workers. In doing so, companies will have to restructure with Singaporeans as their core employees. Lower income Singaporeans working in these industries will benefit by earning higher wages, as companies would have to pay better to attract locals to take up these jobs.

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Part 4: NSPs Proposals (I) Improving Fertility Rate 24. We need to be more aggressive in raising our fertility rate. The Baby Bonus scheme has been in place since 2001 and our fertility rate has continued its steady decline for the past 12 years. They have been proven ineffective. Further tweaking the quantum of bonus is highly dubious and raises questions about the Governments level of commitment to raise the fertility rate. 25. In the recent parenthood survey, the average number of children couples intended to have is 2.2, but the actual average number of children they ended up having is only 1.5. NSP recognises that marriage and having children are personal choices, but for those who would like to have more children, we should make it easier for them to do so. 26. The main obstacles facing parents who would like to have more children are as follows: (a) High cost of greater living space for more children The high correlation between population density and fertility rate underscore the importance of sufficient living space. In Singapore, high property price is a significant barrier. (b) Education Financial burden of tertiary education and pre-school, high stress education system are issues parents need to grapple with. (c) High cost of living makes dual income a necessity for most households. Long working hours and stressful working life leaving little time and energy for raising children and childcare arrangement is a huge concern. 27. NSP proposes the following: HDB: (j) HDB housing for joint selection by first timers and parents, i.e. young couples and their parents select their flats together so that they can choose separate units close to each other (e.g. within the same block but at different levels), for easier child care arrangements and future eldercare arrangements. (k) Remove resale levy for parents to move near their child (l) Stop shrinking HDB flats (m) Free upgrade to larger flats (upgrade by one room, max 5 room flat) with 3 or more children Education (n) Primary 1 registration priority for children in families with 2 or more children:

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Phases Current Criteria 1 Child with a sibling in the school 1A 2A(1) 2A(2) 2A(3) 2B 2C Parent is a volunteer, or member of connect church/clan, or active community leader Others Parent is in the Alumni, or member of School Advisory or Management Committee Parent is an old student or teacher in the school

Proposed Criteria Child with at least 2 other siblings (i.e. parents have 3 or more children)

Child with 1 other sibling (i.e. parents have 2 children)

Figure 10 Primary 1 registration priority for children in families with 2 or more children

(o) Further subsidies for tertiary education: 2nd child to enrol in local tertiary education institutions pay half the fees, 3rdand subsequent child free. (p) Abolish PSLE to reduce stress, and the need to pay for supplementary classes for parents who can ill afford them. Others (q) Free delivery and hospitalisation for 3rd and subsequent child (r) All benefits for children to similarly apply to single parents, not for economic reasons, but because we empathise and we care (II) Citizenship and Foreign Labour Force 28. At the heart of our policy proposals, is the core consideration that the well-being of our people should come first, including that of the weakest members of our society. Economic growth is desirable only to the extent that it improves the quality of life of Singaporeans. 29. NSP refute the argument that massive import of new citizens and foreign workers are needed because of our low fertility rate and ageing population. We contend that this policy will further aggravate our low fertility rate and lead to a vicious cycle. With our OASR at 9.8, high by international standards, there is no justification for further increase in our foreign workforce now for demographic reasons. In future, closer to 2030, if we are still unable to raise our fertility rate, and our OASR falls below 4, we can then reconsider the import of foreign labour for demographic reasons. 30. The only reason for further immigration is for economic growth, but this growth has come at a cost of greater income inequality, overcrowded public spaces and infrastructure, higher asset prices, higher cost of living, and higher social friction. This does not enhance the well-being of Singaporeans.

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31. NSP proposes the following measures: a. New citizens under 10,000 per year NSP supports that talented and distinguished individuals be embraced as citizens. Our natural increase in citizen population (birth minus death and those who renounces citizenship) is about 20,000 to 25,000. NSP proposes that new citizenships be limited to no more than half of that, i.e. 10,000 per year. At the same time, we should strive in the next 5 years to improve our fertility rate. b. Pause the growth in foreign workforce until productivity grows at more than 1.5% and public infrastructure has been expanded WP(workers earning less than $2000 per month excluding Foreign Domestic Workers): Pause the growth in the number of work permit holders so that wages of lowerincome Singaporeans are not further depressed. In 2011, we have 464,000 Singapore residents earning under $1500 per month. We have brought in 685,400 work permit holders to compete with them for jobs. This has resulted in a large downward pressure on the wages of the poorest Singaporeans. If the number of work permit holders continue to increase while productivity declines, the wages of lower income Singaporeans will be further squeezed. Companies that wish to expand will either have to offer higher wages to attract locals, or innovate to produce more with less manpower thus improving productivity. c. Uniform quota of 33% for S Pass and E Pass Currently, a quota of 20% is imposed on S pass holders (those earning between $2000 and $3000 per month) while there is no limit to the number of E pass holders (those earning at least $3000 per month) a company may employ. NSP proposes to impose one uniform quota of 33% throughout for equal protection across all salary levels. This also removes the incentive for fraudulent declaration of salary to benefit from the lack of quota for E Pass. d. Higher Development Expenditure for Densely Populated Singapore Over the past two decades, the proportion of development expenditure versus operating expenditure has been dropping. In FY 1996, development expenditure was 40% of the total expenditure, while operating expenditure was 60% of total expenditure. In 2001 36%, 2009 26%, and in 2011, development expenditure has dropped to 25% of total expenditure. We have been under-investing in our public infrastructure developmental projects. We need to adjust our budget to put more into building public infrastructure, especially housing, healthcare and transportation, and less on operational budget, in order to support our population and economic growth strategy.
1996 Development expenditure (S$million) Percentage of Total expenditure Operating expenditure (S$million) Percentage of Total expenditure Total expenditure (S$million) $9,600 40% $14,500 60% 2,001 $9,999 36% $17,846 64% $27,844 2006 $6,412 21% $23,463 79% $29,875 2007 $6,983 22% $24,352 78% $31,334 2008 $8,880 24% $28,590 76% $37,470 2009 $10,612 26% $29,871 74% $40,483 2010 $11,295 26% $32,755 74% $44,049 2011 $11,761 25% $35,011 75%

$24,100

$46,771

Figure 11 Development and Operating Expenditure 1996-2011

Source: Singapore Budget

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Impact on Businesses and Prices 32. It is anticipated that pausing the growth in foreign workforce will lead to renewed claims of shortage of manpower from some companies that rely on cheap foreign labour. It is often claimed that Singaporeans just do not want to do certain jobs. 33. Recently, Sakae Sushi offered $3000 per month for dishwasher jobs. Their HR Department said they received many applications. This shows that it is not just about the nature of jobs, but also the salary that is offered. If the salary is raised sufficiently high, there will be takers. If a certain job is onerous, there will be few takers until the salary is raised high enough to compensate. If that gets too high, higher than the cost of automation or job redesign, companies will choose to automate or redesign jobs, thereby increasing productivity. However, when we allow companies easy access to cheap foreign labour, this adjustment process is hijacked and salaries remain low for these jobs. 34. Companies with healthy profit margins should be able to adjust to the higher manpower cost at the lower income level. They can either (i) accept lower profit margins, (ii) re-distribute salaries amongst the higher-income and lower-income staff and directors, or (iii) raise productivity. 50.5% of Singapores GDP in 2011 is corporate profits. 35. However, we do recognise that there may be some small local SMEs without the healthy profit margins to adapt to the higher salaries at the lower end, and may not have the resources to automate. To help them maintain their cost, we can (i) be more lenient in applying the quota for the very small SMEs employing no more than 5 employees, and (ii) look at reducing other components of their overall business costs, particularly foreign workers levy, transportation cost and rent. These, however, will be the scope of another subsequent paper and touches on other Government policies. 36. It is therefore possible to maintain the overall business cost by adopting a multiple-thronged approach. In any case, a rise in wages of say 10% will result in an overall rise in cost of less than 10%, if other components remain unchanged. Supposing wage cost is 30% of overall cost, then a 10% rise in wages will raise overall cost by 3%. The resultant price increase of 3% can be covered by the 10% increase in wages. 37. It is necessary for businesses reliant on cheap foreign labour to adjust their business models sooner or later, even if the Government does not apply the brakes. The rapid economic developments in other countries are leading to higher wages in their home countries such that it would no longer be attractive for them to come to Singapore to work for low wages. The supply is going to dry up and alternative solutions will be needed.

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Conclusion 38. PAPs population plan places at its core immediate economic growth. It continues to believe that economic growth, however derived, will lead to better lives for the people. Their proposal is a continuation of current policies, but with added promises that infrastructure will be built up quickly to accommodate the larger population, one that grows at about 94,000 per year on average. 39. The trade-off will therefore continue to be the same: higher population density, overcrowded public spaces and infrastructure (which may be relieved if the government can keep to its development plans and schedule), unequal distribution of income, limited resources being shared by more people, higher asset prices, higher COE, and higher cost of living. 40. Contrary to its claim, there is no sustainability in this plan. Even if we accept the PAPs assurance that growing the population to 6.9m by 2030 will bring about greater prosperity for many Singaporeans, what happens after 2030? Grow the population some more? 41. Over the longer term, seeking productivity growth is still what we will have to come back to. We need to stop kicking the can further down the road. 42. NSP would like to offer Singaporeans an alternative plan, one which is more sustainable, focusing more on wage growth and overall quality of life rather than immediate economic growth. We therefore propose to pause the relentless rapid growth in population, give time for Singaporeans to raise their fertility rate, a chance for lower income Singaporeans to level up their wages, and create the necessity for companies to innovate and to raise productivity, ultimately lifting everybodys wages over the longer term.

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Annex A Age Old Support Ratio in Singapore 2001-2012

2001 Residents Citizens Residents and NonResidents Number of Residents ('000) Percentage of Residents aged 65 & above Number of residents aged 65 & above ('000) Number of NonResidents ('000) Number of Nonresidents employed (000) [Assumed to be aged 20-64] 8.8 8.2 11.6 3325.9 7.3 242.8 812.1 2006 7.8 6.9 10.2 3525.9 8.4 296.2 875.5 2011 7.2 6.3 10.5 3789.3 9.3 352.4 1394.4 2012 6.7 5.9 9.8 3818.2 9.9 378.0 1494.2

686.2

713.2

1157.0

1177.0

Basis for the calculation 1. Data are obtained from Ministry of Manpower and Singapore Statistics, and State of the Elderly in Singapore 2008/2009 by the former MCYS. 2. The non-residents who are employed are all aged 20-64. 3. The non-residents employed exclude those who are students and dependents of citizens/PR/work pass holders.

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Annex B Age old Support Ratio Around the World

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Annex C Distribution of Foreign Workers in the Various Industries

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