SINGAPORE: Parents can look forward to paying less for pre-school from January 2020, as

subsidy amounts will be increased across all eligible income tiers.

The increased subsidies were announced as part of measures to support marriage and parenthood,
details of which were provided at a joint media conference on Wednesday (Aug 28) by Manpower
Minister Josephine Teo, Minister for Social and Family Development Desmond Lee and Dr Amy
Khor, Senior Minister of State at the Ministry of Health.

In a media release outlining the details of the new scheme, the Early Childhood Development
Agency (ECDA) said that families with a gross monthly income of S$3,000 will pay S$3 a month
per child at anchor operator pre-schools, as the maximum additional subsidy will be increased from
S$400 to S$467. This is on top of the S$300 basic subsidy. Today, families with a gross monthly
income of S$3,000 pay about S$70 a month per child at anchor operator pre-schools.
Families with a gross monthly income of S$5,000 qualify for a maximum additional subsidy
of S$340 - an increase of S$240.Those with a gross monthly income above S$7,500, who are
currently not eligible for the additional subsidy, will also qualify.  Families with a gross monthly
income of S$8,000 will be eligible for a maximum additional subsidy of S$190. And for those with
a gross monthly income of S$12,000, they qualify for a maximum additional subsidy of S$80.

Mrs Teo, who oversees population matters, said pre-school education is “prominent” on the minds
of Singaporean parents. 
“All of us would like our children to do well. We want to provide as best as possible for the
children, that’s number one.” 
She also stressed the growing importance of full-day childcare services for working parents, and
improving the affordability and accessibility of such services. 
Those who are still unable to pay can apply for further financial assistance, said Mr Lee. 
“For instance, start-up grants are available to defray the initial costs of enrolling in pre-school, such
as uniforms and deposit.” 
In his National Day Rally speech, Prime Minister Lee Hsien Loong announced that Singapore’s
annual spending of about S$1 billion on early childhood education will “more than double” over the
next few years, as the Government looks to make pre-schools more affordable.
He also announced that the gross monthly household income ceiling will be raised to S$12,000, up
from S$7,500 for additional subsidy and S$6,000 for the Kindergarten Fee Assistance Scheme
(KiFAS).
This will extend the means-tested subsidies to 30,000 more households, or over 60 per cent of
households in Singapore.
Mr Desmond Lee also announced that ECDA will expand the partner operator scheme for childcare
operators and a small number of quality kindergartens in 2021, as the current term for partner
operator centres ends in 2020. 
The fee cap for childcare partner operators will also be slightly lowered from January 2021. The
current fee cap for full-day childcare partner operators is S$856 after GST. 
“Kindergartens that join as partner operators will have to meet conditions to ensure accessibility,
quality and affordability for all segments of the public.” 
There are currently five anchor operators and 23 partner operators. As of August, they manage a
total of 822 infant care centres, childcare centres and kindergartens.
Mr Desmond Lee also said the Government aims to lower fee caps at government-supported pre-
schools  “in the medium term” so that families pay about S$300 per month after  basic subsidy, to
match that of primary school fees plus after-school student care fees. 
“Lower- to middle-income working families will continue to receive more help, and pay even less
with means-tested preschool subsidies.” 
He added that 80 per cent of pre-schoolers will have a place in government-supported pre-schools
by 2025. This includes anchor operators, partner operators and MOE-run kindergartens, which
account for just over 50 per cent of pre-school places today. 
More anchor operator pre-schools will be built in areas of demand, especially estates with young
families, he added, and void deck space will continue to be set aside for pre-schools.

“By ensuring access to affordable, good quality preschool, we will give every child a good start in
life, regardless of their background,” said Mr Lee. 

“With these enhancements, we hope to reduce concerns about the cost of putting children through
preschool, and that working parents will have greater peace of mind knowing they are supported in
their parenthood journey.”

Source: CNA/ad(mn)
 ECONOMICS FIRST COMMENTARY MICROECONOMICS

This article is about the Singaporean Government providing additional subsidies to pre schools to make
education affordable for all income earners and thus increase parenthood and marriage rates. Subsidies are
financial aids given by the government to encourage the production of certain goods. These
influence the demand and supply of the goods they are imposed on as they change the equilibrium
price (where demand and supply are equal) of the market.

Making pre education cheaper causes an increase in the number of children enrolling therefore raising the
literacy rate of the country. In the long term this might also cause an increase in the skilled labour force
available for firms in the market. All these constitute external benefits of the service ie the service creates
positive externalities of consumption. To what extent the subsidy would be impactful for the society to work
towards the cause will be discussed in this research. As education is a merit good, the government has
subsidised the sector to overcome underconsumption and avoid market failure.

As there is an underconsumption
or underproduction
of such merit goods, the
government must have
intervened and to some extent
corrected the difference
between the Marginal Private
Benefit and Marginal Social
Benefit curves to provide the
society with the socially
optimum level of benefit it
deserves. There is a welfare loss
in the society due to this
situation which is denoted by the
shaded triangle.
In the diagram the supply curve represents both private and social marginal costs, while the demand curve
represents the marginal private benefit of education in Singapore. As there are external benefits to the society
as stated earlier ,the marginal social benefits curve is above the marginal private benefit curve. The graph
shows that the society is most efficient when Quantity Q OPT is produced at a price POPT which implies that
there are QOPT number of people getting education at fee amount of POPT, however this never happens as the
market equilibrium is always adjusted to the private’s benefit and therefore a Quantity Q S is produced at a
price PS. By this we can understand that there are more benefits that the public can experience than it
currently is and there are less number of people receiving education in Singapore. This can be also denoted
by QOPT - QS.

The impact of the subsidy will be to reduce the costs of production for the schools and this will shift the
MPC curve outwards (The size of the MPC curve shift will depend on the value of the subsidy imposed on
the market) as shown in the diagram below. If the subsidy is applied correctly to the market this means the
socially optimal level of output will be produced i.e there will be Q OPT number of people getting education.
Due to this there will be no external benefit that the market has not experienced and thus the market will
function efficiently
that means the the
Early Childhood

Development Agency(ECDA) will be successful in reducing the fess amount to P OPT.

According to the article this subsidy “is on top of the S$300 basic subsidy”. This maybe due to the difficulty
to calculate the value of the positive consumption externality for this good due to which an additional
subsidy is required. To ensure that the subsidy has 100% effect on the market the Singaporean government
has to ensure that the total shift of the marginal private cost curve must equal to the subsidy amount.
Otherwise the fees amount may not be decreased to POPT and the market could fail.

The objective as stated in the article is “to support marriage and parenthood” although there are more
significant long term benefits to the government by subsidising the pre-schooling department as discussed
already. The government has also adjusted the subsidy value to different income owners which means that
that people will be helped by the government based on the income they earn. This indicates that the
government believes in equity, which gives them extra benefits such as less funds however may attack the
high end income earners. There is also an opportunity cost to this action which could be beneficial in
obtaining the required objective like adjusting home loans for couples in Singapore which may also serve as
a way to increase marriage rates in the country.