WELFARE, HOUSING AND SOCIAL SECURITY IN SINGAPORE

SOCIAL SECURITY IN SINGAPORE

Unlike other advanced countries, there is no unemployment help and help for the poor is minimal. There are no welfare payments except for the elderly and handicapped. Political analyst Seah Chiang Nee says the poor are hardest-hit partly when had economic times strike because the city-state has virtually no social safety net. "'Subsidy' is a dirty word in Singapore. So when food prices go up, their budgets get affected," said Seah.

Singapore has not had welfare on the grounds it would discourage the incentive to work and damage the Singaporean worth ethic. In recent years there has been a call for financial assistance for the unemployed.

The national pension system is called the Central Provident Fund. It acts as both a pension system and corporation, making Singaporeans feel that they have a stake in their own country. The government forces people to save money for their retirement. According to Singaporean law, each Singaporean is required to set aside a certain proportion of his or her income for retirement purposes. The money is deducted from their pay checks. In the mid 1980s, the amount that businesses pay nto the fund was cut dramatically.

The Central Provident Fund is Singapore’s compulsory national social security savings plan. It was established in 1955 to ensure the financial security of all workers either retired or no longer able to work. Citizens and permanent residents are eligible to participate. Since the early 1990s, contributions of 40 percent of the gross wages of employees under 55 have been mandated, but employee and employer share the burden equally. Singaporeans can use these funds to invest in approved securities, to purchase homes in government housing projects, or to pay for hospitalization and retirement. The government makes major expenditures—43 percent of total government spending in 2005—for “social development.” Some 93 percent of Singapore residents (citizens and permanent residents) own their own homes. Of these, 72.3 percent reside in high-density buildings in four-room or larger apartments.

The government heavily subsidizes services in order to make them affordable to all and sets aside 6 percent of the monthly income of each worker into a personal Medisave account, which can be used to pay hospitalization costs for any family member. The Medisave account is part of the Central Provident Fund, which is Singapore's compulsory national social security savings plan. Contribution rates due to be phased in in the early 1990s mandate a contribution of 40 percent of the gross wages of employees under fifty-five, with employee and employer sharing the burden equally. Singaporeans can use these funds to invest in approved securities, to purchase homes in government housing projects, or to pay for hospitalization and retirement. By 1990 some 88 percent of Singaporeans lived in Housing and Development Board apartments, a vast public housing and urban redevelopment project initiated in the early postwar years. Under the program, which began in earnest after independence, Singapore's slums and ethnic neighborhoods gradually were replaced with modern housing estates, self-contained units providing shopping, restaurant, and recreation facilities as well as apartments of various sizes, scattered outward from the old central city. A network of superhighways and a state-of-the-art mass rapid transit system connect Singapore's housing estates with commercial and industrial areas. [Source: Library of Congress, 1989]

In 2006, Alex Au wrote in the Asia Times, On the surface, the government of Lee Hsien Loong “appears to have shaken its historical aversion to welfare schemes and taken on board providing long-term state assistance to a large cross section of the population. Singapore currently does not impose minimum wages, nor are there state-backed pension plans as in many Western countries. The government insists it will fashion the new assistance schemes in a way that avoids institutionalizing the economic lethargy and dependence inherent in Western welfare systems. Lee recently told parliament: "I would like to caution members that we should proceed with care ... it is a real slippery slope. And many, many social-welfare schemes which have ended up in serious trouble have started off with good intentions." [Source: Alex Au, Asia Times, November 23, 2006]

Housing Development Board (HDB)

One of the government's most important roles was the oversight of land use and development. This was a particularly critical issue given the country's minute size (636 square kilometers) and one of the most densely populated countries in the world. As pressure for economic growth increased, optimization of land use became more critical. Central to the issue of land management was another statutory board, the Housing and Development Board, established in 1960. Between 1960 and 1985, the government-owned board completed more than 500,000 high-rise, high-density public housing apartments-- known as housing estates--along with their related facilities were completed. By comparison, the British colonial government's Singapore Improvement Trust had completed only 23,000 apartments in its thirty-two years of existence (1927-59). From 1974 to 1982, the Housing and Development Board built and marketed middle-income apartments, an activity which became a function of the board after 1982. [Source: Library of Congress *]

By 1988 the Housing Development Board was providing housing and related facilities for 88 percent of Singaporeans, or some 2.3 million people--a feat that has been called urban Singapore's equivalent of "land reform." Government encouragement of apartment ownership was both an economic and a "nation building" goal because individual ownership would ultimately pay for the program while giving citizens a "stake in Singapore." The board also provided estate management services and played an active role in promoting the advancement of construction technology. As one of the country's major domestic industries, housing construction served as an important economic pump primer. *

Home owners were encouraged to use their Central Provident Fund savings to pay for the apartments. The factors determining the selling prices of apartments included location, construction cost, ability of the applicants to pay, and the practical limits to government subsidies. Resettlement policies aimed at equitable payments, minimal readjustment, and real improvement in housing conditions. In social terms, attention was paid to providing an environment conducive to community living, integrating the population, preserving the traditional Asian family structure, and encouraging upward social mobility by providing opportunities for home upgrading. *

Starting with a capital expenditure of S$10 million in 1960, the Housing and Development Board's annual capital expenditures rose to about S$4 billion by 1985. The board's capital budget, with funds obtained in the form of low-interest government loans, represented 40 percent of the government's capital budget. Selling prices, rent rates, and maintenance charges were determined by the government, and the board received an annual subsidy of 1 to 2 percent of the government's main operating expenditure.

Housing Development Board (HDB) Flats

The Singapore government’s Housing Development Board (HDB) is by far Singapore’s biggest developer. It was set up in 1960, during an acute housing crisis that faced the former British colony when many residents lived in squatter settlements or overcrowded units with poor sanitation. Between 1960 and 2008, it built 900,000 flats for 85 percent of the population. During its peak, flats were completed at a rate of one ever 45 minutes and applicants had to wait several years before getting a unit.

Bernice Han of Agence France Presse wrote: “Public housing is often associated with poverty-stricken slums and other social ills but Singapore's high-rise apartment blocks built by the government are an exception. Known locally as "the heartlands," these towers dominate the urban city-state's landscape and are home to more than eight out of 10 Singaporeans. Surrounded by lush greenery, these flats are built within self-contained precincts with easy access to amenities including man-made lakes for water sports like canoeing, and parks for jogging and cycling. Some include track-and-field stadiums and swimming pools. Smaller, older HDB complexes that lack these extensive amenities still have shops or a fresh market for meat and vegetables. Schools, libraries and medical facilities complete the heartlands living experience. [Source: Bernice Han, Agence France Presse, October 7, 2008 /+\]

“In his memoirs, Singapore’s founder Lee Kuan Yew wrote that he "was convinced that if every family owned its home, the country would be more stable". Mindful of bloody racial riots that scarred Singapore in the 1960s, the HDB has sought to bolster ethnic harmony within public housing estates. Every estate has a quota for the various racial groups. Once that quota has been reached, a prospective flat buyer has to seek accommodation in another neighbourhood.

Singapore is a multi-racial country where ethnic Chinese make up about 75 percent of its resident population of 3.64 million. Ethnic Malays account for almost 14 percent and ethnic Indians about nine percent. The integration policy has helped Singapore avoid the ghettoes commonly found in other countries, Tay Kim Poh, chief executive officer of the city-state's Housing and Development Board (HDB), told AFP. "I say that this is a very successful policy because if you look around the world, there is always a tendency for the different ethnic groups to congregate among themselves." Asked if the racial quotas are, in a way, restricting the freedom of Singaporeans to live where they want, Tay said: "We do not force people out." Instead, he said, HDB has enabled people of different races and religions to live side-by-side. "That, I think, has helped us over the years to bring people together."

HDB Flats Makes Singapore 'A Nation of Homeowners'

Bernice Han of Agence France Presse wrote: “Ninety-five percent of Singaporeans living in HDB flats own them. The rest are rented out to low-income earners. "Essentially we have housed an entire nation and created a nation of homeowners,"Tay Kim Poh, chief executive officer of the city-state's Housing and Development Board (HDB), told AFP. "I have not seen an organisation or country that has achieved this level of home ownership, so we are unique."[Source: Bernice Han, Agence France Presse, October 7, 2008]

Newly-built HDB flats are priced below market levels, making them markedly more affordable than private condominiums, particularly in a market where prices have soared over the past three years. A two-bedroom condominium unit can easily cost one million dollars (US$699,000) in sought-after districts. In contrast, two- and three-bedroom flats offered by HDB last year were priced from $100,000 to $402,000 depending on their size and location. Some are near the business district and offer a sea view.

The HDB's Home Ownership Programme, created in 1964, offers various schemes to help Singaporeans buy flats, the housing agency says. This scheme in June received a United Nations award for improving transparency, accountability and responsiveness in the public service sector. The HDB also offers housing loans at interest rates below levels charged by banks, he said. Mortgage repayments of HDB flat buyers generally make up less than 25 percent of their monthly household income, according to the housing agency. A newly-married couple planning to buy a resale HDB flat in the open market can get a grant of up to 40,000 dollars, for example, said Tay. These incentives have not come cheaply for Singapore, now one of Asia's wealthiest countries with gross domestic product per capita of S$52,994 in 2007.

With its emphasis on keeping flat prices affordable, the HDB loses money and requires government subsidies. "We are a loss-making organisation for a social purpose," Tay said with a smile. In the financial year to March, HDB received nearly $1.25 billion in government grants to cover its deficit, according to its financial statements. "If we provide homes to our people instead of renting them a home, they have a stake in the country," Tay said,

Welfare in Singapore: The Stingy Nanny

In 2010, The Economist reported: “One policy that Singapore shows no sign of reversing is Singapore’s antipathy towards public welfare. The state’s attitude can be simply put: being poor here is your own fault. Citizens are obliged to save for the future, rely on their families and not expect any handouts from the government unless they hit rock bottom. The emphasis on family extends into old age: retired parents can sue children who fail to support them. In government circles “welfare” remains a dirty word, cousin to sloth and waste. Singapore may be a nanny state, but it is by no means an indulgent nanny. [Source: The Economist, February 13, 2010 ++]

“The aftershock of a deep recession, which pushed unemployment among citizens up to 4.1 percent in September, 2009—high for Singapore—has not altered the popular belief that the dole is bad for society. The casinos, which open on February 14th, have already helped reduce unemployment, which by December had fallen back to 3 percent, seasonally adjusted. The government does run a handful of schemes directed at some of the needy, from low-income students to the unassisted elderly. But these benefits are rigorously means-tested and granted only sparingly. The most destitute citizens’ families may apply for public assistance; only 3,000 currently qualify. Laid-off workers receive no automatic benefits. Instead they are sorted into “workfare” and training schemes. ++

“Applicants complain that the process of seeking help is made tiresome and humiliating. Indeed that could be the point, supposing it deters free-riders. Officials take a dim view of European-style welfare systems, which are said to beget laziness. The Ministry of Community Development, Youth and Sports (MCYS), which administers the various schemes, says theirs are designed as a “springboard” to self-reliance. Getting people back to work takes priority over relieving any temporary drop in income. In a fiscal stimulus unveiled a year ago in response to the financial crisis, S$5.1 billion ($3.6 billion) was allocated for employment measures, including grants to companies to retain staff. Those who remain out of work can join a government training scheme; by December, 169,000 unemployed workers had done so. ++

“Many Singaporeans are wedded to their jobs and look askance at idleness of any kind. The government is leery of generous handouts, fearing they might undercut the work ethic while burdening taxpayers. But the thinness of the safety net also reflects a widespread article of faith, recited and reinforced over the years. Even among the social workers who work in hard-hit communities there is surprisingly little frustration at the meagreness of the handouts on offer or at the lengthy application process. One explains that Singapore needs to weed out undeserving claimants and shakes his head at the potential cost of a comprehensive welfare service. Yet in his next breath he mentions a number of local families who have been forced to sleep rough since mortgage lenders foreclosed on their flats. ++

“Nobody doubts that wealthy Singapore could be more generous. In 2008 the World Bank rated it the third richest country in the world, in terms of GDP per head at purchasing-power parity. And the idea that its Big-Brotherly government might be outfoxed by conniving welfare queens seems odd. When a visiting news crew filmed an elderly woman scavenging in Chinatown and bemoaning her homelessness, the government promptly identified her as a miserly flat-owner who did not need to beg. Indeed, acute poverty is hard to spot in Singapore. Public housing is in good shape; no slums are allowed to fester. Soup kitchens do exist, but foreign labourers are often first in line. ++

“But Singapore still faces the challenge of rising inequality in a society that is also rapidly ageing. By 2030, says MCYS, one in five Singaporeans will be over 65 (UBS, whose largest shareholder is Singapore’s sovereign-wealth fund, has estimated the date at 2020). Incomes have stagnated or even fallen at the bottom of the spectrum, as the rich pull further ahead of the middle classes. Long-term unemployment among middle-aged professionals, who do not qualify for workfare, is on the rise, says Leong Sze Hian, a financial expert and blogger. ++

“Native resentment is also growing against the influx of migrant workers: 35 percent of the workforce of 3m is now foreign. It is often cheaper for companies to import semi-skilled and unskilled workers—there were 680,000 at last count—than to hire locals, who require pension contributions. Official reassurances that migrants create growth do not convince those competing for scarce jobs. Lee Kuan Yew, Singapore’s founding father and still its "minister mentor" has maintained that ambitious migrants help to keep citizens on their toes. In an interview given to National Geographic last July he said that if native Singaporeans lag behind “hungry” foreigners because “the spurs are not stuck on [their] hinds”, that is not the state’s problem to solve. ++

“This nascent backlash may eventually soften the anti-welfare tone set by Mr Lee. The Economic Society of Singapore (ESS)—not exactly a radical cell—recently proposed to a government committee that it should build a more robust safety net, starting with unemployment insurance. This would promote social stability and help muster public support for Singapore’s open-door migration policies, it argues. Properly designed, such measures would not create disincentives to work and thrift. “While self-reliance is a good principle in general, it may be neither efficient nor just if taken to extremes,” noted the ESS. ++

Singapore Vows to Create 'Social Safety Nets'

In July 2012, AFP reported: “Singapore will create a new culture ministry in a bid to "focus on building a cohesive and vibrant society" amid simmering discontent over immigration and income gaps, the prime minister said Lee Hsien Loong restructured his cabinet and vowed to boost "social safety nets" as he announced in a statement the creation of the Ministry of Culture, Community and Youth. One of the new portfolio's tasks will be to promote "harmonious communal relations", said the statement, which comes as tensions mount between native-born Singaporeans and foreigners, mostly mainland Chinese. [Source: Agence France Presse, July 31, 2012 \~/]

“More than 37 percent of the 5.2 million people living in Singapore are foreigners, many of whom have taken up citizenship and employment in the city-state in recent years. The government has tightened visa and citizenship rules following complaints that jobs have been taken away from Singaporeans and a strain put on transport, health care and other public services. As part of the cabinet reshuffle an existing ministry will now focus on social and family development. "We need to strengthen our families and enhance our social safety nets to help those in need," Lee said. \~/

“The ruling People's Action Party (PAP) suffered its worst electoral performance in May 2011 when nearly 40 percent of Singaporeans voted for the opposition, after a heated campaign heavily influenced by social media. The PAP managed to hold on to 81 of the 87 seats in parliament thanks to a controversial system of block voting, but it was shaken by an outpouring of scorn against the government via Facebook, Twitter and independent websites. \~/

“Lee did not give details on what social safety nets he intends to boost, but government critics have been demanding greater attention to the fate of low-income Singaporeans, especially the elderly. Young couples have also complained about a lack of public housing and childcare facilities despite a government campaign for them to produce more babies in order to reverse the decline of the native-born population. \~/

“Acknowledging the newfound power of social media, Lee said in his statement that "we have to improve public communication and engagement, so as to reach out more effectively to our increasingly diverse society". The 60-year-old leader posted a less formal announcement about the cabinet changes on his Facebook page, set up last April along with a Twitter account. "Reshuffled the Cabinet today," he wrote. "These changes will help us to serve Singaporeans better. I hope that all Singaporeans will give my team your full support, and work with us to build a better Singapore for all."

Image Sources:

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, Singapore Tourism Board, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Foreign Policy, Wikipedia, BBC, CNN, and various books, websites and other publications.

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© 2008 Jeffrey Hays

Last updated June 2015

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