SINGAPORE'S POPULATION IS GRAYING, SOCIAL SPENDING IS PRESSURED

Sep 28, 2022

News Resource: Bloomberg

NEWS:

From Bloomberg, by 2030, a quarter of residents will age at least 65 years old. This news comes as a emerging pressure on social spending and healthcare. This is an upcoming pressure on government's expenditure. According to Singapore Population in Brief 2022, the old-age support ratio, residents aged 20 to 64 years per those 65 and above, fell to its lowest ever at 3.8 in June 2022, and is projected to fall further to 2.7 in 2030.

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ANALYSIS:

1, Why does this happen?

Singapore has one the lowest rates of fertility in the world and the birth rates have a negative trend. Singapore has a thriving economy and great career path so women have greater job opportunities than before. Also, society is more open now so women are free to choose to give birth or not, unlike in the past when women were obligated to give childbirth. More women delay childbirth because they are in favor of a career. Family size curtails and more women choose to be childless. Besides that, life expectancy in Singapore is reported to extend longer because the quality of life in the country is increasing.

2, What is Singapore going to face up with?

Rising healthcare costs: Graying population will cause Singapore to face greater costs of healthcare because the old need more healthcare treatment and often catch illness. Moreover, increasing life expectancy means better healthcare, nutrition, and sanitation. These treatments require expensive costs.

Rising pension: The gray population poses a threat of higher rates of retirement. The government will have to expand its pension budgets. This will raise the cost that the government has to spend.

Decreasing labor force: The population is graying so the number of retirees will increase. The number of residents who are at the age of working is outnumbered by the retirees resulting in a shrinking workforce. When the availability of workers reduces, productivity will decrease because of less production. The reduction of supply affects both domestic and international trade.

Reduction in national money supply: Since more retirements and fewer resources in the workforce, there will be a decrease in income tax and an increase in pension fees. This problem leads to a decrease in the national budget.

3, How does Singapore cope with this problem?

Source: www.sg, We Forum

Deputy Prime Minister Lawrence Wong launched the Forward Singapore exercise on June 28th, 2022. This is a nationwide engagement to gather opinions from the Singaporeans on the roadmap for the nation’s next stage of development.

The government invests in life-long learning initiatives to boost society's human capital potential as well as to promote personal development and social integration. For example, SkillsFuture is a national work-study programme launched in 2014 with $500 credit for students aged 25 to strengthen industry-academia interactions for students and mid-career professionals.

Singaporean universities support their alumni in lifelong study by providing fee-waived courses.

Singapore also employs other mechanisms such as social risk pooling to help individuals to want to expand their pensions earning jobs. This relieves wealth inequalities in society. Many jobs such as waiters, janitors, etc., are assigned to retirees.

There are schemes to finance Singapore with the costs of the nation’s aging population. The Central Provident Fund Lifelong Income for the Elderly (CPF LIFE) scheme provides coverage for the retirement income needs of Singaporeans. Another scheme, MediShield Life, provides life-long coverage for Singaporeans' hospitalization expenses, which can be understood as a basic health insurance plan.

4, How does the gray population affect economic growth?

Rising costs: Singapore will have to pay higher costs on healthcare and social development because of higher rates of retirement and an aging population. However, the number of the old outnumbered the workforce available in the country will cause imbalance and budget deficiency. Taxes won't be enough to fulfill the social costs so the country may run into debt.

Possible higher income tax: Workers are at risk of suffering from tax burden since the national money supply shrinks as the outcome of higher retirements. Increasing retirements will decrease the government's budget from tax. To get enough money supply to carry out crucial projects, the government has to increase income tax. As a result, there will be a decrease in income.

Possible higher industrial tax: Firms will also have to pay higher taxes to replenish the national money supply. Industrial tax rise results in the growth of firms since rising taxes cut budgets for investment.

Aging areas: Many areas, especially the outlined ones, are aging because the youth moved to central areas to get more job opportunities. The outlined areas are left with retirees and a lack of workers to develop the local economy.

Labor shortage: There are fewer residents at the age of working so the market faces a labor shortage. To cope with the lack of labor resources, companies implement robotic devices and automatic systems. This may result in unemployment in the long run because when childbirth rises up again, most jobs are replaced by robotic systems.

Rising number of foreign firms and workers: Because the country is aging, foreign workers are welcome to work in Singapore to refill the workforce. Foreign workers who seek career opportunities in developed countries with multinational markets like Singapore will come to work. As more foreign workers are living and working in Singapore, foreign firms will expand their branches to Singapore, and foreigners in the country may also start businesses in the country, not to mention that industrial taxes in Singapore are lower than in the majority of countries in the world. The Singaporean market will gradually become multicultural. Taking into this characteristic, Singapore will receive more international funds.