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Is PAP becoming more welfare oriented?

I predicted not too long ago that the government would become more welfare oriented at a forum organized by Gilbert Goh in 2011. My predictions were not based because PAP would have a change in mindset, but because of necessity and with a huge fiscal reserve, the government can afford to have a more balanced budget in the future. In fact, going forward and if everything else remains constant we’d see more balanced budgets in the years to come.

govt here to help

Photo: Internet

My assumptions are based purely on econometric projections, if the government has a huge reserve and since we are investing our monies in economies which are growing at a rate which is faster than ours; the external wing of our economy is self-sustaining. So there is little incentive to grow the external wing by extracting rent from the locals.

Besides, what our economy requires is a shot in the arm and it is also politically prudent to do so. Our local industries, particularly the SMEs need to be revitalized. The government has probably come to the realization that growing the GLCs at the expense of SMEs is hurting the people. And if you’ve been paying close attention to Hsien Loong and team, they will probably push our GLCs to focus in the regional economies so that SMEs can grow domestically.

But growth in the domestic sector will be sluggish in the next couple of years. With rising cost of living (and it seems like they will be able to tame this beast for the moment) and because of cutting down on the intake of foreign labour, our SMEs will take time to adapt to the new cost structures.

Putting the moral issues of whether the workfare subsidies reach employees and about the profligate use of tax-payers’ monies, any injection into the circular flow of income will boost GDP by a factor of 1.8- 2 times of $3.6B. Hence, the revision of our GDP projections from 1% -3% to 3% – 4% in the next three years. Good GDP growth and a more social focus seems like a good recipe to win over those sitting on the political fence.

According to some analysts, the COE prices are also likely to decline in the next few months/years. And Khaw is likely to keep a lid on HDB prices and even bring it down to tolerable levels. It is also quite unlikely that Khaw would adopt the suggestions put up by SDP, as it Pareto inefficient i.e. as some home owners may be adversely affected by this policy*. (I mean no disrespect to the ex Chief Economist of GIC who endorsed it. To be fair, he said that it is worth looking at)

It seems like the arguments for minimum wage is based on grounds of morality rather than good economics or politics. A minimum wage of S$1200 would more likely to benefit our foreign workers and foreign domestic workers. While we speak of greed and all that (and enough of that rubbish), the real test is whether we are willing to pay S$1200 for our maids (Foreign Domestic Workers) at home. It just seems to me that this policy would be hugely unpopular as it would affect about 600,000 people in Singapore. Unless the minimum wage policy is aimed purely at locals, in which case, the policy makers would be criticized of being home biased or exploitative of foreign workers,  cos their (FW) wages may be lower than the minimum wage floor.

Increasing our population to 7M maybe arguably good economics (still I’m not totally convinced by this) but it is definitely poor politics. It seems like the government wants to grow our population in order to drive domestic consumption and growth. There are some benefits from this exercise, but the key concern is that some Singaporean workers may be displaced (and the PAP knows this). On the flip side, there are more opportunities for locals to set up businesses as the consumption base would be bigger.

There are more reasons now than ever to implement social programmes to keep the electorate happy. And speaking of PAP trying to keep us happy, we may even get free bus rides during off-peak hours. How about throwing in a free lunch at Jack’s Place and free Dim Sums for tea? For some, that would be enough to win their “trust.”

*I do confess that I have not read the whole population paper by SDP in its entirety and if there are any differences of opinion, I’d be happy to publish their response on my blog. 

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1 Comment

  1. ALL says:

    Haha, nice suggestion for this free lunch at Jack’s Place or dim sum for tea!

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