Tag Archives: Population

Immigration – “Plan C” for Calvin Cheng

I originally wrote the below article as an exclusive for The Online Citizen under the title “False dichotomy of Singapore’s options”. I am reproducing it here with their permission.

Calvin Cheng’s recent article for Yahoo on the fate of immigration policy in the wake of the Little India riots is thought-provoking if not a little condescending. In it he juxtaposes the current plan for a population of 6.9 million, driven by the population white paper, with his own “Plan B” – a vision of Singapore with almost no immigration. In framing the debate thus, Calvin presents a false dichotomy between ultra-liberal and ultra-conservative immigration and it should be obvious that there is a third way, a more sustainable “Plan C” which balances the demographic challenges facing Singapore in coming years, with a more productive economic model less reliant on foreign workers who are often exploited.

The problem with the white paper

Calvin claims to have “seen the statistics, the facts” and states that current immigration policy is “anchored on irrefutable facts and figures”. In the context of his article, it is clear that he is referring to the population white paper and the path it lays out towards a population of 6.9 million. Yet both Calvin and the white paper make the same very peculiar mistake, and their conclusions are anything but irrefutable. The supposed link between demographics and the need for immigration relied on by both is actually extremely weak, and the “facts and figures” in the white paper make this point very clear. While it may be true that without immigration Singapore faces a shrinking citizen workforce, the demographic trends charted in the white paper state that this will not happen until 2020. So the “bleak” future described by Calvin is actually quite a long way off, and cannot be seen as a valid justification for the policy of today which he nonetheless supports. Furthermore, there is still no obvious reason why Singapore’s population should need to increase as dramatically as planned. To offset a shrinkage, one obviously only needs to add enough resources to maintain things at their current level, and for this reason the case for 6.9 million was never supported by the demographics arguments made out in the white paper. To put it simply, there is almost no correlation between the demographic challenges upcoming and the immigration policies concocted in response. This weak link between policy and its justification leaves many sceptical as to the real motives behind this most controversial of government schemes.

The problem with plan B

The plan B Calvin describes as an alternative to the population white paper appears to be not much more than a practically zero immigration straw man argument which almost no one has previously spoken for. It describes a relatively unpleasant vision for the future with Singaporeans working in construction, as well as doing “all the other manual work” now done by foreign labourers, and is a plan we are informed comes with “painful” social costs. We are warned that bus fares would have to increase if Singaporeans are to work as drivers, yet does anyone remember fares going down as Chinese drivers have been hired in increasing numbers? Conversely, no mention is made of the jobs Singaporeans do not shun, such as working as cabin crew for Singapore Airlines, but which are done increasingly by immigrants as locals are discriminated against by government-owned companies in the local labour market.

Clearly this Plan B is extremely flawed. Dependent as it is on apparently negligible levels of immigration, it is one which has apparently been plucked from the opposite end of the policy spectrum from the white paper and has been garnished with various unpalatables in the hope that Singaporeans will reject it in favour of current policy. Yet the false dichotomy presented between these two options of extremely high and extremely low immigration should be obvious. Clearly, there is a third path, one with some immigration required for example in construction as well as to offset demographic changes, but not so much that Singapore’s population balloons unsustainably towards seven (or even eight) million.

Plan C for Calvin Cheng

A more moderate and balanced immigration plan C can be characterised with a simple phrase – “steady state normality”. Steady state means we don’t need to keep growing the population indefinitely into the future, a more sustainable idea might be to plan for overall population numbers to remain steady in the long-term, and the current population can become the “new normal”.

The first immediate outcome of not endlessly inflating the population is that we do not need to continually import more construction workers to build more houses for more people. While today there may be a shortage of housing which needs to be addressed, in the long-term this need should tail off. A similar argument can be made for malls and MRT lines if not perhaps for hospitals in an ageing nation. In planning for steady state normality therefore we effectively pull the plug on some of the biggest drivers of immigration, hopefully alleviating some of the major social costs at the same time.

The flip side to not continuing to pump up the population is that the economic balloon called Singapore Inc will also not be inflated. Yet apart from government ministers with GDP linked bonuses, it is not clear who really loses out in that case. Singapore is already an extremely rich country, in GDP terms one of the richest in the world, but it is also one with an extremely unequal distribution of wealth. The challenge for Singapore today should be much less about making the pie bigger, and much more about sharing it more equally. There are obvious ways to achieve this, many of which are unrelated to immigration, but one idea would be to bring back estate duty which may have the added benefit of encouraging a few Ferrari driving wealth managers off the overcrowded roads.

In fact, if we accept a long-term steady state population plan, many of the concerns raised in Calvin’s article are diminished or removed. There won’t for example be lower tax revenues, certainly not while the local workforce continues to grow until 2020, and not after 2020 either, because we should allow some immigration to make up the difference. Even if there were a smaller tax base, the difference is likely to be tiny compared to the billions in surpluses typically collected every year, and would be further offset by a proposed estate tax. Obviously then there would also be no need to dip into the reserves.

Surely there are gaps and flaws in this plan C, but it is just a starting point. The most important thing to bear in mind is that current policy together with Calvin’s plan B represent an obvious false dichotomy which should be rejected. There are other more sustainable options available to us, which chart a path somewhere between those extremes of very low and very high immigration. I don’t claim any unique insight into exactly where that path should lead, but it is a direction that should definitely be explored.

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[Updated 1] Triple confirm. “Tightening on foreign labour” was a lie.

Updated: The editors at TRE pointed out quite rightly that the increase in the number of foreign workers coming to Singapore is on target this year to be less than in previous years. Whether this “reduction in the increase” represents a tightening rather than a “slower loosening” is debatable. The chart below appears to show that the overall trend is mostly unchanged. However, the most important questions still remain. In light of increasing unemployment and decreasing wages, can the government be said to have delivered policy results that benefit Singaporeans? Despite lots of noise around a “tight labour market”, it would appear not.

Government claims to have been tightening on foreign labour could never be reconciled with a population white paper that laid out a path to GDP growth through massive immigration. As I wrote at that time, propaganda rather than policy changes appeared to be driving the debate. The truth – that the government is not tightening the inflow of foreign workers – has recently been revealed by three pieces of information released by the government itself. These revelations leave many in government with some explaining to do – why so much focus on the problems associated with a labour shortage when one does not appear to exist. On the contrary, the problems caused by an over abundance of cheap foreign labour – stagnant wages and increasing unemployment – are very much still present and, if anything, worsening.

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Ten billion in Singapore? Who is being extreme Professor Ng?

I read recently the report on TRE of a speech given by Professor Ng Yew Kwang in support of the government’s hugely unpopular economic and population policies. Surprisingly for a professor of economics his arguments were extremely weak and practically un-hinged from reality. To see an intellectual of such supposed standing resort to ludicrous anecdotes and analogies in support of government policies that are harmful and unsustainable was shocking. In fact his arguments were so poor that he incited the ire of many TRE readers who were ferocious in their criticism and ultimately inspired the professor to respond. Unfortunately the professor’s response was just as disappointing and so I would like to point out what I see as the main flaws with his reasoning.

First of all the professor makes the classic mistake of dividing the world into two groups – those who understand him and those who do not. Of course to those who understand are delivered thanks whereas those who do not are described as extreme and emotional. The professor in his ivory tower presumably does not countenance the hypothesis that he may in fact be incorrect in any respect – a very unscientific and dull-headed position to take.

The professor in his reasoning seems to enjoy reminding readers of the Singapore of the 1960s. So, who is being extreme? Comparing today with the period a few short years after independence is practically the most extreme position one could take – the only more outlandish points of view would be to either indulge in time travel to the future, or rewind to the days colonialism. By making the most extreme comparison possible the professor, who is educated enough to know better, undermines the credibility of his argument.

Next up, as an economist, the professor must understand the importance of data and statistics. In spite of this, he launches straight into anecdotal evidence in support of the efficiency of Singapore’s transport system. You see, apparently, there was this time (once) where the professor just missed catching a bus, but by the power of Lee Hsien Loong and 5.3 million helping hands, SMRT were able to provide for another bus to arrive “less than 1 or 2 minutes” later. Are we supposed to be impressed? Is this story, which the professor would have trouble citing in Wikipedia, never mind an academic journal, supposed to convince us of the benefits of a higher population?

To be fair, the professor attempts in his reply to back pedal from some of his more ludicrous original claims – what originally was “we should also think, if each person pays the same tax, same amount to spend on the road, if we half the number of people, then the width of the road will probably also be halved” becomes “Of course, the widths of roads in Singapore will not be halved overnight if half of the people disappear overnight”. But the point is still massively unconvincing. Apparently we are supposed to look at long-term trends. Then what is the long-term trend? If not overnight, then how many years would it take for the roads to shrink by half? Will the government gather up all the saved space and put it to more productive use, like house building? Of course not, in fact the professor tries to wriggle out of the argument with his assumption that tax and spending have to rise and fall in tandem with population, and, most tellingly of all he says “facilities should be expanded in the long run”.

This is the key point – that “facilities should be expanded”, but the government have completely and utterly failed to expand infrastructure or engage in house building on the necessary scale to support their unsustainable policies. We can help the professor to understand the point by providing a more coherent and less extreme comparison than the one he makes with the 1960s. In 2003 Singapore’s population was 4.1 million, today it is over 5.3 million – an increase of almost 30% in ten years. Is ten years enough of a long-term window for the professor’s theories to bear fruit? If I go back to the Singapore of 2003 will I be able to observe roads that are 30% less wide? I am no economist, but I can tell you the answer to this question is no. I think if you measure Geylang Road, Tanjong Katong Road, Haig Road, Joo Chiat Road or any other road you care to mention, I am sure you will find the size has not changed in a uniform fashion in line with population and available spending. And this is after ten years. In another ten years, with the population white paper having been passed by parliament, the situation will surely have only got worse. How long does the professor want us to wait?

Let us look at the MRT as well. Ten years ago, if you take the train from Eunos to Tanjong Pagar in the morning rush hour, I think the experience will not be too bad. Even five years ago it still seemed manageable. But now it is practically unbearable. Has the width of the MRT increased by 30% in the meantime – of course not! The argument is ridiculous. There may be a few more trains running with higher frequency, but it is clearly not enough. There is even an extra line – the circle line – but it is hardly an option for people who rely on any of the other lines or are not willing to move to TPL’s constituency to take advantage of it. So again, the population driving investment theory is completely unsustainable.

In fact, the professor knows his argument is unsustainable – he even admits it. “However, up to certain limits, the law of diminishing returns due to the limited land size is more than offset by … ” It should be obvious that I do not need to finish the professor’s quote, his argument is dead in the water with his admission that there is a limit beyond which population driving investment does not more than offset the benefits. Singapore is beyond this limit. Far far far beyond. This much is obvious to anyone and it is the reason thousands of Singaporeans attended the historic protest at Hong Lim park recently. The professor tries to steer us away from this line of thinking with another extreme piece of logic, that is “we cannot put 10 to the power of 10 people into the island of Singapore”. Of course not! That would be ten billion, and there aren’t even that many people in the world! 6.9 million may seem perfectly managable by comparison, but only because the words out of the professor’s mouth are so unhinged from reality. To read this point being made by someone who accused his critics of being extreme is unbelievable!

There are other points the professor makes which are somewhat dubious – his statement that “local Singaporeans benefit as a whole money wise” from increasing cost of housing and lower wages being the most obvious one, but I have to give up eventually. Suffice to say the professor, who should (and presumably does) know better, makes all sorts of ridiculous arguments in favour of the PAP’s deranged and unsustainable economic policies. That his arguments do not stand up to his own assumptions and caveats – as well as the fact that he makes the same errors – even more so – than those he attributes to his critics is particularly telling. All this makes his argument completely uncompelling and I urge Singaporeans to reject it.

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Population White Paper De-constructed

The main thrust of the white paper appears to be a discussion on the proposed role of immigration in solving Singapore’s pending demographic problem. For such a long-awaited and crucial government planning document, it is unfortunately an extreme disappointment – light on detailed analysis and justification with regards to too many factors and assumptions. In fact the attention to detail at times is so lacking that it is hard to interpret the document as what it claims to be – a “population white paper” – and in fact easier to see it as a lazy blue print for unsustainable economic growth instead.

For example, the most obvious questions regarding Singapore’s future population revolve around our total fertility rate (TFR). Firstly – why is Singapore’s TFR so low? I have read every page of the white paper and this question is not even asked let alone answered. Secondly – what should we do to increase our TFR? The white paper devotes one short paragraph out of its 78 pages to this question:

“Raising Singapore’s birth rate is also critical to maintaining our strong Singaporean core and addressing our demographic challenge. This requires the community, employers, families and individual Singaporeans to make the right choices and decisions, collectively and individually.”

It is interesting to note that this, the only paragraph in the white paper which describes raising Singapore’s birth rate, makes no mention of the role the government should play. Community, employers, families and individuals all have a role to play, but apparently not the government. It is hard to believe that this oversight does not stem from a deliberate decision not to ask the previous question regarding why Singapore has such a low TFR. Many would blame the government for the high cost of living, difficulty and delays in buying a home and the extremely long working hours many suffer in a struggle to make ends meet. Many would therefore also look to the government to rectify these problems with a view to improving Singapore’s TFR, but it seems the government will not be forthcoming.

In defence of the white paper it does present a list of government social policies broadly in support of family life and child raising. However these appear to stand somewhat alone from the rest of the white paper, almost as an afterthought. The role these policies play in solving Singapore’s demographic challenges, the intent or otherwise of the government to support our TFR, any suggestions for future family planning policies to reduce Singapore’s dependency on foreign workers by encouraging more births are all questions which again go completely unasked.

This lack of rigour in failing to ask, let alone answer, the most important demographic questions is one of the main reasons why I state above that it is hard to interpret the paper as what it claims to be – a “population white paper”.

* * *

So what does the white paper talk about? The main metrics it appears to rely on are population, productivity and GDP. From the executive summary:

“Up to 2020, if we can achieve 2% to 3% productivity growth per year (which is an ambitious stretch target), and maintain overall workforce growth at 1% to 2%, then we can get 3% to 5% GDP growth on average.”

and in the next paragraph

“We may see GDP growth of between 2% and 3% per year from 2020 to 2030.”

I feel these points are key to understanding the true premise of the white paper. GDP appears to be described as a goal, something to be achieved. The equation can be seen as population + productivity = GDP. Population, supposedly the driving force of this paper, is in fact just an input, and GDP is the result. One only has to have the most cursory understanding of Singaporean politics to know that the PAP love few things more than GDP growth. It appears therefore to me that the document is merely an excuse to use Singapore’s upcoming demographic challenges as justification for fueling GDP growth by expanding the population of workers. In fact many (including a Nobel prize winning economist) have commented recently that this has been the governments sole economic policy for some time now.

Of course the white paper tries to avoid presenting itself in these terms. It presents various other parameters and observations in support of the hypothesis that demographics are driving the population and thus immigration aspects of government policy. Below I will analyse some of these, attempt to show that they do not hold water in a convincing fashion and encourage the reader to discard them. If they are to be discarded, the conclusion I suggest we are left with is the one I describe above, that the white paper is using the goal of GDP growth to drive population and, indirectly, immigration targets.

First of all let us talk of calibration – are the solutions presented by the white paper aligned to really solve the problems it warns us of? The white paper purports to be driven by pressing demographic changes – it talks of a “turning point in 2012” when the first cohort of baby boomers turned 65 and suggests that we need to act now. The paper also speaks of a decline in working age citizens from 2020 and a decline in the citizen population itself from 2025. The paper further warns us:

“These significant demographic issues will quickly be upon us. We need to take action early, so that we can address them in a measured and calibrated way”

Clearly there is a multifaceted demographic challenge facing Singapore, which has already begun, and which will continue over the next seven to twelve years and beyond. But in response to this multifaceted challenge, the white paper presents only very blunt answers – workforce growth of between 1% and 2% per year until 2020 and around 1% from 2020 to 2030. 15-25k new citizens per year. 30k new PRs per year. Where are the projections, the alignment, the calibration? Why not defuse the demographic time bomb by matching immigration to projected population trends? The white paper actually alludes to the challenge not being quite so immediate – our citizen workforce is in fact still growing today, and will continue to grow until 2020. So why not calibrate, and start from a much lower baseline of immigration today and increase the number over time as growing numbers of our workforce move into retirement? Why a blanket number of new citizens every year? If we will only see a decline in the citizen population after 2025, then why act now? Let us plan now, but plan to act in 2025 – if at that time we still believe that we need to grow the number of citizens, then we can. The white paper clearly tries to make all the right noises, but in looking at the details, we can see too many gaps. Does the white paper really aim to solve complex demographic challenges, without any calibration between cause and effect? Or is it actually a justification of existing and continuing policy – ultra liberal on immigration to support unproductive and inefficient industries in an attempt to keep Singapore’s GDP growing for some ill-defined reason?

Second let us talk of the lack of explanation – the white paper presents various concerns which it alleges to solve through immigration. But it doesn’t always explain whether the “problem” is really something that needs solving, or why immigration is even the answer. We can see this in the discussion of “support ratios”. As Singaporean society ages, we are told there will be less younger workers to support the aged. The paper tells us the support ratio today is 5.9 whereas in 2030 it will be 2.1. But there doesn’t seem to be any explanation of what is a sustainable support ratio for Singapore. Bizarrely the paper presents support ratios merely in terms of the citizen population, which is hugely disingenuous since Singapore already has a huge population of immigrant workers, and our support ratio values should be taken to be much higher. But what of the demographic challenge? Perhaps in Singapore a support ratio of 2.1 is perfectly manageable? The importance of a support ratio in society is typically to do with funding welfare spending and safety nets. In many countries, the public services provided to the elderly today are paid for from the taxes of today. In those countries, an aging population presents a significant challenge in terms of paying for more welfare for the elderly from a shrinking base of working taxpayers. Singapore is not one of those countries. The PAP’s aversion to welfare spending is known to all. Singaporeans are expected to look after themselves in old age and the large numbers of our elderly who sell tissues and collect cardboard is a reflection of this. So it is hard to imagine that lower support ratios are a significant challenge for Singapore, certainly not one that would justify ramping the population up to 6.9 million, when our current crop of foreign workers should be more than adequate. That the white paper even bothers to bring this up without suitable explanation or analysis is just frustrating, it could easily be seen as an attempt to convince people of the need for immigration when perhaps the need is not really there.

To conclude – for the reasons outlined above, it is hard to interpret the white paper as what it claims to be – a solution to upcoming demographic challenges through immigration – increasing the population to 6.9 million along the way to a dynamic Singapore. Rather, since the most important questions on Singaporean demographics have not been asked, let alone answered, the premise that demographics are driving this document is not well made out. Further, the government’s growth equation “population + productivity = GDP” reveals the true driving force behind this plan – that population is an input and GDP is the result, a result we all know the PAP craves. The inability of the document to calibrate its immigration solution to the complex, multifaceted nature of the upcoming demographic challenges facing Singapore betrays this reality – that GDP not demographics is driving the policy. Finally, when the paper does attempt to support itself with reference to demographics, specifically support ratios, the lack of analysis or explanation makes the argument wholly unconvincing. As many others have noted, I must too conclude. The “population white paper” is nothing of the sort, it is actually just a means to justify the PAP’s long-standing goal of maximizing GDP, and since the ruling party appears to have run out of ideas many years ago, they resort to the age-old tactic of increasing labour inputs.

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