What you need to know
Singapore has excellent healthcare and education, but only a fraction of the population can afford it due to a systemically repressive regime that saps economic vitality at every turn.
Last week, two international surveys released rankings that painted two very different pictures of Singapore.
On the one hand, The World Bank released its Human Capital Index, which ranks Singapore top in the indicators it used to predict “the amount of human capital a child born today could expect to attain by age 18.”
On the other hand, the Commitment to Reducing Inequality (CRI) Index released by Oxfam International ranked Singapore among the worst 10 countries in the world in terms of tackling inequality.
But which is right?
Singapore’s Finance Minister Heng Swee Keat came out with guns blazing and lambasted Oxfam’s index, calling it “a completely wrong analysis.”
“As we know, what really matters to our people is the outcome,” Heng said. “It’s the health outcome, it’s the educational outcome, and those are fairly objective measures.”
Singapore’s Minister for Social and Family Development, Desmond Lee, also chastied Oxfam’s report. He echoed Heng’s sentiment in saying: “We think it is more important to look at the outcomes achieved.”
Lee pointed out that, “in education, our students consistently outperform others in international rankings. In the Program for International Student Assessment (PISA), our 15-year-olds rank first for mathematics, science and reading, and our students from the poorest families perform significantly better than their counterparts in OECD countries.”
Indeed, when looking at the PISA results, Singapore does “outperform the rest of the world.”
But dig deeper and a very different story emerges.
An unequal story
When broken down by level of difficulty and wealth, a disparity becomes obvious – it is most apparent for science and reading (though the same inequality is also seen in mathematics).
This is primarily because it has the widest performance gap between the richest and poorest compared to other leading countries. At the highest level of difficulty (Level 4), Singapore does come top, but the gap between the richest and poorest remains the widest among all the countries compared.
In fact, the poorest students’ performance not only lags behind the richest students in Singapore, but also behind the richest in the majority of the other countries ranked.
Moreover, the government limits the number of Singaporeans who are able to receive higher education at universities, and “cap[s] the proportion of graduates in a cohort at about 30 to 40 percent.”
A leaked WikiLeaks diplomatic cable also reported that an Assistant Director of the Planning Division at the Ministry of Education (MOE) Cheryl Chan said in 2007 that, “the government does not plan to encourage more students to get a higher education.”
She was also reported to have added: “The university enrolment rate will continue to be maintained at 20-25 percent because the Singaporean labor market does not need everyone to get a four-year degree.”
Singapore's citizens are also deprived of scholarships – only an estimated 6 percent of Singaporeans receive scholarships while the government offers scholarships to more than half of the international student population.
In an attempt to quell unhappiness, the government changed the grading system for the Primary Six steaming examination at 12 years old, and just last month announced that it would remove all examinations at Primary One and Two, and the mid-year examinations at Primary Three and Five, and at Secondary Three, but without fundamentally changing the system.
But the changes are cosmetic. Singapore’s students will still be streamed from as early as 10 years old at Primary Four, then at 12 years old at Primary Six, and again at 14 years old at Secondary Two and again, at 16 or 17 years during their 'O' Levels.
There is also clear evidence of a correlation between the streaming level and wealth or social class.
Of the students who entered the top schools or top streams, up to half do not live in Housing Development Board (HDB) public flats, whereas for students in the other schools or lower streams, 80 percent live in HDB flats (based on the last time these figures were available).
Public housing has an income limit in Singapore, providing an opportunity to use the data as a proxy for wealth.
Now, 82 percent of Singaporeans live in HDB flats, so you see what this means: the majority of top-stream students live in expensive private accommodation.
Moreover, of the students admitted to the Architecture, Dentistry, Law and Medicine undergraduate courses in two of Singapore’s public universities, NUS and SMU, in 2012/2013, only an estimated 2 percent were students from polytechnics.
In fact, on average less than two polytechnic graduates were admitted to law courses at NUS and SMU from 2007 to 2012, or less than 1 percent of the cohorts. Also, whereas 60 percent of students who started Primary One in 1990-1992 lived in one, two, three and four-room HDB flats, by the time they entered university, the students from these flats were reduced to 45 percent.
An even lower 13 percent of the students came from one, two and three-room flats, down from 23 percent.
Social segregation into the different social classes thus happens very early in Singapore, even before citizens reach teenhood.
This is encapsulated by a recent documentary on Channel NewsAsia, “How Kids See Class Differences,” where students from the Normal (Academic) and Normal (Technical) streams “spoke about how Express students [an advanced stream in Singapore’s education system] would roll their eyes at them and call them ‘stupid’,” and how a banquet waiter had said: “I was not treated properly like a human being”.
In fact, this class segregation persists into adulthood. Last year, the median starting salaries of university graduates was S$3,400 (US$2,467), that of polytechnic graduates was S$2,200, and for students who graduated from vocational institutions at the Institute of Technical Education (ITE), their starting salaries were S$1,700.
Compared with other OECD countries, this presents the widest disparity in salaries indexed to education level.
Singapore’s first prime minister, Lee Kuan Yew, said in 1983: “If we continue to reproduce ourselves in this lopsided way, we will be unable to maintain our present standards. Standards of competence will decline. Our economy will falter, administration will suffer, and society will decline.”
So despite an outwardly rosy picture, Singapore’s education outcomes become more unequal as the level of educational attainment increases, which is then transmitted to lifelong earning potential. Singaporeans also pay among the most expensive university fees in the world.
Heng also said that other than education, health outcomes are “what really matter.”
Again, in the Global Burden of Disease Study 2016 which looks at 37 health-related United Nations' Sustainable Development Goals (SDGs) indicators, Singapore ranks top.
But again, when you dig deeper, Singapore’s healthcare is very unequal. The country only introduced “universal” health insurance in 2013. Speaking about the scheme known as MediShield Life, Prime Minister Lee Hsien Loong in 2014 said: “We must be willing to participate in a universal healthcare insurance scheme, because of a sense of solidarity with our fellow citizens.”
However, what he omitted to tell his audience, including then-World Health Organisation Director-General Margaret Chan, is that Singapore’s national healthcare insurance only covers 2.1 percent of Singapore’s total health expenditure.
Also, MediShield Life is only one of three “pillars” of Singapore’s health financing system. The key pillar is Medisave, which collects 8 to 10.5 percent of Singaporeans' wages.
In other countries which collect a similarly high level of health insurance premiums – of 13 to 15 percent (Croatia, Estonia, France, Germany and Slovenia) – their health insurance schemes cover between 66 and 78 percent of total health expenditures.
You would expect that in Singapore, with the 8 to 10.5 percent that is paid into Medisave, the scheme would also cover about 60 to 80 percent of total health expenditure. But no, Medisave in fact only covers 5.5 percent, or just a tiny fraction.
There are two things to note. First, Medisave is not designated as a health insurance scheme; it is what is known as a medical savings account (MSA). However, Medisave is the only nationalized medical savings account in the world. No other country adopts such a scheme on a national level. China has similar schemes, but they are only implemented in some cities and rural areas, and in the United States and South Africa, these schemes are privatized.
Why do no other countries implement such a scheme? A 2010 WHO report explained that it is because “MSAs may actually be widening rather than filling the coverage gap.” In fact, the report stressed that, “there appears to be an erosion of solidarity as one proceeds from social health insurance to private health insurance to MSAs.” Singapore’s healthcare financing system is therefore unequal by design.
Indeed, the adequacy of Singapore’s Medisave is dependent on the wages of workers as there is no risk-pooling mechanism, which means that workers can only use whatever they contribute into their Medisave for healthcare, and because the rich-poor gap in Singapore is the widest among the developed countries and one of the highest in the world, poorer workers are therefore at a major disadvantage because they are likely to more rapidly exhaust their Medisave funds.
Again, Singapore’s healthcare financing system is very unequal – the most unequal among the developed countries – based on the wage input. Even worse, Singapore also mandates that when workers have used up their own Medisave, they have to start sapping the Medisave accounts of family members before they can start applying for Medifund – the third pillar in Singapore’s health financing system.
For low-income workers this puts an entire family’s Medisave accounts at risk of exhaustion.
And even if Singaporeans need to access Medifund, a medical endowment fund for the lowest-income group, they do not come under the scheme on an automated basis when their Medisave (and their families’) runs out.
In 2016, S$161.1 million of Medifund funds were disbursed to 1.1 million approved applications, which means that each approved Medifund application received only S$141.
One might assume this means Singapore’s healthcare costs are low, but the opposite is the truth. Singapore’s out-of-pocket expenditure amounted to 54.8 percent of total health expenditure in 2014, which was the 17th highest in the world, and the highest among developed countries.
In dollar value, it was US$719.4 per capita in 2015. On a purchasing power parity basis, Singapore’s out-of-pocket expenditure climbs to fourth highest in the world in 2015. Singapore’s healthcare is thus very expensive.
In fact, in 2012, there were more than 2,400 Singaporeans who had to spend more than S$10,000 in out-of-pocket hospital bills, precisely because healthcare costs in Singapore are so high. There are no more recent figures on this as the Singapore government is not transparent about such information.
This piece of information is only available due to the probing of the only opposition party in Singapore’s government, The Worker’s Party, which only makes up less than 9 percent of the seats in Singapore’s parliament. The rest is filled by the People’s Action Party (PAP) which has dominated for nearly 60 years, and has controlled not only the information flow but also how much gets returned to Singaporeans for their healthcare, education and retirement.
Exactly how much of total health expenditure Medisave, MediSheld and Medifund comprises was also only revealed after persistent questioning by The Worker’s Party.
In fact, The Lancet in 2013 pointed out that, “the so-called 3Ms (Medisave, Medishield, and Medifund) finance less than 10 percent of the total national health-care expenditure.”
And yet this is not because Medisave is inadequately funded. In fact, Medisave maintained an average balance of S$25,600 last year. But if Singaporeans have such ample funding in their Medisave accounts, why do they still need to pay so much out-of-pocket for their healthcare bills?
When taking other countries as a guide, Singaporeans’ Medisave contributions should cover cover at least 60 percent of total health expenditure, but instead citizens must fork out nearly 60 percent on their own to pay for out-of-pocket health expenditures.
Singaporeans are thus actually paying double for healthcare, and inequality in Singapore’s healthcare financing system is perpetuated by this non-incidental design, as well as the wage-indexed system that Medisave contributions rely on.
But inequality is also perpetuated because there is a cap on how much Singaporeans can access from their Medisave, and MediShield Life, for healthcare. In fact, Singapore is the only country which puts a limit as to how much patients can claim from the country’s healthcare schemes, whereas in the Nordic countries and the other Asian Tigers, a cap is instead put on how much citizens need to pay, while their governments cover the rest.
If you remember the medical savings account (MSA) in China that I told you about, even though it is also an MSA like Singapore’s Medisave, what is different is that first, half of China's MSA contributions is risk-pooled, and second, Chinese citizens only need to pay out-of-pocket payment on up to a limit of 5 percent of their annual salary.
Both these features – risk-pooling and an annual limit on payment which protects the individual – does not exist at all under the Medisave system, notwithstanding how Medisave in any case only covers 5.5 percent of total health expenditure.
This lopsided structure has created massive inequality and leaves each of the healthcare schemes to accumulate massive surpluses. In 2016, Singaporeans were only able to claim less than 13 percent (S$758 million) of the S$5.9 billion total assets that MediShield Life has accumulated as at the end of 2016.
The government is thus able to profit from a surplus of more than 87 percent of the scheme’s balance. And for Medisave, the government earned even more – from the total Medisave balance of S$89.5 billion accumulated as at the end of last year, Singaporeans were only able to withdraw S$964 million in direct expenses, or only 1.1 percent of the total.
This means that the Singapore government is sitting on a whopping 98.8 percent of the Medisave account! And this still does not include the out-of-pocket expenditure that Singaporeans have to pay when they go to see general practitioners – the GP Fee Survey in 2013 found that the median consultation fee in Singapore was SG$35, and could be as high as SG$100.
Singaporeans pay their Medisave contributions as part of their pension obligations to the Central Provident Fund (CPF). Singaporeans are required to contribute 37 percent of their wages into the CPF (20 percent employee contribution and 17 percent employer contribution), out of which 8 to 10.5 percent goes into Medisave. There are no breakdowns as to how much the different income groups pay into their CPF and Medisave – again, the Singapore government chooses not to be transparent about these details.
But again, thanks to The Worker’s Party, it was revealed that of the “total amount of money in individual CPF accounts when individuals became deceased” in 2015, the mean and median CPF balances were S$18,600 and S$6,800, respectively, while at the 10th and 90th percentile, the balances were S$500 and S$45,400, respectively.
Legal health coverage is an illusion and only masks a lack of effective access. — The Social Protection Department (SPD) at the International Labour Office
Using these figures as a proxy and recalling that the average Medisave balance last year was S$25,600, a very raw estimation might put the median balance at S$9,359, while the 10th percentile earner might only have S$688 inside his/her Medisave, and the 90th percentile earner might have S$62,486 – you can see how unequally funds are distributed across the groups.
On paper, sure, Singapore’s healthcare system looks good. The Social Protection Department (SPD) at the International Labour Office estimated that 100 percent of Singapore’s population has “legal” health coverage.
However, it also explained that out-of-pocket expenditure mainly “occur[s] if the extent of benefits or services covered is too limited” – Singapore’s out-of-pocket expenditure of 54.8 percent is the 17th highest in the world and highest among the developed countries.
The SPD continued: “In such cases, legal health coverage is an illusion and only masks a lack of effective access.
“Such expenditure is frequently significant and might lead to impoverishment or deepened poverty for those who are poor already. In the worst case, people are totally excluded from access to any needed health care because they do not have the means to pay for it,” it said.
It added: “In fact, we find a positive correlation between poverty rates and shares of [out-of-pocket healthcare expenditure] in total health expenditure: the extent of impoverishing [out-of-pocket healthcare expenditure] increases with the level of the population living below the poverty line. In countries where less than 2 percent of the population are living on US$2 day, about 20 percent of total health expenditure derives from [out-of-pocket expenditure]; in countries where more than 50 percent of the population are living on US$2 a day, it amounts to as much as around 50 percent. Thus it is the poorest and most in need, who suffer most from [out-of-pocket healthcare expenditure] and related inequities.”
Now, the 37 percent contributions made by Singaporeans into their CPF social security pension fund is the highest in the world. With that high a pension contribution, you would expect that Singaporeans would have the highest retirement adequacy in the world. But again, the opposite is true.
Singapore's abject inadequacy
According the OECD, Singapore’s retirement funds are actually one of the least adequate among the OECD and Asian countries measured. As if the 37 percent CPF contribution is not already high enough, the International Longevity Centre – UK (ILC-UK) also “estimate[d] that the average [Singaporean] entering the workforce today will need to save an additional 12.5 percent of their earnings every year, on top of what they are already saving, in order to secure an adequate retirement income”.
“Given that individuals are already saving in excess of 20 percent of their earnings, this means individuals would ultimately need to save in excess of 30 percent of their earnings,” ILC-UK said. Including employers’ CPF contributions, this would amount to at least 50 percent.
“Therefore, by comparison to other developed countries, Singapore does badly on this measure [of adequacy],” it added.
A part of the reason why, is that the CPF that Singaporeans pay which should be rightfully used for retirement is also being used to pay for Singapore’s housing. Singapore also uses the CPF “as a macroeconomic tool to manage business cost and the economy’s competitiveness by cutting CPF contribution rates, ” or increasing them.
Economists have pointed out that because Singaporeans are not able to access their CPF for reasons other than for healthcare (Medisave) and a few other minor purposes, Singaporeans are left with no choice but to use their CPF to pay for housing.
And because the CPF is channeled into housing, it has exacerbated housing price inflation. An article in The Business Times explained: “CPF money also contributed to the liquidity that drove asset prices higher, triggering asset inflation, which in turned sucked in more CPF funds.
“Against all this is the depletion of CPF savings for retirement,” it added.
Now, 82 percent of Singaporeans live in public housing, and Singapore’s public housing program is becoming an unraveling mess as we speak. Singaporeans recently came to understand that the public HDB flats that they buy will drop to zero value at the end of the 99-year lease and in fact, apartment prices would start to decline at some point over the course of the HDB flats’ 99-year lease.
Minister for National Development Lawrence Wong said: “As the leases run down, especially towards the tail-end, prices will come down correspondingly.”
And yet, Coordinating Minister for Infrastructure Khaw Boon Wan had the cheek to say that he does not know when prices would decline. “At what point will [prices] begin to depreciate and hit zero at year 99? We don't know because there are no market statistics for it. When will that turning point be, is it year 80, year 70, year 90? I don't know,” he said.
But how can this be? Economists have estimated that apartment prices will start to decline from the 50 to 60-year mark. Blogger Roy Ngerng pointed out that based on the government’s own calculations under the Lease Buyback Scheme, where the government would pay only S$190,000 to buy back the last 35 years of the lease of a 65-year-old flat which has a current value of S$450,000, that by extrapolation, the government is projecting that flat prices might even start to decline with 35 years left on the lease.
What angers Singaporeans is that there has been no transparency over how HDB flat prices are calculated and since it has been revealed that flat prices will drop to zero after 99 years and that apartments would then be reclaimed by the government, they are now asking why Singapore’s second prime minister Goh Chok Tong encouraged citizens to monetize their flats as part of an asset enhancement programme, and why Singapore’s first prime minister Lee Kuan Yew had said as recently as in 2011 that, “we intend to keep the values of these homes up. It will never go down.”
In 1995, Goh said: “Tonight we mark an important milestone for Singapore. In the 1960s and 1970s, we struggled to provide a roof for all Singaporeans. In the 1980s, Singaporeans were able to own their homes. Now, in the 1990s, we embark on a new phase where the government increases your asset value through the Assets Enhancement Program.”
But by the 2000s, Singaporeans were found to be “asset-rich and cash-poor” by the time they retire, and now in the 2010s, Singapore’s apartment values are declining – this is the happy Singapore housing story.
Singapore’s current and third prime minister Lee Hsien Loong tried to deflect the problem by saying that the government would come out with a Voluntary Early Redevelopment Scheme (VERS) to buy back flats at the 70-year point, but critics have pointed out that by the 70th year, apartment prices would have already dropped in value and the people who had traded and bought flats at high prices would not be able to recoup their losses – losses which the Singapore government have a hand in encouraging.
And to top that, VERS will “not start […] for another 20 years” – this is how long the Singapore government seems to want to defer the problem. Lee said: “This is a long-term plan.” But can the government make such a guarantee? They could not even guarantee that apartment prices “will never go down” – a claim that was made just seven years ago. The fact of the matter is that the Singapore government had known that apartment prices would go down to zero long ago because they are in control of Singapore’s housing program.
The question being asked by Singaporeans is why they should pay for the land costs since the government owns more than 90 percent of the land in Singapore.
In fact, Khaw even said, “[the government] control[s] the (public housing) construction program [and] we set the price (for the HDB flats).” But even so, no one knows the government’s formula for pricing HDB apartments.
It has been estimated that land costs comprise about 60 percent of home prices and the question being asked by Singaporeans is why they should pay for the land costs since the government owns more than 90 percent of the land in Singapore, and their apartments, which sit on government land, are to be taken back by the government and rendered worthless.
Singaporeans have to pay inflated HDB prices resulting in them relying on their CPF retirement funds to pay for housing, and therefore not having enough saved for retirement. In fact, Singapore has the most expensive public housing in the world, with apartments costing as much as S$495,000 for a five-room space of only 113 to 116 square metres (and smaller for flats with fewer rooms).
At the same time as Singapore’s HDB prices started escalating from the mid-1990s – due to Goh’s asset enhancement program – Singapore’s government started reducing flat sizes. five-room flats today are even smaller than in the 1970s.
What’s more, HDB flat prices did not always include land costs. It was only in 1985 that the Singapore government decided to become greedy. In 1985, then-National Development Minister Teh Cheang Wan said: “The fundamental shortcoming of the existing system is that the cost of the flat is not reflected in the accounts. Currently, besides annual subsidies provided by government for HDB operations, the government has been subsidizing public housing through the provision of cheap state land.”
He added: “In order that the new accounting system will fully reflect the true economic cost of flats, the HDB will return all its undeveloped land stock back to the government at cost before April 1, 1985.”
And the shocker: “As and when land is required in future for public housing and related facilities, the HDB will buy the required land from the government at current market value for similar private residential land. Thus, the true current economic cost of flats, both of land and construction cost, will be clearly reflected in the HDB accounts.” (emphasis mine)
But in fact, even before the government decided to include land costs to jack up HDB prices, prices had already been increasing. Former opposition politician Chiam See Tong pointed this out in 1985: “Prices of HDB flats have dramatically increased. In 1979, prices of HDB apartments increased by 15 percent; in 1980, by 20 percent; in 1981, a hefty jump of 38 percent; in 1982 and 1983, there were 5 percent increases; and in 1984, the increase was 2.5 percent. On average, for the four years beginning 1979, the increase in selling price was about 19.5 percent.” Chiam pointed out that, “prices of HDB flats are priced too high, taking into account the HDB need not pay the increase in land prices since 1973. All the land acquired by the HDB is based on 1973 prices.”
And the last time that the breakdown of flat prices was provided in parliament in 1998, the Worker’s Party’s Low Thia Khiang also calculated that the government was “mak[ing] a profit of more than S$44 million” for flats in a HDB estate in Sengkang. Low added: “After deducting the construction cost and land cost, there is a lot of profit to be made from the sale of the Sengkang flats.”
It is no wonder that ILC-UK has calculated that Singaporeans would need to pay another 12.5 percent from their wages to have adequate retirement funds. So much for social housing. Singapore’s social housing program is not what it seems – it provides a roof over people’s heads by depriving them of their retirements.
Yet, when it comes to their retirement funds, Singaporeans were only able to receive median CPF pension payouts of S$260 in 2011 and S$394 in 2014. Again, no other relevant information has been revealed by the Singapore government. When comparing the pension payouts to Singapore’s median wage of S$2,925 and S$3,276 in 2011 and 2014, respectively, the CPF payouts only amounted to 8.8 and 12.0 percent of wages, which supports the OECD’s calculations of the low replacement rate of Singapore’s CPF retirement funds.
The OECD calculated Singapore’s average net replacement rate to be only 42.1 percent. But the Tsao Foundation, a non-profit family foundation in Singapore, had a lower estimate – it calculated that the CPF would “replace just 17 percent of net lifetime average earnings in Singapore […] compared to 70 percent across the OECD countries”.
But the other problem with Singapore’s CPF retirement scheme is that it only earns fixed returns of 2.5 to 4 percent on the majority of its funds.
Only the first S$60,000 of the funds earns up to 3.5 to 5 percent, while for the elderly aged 55 and above it is 6 percent on the first S$30,000.
In comparison, the average return on pension funds globally last year was 10.5 percent, and in the year before, it was 15.7 percent. This represents funds lost for Singaporeans who are not able to earn from the compound interest on a higher interest rate.
However, what is even more perplexing is that even though Singaporeans receive such low pension payouts, the CPF fund they pay into has actually become the ninth largest pension fund in the world. So, why the anomaly? The scandalous reason is that Singaporeans’ CPF funds are actually transferred by the Singapore government into one of the government’s two investment funds, the GIC, which “returned 6.6 percent per annum in United States dollar (USD) nominal terms” over the last five years.
Temasek Holdings, the Singapore’s government other investment fund, tried to deny that it is able to use the CPF but a 2004 constitutional amendment allows Temasek to access the CPF funds – a fact that Temasek has actually admitted to as well.
The Singapore government does not disclose how much the GIC manages because it claims that, “it is not in our national interest to publish the full size of our reserves [as] it will make it easier for markets to mount speculative attacks on the Singapore dollar during periods of vulnerability.”
Right. The Norwegian Government Pension Fund Global which has almost three times the assets of GIC’s estimated assets is able to produce fully transparent annual reports while the Singapore government is would not even disclose how much GIC manages.
Also, do you know that the Singapore government has turned GIC and Temasek into private entities, even though they use public funds? At least Norway calls its fund as it is – a “pension” fund, and does not hide behind another name while taking its citizens' funds to invest in a secretive manner.
Why does the Singapore government have to hide behind so many layers just to invest Singaporeans’ hard-earned pension funds? In fact, when asked about Singapore’s sovereign wealth funds in 2008, Singapore’s prime minister Lee Hsien Loong famously said: “Our funds are accountable to the government. I would not believe that transparency is everything.”
But the real reason that the Singapore government does not want Singaporeans to know how much GIC manages and its returns in SGD terms is most probably so that Singaporeans cannot make direct comparisons with the CPF funds and returns, which the GIC uses to fund its investments.
Given the backdrop of the GIC’s 6.6 percent in USD returns and the Temasek’s 12.9 percent returns, it is highly unreasonable that Singaporeans are only able to earn 2.5 to 4 percent on the majority of their CPF funds. Singapore’s prime minister Lee Hsien Loong is the GIC’s chairman while his wife Ho Ching controls Temasek Holdings as its CEO. The interest earned by GIC and Temasek Holdings, which is not returned to Singaporeans, is described by various economists as a regressive tax.
The International Monetary Fund (IMF) explained: "The regressivity is compounded by the implicit tax on CPF wealth, which falls disproportionately on the bottom half of the income group.” This is because for higher-income earners who earn above S$6,000, they do not need to pay CPF on additional fixed salary earned above this level.
Singaporeans are unknowingly losing S$2.63 billion on their personal incomes to the government by this stealth tax.
IMF added: “The tax is both large and regressive because households on relatively lower incomes are likely to have a larger proportion of their wealth in the form of CPF balances. […] This tax also affects intergenerational fairness, because the current generation bears the burden of reduced consumption for the potential benefit of future generations." But at the rate that Singaporeans have to keep paying this implicit tax, there isn’t an end in sight as to when any “future generations” will be able to benefit at all.
Using only GIC's returns, the IMF also estimated that this implicit tax on CPF would amount to S$2.63 billion in 2008. In 2008, the government collected S$6.6 billion in personal income tax from Singaporeans, which means that the implicit tax on CPF is as high as 40 percent of the personal income tax collected.
In other words, Singaporeans are unknowingly losing S$2.63 billion on their personal incomes to the government by this stealth tax. This implicit tax of S$2.63 billion calculated for 2008 is even more than the total of S$1.9 billion paid out under MediShield, Medisave and Medifund combined, and in 2008, would have covered 30 percent of the total health expenditure of about S$8.5 billion, and would have reduced Singaporeans’ out-of-pocket expenditure by two-thirds to only 20 percent – which would be in line with other developed countries.
In fact, the S$2.63 billion in implicit tax is 8.5 times higher than the amount of S$306.6 million withdrawn under the retirement scheme in 2008. And when it comes to housing, the S$2.63 billion amounted to 45 percent of the S$5.85 billion that was withdrawn from the CPF to pay for housing in 2008.
Last year’s GIC returns of 6.6 percent in USD terms would be about 5.4 percent in SGD terms, based on blogger Leong Sze Hian’s calculations. According to Roy Ngerng, it was also revealed at the IPS Forum on CPF and Retirement Adequacy that the average CPF returns in 2014 was 4 percent.
Using the IMF method of calculation, the implicit tax on CPF as of last year would have amounted to about S$5 billion (5.4-4 percent × the S$359.5 billion total CPF balance in 2017), even though this would likely be an underestimate.
The inequality that Singapore faces is not only between the rich and the poor. It is also one between the political elites and the ruled. While Singaporeans are restricted from using their Medisave and MediShield Life, and while they get back low and inadequate payouts from their CPF, the government takes more than 98 percent of Medisave’s surplus, 87 percent of MediShield Life’s surplus, the surplus from CPF and its implicit tax, not to mention land costs Singaporeans are forced to bear as part of their housing costs, to fund the GIC and Temasek Holdings, allowing these two entities to become the eighth and ninth largest sovereign wealth funds in the world.
Singaporeans are left to pick up the slack amid reports of citizens who “choose to die” instead of seek out their healthcare needs “because they cannot afford it.” In fact, the Tsao foundation calculated that the percentage of Singapore’s elderly who are living in poverty more than doubled from 13 percent in 1995 to 28 percent in 2005, and then jumped again to 41 percent in 2011.
When you compare this with the OECD, Singapore ranks only second behind South Korea’s 45.7 percent as having the highest elderly poverty rate. In fact, since 2011, Singapore’s elderly population living in poverty might even have grown to become the worst among the advanced economies today.
Singapore’s prime minister earns more than 210 times the amount the city’s cleaners earn.
It has also been estimated that up to 35 percent of Singapore’s total population is living in poverty. The 35 percent poverty rate would put Singapore as the worst for the measure among developed countries, on a par with developing nations. Similarly, Singapore’s income inequality as measured by the Gini coefficient, is not only one of the highest among the developed countries, but also one of the highest in the world.
Minimum wage woes
Singapore still does not have a minimum wage. Oxfam pointed out that “there is no minimum wage, except for cleaners and security guards,” but even then, their so-called “minimum wages” are only S$1,060 and S$1,100, respectively, and when you compare Singapore’s so-called minimum wage with other similarly-wealthy developed countries, the minimum wage is about S$2,000 in Canada and Japan (Tokyo), S$2,500 in Belgium, France, Germany, Ireland, the Netherlands and New Zealand, and S$3,000 in Australia and Luxembourg.
In fact, low-income workers earn as much as S$3,500 in Finland, S$4,000 in Denmark and Sweden, S$4,500 in Norway, and S$5,000 in Switzerland. In comparison, 26.4 percent of Singapore residents still earn below S$2,000, 36 percent earn below S$2,500, 43 percent bring in below S$3,000, 57.6 percent earn below S$4,000 and a staggering 67.5 percent, or two-thirds of Singapore residents, earn below S$5,000.
It is no wonder that Numbeo ranks Singapore as having the lowest purchasing power among similarly-wealthy developed countries – it’s also ranked the most expensive country in the world for the fifth year in a row by The Economist, even though its low-income workers are the poorest among similarly-wealthy developed countries.
In fact, Singapore’s “minimum wage” is similar to that of countries like Estonia, Greece, Malta, Poland, Portugal, Slovenia and Spain, where their cost of living is only half to two-thirds that of Singapore’s, and where their GDP per capita is only a third to half that of Singapore’s.
Singapore’s minimum wage should be twice that of theirs, or at least S$2,000. Meanwhile, more than 7 percent of Singapore residents still earn less than S$1,000, and when you include the foreign workforce, more than 20 percent are earning less than S$1,000.
Whereas in Norway and Denmark, their prime ministers only earn five times that of the lowest-wage workers and in similarly-wealthy developed countries, political leaders only earn 10 times the minimum wage, Singapore’s prime minister earns more than 210 times the amount the city’s cleaners earn.
All this while Singapore’s government refuses to define a minimum wage or an official poverty line.
Oxfam also called out Singapore’s “harmful tax practices […] in having very low tax rates.” But who among Singapore’s rich benefit from the low taxes? The answer? Singapore’s prime minister and the ministers themselves. The Singapore government has been very secretive about their salaries after an outcry in the country’s general election forced them to reduce their pay packets in 2011, but even after the reduction, the prime minister and all the country’s ministers still earn the highest salaries in the world, and higher than any other political leader, even the president of the United States.
In the calculations of their own salaries, Singapore’s government has been very generous, leading to many criticizing the government’s double standards of giving itself minimum wage instead – and the highest one in the world at that. On top of their 12-month salary, the ministers are also paid a 13-month bonus, an Annual Variable Component (AVC) bonus of up to 1.5 months, a Performance Bonus of up to six months and a National Bonus of up to six months.
The prime minister does not get a Performance Bonus but he earns twice the National Bonus, which means that the ministers get a total bonus of up to 14.5 months. In comparison, companies will only be required to pay cleaners two weeks of bonuses, and worse still, this will only start in 2020.
It was not known how much the prime minister and ministers earn exactly in bonuses but as a result of last month’s probing – again thanks to The Worker’s Party – it was found that from 2013 to 2017, the ministers earned an average of 1.3 months of AVC, 4.3 months of Performance Bonuses and 4.1 months of National Bonuses.
Based on estimates from Roy Ngerng’s The Heart Truths blog, Singapore’s prime minister would have earned as much as S$2.7 million in salary over this period, or up to 12.3 months of bonuses. The Online Citizen estimated it to be as high as 14.5 months in 2013. But it could be more, because this is still not including the Special Variable Payment, for which there is no stated limit as to the number of months of this bonus the prime minister and ministers are eligible for. In theory, this means that there is no limit as to the total salary that they can earn – it is infinite.
Oxfam also highlighted Singapore’s problem of “providing tax havens for avoidance and evasion.” Indeed, Singapore is ranked fifth on the Financial Secrecy Index, and hosts the fifth-largest offshore financial activities in the world.
Meanwhile, Singapore’s millionaire ministers are reluctant to implement a minimum wage for Singapore’s workers.
Sure, Singapore might have a good education and healthcare system. But what is the point of having a good system when people cannot access it? Low-income Singaporeans are left behind in the education system and the healthcare system.
Speaking at the Human Capital Summit, Prime Minister Lee Hsien Loong even had the cheek to lecture other countries. He said: “The first starting point for the government must be, we want to improve the lives for all of the population, not just some of it.
“Because if you do that, then as their basic lives improve, they can start thinking about the future,” he added.
Perhaps Lee should take a look at his own backyard and apply his own teaching to the country he is leading, or rather, taking in the wrong direction. Because it is quite clear by now that the Singapore government does not “want to improve the lives [of] all of the population,” but only for some of them.
And the real problem is not just with how the Singapore government distorts the system to create the gap between the rich and poor in Singapore, but how the government makes themselves part of the rich.
Singapore’s prime minister earns nearly 60 times more than the median wage in Singapore, which is even more than the 10 times more than minimum wage that political leaders in other similarly-wealthy developed countries earn.
What is more repugnant is how the Singapore government has manipulated the instruments of government to collect wages and force citizens into the highest social security contribution rate in the world – the CPF – while operating one of the richest sovereign wealth funds in the world, leaving Singaporeans with among the least adequate pensions in the world, and obliging them to pay for one of the highest out-of-pocket expenditures for healthcare in the world, and among the most expensive university fees in the world.
Meanwhile, a large swathe of Singaporeans earn the lowest wages among similarly-wealthy developed countries, have the highest poverty rates and one of the highest inequality rates among developed countries, indeed one of the highest in the world.
So, both the World Bank and Oxfam are right. Singapore does have a good education and healthcare system. But Singapore is too unequal for many of its people to be able to access these fully, or to benefit from them equally.
It is perverse that the people who have taken over Singapore’s government make use of the state to economically oppress its people, and that institutions like the World Bank would release reports to affirm such oppression.
Oxfam said: “The [World Bank] downplays the severity of inequality and contradicts internationally agreed labor standards. Just last week, the IMF said higher minimum wages are needed to counteract extreme inequality.
“Our latest research shows that many countries are making the right policy choices, like boosting minimum wages. The World Bank should be doing everything possible to encourage policies that help workers and reduce inequality,” Oxfam added.
To sum up, would a decent minimum wage hurt Singapore, as those aligned with Singapore’s ruling PAP like to say?
But while the lowest-wage workers in Denmark earn about S$3,925, Singapore’s cleaners still earn only S$1,060.
Meanwhile in Denmark, healthcare is free (citizens pay only up to S$360 a year to see a GP and S$850 a year for medication), education is free, the Danes get back a net replacement rate of 80.2 percent on their pension, and Denmark also has unemployment benefits of “up to 90 percent of [...] previous work income”, which can pay as much as S$3,700 – all these from an average tax of 36.3 percent.
Singaporeans pay for some of the most expensive university fees and healthcare in the world (based on a purchasing power parity), and get back one of the lowest replacement rates on their retirement funds, and do not even have unemployment benefits – one of very few countries in the world not to offer any.
Singaporeans pay 37 percent of their wages into the CPF – similar to the 36.3 percent the Danes pay into tax, but the Danes in return receive free healthcare and education, and are socially protected. The same cannot be said for Singapore. And while the critique has been that the Danes have high taxes, their higher wages mean that they would still have higher disposable incomes than the majority of Singaporeans, and therefore higher purchasing power, enabling them to afford to pay for housing – and housing prices only average S$450,000 anyway – not too different from Singapore.
Denmark also does not allow foreigners to purchase property unless they have previously resided in Denmark for five years, are working in Denmark, or have a valid residence or business permit. Meanwhile, not only is Denmark very equal – in fact one of the most equal in the world, and also ranks top on Oxfam’s index, and an impressive 17th on the World Bank’s index, it also continuously ranks among the top performing countries in the world on various indexes.
And Denmark is able to do all this with a similar GDP per capita and population as Singapore – while paying its citizens high wages, and returning the money it collects from its population to provide social services, instead of using the monies to enrich their own government investment funds, the profits of which do not actually benefit Singaporeans. If Denmark can do it, there is no reason why Singapore cannot, except that its millionaire ministers do not want to.
Singapore's CPF pension payouts and Medisave healthcare scheme are pegged to the wages citizens earn. And how much they earn also determines how much they will be able to use from their CPF to pay for housing. Additionally, Singapore's education outcomes are clearly unequal. Sure, Singapore has a high-quality healthcare and education system, but they are only useful when you can afford to pay for them. In short, Singapore’s pretty exterior masks an ugly internal scene.
Perhaps the best way to understand this is that the PAP has styled itself in the DNA of Singapore’s first prime minister Lee Kuan Yew. Lee said in 1983: “We are born unequal and we have got to make the best of [that] lot.” Since then, the PAP has hardwired itself to create this reality in Singapore based on eugenic principles of discrimination.
As Donald Low, former associate dean at the Lee Kuan Yew School of Public Policy said to South China Morning Post, “the root causes of economic inequality [in Singapore are] an elitist education system, and the government’s anti-welfarism.
He added: “All this class consciousness and implicit bias is a function of our systems and policies.”
The PAP government has ruled Singapore for almost 60 years and has never relented in persecuting its critics over the duration of its rule. It is no wonder that The Worker’s Party is also currently facing persecution now.
But the most baffling question is why Singaporeans vote to hurt themselves over and over again.
Editor: David Green (@DavidPeterGreen)
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