A falling birthrate and an aging population threaten the social fabric of the city-state of Singapore. In a competitive country, population growth is important to sustain the future development of the economy.
The declining birthrate can be partially explained by an increase in working hours and a lack of work-life balance. If this is not addressed, then the problem will continue, as the declining birthrate will cause fiscal problems for the island. When the increase in the aging population and the decrease in the labor force are factored in, the added fiscal constraints of increased subsidies, taxes and pensions could eventually become a serious burden.
One explanation put forward, in Singapore and elsewhere, is that the decline in the fertility rate is related to the high cost of living, which in Singapore is certainly an issue, but not to the extent that it should be considered the most important factor. The primary reason for the decline in fertility is partly due to an absence of work-life balance, followed by a lack of leisure activities geared towards creating an environment that is conducive for raising children.Enjoying this article? Click here to subscribe for full access. Just $5 a month.
To counter these issues, the Ministry of Manpower and the Ministry of Finance, in consultation with the Monetary Authority of Singapore, should create a sustainable model for basic wages that is in line with the current inflation rate, pursuant to a yearly review that should be included in the national budget. Moreover, the government should look into reviewing the current five-and-a-half-day work week, by piloting a cross sectional study of a three-day working week, or by reducing the maximum number of hours per week that people can work.
Some countries are using financial incentives as well as parental leave programs in an attempt to stem the decline in the rate of fertility. For instance, the Lithuanian model of increasing birthrates for parents is to offer a generous period of fully paid parental leave. Germany provides both parents with the option of taking paid leave, with the state defraying the costs. The state pays the parent who stays home with the child 65 percent of that parent’s current net income for a year. If both parents decide to take time off, then the total number of months increases from 12 to 14 months.
Even with such an attractive scheme in place, both Lithuania and Germany still suffer from low fertility rates. Germany at least offsets this somewhat with its immigrant friendly policies; however, merely relying on benefits seems to be doing very little to increase population growth for either country.
Still, having the state defray the opportunity costs of lost income at least helps to engender a vision of a child-friendly society. In Singapore, apart from instituting paid parental leave, it would be beneficial for the government to sponsor social activities that give people a chance to meet others outside of their own network.
At present the total fertility rate is dangerously low (1.3 in 2012), and if it stays at that level, drastic measures will be required to prevent economic stagnation. For instance, the government would need to increase the retirement age to prevent the labor force from shrinking further. It might also choose to invest in new technologies such as robotics, and to find a way to fuse them with labor intensive industries as a means of replacing the labor force. This sort of investment would of course be extremely costly, with a long wait to see any return on investment. As an alternative, then, the government could repeal its current immigration policy, aiming for a massive influx of immigrants to keep the economy going. That, however, could sow social discord.
The problem Singapore faces is that if it chooses to continue the same path, then in a generation or two it could be a society of geriatrics. On the other hand, if it elects to change its current policies then the country will face an uncertain future, as social experiments rarely turn out as expected.
Suhith Sitharthan has worked as a Maritime Security Analyst as well as a Southeast and Northeast Asian research analyst for a top think tank in Australia.