I was first drawn to this book not just by its bright orange cover, but also by the inherent contradiction in its title. Utopia is often seen as a dream that idealists wish for, not something that realists envision.
Source: Bloomsbury.com
Bregman, a young Dutch historian, attempts to marry these two opposing ideas. The book centres around three utopian ideals: a 15-hour work week; universal basic income; and open borders.
In this brief piece, I focus on the provision of a universal basic income and its perceived impact towards the achievement of the utopian idea, and rather myopically from the Singaporean context.
We have come to associate the concept of universal basic income with left-leaning egalitarian societies, such as those in Scandinavia. Bregman points out that one of the first real attempts at provid- ing a universal basic income were in fact spearheaded by Ronald Reagan. Today, Reagan’s Republican party is often associated with low taxation and unfettered impulses of free market capitalism. Yet Reagan and his advisors realised that an unregulated economy would leave people behind, and that the selective provision of social assistance might not be the most efficient solution.
In recent years this debate around universal basic income has intensified. The financial crisis of 2008 highlighted the fragility of our global economy, and rapid technological advancement has made many redundant.
I am hard pressed to find anyone who thinks of Singapore foremost as a welfare state, so it is interesting to note that its government spent S$32 billion in the last fiscal year on social development. This is nearly three times more compared to a decade ago.
Singapore has adopted a kueh lapis1 approach to the provision of social welfare. Heavily subsidised education, healthcare and housing are available to a large proportion of the population, while more targeted direct cash transfers are available to a small group who meet stringent criteria. This model has served Singapore well, but in my view is inadequate to tackle future challenges. I will explain why I believe Singapore’s current model of welfare provision is inadequate for the future, and a universal basic income could possibly be the right solution. I shall also attempt to address some of the common concerns surrounding the provision of a universal basic income and how it could be overcome.
First, a brief look at what Singapore has been doing so far. The government would typically identify a burgeoning sector and devote significant resources to support its development. For example, over a decade ago the government saw the possibility of Singapore becoming a bio-medical hub. It constructed industrial parks to house international pharmaceutical firms, providing them with the necessary infrastructure. It also tasked government agencies to look into existing laws and policies to ensure that none unnecessarily impeded the growth of the sector. Upstream, it opened up new and expanded existing bio-medical faculties in the polytechnics and universities.
Today, new disruptive entrants like Redmart, Uber and Airbnb come to market with pockets deep enough to redefine their sectors. In such a fast-changing economy, job stability is not guaranteed and many choose to be part of the ‘gig’ economy, availing them to various opportunities to earn an income. The instability of the ‘gig’ economy is a problem in itself, which a universal basic income could help address — but my argument runs a little deeper.
Singapore’s traditional comparative advantages are fast being eroded. The cost of labour has increased significantly in the last few years, coupled with advancement in educational standards in the region. Singapore’s key comparative advantage — a highly skilled and low-cost workforce — is fast becoming irrelevant.
Singapore needs its own Uber or Grab, it needs to have local home- grown innovators that leverage technology to disrupt existing economic structures. Singapore cannot continue to rely on foreign investment or large government-linked companies to drive the economy but would have to lean on a dynamic, competitive and cutting-edge small and medium enterprise sector. Such a sector would require young entrepreneurs willing to take calculated risks.
It may seem contradictory to be talking about social safety nets and a vibrant knowledge economy because we often associate social welfare with the elderly, the destitute and the poorly educated. An innovative economy requires risk-takers, and if one is saddled at an early age with debt and has no safety net, one is unlikely to forsake a safe career for the path of innovation and entrepreneurship. A universal basic income would help to at least in part alleviate this concern. Simply put, a universal basic income might be the financial security one needs to leave an unfulfilling job to try their hand at entrepreneurship.
Singapore’s low total fertility rate (TFR) is something that keeps many of the nation’s top minds awake at night. The government has spent significant resources encouraging young couples to start families including direct cash transfers, improved maternity and paternity benefits, and subsidised medical costs, and even advice on conceiving in small spaces, among others. Despite these, Singapore’s TFR has not seen a significant increase and is far below the replacement rate. A universal basic income may in part help to increase the TFR. One of the most commonly cited reasons for putting off or choosing not to have children is cost, both direct and indirect. A universal basic income will clearly alleviate the direct cost incurred when one chooses to have children. A part of a parent’s universal basic income can be put aside to pay for the child’s expenses including their education. A universal basic income may also provide couples with the financial security needed to start a family young, allowing them to focus on their careers at a slightly later age.
Many have argued that a universal basic income may end up becoming a crutch, significantly affecting the productivity level of Singaporeans. The idea of a universal basic income is not new; it has been tried and is still being piloted, though only within small communities and for limited durations. In randomised trials in countries as diverse as Brazil, Kenya, Canada, Finland and Mexico, universal basic income has resulted in reductions in malnutrition and crime, and improvements in education outcomes, equality and economic growth.
These results are by no means comprehensive and may not have a similar impact in Singapore. Though the evidence may indicate that a universal basic income can result in improvements in social outcomes, it does not address the primary concern of naysayers — its effect on the productivity of the labour force. Singapore has been grappling with stagnant levels of productivity, which have led the government to adopt various schemes with the hope of increasing productivity. A universal basic income may further extinguish the ‘fire in a person’s belly’ and led them to be less productive or worse still, to not seek gainful employment.
It is my opinion that a carefully calibrated universal basic income can help to significantly mitigate this concern. Singapore does not have an officially defined poverty line, but for a universal basic income to be implemented one would have to be calculated. A universal basic income should ideally be slightly below, or exactly at the officially defined poverty line. This is to ensure that if one were to rely on a universal basic income alone they would not lead a particularly comfortable life. This may seem counter-intuitive to my earlier argument where I stated that a universal basic income would allow one to leave an unfulfilling job to pursue their true passion. I like to believe that the two points are not inherently contradictory. A universal income should not allow an individual to leave a job simply because they do not like it, instead it should motivate those who have alternative career pathways to pursue their passions even if the chance of success is uncertain.
For my final point, I will address another real concern of a universal basic income — inflation. With universal basic income, it would seem, on the surface that the amount of money in the country would increase. This would only be true if the government printed more money to provide for a universal basic income. I do not think the Singapore government would have to go down that route. As mentioned at the beginning of this piece, the state spends around S$32 billion on social development. This figure includes subsidies to public housing and education, besides the provision of financial assistance to low-income individuals. With a universal basic income, most social expenses should cease — possibly with the exception of subsidised education, healthcare and public housing. The cost of subsidised healthcare can, in part, be borne by private insurers. Subsidised education is a public good that would reap a greater benefit for society as a whole than for the individual. I will also rather controversially suggest that the government gradually remove the subsidy on public housing. The government should continue to provide a small number of low-cost rental flats for the desperately poor and destitute, but allow the rest of the housing market to be market-driven. This policy can only be carried out when coupled with reforms in the housing market, including limitations on the purchase of properties by non-residents, the purchase of properties for investment, and even regulations concerning the banking of land by developers both local and foreign.
If the government gradually phases out various social assistance schemes, keeping only the bare minimum, the savings would be able to fund a significant portion of universal basic income provision. The remaining would have to be raised through a more progressive taxation model for both individuals and companies. This would allow for the provision of a universal basic income without the need to print additional money, which would lead to inflation. This is of course a simplistic argument, as the increased taxation on the wealthy to pay for a universal income would effectively move money that may have been in investments towards consumption, driving prices up. This effect may be a concern at the start but as inequality falls, it would have less of an inflationary impact.
If one is still very concerned that a universal basic income would lead Singaporeans to drink more, gamble heavily and indulge in vices, all adult Singaporeans and permanent residents have a Central Provident Fund (CPF) account that can be used to receive a universal basic income. The government can than regulate where the money is spent, allowing it to be used to directly offset certain expenses like rent, utilities and public transport while providing for a small monthly cash allowance.
A universal basic income may not be the panacea for the ills of the world’s capitalist economic model, but there is no better place than Singapore to test its effectiveness and viability. Singapore’s early largely due to its leaders’ willingness to go against the grain of pre- vailing conventional wisdom. Maybe today it is time for us to once again go down the road less travelled.
VIGNESH NAIDU
Vignesh Naidu is Research & Project Manager at The HEAD Foundation. Before joining The HEAD Foundation, Vignesh worked with a large Singaporean conglomerate to strategise and develop a comprehensive learning and development framework. Vignesh has also worked at the Lee Kuan Yew School of Public Policy as a case writer, focusing on social policies and behavioural economics.
OCTOBER 2017 | ISSUE 2
Challenges of Our Time
