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Distrust in the CPF, and the eroding social compact

by Howard Lee
13/06/2014
in Commentaries
Reading Time: 5 mins read
0

By Aloysius Chia

There are some people who think that the problem raised by Roy Ngerng, the blogger who has recently brought to the forefront the issue of the CPF pension system, is merely a problem of word play. That is, they see it as a problem that is simply about poor communication between the government’s ideas of how to secure the people’s money and the various individuals take on how to use it.

These people think that once the problem of communication is resolved, the problem of details will be resolved, with people coming to a consensus about how the interest paid should be, and other details such as the minimum sum amicably settled.

It is easy to miss the larger point here, since the CPF is only part of a larger system of how the government relates to the people. One can easily see only two world views clashing between what the government thinks is right, and those who are disgruntled with that view.

However, there is an underlying tension in this conflict that reveals more than just resentment and a lack of knowing how the CPF works. The historical compact between the government and people, where the government will do what it can to enable the security of livelihood for the people, and the people giving their mandate to the government, is disintegrating.

Traditionally, the PAP has been like a conservative guardian. It demands that people protect the state in return for providing a good foundation for everyone. Long term interests such as public housing and heavy subsidies of education are implemented in so far as people contribute back to future work and taxes.

The CPF reflects this compact. From salaries, people save a portion into a fund which the state borrows (through the issuing of bonds), which it then invests into reserves for future uses or emergencies. Unlike other welfare states, there is no welfare tax that are distributed, guaranteeing some kind of pension scheme to all. Rather, how much people have in their retirement savings depends on how much they work.

But this demands people must be able to obtain work, hence the business friendly environment which the government goes all out to maintain. Those with low incomes can receive an occasional top up to help them rise to a better position.

Most Singaporeans actually agree with this compact. That is why the PAP has been able to stay in power for so long.

This agreement however, is increasingly being eroded by domestic policies that have aided, not alleviated, consequences from larger structural forces on the economy.

For one, income disparity is rising. A recent background paper written by scholars from the Lee Kuan Yew School of Public Policy (pg. 9) clearly outlines that domestic policies have exacerbated, not dealt, with this problem. In particular, they highlight three reasons for the widening income gap:

  1. A less progressive tax system;
  2. Excessively liberal foreign worker and immigration policies, which suppresses wages; and
  3. Having a “global city” aspiration that raises wages on the higher end of the labour market.

While the government tries to help those who are left out with transfers such as Workfare and the Pioneer Generation Package, there are some, such as Lawrence Wong, who seem to think that all is well. For instance, in a recent newspaper article he is quoted as saying, “If you look at where our Budget is, it is firstly highly progressive … from 2003 to 2013 the lower deciles are getting a lot more in terms of transfers.”

Disputes about CPF dive right to the heart of inequality and widening opportunities, which is increasingly full of contradictions.

The government raises the Minimum Sum, saying it must be raised due to inflation, yet at the same time creating the conditions that makes it harder for some people to meet this sum. And although they can work longer to meet this sum, they no longer feel the sense of security that they can manage to do so, which is becoming uncertain especially for those who do not have opportunities for employment.

It is sheer hypocrisy to ask people to put more into a general fund, which the state borrows for profitable investment, while the current government is paying scant attention to persistently high inequality, stagnating wages and unequal opportunities.

The recent protest then, is not just merely about the CPF; it also reflects a lack of trust towards the government which itself has actively cultivated. If the government does not put in its share to uphold this trust, as it was before, the people will not feel a need to trust it.

The fact of the matter is that people have a right to change the government if they feel that the government is not doing well, doing right, or doing enough. They should not be afraid to do so if they feel that the trust that they have given to the government is violated.

If the government does not care to listen to its citizens, or feel that it can do so at the expense of a substantial group of them, then there is no need for these citizens to care for the government that doesn’t bother about them.

Useful links:

Gini coefficient under ‘Household Income from Work’, Singstats: http://www.singstat.gov.sg/statistics/browse_by_theme/income_expenditure.html

Workfare Income Supplement Website: http://mycpf.cpf.gov.sg/Members/Gen-Info/WIS/WIS_Scheme.htm

Pioneer Generation Package: http://www.singaporebudget.gov.sg/data/budget_2014/download/annexb1.pdf

Work Training Support Scheme: http://www.wda.gov.sg/content/wdawebsite/programmes_and_initiatives/WTS_TrainingGrant_Individual.html

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