Terence Ho is an Associate Professor in Practice at Lee Kuan Yew School of Public Policy. Over the past decade, Professor Ho has held various policy research and leadership positions in the Singapore public service, including as an economist in the Ministry of Trade and Industry and Divisional Director of Manpower Planning and Policy at the Ministry of Manpower.
A frequent commentator for publications such as the Straits Times and Channel News Asia, Professor Ho specialises in economic and manpower policy, fiscal policy, public sector management, and organisation, social security, inequality, and social mobility. He joins us to discuss Singapore's economy in this time of volatility and uncertainty.
David Austin: Thank you, Professor Ho for joining us. The world economy is going through a rough period with slowing growth and skyrocketing inflation. Singapore two has been affected with our inflation rate reaching 5.6 per cent in. Supply disruptions have seen the price of raw and cooked food as well as fuel and electricity rise rapidly. And this has affected many Singaporeans. What, if anything can be done about this?
Terence Ho: Monetary policy is, of course, one lever that the government can use to stem imported inflation. The Monetary Authority of Singapore (MAS) recently announced its fourth policy tightening move since October last year, and the appreciation in the Singapore dollar against most major trading partners with the exception of the United States, since the beginning of the year has helped to temper imported inflation, but this will come at the cost of weaker export demand and slower economic growth.
To also help with the cost of living, the government has done a few other things. It has distributed community development council or CDC vouchers for citizens to spend in food centres and heartland shops and also provided targeted relief to households and businesses. As part of a S$1.5 billion relief package announced recently and for lower income households, this would include additional cash transfers as well as the permanent enhancement to ComCare assistance.
Beyond this package, Deputy Prime Minister Lawrence Wong has indicated that the government is prepared to do more, to provide further support if necessary. however, the principle would be that help will remain targeted at the most vulnerable rather than as a broad fiscal stimulus which could further stoke inflation.
And for food, I should add that the strategy is to diversify sources, stockpile where possible and increase domestic production.
None of these by itself is enough but, this multi-pronged approach could help to blunt the impact of supplier disruption from specific sources.
David Austin: So those are some policy changes that have already taken place to help people. What about the fact that some are calling for the deferment of the goods and service tax hike or the planned increase in the carbon price? Do you agree with those suggestions?
Terence Ho: Well, those calls are understandable, but my view is that given that inflation may be elevated for some time. I mean, with the war between Russia and Ukraine still proceeding, there's not necessarily a better window in the near future in which to raise the Goods and Services Tax (GST). Already the GST hike has been delayed and staggered while our structural spending needs continue to grow.
And fortunately, Singapore still has the means to provide targeted relief to the low income and more vulnerable citizens and households to help tide them over this period of high inflation. So there's a case for proceeding with what has already been announced. And as for the carbon tax, there's still time to monitor the situation before the planned increase in 2024.
David Austin: Is it inevitable that Singapore as a global city will also be a very expensive city to live in and what could be done to help lower income Singaporeans and retirees cope?
Terence Ho: The cost of living is always going to be high in Singapore as this is after all a global city with many affluent locals and foreigners here. The price of land, for instance, will feed into business costs and the price of most goods and services. Therefore, social transfers such as the Workfare Income Supplement, the Silver Support for retirees and the Goods and Services Tax or GST voucher are important.
And so are subsidies for housing education and especially healthcare. Besides transfers and subsidies, there are also things the government can do to influence demand and supply and hence prices. For instance, by providing a steady and adequate supply of residential and commercial land, this would help to keep housing prices and commercial rent stable, even as demand rises and falls.
And on the demand side reforms to healthcare insurance, for instance, such as a minimum co-payment for the so-called integrated shield plans, these will help to manage healthcare consumption, and hence healthcare inflation. The MAS has also implemented cooling measures to rein in surging housing prices. And in the provision of public amenities and services, I think there should be a deliberate effort to provide Singaporeans with low- or lower- cost options.
So this could include the building of more hawker centres or the expansion of the social enterprise model for food courts, for instance, and for housing, there should be an adequate supply of smaller HDB flats and other areas. Whether we talk about transport or healthcare. I think it's about maintaining affordable, in some cases, no frills service options.
David Austin: Along those same lines, do you think there's a need to provide greater assurance for citizens, whether in terms of job and income protection, as well as healthcare and retirement adequacy?
Terence Ho: Yes, I think so, but clearly in the context of global economic volatility and the economic restructuring that's still taking place in Singapore. It will be increasingly necessary in my view, to give citizens a sense of assurance, particularly in regard to job income and retirement adequacy.
Looking back over the past 10 to 15 years, social security in Singapore has been strengthened through various programmes, ranging from Workfare, which I mentioned before, Silver Support, the GST voucher, and these have been repeatedly enhanced over the years. And at the same time there's been greater use of social insurance, or risk pooling through, for instance, MediShield life and CPF LIFE, which are healthcare and longevity insurance respectively. There's also stronger social support and a recent announcement of permanent enhancements to ComCare.
Beyond these, there may be a need for a form of unemployment insurance or unemployment support for those who have lost jobs and income since the onset of the COVID-19 pandemic.
There have been various temporary relief schemes such as the COVID-19 Support Grant followed by the COVID-19 Recovery Grant, which are not limited to ComCare recipients or those who have little or no savings. I think we may need something like this on a permanent basis. A joint task force looking at issues facing professionals, managers and executives that was set up by the NTUC and the Singapore National Employers Federation has come up with a recommendation for temporary income relief for the involuntarily unemployed. This is something I think the government could consider. And another group that needs attention is the self-employed or those whom some call gig workers, to give them greater protection from illness or injury on the job, as well as to help them build up retirement savings. I understand that there is an ongoing advisory committee on platform work, that's considering whether platform companies that hire these workers should be required to make CPF contributions, to support workers' housing and retirement needs.
David Austin: Does Singapore's social compact need refreshing for instance, should there be more redistribution to reduce inequality?
Terence Ho: So as a set of mutual obligations among citizens, and between the government and the people, the social compact, as we call it in Singapore, will need continual renewing with each generation of Singaporeans. For many years, Singaporeans have been promised that if we study hard and work hard, we will enjoy rising incomes, better housing and, improved standard of living over time. While this is still true, there are fresh challenges I think now that the Singapore economy has matured and growth is slowing. The forces of global competition are pushing up income and wealth inequality. And in Singapore, there is a risk of social mobility being eroded as society stratifies along socioeconomic lines. And as we have discussed, affordability and the cost of living are pressing concerns for our many Singaporeans.
I think a few things are needed. First, additional effort must be put in to ensure Singaporeans of fair opportunities. This means investing heavily in education and skills for the young, beginning in preschool and through the schooling years, as well as for working adults, so that all will have the opportunity to move up through life.
Second, as I've touched on earlier, there's a need to strengthen financial assurance, particularly in regard to income and retirement adequacy and healthcare affordability as the population ages. And third, there may be a need for greater redistribution so that everyone plays a fair part in fostering an inclusive society.
Budget 2022 has introduced more progressive income and property taxes. But beyond this, it's still worth having further conversations on whether and how much more can be done while at the same time, maintaining an overall competitive tax regime and keeping the tax burden low for the broad middle class to encourage work in enterprise.
David Austin: And in launching Forward Singapore, the new national conversation, DPM Lawrence Wong, spoke of the need for a more open and compassionate meritocracy. What would this look like? And how can we work towards achieving this?
Terence Ho: I think an open and compassionate meritocracy is one that is not too narrowly focused on academic qualifications, or educational attainment, but also recognises a broader range of talents and contributions. It would also produce a more equitable distribution of economic rewards rather than one that generates high inequality and winner-takes-all outcomes. So, we must start with the education system. Investment in high quality and affordable early childhood education is critical to give all children a good start in life. In Singapore, we have programmes such as KidSTART and the Learning Support Programme to help those with lesser means or a weaker start to catch up and steps have also been taken to reduce excessive focus on examinations and grades.
We then need to look beyond the education system, to the workplace and broader society. There must be opportunities for progression through one's working life without being constrained by past educational attainment. This makes sense when we consider that jobs have transformed dramatically and skills require continuous refreshing.
I think employers can do their part by not pigeonholing employees or locking them into predetermined pathways, according to their past educational qualifications. Instead employers should champion upgrading and skills relevant to job and business transformation, and to carve out time for employee training. And finally, to reward workers for the efforts in training and picking up better skills, through higher pay. At the sectoral level, the expanded Progressive Wage Model in Singapore will allow workers in traditionally lower income sectors and occupations to earn more as they upgrade their skills.
This is about recognising and rewarding the contributions of every worker. And will also help to reduce Singapore's reliance on foreign manpower, particularly in essential service occupations. The higher wage costs that would result could be offset to some extent by high productivity but the balance would have to be borne by society at large, which means by businesses, consumers, with the government providing transition support.
I think these efforts span the education system, as well as training and employment practices. They all have to come together to help realise this vision of a more open and compassionate meritocracy.
David Austin: Very good. Thank you.
Terence Ho: Thank you so much.