Budget 2017: Time to break up the Baby Bonus
by Daniel Yap
MY BIGGEST disappointment with the 2017 budget is not just how “same old” it is, it’s how nothing is being done to overhaul the Baby Bonus Scheme. A same old budget would be fine if things were all working out, but that’s not what Singapore is looking at in the next 10 years.
Taking a page from the “same old” Committee for the Future Economy report is not going to cut it with yet-unsolved issues still staring us in the face. Healthcare costs are rising and will continue to rise. Labour supply is tight.
All talk about a budget for Singapore’s long-term future is rubbish without a clear action plan for Singapore’s dismal total fertility rate, which fell to a pathetic 1.20 in 2016 from an equally low 1.24 in 2015. All this while, we have been rah-rah-ing about a spike in births (although not the birth rate) during the SG50 jubilee year.
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A low birth rate has negative repercussions on a host of national issues: labour supply, immigration, national identity, the ageing population, healthcare, and economic growth, to name a few. Why then is Budget 2017 providing no new ideas for this? Why aren’t we focused on changing up the Marriage and Parenthood Package and Baby Bonus Scheme since it clearly isn’t having the effect we need it to have?
PM Lee has talked about ruthlessly discarding ideas that aren’t working, and after 16 years, haven’t we realised that this is not going the way we want it to?
Has Singapore simply given up? Are we not spending more to highlight the importance of a healthy birth rate?
Or has the G made some quiet internal calculation and realised that it is cheaper to naturalise citizens from abroad, making other nations pay for child-raising, and then Singapore picks the best and reaps the benefits of their productive adult years, leaving only their silver years for the state to pay for?
It is a shrewd but cold way of thinking about it, and a fantastic way to balance the budget – don’t spend on trying to fix what you’re already horrible at. Just work on the economy and on what attracts new citizens, like security and HDB grants. Cover up Singapore’s weak spots by leveraging on its strong points (attractive to migrants). Never mind if the end result is a bit of a Frankenstein’s monster, right?
But what’s the point of a get-by city where the future belongs to someone else’s children? Let’s not treat the situation lightly. Falling birth rates reflect entrenched attitudes that will take Herculean efforts to move. Where are the Herculean ideas?
Here’s one idea: give each Singaporean child a living wage (sometimes called a child benefit or allowance). Say, $500 a month from birth to 18 years (then the boys can start living off their NS allowance). And 20 per cent goes into CPF (because we’re Singaporean like that). Inflation-pegged increases kick in every two years. Two kids could buy you a 2-room HDB flat. At age 18, they would have $27,000 in CPF to pay for university or a house.
It’s a Singaporean version of what some other states are doing – countries like Sweden and Finland have a state child allowance (about S$170 for Sweden, plus a bonus for larger families; Finland pays a child allowance of S$140-250 depending on birth order; Ireland has a child benefit of just over S$200 per child, with a multiplier applied for multiple births). Total fertility rates there hover around 1.8 and 2.0; a healthy situation once you factor in some immigration.
Such a plan will cost us $5.4 billion a year if we have 50,000 babies (right now with 30,000 babies it will cost about $3.3 billion). We’re already spending $2 billion a year on the marriage and parenthood package. The extra billions spent will have a better long-run payoff than GIC’s impressive track record (GIC contributed $15 billion to the 2016 budget).
Want to tweak it further? Consider this – those who want children will want children, and those who don’t will not be convinced. So structure benefits so that parents will plan to have three or more children (i.e. the biggest bonuses kick in at child number three).
The current Baby Bonus is trying most of all to incentivise people to have children in general, and the incremental bonus for the third child and above is small. Make it such that the first two children receive an allowance of $250 each, but the third child receives $1,000. It’s not stingy, but it will definitely tip the balance towards already-parents making the decision to have yet another kid.
What about reforming education, a major reason for people to not have kids, within the next 10 years so that we no longer feel like it’s a pressure-cooker arms-race winner-takes-all mugger-fest that then feeds into our working life?
Instead, all we are talking about now in the kopitiams is a 30 per cent water rate hike, while the G is trying to convince us that this is a budget to “secure our future”. I don’t care much for either narrative.
Featured image by Sean Chong.
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