~ By: Kumaran Pillai ~
Instead of welcoming the government’s benevolence of helping the downtrodden, citizens are outraged by the government’s lack of empathy. For the most part, the ‘noise’ or the Internet chatter has not helped them in getting a handle on what has irked us. All we hear is their constant mantra that they are doing enough and in their minds, they are probably doing more than what a prudent government should do. One TOC commentator using the moniker ‘voice out’ said that he (or she) is concerned that PAP is becoming more populist instead.
If they are purely addressing the issue of being poor without taking into account of social mobility or the lack of it, then the government is probably leaning towards populism. From all the arguments put forth, it seems to me that the government is only addressing the issue of housing and not talking about how to alleviate the plight of those who are earning $1000 to $2000 a month. The $60,000 housing grant is helpful, but what is alarming is that, their assumption that the poor would be able to pay-off their housing loan in 20 to 30 years and they will be able to realize a modest appreciation in the property values at the end of it, sufficient to see them through their retirement, is the point of my contention.
If their model is based on the historical performance of properties, then the beneficiaries are those who already own multiple properties. And their model also assumes that the property market will continue to give the kind of returns that would address the retirement needs of those in the $1000 income range. The downside of this model is that, there is an odd chance that the property market might crash at the time they retire. Chances are this group will have to still scavenge our hawker centres and food courts for tin cans and cardboards to make a living twenty years down the road.
Looking at the upside, having a stellar property performance itself poses other problems. New home buyers would find it more difficult to buy larger houses and more would have to resort to smaller units and grants. Obviously, when property markets appreciate the grant quantum will also need to be adjusted upwards accordingly. So, more monies will have to be allocated to support the poor and the newcomers to the property market. It would really be the case of ‘show me the money!’
Typically, governments raise the taxes, draw from their reserves, and borrow from World Bank (or other banks) or issue government bonds. Of course, the smarter thing to do is to grow our economy, given that we will only need this money sometime in the future. Growing our economy would in turn ensure a larger tax base to support the communities in the fringes. It seems to me that the government will continue with its current growth plans to meet our future financial/budgetary needs.
There is also a concentration risk for those in the lower income groups, in other words, the financial risk of putting all the eggs in one basket. There is little or no diversification of assets to start with. Investing all their savings in a single property would mean that they are foregoing and precluding themselves from other economic activities and investment options. There is an opportunity cost to the individual and a cost to the society at large for we have to come up with more programmes to support them in the future.
The only hope for those in this income group is when one of the offspring breaks the mould and gets a better paying job. Otherwise, they are basically stuck in a poverty trap and have no opportunity to participate in our economic growth or progress.
Short of telling the government what to do, what I would like to see is how the government would address the issue of social mobility and what programmes they are going to have in place to help these people move up the social ladder faster. There have been many suggestions, such as, minimum wage, adult skills development programme and such. I will leave out the arguments for minimum wage for now. It is a separate topic which merits an article of its own. The basic principle behind it is based on the principle that all participants in the economy are given an equal chance to participate in the economic progress. (Some argue that it is a left leaning policy and does not necessarily address the issue of social mobility)
The proverbial saying of, “give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime” comes to my mind. The $60k grant is like giving the poor the fish. What we need is egalitarianism of rights that every individual in our society has a fair and equal opportunity to partake in our economic progress. I leave you with a question, have the poor in our nation become a forsaken lot? ————————————————————————————-What is “Real Affordability”?
If you want to purchase that 2rms HDB $100K flat with a monthly salary of $1K with a repayment of 30 years, be prepared to have at least two meals a day on 40cents maggie mee with some veggie for a lifetime, travel on bus instead the mrt, depend on Medifund for subsidised healthcare, Workfare payout for skills upgrading, GST coupons and utility rebates, or else you will not be able to make ends meet, so is there social mobility?
If you do not teach a Man to fish, provide him a job for a lifetime, and help him build his nest, can he afford to pay for your “affordable” housing? What is a truely “Asset Enhancement” scheme when it does not even form the basis of fundamental economics?
– Contributed by Oogle.