atans1

Welfare: Jam to-morrow and jam yesterday – but never jam today

In Economy on 09/12/2010 at 5:20 am

When read I this “prudence and discipline” article last Friday* reporting a speech on S’por’e welfare system (past, present and future) by the PM, I was reminded of the conversation between Alice and the White Queen in Lewis Carroll’s book Through the Looking Glass and What Alice Found There”.

In the book the White Queen offers Alice “jam every other day” to work for her: “The rule is, jam to-morrow and jam yesterday – but never jam today … It’s jam every OTHER day: to-day isn’t any OTHER day, you know.

“[J]am to-morrow and jam yesterday – but never jam today” has since then become an expression for a never-fulfilled promise, which is what many think the promise to help the poor has become.

What annoyed me was that the PM  doesn’t understand the issue: saying we couldn’t afford European style welfarism. Trouble is no-one sensible is asking for this, certainly not the opposition parties or the do-gooders.

The ex-head of the civil service and now chairman of the Public Service Commission showed he “got it” when he said at a recent speech in the US to S’pore  scholars: “More and more citizens, especially younger Singaporeans, agonize over the fact that there are still poor people in wealthy Singapore.”

The issue is the smallish amount of welfare payments relative to the Budget. Take Workfare the govmin’s flagship programme. It  has the right idea but is too ungenerous.

The PM in November said abt Workfare: “[A] total of $1.65 billion in the last five years, or $400 million a year, to help 400,000 low-income workers”. The Finance Minister said in February this year that the enhanced Workfare scheme will cost the government S$100 million annually. So the spending on Workfare is now S$500m or 1.5% of the operating expenses in the latest Budget. Still peanuts. And yes I know that 1.65bn divided by 5, doesn’t equal 400m. Taz why I quoted the exact words.

And if the govmin is concerned that increased annual payments to the poor will lead to moral degeneration and the destruction of its “Work will make you free” philosophy (seriously though, there is the very human issue of rising expectations and politicians pandering to the voters), why not try Kaushik Basu’s solution? The Cornell University professor, and chief economic adviser to India’s finance ministry, says it is not enough that the income of the bottom 20% rise at the same percentage rate as the average. Instead, they should get an equal absolute share of the income the economy.

This would mean only a one-off transfer of S$3.1 billion to the poorest 20% of S’poreans. Less than Temasek’s realised loss on Merrill Lynch. Temasek could have lost as much as US$4.6bn (in 2009 March this would have been S$7bn) on Merrill Lynch. (BTW, March 2009 was not gd for Temasek. The much smaller loss on Barclays (800m sterling?, was then worth abt S$ 1.7bn ).

(http://atans1.wordpress.com/2010/10/13/minimum-wages-missing-the-point/ for more on these)

We got the money for more “jam today”.  We don’t need to borrow to fund enhanced Workfare.

The combination of Budget surpluses, CPF money (indirectly via a circuitous route), and state land sale proceeds, have resulted in our SWFs having 179.5% more in assets than S’pore’s 2009 estimated GDP. For more details on our assets: http://atans1.wordpress.com/2010/11/19/property-sales-also-fund-our-swfs/ and follow the links in the piece.

And the author of this cheeky thinking-outside-the-box piece (which shows that the funds GIC and Temasek have works out to S$230,000 a S’porean), points out to me that at Temasek’s 17% annual return since inception with a few adjustments for mgt fee and inflation, each S’porean can get a S$28, 750 payment a yr. He uses a return of 12.5%.

There is no need for “The rule is, jam to-morrow and jam yesterday – but never jam today … It’s jam every OTHER day: to-day isn’t any OTHER day, you know.”

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  1. Did the indian government try Kaushik Basu solution?

  2. Call me a cynic, but why don’t we wait for him to successfully persuade the government, successfully implement the policy, check for unintended effects a number of years after the policy is implementated before we consider implementing it in singapore.

    Alternatively, we can ask a rich man to distribute his wealth to his workers. Then we check on his workers 5 to 10 years after the distribution to check whether they live a better life.

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