Sunday, February 17, 2013

On potentially unsustainable immigration in Singapore

The demographic structure of Singapore, is characterized equally by a very low fertility rate among the population of Singaporean citizens and a very high rate of immigration, has become a major political issue in Singapore. An very open immigration policy that implements the principles of replacement migration in their purest form is politically unpopular.
Singapore, which is boosting infrastructure to accommodate a population of 6.9 million by 2030, said the number of people in the city state will be “significantly” lower than what it is planning for.

The government won’t decide on a population trajectory beyond 2020, Prime Minister Lee Hsien Loong said in Parliament yesterday as lawmakers from his ruling party endorsed a white paper that outlined proposals including allowing more foreigners into the country to boost the workforce. Opposition members rejected the motion, saying immigration as a policy to spur economic growth is not sustainable.

Record-high housing and transport costs, public discontent over an influx of foreigners and infrastructure strains in the country of 5.3 million people are weakening approval for Lee’s party. Singaporeans are planning a protest next week against the government’s population projections for 2030, which could see citizens, including new ones, making up only one of every two people on the island smaller in size than New York City.

“We will track and control the number of non-Singaporeans and the inflow of immigrants so that we are not overhauled just by the sheer flood of people coming in,” Lee said. “We are not deciding on a population of 6.9 million for 2030 now.”

Lee’s administration is under pressure to placate voters without disrupting the entry of talent and labor that helped forge the only advanced economy in Southeast Asia. His party lost two by-elections after returning to power in May 2011 with the lowest share of the popular vote since independence in 1965.

Much of the public opinion I've come across is hostile. This expatriate blogger and this Singaporean blogger, for instance, each favour letting the Singaporean population age and eventually decline, if it helps prevent a deteriorating quality of life for Singaporeans. The dramatic consequences of very low fertility in Singapore don't seem to matter. (An April 2012 government presentation suggests that, at current birth rates and without increasing citizen numbers through naturalization, the Singaporean citizen population will start experiencing negative decrease around 2025. This seems about right.)

What are the reasons for low fertility in Singapore? Numerous papers--"Below-Replacement Fertility in East and Southeast Asia: Consequences and Policy Responses" by Gubhaju and Moriki-Durand, published in 2003 in the Journal of Population Research; the 2011 paper "The Determinants of Low Fertility in Singapore: Evidence From a Household Survey" by Hashmi and Mok; the East-West Centre's May 2010 paper "Very Low Fertility in Asia: Is There a Problem? Can It Be Solved?" by Westley, Choe, and Retherford--trace the causes for very low fertility in Singapore, as elsewhere in high-income East Asia, to contradictions between the policies which promote high economic growth and policies which promote marriage and family formation, and conservative norms for women in families and as mothers which encourage many women to postpone marriage. As a consequence, marriage rates have dropped while non-marital fertility remains low. (The two factors seem of comparable importance.) In the context of a very competitive economic environment made increasingly more so by deregulated labour market and immigration, it makes sense for individuals to postpone family formation and instead work on accumulatng the capital necessary to live. These are compounded by the very high cost of living in an increasingly densely-populated Singapore, and the economic cost associated with parenthood.

Gavin Jones' paper "Late marriage and low fertility in Singapore: the limits of policy", published in May 2012 in The Japanese Journal of Population, makes the point that--to a certain extent--Singapore's three decades of heavy government involvement in fertility, starting in the 1980s with relatively crude baby bonuses but proceeding to increasingly sophisticated schemes for government childcare and paid parental leave, may have helped keep fertility high. Recorded fertility in mostly-Chinese Singapore may be lower than that of the Chinese living in the Malaysia that Singapore was once part of--the Malaysian situation was profiled here at Demography Matters in 2009 (1, 2)--but it's higher than that of other East Asian cities.

Comparison[s] with low-fertility East Asian countries [raise] some interesting observations. First, Singapore’s fertility is in the same league as these countries, though it has never gone as low as recent figures for Taiwan, Hong Kong and South Korea. Bearing in mind, however, that Singapore is a city-state, comparisons with other cities in the region are appropriate. When this is done, we find that Singapore’s fertility rate is approximately 15% to 50% higher than in cities including Tokyo, Seoul, Busan, Shanghai, Beijing, Taipei, and Hong Kong [. . .] There may be some elements of policy in Singapore that are partly responsible for these differences. Second, fertility differs substantially among the different ethnic groups in Singapore. Malay fertility is substantially higher, and Chinese fertility lower, than the average. However, given the three fourths weighting of Chinese in the resident population, the overall fertility level is heavily influenced by the fertility of Chinese Singaporeans (whose TFR fell to a historic low of 1.08 in 2009). Malay fertility rose substantially for some time after being the first Muslim population in the world to reach replacement level fertility in 1976, but it has recently fallen sharply to reach its 2009 TFR level of 1.8.

[. . .]

Fertility has not responded as hoped, and this may well reflect the fact that the baby bonuses and tax concessions for children are not substantial enough to make much of a dent in the high monetary costs of raising children. Moreover, the culture in many Singapore workplaces remains unfriendly to those who prioritise family over responsibilities to the firm, and this discourages women from having a child that may hurt their career prospects and relationships with workmates. Nevertheless, it could well be that Singapore’s more comprehensive policies to support marriage and childbearing go a long way towards explaining why fertility rates in Singapore, though disappointingly low from the perspective of the Singapore government, are higher than in other major cities in the region, as noted earlier.

Granted that it's unlikely that the Singaporean government can do anything about the high cost of living in Singapore, or that it will be able to enact anything more than slow change in the cultural norms which keep fertility rates low, skepticism about the results of the latest government push seems justified.

"My mother-in-law hates me and she says I'm selfish, but I don't really care," says [Penelope] Sim, a human resources consultant who's been married for six years. "Everything's crazy expensive and life's already stressful enough here without children. If there's no one to carry on the family name, then so be it."

Sim, 33, embodies Lee's challenge to persuade Singaporeans to wed younger. While the birth rate was about 1.3 children per woman in 2012 - barely enough to replace one parent - a backlash against soaring immigration forced the government to curb the influx of foreigners, leading to labour shortages and slower economic growth.

Measures since 1987 to reverse declining fertility, including handouts of as much as S$18,000 (HK$113,600) and extended maternity leave, haven't worked. The nation's birthrate in 2010 and 2011 were the lowest in 47 years of independence. About 36,000 babies were born to residents in 2011, compared to nearly 50,000 in 1990.

The failure to encourage more births means the country will face a shrinking pool of workers and consumers - a deterrent to investment. It will also increase the burden on younger employees to pay for an ageing population. Lee says higher taxes will be needed in the next two decades as the government boosts social spending to support the elderly.

Measures released on January 21 on a government website called "Hey Baby", include boosting Singapore's annual budget on marriage and parenthood to S$2 billion from S$1.6 billion, including spending on matchmaking, housing grants, childcare and fertility treatments and cash gifts for babies. In 2001, the budget was S$500 million.

The prime minister, who has four children, is encouraging couples to start a family earlier by giving priority public housing to those with children below 16 years of age. With some of the most expensive real estate in Asia, government-subsidised homes are the only affordable option for most young couples, and waiting lists for new apartments can extend years. The government will make a S$3,000 contribution to childhood medical expenses and last week announced measures to make childcare more affordable.

Is immigration the answer? In the short term, it may be, but as Mukul G. Asher noted in 2008--see this short presentation that was expanded in this paper--Singapore will be competing for immigrants with other destinations, many of which may do a better job of reconciling economic and family needs. The fertility of new Singaporeans is likely to converge with the old. In the medium term, unless unrealistically large numbers of immigrants come to Singapore, the population is still going to age spectacularly. In the long term, a bigger problem may be created. (The conclusion of the South Korean segment of the United Nations' report on replacement migration that, in order to keep potential support ratios at the level of 1995 given prevailing fertility, 5.1 billion people would need to immigrate by 2050 comes to mind.) William Pesek, below, may be right to call this "the human equivalent of what Bernard Madoff did with money", “Ponzi demography.”

All this leaves aside the issue of whether or not immigration on the scale envisaged by the Singaporean government is going to be popular, or even politically possible; authoritarian though Singapore might be, it's still a parliamentary state with elections. Clinging to an economic model requiring politically unsustainable--perhaps physically unsustainable, given Singapore's small size--level of immigration brings to mind Paul Krugman's argument that high economic growth in East Asia, especially Singapore, was the consequence less of productivity growth and more by inputs of labour and capital. At some point, something will have to give. William Pesek's Bloomberg News opinion piece, "Singapore's Population Bubble", highlights the potential fragility of the current political consensus.

The signs of overcrowding and urban stress are palpable to any visitor. Prices are surging, public services in a nation famed for nanny-state tendencies are slipping and some of the finest infrastructure anywhere is bucking under the strain. Locals blame the influx of immigrants, which Prime Minister Lee Hsien Loong’s ruling party touts as one key to Singapore’s success in the years to come.

The city-state, with about half the area of New York City, has 3.3 million citizens and 2 million foreign residents, many of whom have contributed greatly to Singapore’s growth in finance and construction. Yet complaints that overseas workers deprive locals of jobs and drive up housing prices fill the air. Singapore is the third-most-expensive Asian city and ranks as the sixth most costly in the world, according to an Economist Intelligence Unit ranking of 131 cities.

[. . .]

Sadly, some of the rants one reads in the media and online veer toward xenophobia. If Singaporeans are so livid, they should stop supporting Lee’s party. After all, isn’t the government, by seeking to import more human capital, telling its own people that they lack the skills to compete? Anyone who doubts Singapore is serious only has to look at accelerating efforts to reclaim land from the sea for development, giving the city the room for population growth.
[. . .]
Singapore needs to find another way. The era of easy growth is over. Just as economies such as Japan and South Korea are seeing the limits of their export-led models, Singapore’s formula has run its course. Raising the productivity of its current workforce would be more potent for a developed, open economy looking to compete in a region dominated by the cheap labor and manufacturing of China and India. Singapore should focus as much energy on incentives for its existing residents to innovate and start new businesses as on adding more bodies.


Noel Maurer said...

Let's say I'm half a Singaporean marital couple and we have a child.

Do we know the stream of benefits that we will receive over the next eighteen years? That is, how much child care, how much more house, how much cash, etcetera, per year, over the dependent life of the child?

As is, I'm having trouble judging whether the subsidies are large (and therefore surprisingly ineffective) or rather small.

I'm also at a bit of a loss as to why the government can't change a culture unfriendly to parenthood. Some well-designed changes to liability law and poof! It's done.

My guess is that the government doesn't really spend all that much. S$2 billion, after all, is only US$1.6 billion ... a whopping $2,285 per child under age 14.

That's nothing. That's high-quality child-care for one month.

More coming.

Noel Maurer said...

Singapore is not serious!

There were 42,600 births last year. A TFR of 2.1 would imply a little over 69,000 births.

If you handed over a check for S$400,000 for every child, the cost for 69,000 births would be $27.7 billion.

How much is that? Well, in 2011 that was the size of the government's budget surplus!

I say again, I say loud, let us join and shout ...

"Singapore is not serious!"

Randy McDonald said...

I'd join you.

I will note in passing that the Singaporean government does not seem interested in shifting Singaporean cultural norms on family and parenthood. More active intervention in business to prevent discrimination against people trying to form or support a family is a non-starter, as are more substantial baby bonuses or funding for child care, as is (more broadly) accepting reproduction and family structures that don't fit the traditional heterosexual nuclear model. Presumably it's not interested, doesn't think support exists for these changes, or both.

A commenter at my blog expects that these measures will fail, as will the immigration program. What will happen to Singapore at that point will be interesting.

Anonymous said...

I think it's good that Singapore realizes that they need to increase birth rates. It seems like past attempts to increase TFR have met with limited success.

I think that there are 3 main reasons why previous attempts to increase the birthrate have met with limited success.

First the current pro-natal policies that have been tried don’t make any regard to the age of the parents. One study that I read said that many women want to have two or three children. But when they don’t start having kids until they are in their 30’s they simply run out of time and end up with only one child. At least some of the policies should be geared towards getting people to get married and have kids earlier (at least by 27, maybe even younger).

The second is that the policies often don’t start until a couple has had their 3rd kid. Jumping from 0 to 3 kids is a big jump so I think people often disregard those policies because they think it won’t affect them. But if there are incremental policies that keep incentivizing people to have one more kid then it doesn’t seem like a big jump.

The third is that the benefits often take the form of a one time payment, but children are an on going expense for the parents so the incentives need to be on going. They get some money but not enough to pay for daycare, and a bigger place to live on a continuing basis.

I think something like the following would be more effective.

When couples have their 1st kid they should get money that can be used to pay for college, to pay off student loans, or to cover a down payment on a house or condo. The amount of money should be substantial so it is a good incentive, possibly $30,000 per couple or even higher. We should also consider making this age restrictive, maybe to 27 or even younger. This will bring back a sense of urgency to getting people to have kids and bring down the age at which people have their first child.

When a couple has their 2nd child they should be eligible for subsidized child care. This benefit would be available for both of their current children as well as future children they have. Childcare is a big expense and in households that have two working parents it is a big reason that people don’t have kids. For families with a stay at home parent they could receive the money that would have been spent on childcare as a direct payment.

When a couple has their 3rd child they should be able to receive a substantial tax rebate or direct payment, maybe $5,000 per child. This benefit would be available for all 3 of their current children as well as any future children, so as soon as they had their 3rd child they would begin receiving $15,000. Once they had their 4th it would go up to $20,000. They would get it each year until a child turned 21. This would help offset the cost of raising a child. Since it doesn’t start until they have had their third child it will also encourage parents not to wait too long to have their third child.

When a couple has their 4th child they should become eligible for larger subsidized housing. They should be able to rent a 4 bedroom apartment for the price of a 1 bedroom apartment. This benefit would be available each year that they had at least 3 children under 21. As people have become more urbanized the size of their housing and the cost of housing has become one of the limiting factors on family size.

Once a couple has their 5th child they should begin getting an increase in their pension or Social Security of 20% (or possibly more) per child. So after their 5th child they would get a 100% increase (20% for each of the first 5). If they had a 6th they would have another 20% for a total of 120%, etc. One of the main reasons that people used to have a large family was that they were seen as a source or security in old age. This will bring back the connection between a large family and economic security in old age. Other incentives or be added in for 6th, 7th, 8th or higher number of children.

Jesse said...

I can see how the child unfriendliness and workaholic culture of Singapore could help explain why they have a low TFR. But all advanced industrialized countries also have a low TFR. And in Europe I think that most countries have pretty family friendly policies (good maternity/paternity leave, a relatively high number of vacation days, etc.). So are the causes of a low TFR linked across all developed countries? Or is it different in different societies?

jemand said...

@ Jesse, it is more than just existing policy, the social expectations of parenthood and work affect whether or not a couple will see using a policy as realistic or not.

For some countries, the expectation that a mother stay home or a worker not have family distractions, is going to overwhelm what little the government has done, whereas an equivalent incentive from a government in a different cultural context could be very effective.

Examples I am thinking of are Germany or Japan vs France or Sweden, or northern vs. southern Italy. I have seen indications that cultural norms on the role of women in families with children, and the cultural norms on what a "good" worker look like, may make otherwise effective government policies ineffective.

Jesse said...

@Jemand That's interesting, and also somewhat worrying. I know that the UN's long range population projections assume that birth rates will eventually return to replacement levels. Presumably governments will take steps to encourage higher birth rates to prevent their economies from declining. But if government policies can't change TFR much that would suggest that some countries will be doomed to fall into a demographic trap and decline. Has any country ever attempted to change the cultural norms in their country to make them more friendly to families? If so have they ever been effective?

jemand said...


I can't think offhand of any countries which have had a lot of success changing cultural work/family norms on purpose.

I personally believe that most, if not all, countries will eventually get there, but some may take much longer and have correspondingly much longer demographic declines and associated economic complications.

That's not based on anything tremendously strong, though, just my gut feeling that the vast majority of countries (esp. the ones that most people live in, which is skewed towards the more populous ones) have large enough populations that they could, in principle, endure several generations of demographic decline and yet still have enough people left to maintain a stable population as soon as the necessary cultural changes are put in place.

Anonymous said...

Well governments will have to get used to lower population growth in the future . We cannot go on increasing the world population and especially consumption , the worlds resources are finite .
The only real reason for population increase is financial , and does not increase quality of life .

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