How would you like to receive a salary of $1200 a month for nothing?

Finland-Flag

Finland’s government is doing precisely this: to give everyone of its citizens a basic income of 800 euros a month and scrapping benefits altogether.

A basic income means simplifying the social security system. The Netherlands had already been trialling a similar proposal.

Previous experiments have shown that universal basic income can have a positive effect.

In small scale experiments in Canada, everyone in the Canadian town of Dauphin was given a stipend from 1974 to 1979. The experiment showed a drop in working hours, mainly because men spent more time in school and women took longer maternity leaves. This contributed to significant improvements in health, better performance at education and better family life.

In Uganda, when thousands of unemployed people in Uganda were given grants of twice their monthly income, working hours increased by 17% and earnings increased by 38%.

What started off as a crazy idea and far-fetched experiments are beginning to see actual implementation. Finland may or may not proceed, but polls show strong support – at 69%.

Low-wage workers
Is this idea too crazy for Singapore?

First off, we have to ask why. Why should the country even provide the basic salary? What problems are we trying to solve?

Finland’s program is meant to tackle unemployment. Their unemployment rate stands at 8.7% since October 2015. The basic income would allow people to take on low-paying jobs without personal cost. At the moment, if a Finn takes on a temporary job, he would get lower welfare benefits, which can lead to an overall drop in income.

So in a way, their welfare program discouraged people from getting work. That is the sort of scenario Singapore wants to avoid.

Our unemployment today hovers around the 2% mark. The country is at full employment. Whatever the effect of such a program, we have to ask if the country can afford it.

$1200 per Singaporean would cost us some $36b. That is a phenomenal amount. Already the country spends about $50b a year just to keep everything running.

In fact, it would be argued that we need to do a reverse of these liberal experiments. We need to develop policies that motivate the worker and as well as the businessman. The lack of an “iron rice bowl” keeps each individual on their toes and the threat of competition pushes workers to always keep their employability sharp.

Programs such as the Progressive Wage Model produce a dual effect of assuring the worker of a decent wage and simultaneously improves their skills for better wages. Both the employee and employer stand to gain.

Personally I am glad that we do not take such a lazy approach to welfare. Minimum wage…and now basic wage, these are old and blunt clubs that are used to whack a problem, but ends up hurting the host more. I’m glad that we develop precision tools to slice away the issue and in turn, healing the rest of society.

 

 

About the author

Tay Leong Tan

Tay Leong Tan is a collective of 3 writers. Tay, Leong and Tan. (Who were you expecting?!) We are enthusiastic about labour issues, economics and current affairs in particular.

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2 Comments

  • I’m a public policy professional from the UK and I’ve been living in Singapore for six months. Already I really love this place but it does have some issues that make me disagree with the author.

    Singapore does have an inequality problem. When I go to Pek Kio market to eat, I’m being served by extraordinarily hard working people on shockingly low wages. And you see this all over the service and retail sector. It’s unfair to say these people don’t work hard yet they have highly restricted rewards.

    The equality issue comes from the limitations these people have in terms of social life, education and in end cases, in healthcare. All these limits mean you are creating two classes of Singaporean who don’t mix.

    When you create a poor class of citizen and drop a new child into it, the expectations of that child, quite reasonably, are that the better life is out of their reach. This can lead to a lack of ambition or even a turn to crime to escape poverty or to build esteem.

    So far from inequality being unfair for an individual in limiting their opportunities, my case is that greater economic equality would enhance the productivity and social mobility of the workforce, and in the long term reduce crime (which is of course a long term and successful priority).

    Citizens Income or Minimum Wage are sort of interchangeable policies. Having either one offsets the advantages of subsequently implementing the other.

    In Singapore, you wouldn’t necessarily want to have a minimum wage if there was an alternative because that would drive up the price of wonton mee at Pek Kio and a lot of other consumer prices.

    So a Citizens Income for Singapore would be a graceful alternative. You wouldn’t implement it at $1,200 a month but at s more modest level. I would probably set it according to the value of Temasek returns and Foreign Worker Levies, to give a direct connection between immigration and economic development and the average Singaporean’s pocket.

    And over time you would see these costs offset by lower benefit claims and higher productivity.

    I’d ask the author to have another think.

    Alex

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