Beware the ageing population false dilemma

Silver Tsunami

Surfing the silver tsunami

I have briefly touched on this topic in a previous post, but there is a need to dwell further because it’s worrying how this discussion is shaping toward the direction the government wants it.

We know the problem: birth rates are low and our population is ageing. As baby boomers move into retirement, our elderly support ratio (number of residents aged 20-64 years per elderly resident) will fall, putting a heavy strain on the social support network as the tax base decreases.

The answer, however, is not a straight choice between increasing birth rates and importing foreign workers to make up for the short fall, as discussions in the mainstream media seem to suggest. This is a false dilemma fallacy we are presented with.

In the Occasional Paper on Population and the Economy released by the Ministry of Trade and Industry last week, it is rightly pointed out that to prepare ourselves for the silver tsunami, there are three things we should be doing:

  1. Business restructuring and retraining of the workforce (i.e. raise productivity)
  2. Encouraging more residents to enter and stay in the workforce
  3. Complementing our resident workforce with foreign workers

Sadly, being a government mouthpiece, the paper finds it necessary to place added emphasis on the third point while glossing over the other two. Indeed, 6 pages out of its 23-page length were spent explaining the importance of the foreign workforce with examples being cited ad nauseam of how we have benefited from it. The other two points are briefly discussed within a single page (Page 15). Specifically, on raising productivity, the paper summarily said:

One of the main recommendations from the Economic Strategies Committee in 2010 was to raise productivity growth to an average of 2-3% per annum over the next decade, an ambitious target given the experience of developed countries.

[…]

Raising productivity will require not just government initiatives. Ultimately, it will be the direct efforts and ideas of both employers and workers that will improve productivity. We will need to work together to continuously seek new business models and develop new skills in order to raise productivity at all levels.

Note how quickly the paper concludes that it is hard to raise productivity. It then cites some existing government initiatives before going on to place the onus onto employers and workers. Now if raising productivity is hard, isn’t raising birth rates an even more challenging task that involves major changes in workplace policies and shift in lifestyles and societal mindset, bearing in mind that it is an even bigger losing battle faced by many more developed countries? A TODAY reader sensed the lopsidedness of the paper as well and wrote a letter asking the ministry to provide more facts.

It is unlikely we will see birth rates rise to the levels of the post-war baby boomer era. So as this said generation edges toward retirement, we must recognise that our support ratio will continue to decrease until birth rates approach a longer term equilibrium level or interval. It is a tsunami we have little choice but to ride out, instead of pushing back. Relying on net inward migration is a popular solution with governments of the day because it keeps the economy growing while pushing the problem to the future generation. The inconvenient fact ignored by the media is that when the population ages and the proportion of elderly increases, if we counteract by ushering in more foreign workers to maintain the tax base, overall population has to go up. There’s no way it could continue to stay below the 6 million mark. For other countries, the problem is less acute because cities can afford to expand geographically. But for Singapore, there are very hard limits on land area as I’ve mentioned before and we are already reaching breaking point.

Population Pyramid

The abominable face of our future population (click to see full size)

So this should not come down as the ultimatum Trade and Industry Minister Lim Hng Kiang has issued us: have more kids or accept more foreigners, else there will be slow growth, lower wages, more thunderstorms and general doom and gloom. While no rational citizen should doubt that this country needs foreigners to function, few would trust the MTI’s words that foreign manpower policy will be ‘calibrated’ without further squeezes in public infrastructure. Instead of continuing to pursue this easy but unsustainable way out, the main thrust of the government’s efforts has to be to raise productivity and boost the workforce within the resident population. I will elaborate on these in a further post.