The Provision and Design of Social Safety Nets in Singapore: What is Optimal and Sustainable?

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1 The Provision and Design of Social Safety Nets in Singapore: What is Optimal and Sustainable? Ho Kong Weng Singapore Management University 27 October 2016 Slides prepared for Singapore Economic Policy Forum 2016

2 Outline Design of Social Safety Nets (SSNs) Provision of SSNs in Singapore SSNs in OECD Great Recession and SSNs; Unemployment Benefits; Minimum Income Benefits Singapore s (Alternative) Policies Optimality of Social Safety Nets?

3 Design of Social Safety Nets Objectives: economic growth, political stability, poverty relief, equity and mobility Singapore: basic needs, children, integration Constraints: economic, governance & politics, administrative, social

4 Objectives of ComCare Assistance and Programs for Community Attain sufficient income to meet the basic needs (of SC, PR, and their family member in financial or other difficulties) Address the development issues faced by their children Facilitate their integration into society ComCare Fund: $1.7b (FY2014) In FY2014, $116m disbursed: $68.5 funded by interest income, the remaining by budget of MSF

5 Five Types of Assistance ComCare Short-to-Medium Term Assistance ComCare Long Term Assistance ComCare Assistance for Children ComCare Interim Assistance Supporting the Community

6 Source: ComCare Annual Report FY2014

7 Source: ComCare Annual Report FY2014

8 Social Safety Nets (SSNs) in OECD Countries Welfare programs (US), social assistance programs (EU) Anglo-Saxon: less reliance on social insurance instruments; greater use of targeted support (higher share of non-contributory spending) Continental Europe: substantial social insurance; universal/generous family benefits; residual meanstested programs (greater coverage and extent of redistribution) Differences in political institutions, racial fragmentation, beliefs about nature of poverty

9 Types of Non-contributory Social Transfer Programs Guaranteed Minimum Income (GMI) Housing Benefits Family Benefits Long-parent Benefits Employment-conditional Benefits Childcare Benefits

10 Need for SSN Reform? Increasing long-term unemployment Population aging Changing family structures Funding and delivery tensions between central and local authorities

11 Work Incentives: Policy Responses Extending possibilities for part-time work Changing benefit delivery form household to individuals Employment conditional benefits More help in the job search Reduce benefit amounts Reduce duration of benefit More rigorous tests of active work-seeking

12 Social Exclusion: Issues Relative nature of social exclusion Mechanisms that produce social exclusion Dynamics of exclusion Policy responses: Full-time paid employment will be sufficient? Range of needs including adequate housing, healthcare and access to social institutions?

13 Great Recession and SSNs in US Acceleration in both mean-tested and social insurance expenditure Growth in Earned Income Tax Credit (EITC), Supplemental Nutrition Assistance Program (SNAP) Growth in Social Security retirement program (OASI), Unemployment Insurance program (UI)

14 Moffitt (2012), The Social Safety Net and the Great Recession, Stanford Center on Poverty and Inequality

15 Moffitt (2012), The Social Safety Net and the Great Recession, Stanford Center on Poverty and Inequality

16 Moffitt (2012), The Social Safety Net and the Great Recession, Stanford Center on Poverty and Inequality

17 Unemployment Benefits and the Great Recession Hagedorn et al, 2013, Unemployment Benefits and Unemployment in the Great Recession: The Role of Macro Effects, NBER Working Paper Unemployment benefit extensions affect both job search and job creation, raising equilibrium wages and unemployment.

18 Minimum Income Benefits in OECD Social assistance benefit may react more to labormarket conditions Lack of work experience (relative to unemployment benefits recipients), minimum income beneficiaries face less promising employment prospects Challenges: Effective minimum safety nets when needed; financial and operational capacity to deal with new claimants adding to the stock of recipients

19 Singapore s (Alternative) Policies Workfare Income Supplement Progressive Wage Model

20 Optimality of Social Safety Nets? Growth Fiscal sustainability Behavioural changes Intergenerational mobility Preference changes