The need for a new welfare capitalism

This piece takes a step back from empirical work and invites the reader to join me in a bit of conceptual exploration, on the way goods and services are produced in a modern economy like Singapore’s, and the institutions that support those people who work to produce those goods and services.

To Singaporean ears, the term “welfare state” epitomizes all that is wrong with the decadent West: a state which saps the industry and drive of its people, rewards idleness and irresponsible fecundity, and yet delivers unemployment, crime, a breakdown of the family unit, and all that at far greater cost to the taxpayer than the Singaporean system. By contrast, we value work so much that we have neither a minimum wage nor an unemployment insurance. We value family solidarity, so we require those in need to turn to their family first—even to the extent of legislating a requirement for children to care for their elderly parents.

But defenders of Singapore’s system neglect a few vital facts. The foundations of our social institutions were laid down when our population was much younger and the occupational structure of our economy was less skill-intensive than it is today. The demographic dividend paid off by keeping healthcare costs and demands on the health system low. Meanwhile, it was possible for (largely healthy, young) workers to switch jobs and sectors in a relatively low-skill economy if they were made redundant. Jobs were fungible and it was a workers’ market in a long boom era of near-zero unemployment. If one were looking for empirical confirmation, I suspect that the CV of a typical 55- or 60-year-old worker nearing retirement today shows a surprising amount of diversity and adaptability in occupational choice.

While the demographic dividend faded, many of the blue-collar and low-skilled white-collar jobs vanished or became closed to Singaporeans. This was due to a combination of changes in economic structure, social convention or stigma, and simply the fact that older workers were understandably reluctant to take up menial, physically-tiring work. If I were to guess I’d trace this structural change to the 1990s and early 2000s. Further structural changes have brought in more employers (particularly in hospitality and tourism) who, though they hire large numbers of semi-skilled workers, prioritise low wages and (possibly) youth while offering little career advancement. This is a characteristic of most front-line service jobs. Meanwhile, driving a taxi is the new genteel unemployment for the squeezed middle.

We need to recognise that these structural changes in the economy were unanticipated and unprepared for by workers. The prosperity and growth of the 1990s built optimism, epitomised by the rising stock market and buoyed by the worker-capitalist. When the stock market crashed in 1997, and Malaysia froze the CLOB trading mechanism, thousands of Singaporean investors lost huge amounts of money. More subtly, globalisation was a similar unprepared shift, in which low- and middle-skilled jobs were exported overseas, while low-skilled workers were imported. It’s well-recognised that globalisation has permanently altered the nature of the post-industrial economy, making it more dynamic and unpredictable. What’s not recognised is that workers could not have foreseen this structural insecurity nor taken steps to insulate themselves from it. This makes it hard to justify holding workers responsible for lacking adaptability. While investors can go back to work, what can workers do to earn a living when work evaporates? We should at least consider the possibility that society has certain obligations to step in and help.

I’m not suggesting that low-skilled Singaporean jobs should have been protected—I don’t want to be drawn into the standard globalisation versus protectionism debate, because every A level econs student can do that. Rather, I’m suggesting that unemployment, particularly structural unemployment, is now far more of a social risk than it was before. (I use the term “social risk” to designate risks which are highly correlated between individuals, such as the risk of unemployment brought on by a generalised economic crisis, or due to structural changes in the economy brought about by globalisation. Since private insurance depends on risks being uncorrelated, social risks represent a market failure, which is within the government’s ambit to address.)

Globalisation can’t be reversed. But the fact remains that it could not have been foreseen—we could not have expected workers to prepare for it. In addition, the nature of new work practices like outsourcing is that employees are easily replaceable. And the peculiar crisis of post-industrial economies is that for the first time in human history, we have an explosion of jobs in the information industries which, given regular distributions of talent in human populations, are inaccessible for the vast majority of people. These are the jobs that are earning the highest returns. Anything that can be automated has been or will soon be automated, and the defence against that—skill—is something that almost by definition not everyone has—especially not older Singaporean workers who the government held back from educating to a high enough level in their youth. (Even up till now, demand for tertiary education far exceeds supply, with the result that if you’re at the 40th percentile or so from the top in terms of university admissions, you need a good slush fund to get a private education or go overseas. Isn’t there an obvious disadvantage to kids from less well-off families?) The alternative is poorly-paid front-line service work with little job security.

As I’ve argued, we could not reasonably have expected workers to prepare for economic crises, globalisation, and the nature of the post-industrial economy. Moreover, these are all failures of the market and irresolvable through the market. I’ve already argued that the loss of work brought about by economic crisis or globalisation is a social risk and a market failure. The post-industrial economy is likewise a natural development of the market. Trickle-down economics, of the sort that led us to open the casinos and grow the finance sector, is bunk.

The Institute of Policy Studies posited back in 2012 the need for a “new social compact”, given the rise in inequality. But what this new social compact consisted of was more public tolerance of policy experimentation, more neoliberal economics. I doubt it would benefit the common worker.

What’s left, I think, is a new welfare state. It would affirm the fulfilment that work brings. To achieve that, it would at least partially indemnify workers (unemployment insurance) and help them adjust (job training and restructuring) to the flux inherent in the modern economy. It would institute a minimum wage among the many other conditions that we expect of work (minimum safety requirements, maximum hours, minimum off-days and notice periods, minimum parental leave). It would educate workforce entrants flexibly but rigorously and cultivate independence of thought (at least partly through a more vigorous media). And it would level opportunities and invest heavily in early childhood—right from birth.

There is the argument that we can’t afford welfare, or that we would have to kill the goose that lays the golden eggs in order to fund it. I think that’s preposterous. Wealth and profits are high and concentrated in Singapore, and denying welfare serves to sharpen the concentration of wealth in the hands of a small segment of society. As Sudhir Vadaketh recently argued, there are spheres of Singaporean life which are increasingly separate—the knowledge worker who can afford what used to be the trappings of the middle class, a condo, car, and regular vacations; and the semi-skilled worker who was high-skilled when s/he left school but has since fallen back (in both the tangible indicators, like wages, and the intangible ones, like career progressions and life goals) as the economic world has outpaced him or her. And this separateness has been legitimised.

On the topic of separateness, over the past few years the national media have occasionally covered stories of Singaporeans who have been forced to live in Johor Bahru for cost reasons. To my knowledge no writing in the public domain has quite grasped what I think is truly significant about this. I think one of the inalienable rights of citizenship is that one should be able to live in one’s own country—can it get more basic than that? Particularly if we are asking the children of those families who have to live in Johor, yet consider themselves Singaporeans, to make sacrifices and potentially defend the territory that they cannot call home? Singapore’s become a country in which some of its citizens cannot afford to live, migrating out of economic necessity—that’s something we associate with the poorest of poor countries. In other words, we have become so unspeakably rich that in the process, some Singaporean families have fallen off the income distribution entirely. It debases our citizenship that we Singaporeans must live not just in different spheres, but even in different countries. A new welfare capitalism in Singapore must make living in our country possible for all our citizens. And we should also be concerned about separateness in spheres of life within Singapore.

One final reason why a new welfare state is necessary: the cruellest irony is that as we are extending life medically, the post-industrial economy is shortening the useful life of the average worker. In the future those who can work till 75 will be the lucky ones; the rest would have been lost to attrition over the course of their working lives. We must at least think about how they can maintain dignified, socially-meaningful lives even if they are not directly involved in production—”labour excess to capital” (as a Marxian might put it) cannot become people excess to society.

Singapore is a rich country, and taking care of its citizens is not just affordable, but imperative in a post-industrial economy. If we don’t take care of our own people, the sacrifices we demand for citizenship—ultimately, to die to defend our social institutions and our way of life—will more and more resemble empty exchanges of heavy responsibilities, for worthless rights, in defence of hollow ideals.


Postscript: I might come under criticism for “pointing out problems without offering solutions.” (1) The particular problem I’m concerned with is that few Singaporeans seem even to be aware of the nature of the post-industrial economy. Writing is my way of addressing this problem. (2) The nature of the post-industrial economy poses problems that all post-industrial economies are facing—and are trying in their own way to address. I’ve already mentioned some ideas above. But I’m not sure if they solve or just ameliorate the problems.

Some further reading

  • Arthur Okun. 1975. Equality and Efficiency: The Big Trade-Off. Washington DC: Brookings Institution Press.
  • Gøsta Esping-Andersen. 1999. The Social Foundations of Postindustrial Economies. Oxford: OUP.
  • Karl Polanyi. 1944 (reprinted 2001). The Great Transformation. Boston: Beacon Press.
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