Hijacking the Debate?

Are Middle Class Concerns now at Forefront of Compulsory Annuities

In a strange twist in the compulsory annuities debate, protestors have attempted to compel the state to perform better in terms of CPF returns. If it (the proposed compulsory purchase of annuities) is, as some critics might allege, a draconian encroachment on their compulsory savings, then what the so called critics are asking for, sustained higher interest returns at a rate far higher than SGS long term bonds, appears to my mind at least oppressive. And I don't mean oppressive against the state.

Besides, they have hijacked the debate - a debate I believe was initially and predominantly for the benefit of the lower income group. It appears to my mind now to be one which is largely of middle income group concerns.

After all if what is asked for is granted – this demand for increase interest rates - it will be a windfall for the middle income group, who have relatively more money in their CPF accounts. This is compared to the lower income group who simply have no money, or no contributions, or the upper income group, who do not put as much percentage of their wages in their CPF account. It is quite clear that an increase in interest rates for every dollar benefits the middle income group the most.

And what about the poor and old? If interests rates in CPF accounts indeed increase for everyone, my simplistic belief is that that will lead to inflationary pressures and the poor will indeed suffer more. If that is indeed true, so much for the critics’ desire to represent the interests of the old. But I am not sure about this part. (What the effect of giving the middle income group more money is exactly requires more thought)

However, the Government’s initial idea that interest rates should increase only for the first X dollars is much wiser but was not applauded. Perhaps that interest rate for the first X dollars should increase more to protect more of the poor – that will be indirectly/directly welfare for those with eyes to see. But is that what the critics are seeking?

Nay. They want it provided for every single cent. The middle income group is truly wise.

Then there is this idea bandied around that the poorer will die earlier, and those who die early will invariably fund the richer who will die later. This perspective is simply the idea that we should tax the rich instead of the poor. It ignores the reality that the poor who live to the old age, while in the minority, will also benefit. It just means that people who die early will help to assist people who die later. One can divide it by sexes too. Males tend to die earlier. So man are taking care of woman? Or those whose parents die below 70 fighting those who parents lived pass 80 in a genetic battlefield? Thats why it must be compulsory. The risks differ too widely and if it is not compulsory, the costs of the insurance will be too expensive, especially for the poor.

Well, if these critics are indeed angels and represent the middle income group perspective, an alternative paradigm of higher taxes for the richer (and themselves) will indeed be possible. But they lack both political power and perhaps altruism to support policies to increase taxation and protective employment legislation for the lower income group.

Indeed, as income and corporate taxes reach historical lows, the middle classes merely shrug. Some even applaud. The underbelly of lowly paid workers in our economy made possible by our ‘liberalization’ of the employment market has meant that lower income group employment is under pressure. But this have in general meant cheaper goods and increased living standards for the middle income group.

Besides, the population increase as a result of a liberal immigration policy has also “increased” the value of the property the middle classes own. Will the middle income group take a hit in their living standards for the poor? I strenuously doubt it. While most outspoken critics speak for the lower income group in this respect - they might argue for increased taxation and for more employment legislation; in this debate on compulsory annuities- I think they miss the point by asking for more interest rates for CPF.

Does the middle class majority want to take care of anyone except themselves and their families? Does not seem to be the case. The shift to the welfare paradigm despite all that talk is not supported by the darkest recesses of the critic’s soul. The critic today seems merely to represent the middle income group angst because the state is concerned about the widening income gap and the middle class does not seem to be benefiting as much from the latest proposals. The recent CPF change by the Singapore government represent a shift towards a more welfaristic course – with keen awareness of the social strain (plus lost of political support) a widening income gap can bring. Little must they have expected the middle classes to get so angry and demand more despite growing prosperity. The best way to stop all these critics is not to give in to their demands, but to provide more assistance to the lower classes, and considering the ambit of debate as defined, this increase assistance to the truly poor should be provided through topping up the CPF accounts of those who belong to a lower economic strata.


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Add: The more polite way to say this in this century in not "lower classes" but lower income groups. I have changed it accordingly.

Add2: Whether there are any elements of 'welfare' of course is merely speculative. The point of the post in case people get angry is that: welfare is not being asked for and people are angry over its compulsory nature. What is being asked for has nothing to do with redistribution of wealth. What is asked for is more money for the middle classes. And I think that's a wrong way to look at it.

The increase of interest rates on the first $X in the CPF represent distribution of wealth in a certain way and is essentially welfare. However, CPF money come from work and some of the poorest members of society will not have work. Perhaps the state can look at ensuring they have $x in their CPF accounts too.

Add3: On the question of fairness. See here