Beruflich Dokumente
Kultur Dokumente
ECON317 Paper
There are many ways in which social programmes are funded around the
world. A more traditional model would be those that are provided through government
firm or by the government. Under this scheme, the contributor receives a lump-sum
reward based on the capital gain and income returns from the investment from his or
her contributions over the year and the contributor may then invest or spend it
The adoption of the latter scheme by the Singaporean government forms the
basis of Singapores Central Provident Fund (CPF) and allows the ruling Peoples
Action Party (PAP) to allocate resources in the areas of education, health, housing and
pensions whilst leaving the economy mostly market-driven. This compulsory savings
plan for working Singaporeans and permanent residents, funded by both employers
and employees, is used primarily to support their retirement, healthcare and housing
Employed Singaporeans and their employers contribute to the CPF that go into
four accounts: Ordinary Account (OA) for housing, CPF insurance, investment and
education, a Special Account (SA) for old age and retirement-related financial
products, Medisave Account (MA) for medical insurance, and the Retirement
Account (RA) to meet basic needs during old age. The age at which these
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cumulated savings can be withdrawn is 55 years, after which most account holders
will be able to spend or invest the money as they wish (Ministry of Manpower, 2016).
Such a scheme has numerous benefits. Firstly, since the funds for retirement
have already been accumulated out of the past earnings of the account holder, they
need not be derived from the current tax revenue of the government. This prevents an
undue drain upon the public budget, allowing a greater portion of public expenditure
a smaller proportion of GDP, so creating greater incentive for private sector growth.
own available resources to meet these compulsory payments and are given incentives
to improve themselves through education, skills acquisition, hard work and career
advancement.
Loke and Craner (2009) note that the impact of the CPF on Singaporean
the country, in terms of healthcare provision and poverty reduction. The CPF forms
hospitalization, day surgery and certain outpatient treatment expenses. The concern
for this scheme is that Singapores Medisave is not entirely fair and rising healthcare
Although it is not intended for poverty reduction, the CPF plays an important
role in helping Singapores residents to build their household assets. However, many
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have noted that the CPF is only applicable to those who are employed and beyond
that, Singapores current public assistance schemes are limited. Asher and Nandy
(2007) comments that less than 5% of low-income households have benefitted from
the state-funded systems and only 0.07% of the population received public assistance
in 2004.
Is this program efficient? It can be argued that this CPF program creates a
relative to taxes as well as incentivize each person to advance their careers. The
Singaporean CPF has resulted in a society where majority of the population are equal,
with the exception, of course, the gap between the affluent and the rest of society
(Ramesh, 2004; Zhang, 2003, Mendes, 2007). However, this equality has been
achieved through mandatory payments that force Singaporean residents to earn 2.5%
It should be noted that the CPF is not intended to redistribute income and does
not involve interclass transfer of wealth. (Tremewan, 1998). Rather, it amplifies the
inequalities because the employees only receive what have been contributed to their
accounts. While it provides those in the middle class with opportunities to improve
their socioeconomic status, those in the working class would be caught in a poverty
trap that allows them minimal savings to draw on when they need it most in
retirement. Whats more, the contribution rate is not progressive as 20% contribution
would be more important, since at that level, any additional wages would go to
necessities before it is spent as disposable income. Thus, the main beneficiaries of the
programme are the affluent and the better-paid workers (Tang, 2000: p.38). This
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responsibility, social discipline and work ethic. Ultimately, this minimalist
aristocracy, those with expert knowledge and in order to create a good society the
government should invest in the creation of the intellectual aristocracy. In fact, the
former deputy Prime Minister Rajaratnam, stated the Singaporean was built on a
political meritocracy, consisting of the best and brightest citizens (Low & Aw,
1997:11).
Based on the context of Singaporean society and CPF model, the two main
1. The CPF limits personal autonomy and the question raised is whether this
the working poor, the unemployed, the disabled, and the poor elderly
Robert Nozicks 1974 book Anarchy, State and Utopia and John Rawls 1971 book
The first main criticism of the CPF stems from Nozick and his Entitlement
fundamentally around the idea of liberty. Nozick argues that there are three sets of
rules of justice that defines the acquisition, transference and rectification of property
rights. Liberty is a prime feature of a just society and exchanges that are made fraud
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or theft or restricting someones access to voluntary exchange are therefore not just.
(Nozick, 1974)
earnings is like making a person work a proportion of his working time for anothers
and emphasizes the idea of the night-watchman state; the idea of a minimalist
government whose only role is to keep the peace and enforce contracts. Such
government is selected by people because the peoples state nature recognizes that
purchase whatever healthcare they want, in contrast with countries with universal
health care system such as in Canada. However, the CPF is not consistent with a
do as they please as long as the rights of others are not infringed upon. Certain civil
liberties are restricted and mandatory payments are required in order to pay for
Nozick regard the state as an institution whose sole duty is to only enforce
contracts and protect the property rights of its citizens. However, the State, according
to former Prime Minister Lee Kuan Yew, could not be the Nightwatchman state as
described by Nozick and cannot leave individuals and their families to fend entirely
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for themselves (Han, Fernandez and Tan, 1998: 165). Although competition and
performance was the best way for society to level up, the less well-off should not feel
they have been discarded, for that could threaten social cohesion. The Singaporean
government claims a much broader compass of authorities and treats the state as
This brings us to the second main criticism of the CPF system. The
and the ways of life of societies. This is in contrast with Rawls Difference Principle
justice depends on the sociocultural environment where the citizens live in (Benhabib,
1992; Macintyre, 1978; Sandel,1998), Rawls argues for a veil of ignorance, where
fairness or equality is achieved through the maximising the utility of the least
advantaged.
Rawls argues that justice can be achieved through adapting the two principles
of justice that guarantee a just and morally acceptable society. The first principle,
known as the Principle of Equal Liberty, is that it is the right of every individual to
have basic liberty that is compatible with the liberty of others. The second principle,
the Difference Principle, is that social and economic inequalities should benefit the
for all.
in what is known as the Original Position, where they do not know their abilities,
social position, preferences. Once they step out from behind the so-called Veil of
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Ignorance, the rational self-interested person would choose a system which has the
health, education provided through the CPF and generous income transfers through
Singapore, while low-income families, until recently, have been overlooked. The
consequence is a welfare regime that discriminates between the underclass and the
middle class: a significant underclass that has little or no CPF savings to fall back on
and at the mercy of charitable relatives or organisations, residual provision for relief
(Han, Fernandez and Tan, 1998). Those with average intellect and abilities occupy
the middle of the diamond. At the top, IQ and competence levels were considered the
best and brightest of society. The opposite is also true towards the bottom of the
population diamond. Lee argues that it is the role of society to encourage and reward
those with talent and ability. He also adheres to the viewpoint that liberal values result
in erosion of social responsibilities and does not produce any benefits. According to
Lee, the invisible hand of unregulated free-market capitalism undermines the family
and disrupts local communities leading to an increasingly fragmented life for citizens.
opportunity, which is also the first part of difference principle, Rawls argues that
talent and effort are morally arbitrary. The meritocratic system in Singapore is a
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criticism of Rawls difference principle which is biased against giving credit to one's
talent. Rawls argues that talent and work ethics are not within the scope of free will.
In his words, A just scheme answers to what men are entitled to; it satisfies their
legitimate expectations as founded upon social institutions... But what they are
entitled is neither proportional to nor dependent upon their intrinsic worth. (Rawls,
1971)
considers a primary resource, one that all people expected to have and value behind
the Veil. Rawls argues that those who are talented should be entitled to values like
respect and property from society, but must apply their talents in a way to benefit
those who do not have the same talents the least advantaged in society. Since
individuals in a society start from behind the veil of ignorance, no one has any
knowledge about their individual conditions after stepping out from behind the veil,
any self-interested rational individual would agree to a society that would maximises
one's effort as fully moral arbitrary is not so convincing. Alternatively, if effort is, to
certain extent, motivated by free will, Rawls argues that effort is still credited since
there is restricted and justified inequality. Under Singapores CPF scheme, the effort
is not credited, but the contribution to society, due to the impossibility to measure
to credit effort instead of contribution, because a diligent person may not benefit the
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This essay has considered two main criticisms against the CPF scheme in
Singapore. The arguments raised against this system are similar to the criticisms
placed against other welfare distribution systems that there is lack of individual
autonomy and fails to provide those least advantaged in society. If we were to claim
that the CPF system is unjust, as indicated by Rawls and Nozicks theories of justice
because of the idea of self-help that is implicit in the Singaporean society that leads to
lower-class citizens to contribute the CPF, we must demonstrate how these types of
citizens must have a right to access government welfare programs for free. However,
this does not mean that these criticisms should be dismissed but to analyse these
criticism from the viewpoint of the above mentioned philosophers. This paper
therefore shows that there will always be doubt about the justification of making such
moral judgments.
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Bibliography
Han, Fook Kwang, Warren Fernandez and Sumiko Tan. Lee Kuan Yew: The
Man and His Ideas. Singapore: Times Edition, 1998.
Low, L. and T.C. Aw. Housing a Healthy, Educated and Wealthy Nation
through the CPF. Singapore: The Institute of Policy Studies & Times
Academic Press, 1997.
Sandel, Michael J. Justice: What's the right thing to do? New York: Farrar,
Straus and Giroux, 2009.
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Seng, Lim Tin. Central Provident Fund (CPF). 5 January 2005. 4 October
2016.
<http://eresources.nlb.gov.sg/infopedia/articles/SIP_573_2005-01-
05.html?s=cpf>.
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