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Yes! You can have welfare in Singapore!

Posted by intellisg on June 23, 2007

Mohd Arif, 32, works as a technician and takes home $2200. He hardly saves and needs to support his three children at home. His wife, a production operator helps out but brings home only $900 a month. Below the median family income of about $5400, life is harsh. Things could easily get more depressing if you find out that after July 2007, your consumption will be taxed 2% higher.

The year 2007 will be remembered by the blogosphere as the one in which Singapore ministers declared a 32.5% salary increase for themselves from about $1.2 million to about $1.6 million. It is also a year where the good and services tax will be raised from 5% to 7%.  Clearly, declaring a tax increase and granting senior government servants a large pay increase in the same year has ruffled the feathers of many citizens, the most vocal being the bloggers in the Internet. The political capital expended in these initiatives is clearly a heavy one and only time will tell if this decision will impact the people’s support for the government in the years to come.

Within the maelstrom of blog postings regarding ministerial salary increases and GST increases are questions which are directed at Singapore’s most sacred philosophy of pragmatism. In many cases, pragmatism represented paying top dollar for top talent and it’s antithesis being that of a welfare state – where Singaporeans can receive a sum of money to tide them through hard times during periods of unemployment.

Critics of the welfare state are legion. They are mostly concerned with people losing the incentive to work hard and build a productive life for themselves. Supporters believe that it is very insensitive for the government to withhold several hundred dollars to sustain families every month and yet spend so much effort justifying their hundreds of thousands of dollars in salary increases.

As such, history will unfold in a typical Hegelian dialectical manner – the thesis being a pragmatic, uncompromising Singapore which can sustain the reality of a ministerial salary increase with more consumption tax, and an antithesis, being for a softer and kinder Singapore that is willing to lend a hand to citizens who have fallen on hard times.

Capitalists and investors in Singapore are well aware on how to resolve these two differences and perspectives and it is , in fact, largely possible for middle income Singaporeans to create welfare for their families by reducing their expenses and investing their money intelligently in the local stock market.

How to establish your own welfare state

The first step in becoming a welfare state would be to think about how a welfare state should function. Perhaps in your conscience, you feel that if you’re unemployed, the welfare state should provide $600 a month to allow you to survive difficult periods of unemployment. This adds up to about $7200 a year. While $600 is not a great number, it can pay the electrical bills and the instant noodles you will need to feed on when you are in dire straits.

The next step to becoming your own welfare state would be to set aside a sum of money to establish your income needs in 10 years. Based on very reasonable assumptions, you should be able to do so with a mere $500 over 10 years. This is easily achievable by the median income family who makes $5400 a month. It gets progressively harder as household incomes drop but safe to say $500 of savings is possible for at least 70% of Singaporeans. The establishment of a welfare state will definitely require some personal sacrifices, you would have to end the visit to posh restaurants and cut down on expensive coffee joints to be able to save $500 a month.

Now let us take a look at the state of the Singapore stock market. Let’s look at my three welfare state stocks:

Macarthurcook Properties ( A0P ) yield above 8%, pays money quarterly and is projected to pay on the months of January, April, July and October.

Omega Navigation (O57) yield above 8%, sends a check to your mailbox every March, June, September and December.

Pacific Shipping Trust (P48U) yields a above 9% and pays every February, May, August and November.

Notice that by picking these three stocks, you get paid every month at least 8% a year.

Let’s examine the effects of an investor who buys these three counters for an extended period of time of 10 years. At $500 a month, compounded at about 8% will result in about $91,473.00. At 8% dividend yields, you can expect about $609 in dividend cash flow every month,

Voila, $600 a month into your pocket in times of employment or unemployment.

Risks of adopting this approach

This is not an article to recommend a buy on stocks I mentioned but to inform Singaporeans that stocks that pay 4 times a year and over 8% in dividends do exist. As an investor and a capitalist, you will need to carefully study the market and seeks out many of these investments to diversify their holdings.

Investments of this nature also can appreciate very fast. While this can give you capital gains, you will need to cycle your investments to other stocks which have the old 8% quarterly payout character.

Naturally, if stocks can yield such large numbers, many risks exist that could torpedo the best plans towards financial independence. For example, you need to assess what happens to the payouts of shipping trusts if charter rates fall.

Build your welfare state now

Generally investors and capitalists are more hesitant to criticize government policies. These days, dividends are taxed at only one level – the corporate level at about 18%. The money that reaches your pockets does not incur any personal taxation.

It is also possible that in the years to come Singapore would need to become more competitive than Hong Kong which means that it would have to generate a more vibrant business atmosphere by lowering corporate taxes even further.

In conclusion, this is the true key towards establish a welfare state. The Singapore government does levy low taxes and is very helpful in helping you help yourselves.

Why not use this privilege to become even more self reliant so that the government can put in more effort to help those to really need help instead?

—————–

Christopher Ng Wai Chung, 32, is an IT Project manager who dabbles in personal finance and wealth management. His books, Growing your tree of Prosperity and Harvesting the Fruits of Prosperity meld his philosophical ideals with the realities of seeking financial independence in Singapore. Harvesting the Fruits of Prosperity can now be found in Orchard Kinokuniya. Be sure to ask counter staff for its location.

Christopher’s blog can be found in treeofprosperity.blogspot.com. He can be reached at waichung.ng@gmail.com.

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23 Responses to “Yes! You can have welfare in Singapore!”

  1. handsomeme said

    Let talk facts,
    no one trust and respect a government and MP who talk so much but show superficial concern because they merely treating their millions dollars as a job not a calling. Worse still, their speech are scripted by scholars, a reflection of talking big cock only.

    We need real leaders not a expensive preacher that preach and preach but does not practice its value.

    With wages going down (PAPPIES need not applied), cost going up, and leaders love money more than love Singapore, future isn’t bright for nation until one learn venture oversea and take much risk because this place will be known as Sinkapore.

    Ask yourself, you work so hard just to survive and get expire, to be replaced by FT ? Oh yah, doesn’t really matter, the cost of even financing is even going up because gov has very large stake and interest in running major banks here.

  2. handsomeme said

    It all about money here. Let face it and move on.

  3. handsomeme said

    It’s time someone make a contact lens that show Dollar sign. So next time, I won’t waste time talking to someone who just want money. From look of their eyes, I know that No MOney No Talk.

  4. phew! said

    Hilarious! Contact lens with $dollar$ signs…

  5. handsomeme said

    Chris says:
    “Why not use this privilege to become even more self reliant so that the government can put in more effort to help those to really need help instead?”

    Unfortunately, the gov ultimately realized that those who really need help are themselves in term of mega-bucks salary. Just like corporation, they paid themselves rewards, bonus and high salary to themselves first before others. The problem with this is that they choose their own salary and justification. Anything beyond that is just wayang as we have seen.

    Due to lack of transparency, these salary is just a skin-deep, mega-bonus is more of concern because they will increase other prices based on their so-called economic performance ! Talking about conflict of interest.

    Help yourself to migrate instead of suffering at hand of PayAndPay scam.

  6. Actually, the responses to this post have been pretty disappointing given that Singaporeans are pretty emotional about welfare on the Internet.

    Looks like I have much to learn about making my articles more engaging.

    Maybe to just to spark a few conversations, should welfare really be something that the government should provide ?

    Why can’t we think out of the box and fall into the trap of politicizing welfare when people do have the tools to seek alternatives without begging the government for more ?

  7. handsomeme said

    Chris,
    when gov that already state its stand on welfare and preventing crude mentality already show how much they afraid of giving the nation more to better and fulfiling life. The gov just afraid there will be no more rat generating money for their big fat salary and bonus.

    It is not we tying welfare with politics, it is the gov themselves tying welfare with politic using printed media etc !

    Why discuss about welfare and fantasize about it when gov already ‘move on’ to other topics or distraction ? Obviously, the gov aren’t interested in welfare for nation but themselves because welfare for nation is a cost center not profit center for Singapore incorporated !

    If you writing articles target for gov to improve our welfare, it highly to fail.

  8. handsomeme said

    “should welfare really be something that the government should provide ?”

    If this question is asked by gov, I will have burst with anger because it is a sarcastic remark.

    If you want welfare, gov will happily tell you that they will give you progress package after every election to help with cost increment. That’s alone is their definition of welfare !

  9. mondragon said

    Chris,

    I think your solution is more suitable for the middle class. When we are talking about welfare, I think we should be more concerned about those with income in lower bracket. A lot of them are too weak/frail to find work, or employees find them too old or expensive compared to workers from India. You think the auntie who cleans the table at food courts or sell tissues knows how to read English, let alone financial reports? You think the Uncle who has problem paying for his medication able to save even $30 every month?

    So for those who are already in the so-called “lower” class, life will always be a struggle 😦

    Regards

  10. Mondragon,

    I agree with you completely, as much as I’ve struggled with many finance white papers in my spare time, I can’t think of a systemic solution for the lower income groups. Even if I could think of a bright idea, how many of people in the lower income groups will come over to the Intelligent Singaporean to red its articles ? ( Microfinancing got Mohammad Yunus a Noble prize so it takes a lot of brains to help lower income groups. )

    Now, given the limitations behind my ideas, the middle class CAN help itself achieve more financial equilibrium and rely less on the government, and even allow the government to raise more taxes. If that happens, the government will more likely be able to focus more on the lower income groups.

    It’s important to remember that when we stick our hand out to ask the government for something, other Singaporeans are normally paying for what we are demanding for.

    ( In case you’re wondering about my political affiliations, I vote PAP only because I live in Sembawang GRC. I’ve had dinner with Low Thia Khiang a couple of times and count opposition candidate Goh Meng Seng as a good friend and buddy. )

  11. mondragon said

    Chris,

    The only way I can think of to help the lower income group is thru education. I am not talking about education in sciences or maths etc, but rather social education. Our education system should be spending more effort and time preaching values like philanthropy, and hopefully there will be generations of s’poreans in the higher income bracket helping those at the lower end. Unfortunately are we seeing more Foundations being set up, or more rich people getting richer?

    Also, the number of people in the middle class could be shrinking. With globalisation, income disparity will be bigger and I think that the middle class will be further divided in upper and lower middle class. By then, the lower middle class will start to struggle too.

    Please also note that dividends can be cut. This may not be completely bad news, although they generally are, as the company may be using cash for expanding. Another problem is that if they effort to understand the business in order to generate 8% is a lot, then it will be more worthwhile to buy into companies that can generate captial growth as well. The returns will be greater than 8%. If a person has limited financial knowledge/interest, then he might as well set aside $X to buy ETFs every month since this will diversify away unsystematic risk

  12. mondragon said

    Btw, I have no problems with minister having pay increment. What I am unhappy about is the reason given. If they increase their pay based on certain more objective critieria (like Minster of Home Affaris getting x% increment because Y number of terrorists attacks are stopped).

  13. darkness said

    To really get a handle on poverty – one needs to appreciate the dynamics of attrition – poverty is simply a manifestation. Its symptomatic, hardly the root cause. For example if you want to find out what are the chances of a nation winning a protracted war – don’t waste your time counting pocket battle ships or war planes. All you have to do is calculate its industrial conversion capabilities e.g tonnage of raw iron ore converted into number of sheet steel. For over 2,000 military scholars have used roughly the same formulaic approach – I admit, it’s at best crude, but even today, it produces remarkably accurate results – in the same way, if you want to know why its so difficult to alleviate poverty, then you need to bring to light those factors that either generate or are responsible for the cycle of attrition – its not called the poverty trap for nothing. Then and only then can you really grasp the magnitude of what you are trying to accomplish.

    The only problem there is after doing your calculations – you may not like what you are presented with – the solution that is and that’s the reason why most countries don’t pursue poverty eradicating programs. This of course requires you to ask: cost is high too who? Maybe to the same people who keep harping on about why nothing is done for the poor?

  14. darkness said

    What if I told you that less than 0.0001% of the population read blogs? That will be like saying only 6% of Americans have passports – that’s to say only 6% of population of the most influential country in the world has ever traveled abroad. Bush didn’t even travel to Europe till he became the president! Are Americans stupid? Hardly – but are they ignorant? Perhaps.

    You see the problem is this, the poor will never ever read what’s written here, neither will the middle or even the upper class – not in significant numbers at least. The most inefficient type of blog to sustain that’s to say, the amount of intellectual energy expended versus the return on that energy curve remains the socio-political blog. We are a bit like art galleries, seldom full even on a public holiday and only full on a rainy day for all the wrong reasons. And any attempts to fashion them into the mainstream anything will simply fail – you could expend less energy and blog about food and get a healthier return on your investment, at least 500% minimum. If you played the love story card, perhaps even 5,000 %! I am not joking, I am dead serious, I have the T-shirt to prove it, but as far as socio-eco blogs are concerned the appeal will always be a paltry 0.0001% and a bit more.

    Now you know why the Singapore government would never ever consider regulating blogosphere, not in this corner at least – we are truly statistically insignificant to the point of being completely inconsequential and that incidentally is the same reason why the poor will never ever read what’s posted here. This may come as a rude awakening to many, but not to others –the cycle of attrition, that is.

  15. fairer said

    problem with the above solution is that it is not without economic liabilities apart from the fact that it is also not full proof. too many following a reduction in expenses( as already mentioned: it’s not an option for everyone especially for the salary challenged) to “build one’s welfare” will come with social costs( eg. SMEs will bare the brunt of consumption retreat and potentially lead to economic depression ). of course, the basic premise is nothing but another politics of convenience “passing the bucket and shifting the problem somewhere else” and so on and so forth. it is simply irresponsible to advocate personal responsibility when the paths have been laden with economic minefields and unjust practices for the less able( no fault of their own).

    perhaps, it is not a question of welfare or not in the absolute sense( at this point) but rather, being financial gratia(eg a MORE generous workfare to make ends meet) to non grads above 50( a special group) who have, in our initial years, contributed to the wealth of the nation but unfortunately for them, the singapore dream has turned to nightmare because of globalisation?

  16. Christopher Ng said

    Fairer,

    You sure you don’t work for a credit card company ?

    Hope I’m not misinterpreting your posting, but are you trying to demonise savers, investors and capitalists. Why not focus your efforts on the various freeloaders in welfare states like France and Australia ? At least we work to export our goods and services.

    Suppose I agree with you. In such a case, I would simply have to advocate that the reader choose the lesser of evils. I’m not on PAP payroll but I certainly am on the payroll of countless business trusts in Singapore.

    I’m afraid that I would have no choice to accept the burden of being irresponsible because I fail to see how taking some personal responsiblity will be worse than whining all day about the lack of welfare in Singapore.

    ( Note : I actually don’t mind a little welfare in Singapore. I just think that it’s easier to get it using my tried and tested methods instead of waiting for the next elections to be heard. )

    Regards

  17. scb said

    Putting Darkness and Fairers’ posts together and one realises the futility of advocating self reliant (or giving oneself welfare as Chris puts it which I think is a misnomer, money made with labour and investment/risk, can never be termed welfare anyway). One is considered poor when having financial difficulties coping with survival due to unemployment, health problems, age linked prejudices and other difficulties. In Singapore in particular, poverty is closely related to policy implementations such as jobs given to foreigners and the ever rising costs of essential goods and services usually imposed by monopolies and cartels! Given that crutch mentality has to be avoided, those affected by policies rather than their personal shortcomings have to be assisted and the Surplus Loaded State has to do its’ duty like any other countries in the World. By now, almost everyone is awared that the Rich are getting richer and the Poor becomes poorer in Singapore, the Government acknowledged just as much but seems very stingy and reluctant to be kind. The majority in the blogospere have spent much efforts in highlighting the plights and some like Chris have tried to assist with ideas to alleviate the sufferings. However, many of the poor need tangible material helps and not just ideas which many may not even comprehend. Personally, I think the Government needs to see its responsibility towards the unfortunate quarter or so of the population. If the poor and not so poor feel miserable, they will soon affect the moods of the rich and powerful and everyone will be in rage, not a good development socially and politically speaking.

  18. LWL said

    Hi

    If I am not mistake when darkness uses the term attrition in this context, he is specifically referring to competitive game theory widely known as the attrition hubris. From my understanding and pls do correct me, darkness, if I wrong. The model involves two parties in a bidding war, where aggression features, that’s why the terminology, war is used between two contestants competing for a resource of value.

    The model was originally formulated by Dr J. Smith. Only when darkness mentioned it in the context of Chris suggested solution of craving out “welfare” – he has slightly modified a few of its axiomatic assumptions by saying a few things.

    (1) The poor will always remain poor because poverty is essential a state of chronic resource scarcity. Where they are ill disposed to compete against a better opponent who has more resources. That was why he made mention of iron ore and how it could be converted into steel.

    (2) Flowing from (1) they will not only remain poor, but their lot will deteriote given the factor of time. As the competition will continue to out strip them.

    (3) Both (1) and (2) are reversible only, if the other competitors gives way. And they will never give way, not in a Smith’s game theory construct because that means, they would have to forfeit an advantage in economic utility and that will never happen, not in the economic world that we live in.

    Am I right? Otherwise why use the same comparative between iron ore and steel, that was the same analogy Von Clausewitz “on war” used, am I right???

    It takes wit to speak in riddles and stanza’s but it takes considerable more to unravel it – dont you think so, Dr Darkness?

  19. blueadamsingapore said

    Hi everyone,

    I just attended an interesting lecture by a Professor Mead on Welfare reform in the USA. Yes, our govt is studying expanding welfare. But it has studied welfare a lot in other countries, especially the USA. For the lower classes, Prof Mead’s studies are that education and training do not really help! It is surprising and a bit counter intuitive. But Prof Mead’s point is that the lower classes want to work and save just like the middle class, but they can’t get their act together. That is what separates middle from lower. The lower classes suffer from this culture of defeat.

    There’s over 20 years of studies to back that up, but what is more interesting is what Prof Mead’s recommendation in the state of Wisconsin did to turn around the rising number of welfare cases. They made work mandatory before getting aid. Basically, get a job first before welfare and training and education is given. It seems to have worked. Over two thirds of welfare cases fell as people got jobs, and continued to receive aid.

    What Prof Mead realised was that lower classes need a working history more than skills and education (which is a middle class thinking). So basically our govt is taking that example up and putting it into action. we saw it this year as workfare income supplement at the budget. They are refining it as we speak.

    That’s all for now. I mean, I am not actually here to speak out for the govt because I am not the policy maker, but I know that they are trying hard to do something for the lower classes first without repeating the mistakes of other first world countries.

    The problem of middle income squeeze is actually more difficult. Japan, Korea and other states are being studied. But I would greatly appreciate it you know of other cases that are being implemented and tell me. Perhaps I can send it on to the policy makers.

    Cheers everyone,

    Adam

  20. scholarboy said

    LWL,

    Well spotted.

  21. scholarboy said

    LWL,

    You have the general gist of it.

    However, I don’t believe point (3) is complete.

    If you are really interested in this area of class war / socio / economic drivers and how they relate to opportunities.

    Do take the time to look at a seminal piece of work called The Bell Curve, published in 1994, by Richard Herrnstein and Charles Murray to explain, using empirical statistical analysis – why the poor will get poorer and the rich will get richer.

    The context of the study related directly to how variations in intelligence in American Society is closely related to income and it raised some startling warnings regarding the consequences of this intelligence gap, and even the propose national social policy with the goal of mitigating the worst of the consequences attributed to this intelligence gap. Many of the assertions put forth and conclusions reached by the authors are very controversial. To add to heat, the math is also pretty screwy.

    If you have a strong foundation in abstract math, this is really a piece of work that you could sink your teeth into and its even quite satisfying.

    So just to add further to a few of your excellent points. This would more or less explain further why, darkness believes – the poor will become poorer / its a mathematical certainty and why he believes poverty is a cycle or trap, that’s not so different from the cobweb model observed in econometrics.

    Just to give you a background why darkness and the others stripped this theory piece by piece and studied it in detail – they wanted to crack a very practical nut: why do some gamers succeed and grow stronger, while others who were similarly disposed failed? Gaming is a bit like running a country in an ultra micro-economic sense, its just a model of the real world.

    Their discoveries improved the demographics of the game considerably, but that is only a game, we are talking abt real world stuff aren’t we?

  22. shoestring said

    blueadamsingapore,

    Thanks for your enlightening comment on what our government is trying to do. Just to pursue it a little further, what is the profile of the (would be) welfare recipients in Wisconsin? Are they similar to those in our bottom 10%? For instance, are they able-bodied, younger/older, more literate? Is their job market similar to ours?

    Knowing the answers to these questions will help us assess the relevance of their strategy in our case and perhaps bring to light the necessary adjustments to be made, such as introducing complementary policy changes needed in related aspects such as the employment market, labour law and taxation.

  23. shoestring said

    This Dr is more eloquent in putting across what I was trying to say:

    http://www.straitstimes.com/ST%2BForum/Story/STIStory_132868.html

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