Popping the Population myths

A story in Today caught my eye: It was about reactions to two commentaries on the Population White Paper which appeared on the Institute of Public Policy website over the past fortnight. The pity is that the article didn’t give me enough of what the commentators said, before zooming into the reactions. The article should have been excerpted for wider circulation, especially the one by four economists writing in their personal capacities on the four economic myths in the population debate.

I’ll try to sum up the myths here and my apologies to the four authors if I didn’t capture everything or over-simplified stuff.

Myth #1: If we don’t have sufficiently large injections of foreign labour, business costs will rise, some businesses will shut down or move out of Singapore, and Singaporean workers will be laid off.

The economists say that this is akin to protectionism and subsidising inefficient companies which should really shut down so that more resources can be freed for higher value-added work. Direct help to those who are laid off with one-off transfers, unemployment protection and get them to re-train. Why protect the companies which rely on cheap labour to stay afloat?

Myth #2: Economic growth is a zero-sum game

The economists say that it is not necessarily true that Singapore must maintain a certain growth rate or will stagnate and become irrelevant if other countries sped up. More likely, other countries’ growth will spur our own. And if foreign investments won’t come to Singapore, it might not be a bad thing if they are investments we wouldn’t want anyway – like those which require plentiful cheap (foreign) labour.

Myth #3: Denser, larger populations create significant economic benefits for cities

The economists say there is some truth in this, but it really depends on the type of population. If more brains are clustered together, then innovation is spurred. But what is being advocated is the inflow of foreigners to fill lower end jobs. How is this good?

Myth #4: Spending on healthcare and social services are costs which have to be financed by higher taxes, and are therefore a drain on the economy

The economists say that healthcare and social services shouldn’t be viewed as costs. Someone’s costs is someone else’s income. Why isn’t spending on MRT lines and public housing viewed as costs then? They are viewed as productive investments although they are likewise financed by taxpayers. We can afford higher healthcare costs since we have large surpluses and if incomes and productivity increase. But the real issue is who should pay for rising healthcare costs? If the G “knee-jerks’’ and shifts most of the costs to consumers, then sure it would be a problem. The economists didn’t quite say it, but they seem to be calling for a review of the current healthcare financing scheme to make sure out-of-payments won’t kill the patients.

Here’s what the four said in their conclusion: “These myths exist because they seem to be intuitively correct. They appeal to our everyday experiences, and are consistent with popular accounts of the economy. These popular accounts include the idea that cities or countries are locked in economic competition with one another, or that jobs must be protected in order for workers to be protected. Our experience with health and social care as costs we try to avoid also explains our intuition that at the national level, this must also apply. But these stories, although consistent and coherent to us, are neither correct nor valid. As cognitive psychologists have found, people tend to rely on explanations that are consistent with their own experiences or with conventional wisdom, rather than on careful deliberation and reasoned analysis.

“Economics is not, and should not be, the only lens through which we examine, analyse and debate our country’s population policies. But when we do apply economics analysis, we should try to get it right.’’

Ouch!

But what an interesting paper! Here’s the link http://www.ipscommons.sg/index.php/categories/featured/118-economics-myths-in-the-great-population-debate It was published on Feb 8, just a day before the Parliamentary debate on the Population White Paper ended. I wish it was out sooner so that MPs can mull over it and raise questions beyond: Why 6.9million? Today captured some reactions to the paper. Generally other economists agreed with its contents and “proposed revisiting fundamentals needed for future economic growth and greater focus on building local talent’’. Hmm. Now what?

In any case, thank you Donald Low, Yeoh Lam Keong, Tan Kim Song and Manu Bhaskaran. Now why don’t you do us all a favour and take a look at the Department of Statistics latest Household Income report released earlier this well and tell us what the hell is happening.

See http://www.breakfastnetwork.sg for a Chef’s Special on City Harvest Church versus Commissioner of Charities.