Quora Answer: Why is Singapore Offering Couples Thousands of Dollars to Have a Baby?

The following is my answer to a Quora question: “Why is Singapore offering couples thousands of dollars to have a baby?”  

Singapore’s fertility is low, below replacement level.  As such, there needs to be a policy shift to address this because it is becoming a problem.  These problems affect the stability of the state, and the security and cohesion of society. 

When the demographics is so skewed, we have an uneven tax base, since the people who will be drawing for medical and other reasons will start to exceed the people contributing to the economy, which is unsustainable.  This can be seen in the CPF, and especially Medisave.  Medisave and the Shield plans work because it is front loaded.  This means the younger people, who statistically make less claims per capita, pay just a bit more to keep the costs down for older people, who statistically pay more per capita.  As long as there are more younger people, it works.  When the number of older people increases relative to the number of younger people, the system starts to break down, and it feeds medical inflation.  This is carried over, on a larger scale, with our taxes.  We need more people paying taxes to offset the cost of keeping retirees alive, and in relative comfort. 

One alternative is to increase immigration of younger, skilled people, which makes perfect sense logically.  Unfortunately, the electorate, as a whole, is not logical; they are emotional.  What they see is a threat to the mythical status quo and their livelihood, without realising that this immigration is meant to support their livelihood.  This makes the level of immigration we require to be politically untenable. 

As such, the government has to go back to coming up with policies to encourage younger Singaporeans to have more children.  This was always the primary policy, but because of the demographic crisis, it is not enough.  Those young Singaporeans born are not enough to fix that demographic time bomb, and they will not be contributing members of the economy quickly enough to stem future borrowings, possibly from our Reserves, to maintain some semblance of our standard of living. 

When we factor in the cost of climate change, and the infrastructure development required to cope with it, along with the manpower, we may not even have enough in our Reserves, which would explain new legislation that authorises future governments to borrow specific to this, and raises the fiscal limits of other borrowings.  Eventually, we still need to come back to immigration to address the issue.  In the meantime, we have little option other than to throw what money we can spare at the problem, and find ways to incentivise Singaporeans to procreate the next generation of tax payers.