Policy Considerations for Long-term Population Growth

6 Ms Poh Li San asked the Prime Minister in view of Singapore's population statistics for 2019 (a) whether the Government will review the long-term population targets given the increasing trend of outsourcing work overseas and reduction in the employment of foreign workers in Singapore; (b) whether the proportion of annual new citizens will remain at approximately 70% of citizens by birth; and (c) how will changes in Singapore's population demographics affect national infrastructure planning.

7 Mr Liang Eng Hwa asked the Prime Minister (a) what are the projected trends of birth rates, life expectancy and immigration in the next decade; and (b) whether the Government has a long-term population target and what are the policy considerations.

The Minister, Prime Minister's Office (Ms Indranee Rajah) (for the Prime Minister): Mr Speaker, may I take the question from Ms Poh Li San and the next question from Mr Liang Eng Hwa together.

Mr Speaker: Yes, please.

Ms Indranee Rajah: Sir, the Government has clarified via a media statement and Factually articles in March and July 2020 that it does not have a population target or seek to achieve any particular population size. Singapore’s population size is affected by many factors, including birth rates, life expectancy, as well as global developments affecting immigration and employment. In March 2018, we updated Parliament that given recent trends, Singapore’s total population size is likely to be significantly below 6.9 million by 2030. This outlook remains valid today.

Like most developed economies, Singapore’s resident total fertility rate or TFR is below replacement. Our most recent resident TFR, for 2019, was 1.14, unchanged from the year before.

To moderate the impact of ageing and our low birth rates, we take in a stable and measured number of new citizens and Permanent Residents or PRs every year.

To the Member’s question on annual new citizens, over the past five years, we granted an average of about 22,100 new Singapore Citizenships each year. This included about 1,600 children born overseas to Singaporean parents every year. We also granted about 31,700 new PRs on average each year, over the past five years. The total size of the PR population has remained at around half a million for many years now. New citizens either share family ties with Singaporeans, or have studied, worked or lived here for some time. They are drawn from the pool of qualified PRs who eventually make the serious commitment to take on citizenship. Citizenship and PR status are granted selectively to applicants who are committed to making Singapore their home, and who can integrate and contribute to Singapore.

Infrastructure planning is a long-term process guided by many factors, not only demographics. These include, among others, land use needs for economic growth, improving housing and transport for our people, socioeconomic and technological trends, as well as ensuring a good environment and resilience to climate change shocks. Our infrastructure planning process allows us to be flexible and responsive in catering to the changing needs of our residents, and ensure a good quality living environment in Singapore.

We will continue to monitor our population trends closely, and regularly review our population policies along with our infrastructure and social development needs. This will ensure that Singapore remains a cohesive society and a good home for all Singaporeans.

Mr Speaker: Ms Carrie Tan.

Ms Carrie Tan (Nee Soon): Thank you, Speaker, and I thank the Minister. First, before I put my question, I would like to declare my interest as the strategic advisor to local charity Daughters of Tomorrow which works with many low-income women, including Long-Term Visit Pass-holders who are married to Singaporeans and have Singaporean children.

Given our low fertility rate that the Minister had shared, would the Prime Minister's Office consider making the citizenship status more accessible to Long-Term Visit Pass-holders who already have Singaporean children in Singapore for the long-term viability of giving them better access to support and employment opportunities within Singapore, in order to provide more conducive environments to bring up their children?

Ms Indranee Rajah: I thank the Member for her question. There are various factors that we look at when we grant citizenship. We cannot only grant citizenship on the basis of giving access to benefits. That cannot be the sole criterion, so, we do look at many things. Importantly, we look at family ties, we look at contributions to Singapore, we look at the stability of the family unit. In short, we will assess each application holistically, but we will give priority to family ties and family support. And even if the parent may not be Singaporean, where the children are Singaporeans, we will also make sure that the Singaporean children are adequately supported and taken care of.

Mr Speaker: Mr Liang Eng Hwa.

Mr Liang Eng Hwa (Bukit Panjang): Sir, I thank the Minister for giving us the indication of the trends of our population. Clearly, the ageing population is expected to accelerate in the next decade. Can I ask the Minister how would that impact the tax burden of the working population then, and more importantly, how do we mitigate that kind of tax burden for that generation working population, going forward?

Ms Indranee Rajah: Mr Speaker, that is actually a very important question. I would like to thank Mr Liang Eng Hwa for raising it.

You have seen from the figures that I have mentioned that our TFR is at 1.14, so it is not a replacement rate. At the same time, we do have an ageing population. Last year, about 15% of Singaporeans were aged 65 and above. By 2030, this will increase to around 25%. What this means is that we have a smaller proportion of the working population contributing for a population that is growing older. So, the ones who are not working, the numbers are going to expand, and if we do not have replacement, the numbers who can actually come into the economy and contribute is going to shrink. That is the scenario that we are looking at.

The question is, how are we going to manage this? There are several strategies. The first and most important, which is what this Government has been doing consistently over the years, is to put in place resilient systems and measures for each generation to save for its own retirement needs.

For example, the CPF helps Singaporeans to save for their old age, covers medical expenses and purchase basic health insurance. With the introduction of CareShield Life in 2018, we now have an enhanced system, which includes CareShield Life, CPF LIFE and MediShield Life. With this kind of national risk pooling schemes, we are better prepared to manage the uncertainties associated with ageing in a sustainable way. Then, the other thing that we have done is we have actually set aside funds. For example, for the Pioneer Generation Package and the Merdeka Generation Package. These are committed funds which you set aside because you know what the numbers are like roughly – the package or size – and it means that no matter what, these funds are available to help that group of ageing Singaporeans.

But there will be new requirements that will come along because as we know healthcare is not a sort of a gentle slope that increases. It actually increases exponentially as you get older. And you will need recurrent revenues for that, especially when we are ageing at a faster pace. For example, the average annual healthcare spending is expected to rise from 2.1% of GDP today to almost 3% of GDP over the next decade.

What this means is that aside from savings, you need revenue. You will need fresh revenue and you have to keep your revenue sources diversified. The share of personal income tax or PIT, of our tax revenue has remained at about 18% from FY2016 to FY2018. The other taxes which contribute to our revenue are corporate income tax, GST and asset related taxes.

When you have recurrent spending, you also need recurrent revenue. That was a key reason why we introduced GST in 1994 because we recognised then, that an ageing population structure would require us to reduce our reliance on personal income taxes. If we continue to rely principally on personal income taxes, the tax burden will weigh increasingly heavily on younger Singaporeans who are still working. You have to try and spread it out and make sure that you have some reliance on personal income taxes, but it is also necessary to have consumption taxes such as the GST. And GST lessens the problem by balancing the taxation more broadly among the population.

But that is not all. You save, you tax, but you can only tax if there is something to tax on, which means that you must grow the economy. So, transforming the economy is very important, which is why on every Budget, you hear Deputy Prime Minister Heng Swee Keat talking about economic restructuring and transformation – it is to grow the economy. We need to raise the productivity of workers and we need to also ensure that our resident labour force is able to support our economic development. That is why we supplement the local workforce with foreign skilled workers, especially in areas where we do not yet have the needed number of local skilled workers; although obviously we want to grow the local skilled workers to be able to do those jobs. And in the long run, raising birthrates. That remains the most sustainable solution to our demographic challenges.