Singapore’s population crisis: Can ‘working for longer’ fix what family perks can’t?

OPEN up and scroll Instagram or TikTok, and you will come across fresh-faced couples in their 20s and 30s boasting about the luxurious life they lead as “Dinks”.

And no, Dink is not an acronym for the latest investing or travel trend. Rather, it stands for “double income, no kids” – in other words, couples who are voluntarily childfree. The acronym has been around for decades but has beengiven new life with the rise of social media.

The joy of being a Dink, say these couples, is being able to spend your disposable income on activities that you would not be able to indulge in if you had to care for young children, such as spontaneous and lavish vacations, expensive hobbies and fine dining.

But this is not just another social media fad. With more couples choosing to delay or opt entirely out of parenthood, many countries around the world, including Singapore, are facing a population crisis.

With that come real implications on healthcare, security, manpower and economic growth. This week, we examine some of the solutions deployed to tackle the population crisis and whether there is any way out of this quagmire.

Plenty of incentives, but no bite

Singapore’s total fertility rate – the average number of children a woman is expected to have in her lifetime – dropped to a record low of 0.97 in 2023, falling further from the previous low of 1.04 in 2022 and 1.12 in 2021, according to preliminary estimates.

Fertility levels, too, have plunged in neighbouring South-east Asian countries such as Malaysia and Thailand. Elsewhere in the world, countries like Italy and the United States are also facing record-low birth rates.

To address this, governments around the world have introduced financial incentives for parenthood. Singapore is a prime example, with pronatalist policies that include housing benefits and cash handouts.

For instance, to provide young families with more affordable housing, families with children or married couples below age 40 get an additional ballot to bid for a Build-To-Order (BTO) HDB flat. This means that such families have three ballot chances per BTO exercise since August last year.

The government in 2001 introduced a cash gift for newborns, dubbed the “Baby Bonus”, and raised it over the years – most recently by an additional S$3,000 last year. First and second-born children can now receive S$11,000 each, while a third or subsequent child gets S$13,000.

Some have suggested that housing policies be tweaked further to encourage parenthood. For instance, The Business Times senior correspondent Leslie Yee suggested in a commentary that the government allow couples with two kids to get back part of what they paid for their BTO unit.

The fertility rate has continued to decline despite these measures. This is because while childrearing costs – which such pronatalist policies are chiefly aimed at alleviating – are often cited as one of the biggest barriers to having children, the decision to have them is much more personal and complex, experts say.

“In the past, people had kids to reduce uncertainty, now they forgo having children to achieve the same ends,” says Kalpana Vignehsa, senior research fellow at the Institute of Policy Studies (IPS).

She posits that more couples are opting to remain child-free to control the uncertainties that face them – be it financial, emotional or environmental.

“Financial uncertainty also feels more pronounced when children are involved, because parents may be easy-going about providing for their own needs but don’t want to sacrifice their children’s needs,” she adds.

And it’s not just parenthood incentives that Singapore is dangling. The government is also taking steps on various fronts to address certain structural issues such as the competitive education system, a lack of work-life integration and more that may be deterrents for people to have children.

For instance, new flexi-work guidelines, which come into effect on Dec 1, require all employers to have a process for their employees to request for flexible work arrangements. While such policies are not explicitly meant to encourage parenthood, they do help alleviate some of the pain points parents face and could encourage those on the fence to consider.

While it remains to be seen whether these initiatives will bear fruit, economists warn that this demographic shift has implications for growth.

“It would be hard to sustain robust real gross domestic product growth if the workforce is shrinking as there are limits to productivity growth,” says Terence Ho, associate professor in practice at the National University of Singapore’s Lee Kuan Yew School of Public Policy (LKYSPP).

“Eventually, economic dynamism and opportunities may diminish in an ageing society with a shrinking population,” he adds.

Alternative solutions

With incentives to encourage fertility failing to successfully overturn the decline in birth rates, governments have to consider alternatives to mitigate an ageing workforce and population.

Increasing the supply of foreign manpower is one way – but this cannot be done indiscriminately, as social tensions often arise between foreigners and locals due to a difference in cultures and lifestyles.

This is an issue which Singapore struggles with as well, as a small and open economy which relies heavily on foreign talent.

Just last week on May 10, former prime minister Lee Hsien Loong said in an interview with local media that managing the tensions between staying open and ensuring social cohesion was the biggest challenge facing the government.

Another way is to increase labour participation, particularly of older workers. Here, governments have explored a myriad of solutions, including raising the retirement age, introducing anti-discrimination laws to tackle ageism in the workplace, and introducing reskilling and retraining schemes for mid-career to older workers.

In Singapore, the age of retirement and re-employment will be raised to 64 and 69 respectively in 2026. The Republic is also set to introduce anti-discrimination laws sometime this year, and has bolstered its reskilling scheme for mid-career workers.

On top of raising the retirement age, some countries have also introduced incentives to encourage workers to delay retirement.

For instance, some European Union member states have allowed older workers to accrue additional pension benefits if they remain in the labour market beyond the statutory retirement age.

Some countries have introduced extended leave days based on seniority. For instance, in the banking sector in Luxembourg, workers are entitled to one additional leave day if they are between the ages 45 and 49; 2.5 extra days if they are between 50 and 54; and 3.5 additional days if they are over 55 years.

Tapping technology

Governments can also devote more effort into exploring whether jobs can be redesigned to make for more flexible work arrangements, says National University of Singapore senior lecturer Kelvin Seah.

Older workers may have dependants to care for, or may not want to spend all their time working in a full-time job, he notes. “If jobs can be made more flexible in terms of working hours and location, older workers may be more keen to participate in the labour force.”

More widespread adoption of flexible work arrangements can also help to attract back more women who left the workforce due to family or caregiving responsibilities.

Tapping technology is another way which governments can use to offset the labour shortage in certain jobs. For instance, certain menial tasks in manufacturing and logistics have been automated in Japan. This comes amid a rapidly ageing population and limited immigration, which is driving the country to turn to robotics and artificial intelligence to support the labour force.

Jobs for older workers can also be redesigned with automation and technology in mind, to reduce the physical demands of the job and thus improve work conditions for older workers, says LKYSPP’s Prof Ho.

“Ideally, artificial intelligence and automation will complement workers rather than displace workers from their job,” he adds.

Beyond anti-discrimination laws, companies can invest more effort into developing a more inclusive work culture for an intergenerational workforce, says Prof Ho.

For instance, companies can seek to tap on the knowledge and experience of older workers by giving them mentoring roles, he adds.

Solutions not foolproof

But these policies are not foolproof, and come with their own drawbacks and limitations.

Take anti-discrimination laws. While these can deter instances of overt discrimination, the law cannot stamp out ageism entirely, notes Prof Ho. “Much would depend on employers’ mindsets and attitudes towards older workers.”

Strengthening employment protection also tends to discourage hiring, notes Walter Theseira, associate professor of economics at the Singapore University of Social Sciences.

“This is because firms fear that, with the presence of anti-discrimination laws, it becomes harder to make necessary labour force adjustments, so they prefer not to increase their headcount to begin with.”

Some policies designed to retain older workers, while freeing up labour costs for businesses, have also received pushback elsewhere.

In South Korea, employers are butting heads with labour unions over the country’s wage peak system. Introduced in 2009, the policy seeks to retain employees facing retirement at lower wages, to free up more capital to hire younger workers.

Unions have called for companies to abolish the system, arguing that it places age restrictions on pay without taking job description and qualifications into consideration.

In any case, some observers note that there are limits to the productivity gains from increasing the supply of older workers.

In Singapore’s case, Prof Theseira reckons that government has already done all it can to maximise its elder workforce. After all, the existing labour force participation rate among older workers is already quite high in Singapore, he notes.

In 2023, the labour force participation rate for residents above 65 years was 31.5 per cent, and it was 72 per cent for those between ages 55 and 64. In comparison, the Organisation for Economic Co-operation and Development’s average was 15 per cent for workers above 65 years in 2018.

It is also unclear if a higher labour force participation rate among older workers would be desirable or not, argues Prof Theseira.

“It is desirable if employment becomes more attractive for older workers, but we would probably not want the labour force participation rate to go up because seniors find that they are unable to afford cost of living increases.”

Increasing the labour force participation rate for the elderly is also not a good sign if it means retirement insecurity, he said.

This is because much of the elderly-friendly jobs available are fairly low-skilled today. Employers are happy to employ older workers for low-skilled jobs, but not so much for the higher-skilled ones.

“We’ll have to see if it goes up in skills as the current generation ages,” says Prof Theseira.

Changing minds?

Even as governments pull out all the stops to halt the population decline, the big question remains on whether citizens, like the Dinks mentioned at the start, could be swayed to change their minds. Experts suggest that there are no straightforward answers to this.

“Fertility intentions and preferences are notoriously fluid and can shift over time and pregnancy status, and can also be ambiguous,” says IPS’ senior research fellow Tan Poh Lin.

Some couples may be more determined to avoid parenthood than others, and those who are less sure may be more susceptible to changing their minds in response to policies or events, she points out.

At the heart of the matter is that parenthood is now viewed as optional, unlike before, and unnecessary for economic security or social advancement, says Dr Tan.

“In fact, parenthood is time-intensive and hence often times perceived as incompatible with career advancement especially among women, or even forms of leisure and recreation,” she adds.

With no easy solutions, all countries can do is to keep incentivising births, experiment with technology, rely on immigration or keep people in the labour market for longer.