Ng Kok Hoe on Money FM

Ng Kok Hoe (KH) was on Money FM 89.3 on 15 October to discuss the new MIS report with radio hosts Elliott Danker (ED) and Bharati Jagdish (BJ). We have transcribed the discussion for those who prefer reading to listening. [Edited on 5 November 2021: Some of this post has been edited to improve the earlier transcription, including clarifying parts that were previously inaudible.]


ED: Time to talk about the most talked about headline this week.

BJ: It’s all about how much one would need to support a basic standard of living in Singapore. Apparently, a family of four, for instance, needs $6,426 a month for a basic standard of living. Now, if you haven’t looked at the study yet and you want to, in order to assess whether or not those numbers are accurate by your own measurement, you should pick it up. It’s called ‘What People Need in Singapore: A Household Budget Study’, this year, of course, 2021.

ED: Lots of people are running their own polls based on this study on platforms like Facebook or even Instagram. I’m sure you have your thoughts about how much you really need to meet that basic standard of living in Singapore. But let’s find out more about the findings from one of the six authors of this study, Dr Ng Kok Hoe, Senior Research Fellow, Head, Case Study Unit and Social Inclusion Project, Lee Kuan Yew School of Public Policy at the National University of Singapore. Dr Ng, a good morning to you. How are you?

KH: Good morning, Elliott and Bharati. Very happy to join your show.

ED: So, the study is called ‘What People Need in Singapore: A Household Budget Study’, you guys used the ‘minimum income standard’ research method. This originated in the United Kingdom. What else can you tell us about the methodology of this study?

KH: This is a reliable method, that’s what I’d say. The team assessed it very carefully before we started. We took into account that the method travels well across different countries and cultural contexts. So, apart from the UK, it’s also used in France, Portugal, South Africa, Mexico and, closer to home, Japan and Thailand. In the UK, we noticed that it has been used to set a living wage for UK employees. And it’s also incorporated in a new measure of poverty that the UK government has said they’ll start to monitor. We visited researchers using this method in the UK. We observed them at work. We flew them over, and they observed us and gave guidance. We piloted and adapted the method. So we did consider it very carefully before starting.

BJ: However, Dr Ng, the Ministry of Finance has flagged issues with your report. It says that those of us reading it should bear in mind the limitations of the approach you used. I am sure that you are aware of some of the issues they brought up. For instance, they said that you considered mortgage payments for flats an expenditure item while playing down the point that the non-interest parts of the payments can be seen as savings actually, that can help households build housing equity. Of course, they also raised several other points. What do you have to say to that? I mean, the fact that, also there are errors in certain assumptions which understate the amount of government subsidies and financial support that is given to low-income families.

when it comes to more social aspects of spending, I am not sure whether there is an expert on whether people should be allowed to wear perfume and how much budget is reasonable to put in angbaos or festivals. There are no experts in these domains. So this method says, let’s talk to ordinary members of public, have them agree, have them debate, and then we challenge them for the rationales.

KH: So we are aware of the statement. And I think a number of the points stem from misunderstanding of the method. So some of the things they flagged, for example, as Bharati, you mentioned, was that we downplayed the kind of saving aspect of housing that is in fact an asset. Actually, we don’t downplay it, we completely disregarded it, because the study doesn’t measure income and saving. The study is about what people need, it’s not about how they will pay for them. So housing as an asset will become an income source later in life, and that’s great, but it doesn’t change the amount that people have to pay for housing currently. Something else they flagged was the diversity of the focus groups. So they mentioned, for example, that 15% of our participants were from private housing. Well actually, in Singapore’s general population, about 21% of Singaporeans are in private housing. So we are under-represented in that segment. And they also omitted to mention that 18% of our participants were in fact from HDB rental housing, more than participants from private housing. So in fact, lower-income participants from HDB public rental housing were the ones who were over-represented in our study. And that’s because our average group size is eight persons, so we have to have one to two participants from either private housing or HDB public rental housing, it would already be in excess of 10%.

ED: Mmm, all fair points, Dr Ng. Yeah, they are fair enough. And as I said, I have friends who are running their own polls based on your research paper on their Instagram page. And we see, in a sense, a very negative, if you don’t mind me saying, a very negative receiving of these numbers, $6,000 plus, right? I do want to dial things really far back, and talk simply about what constitutes a basic standard of living when we look at these?

KH: Our discussions all began from a definition of basic standard of living. And this definition was produced by earlier focus groups. And in those earlier focus groups, participants agreed… there were no controversies among participants that, in Singapore today, a basic standard ofOur discussions all begin from a definition of basic standard of living. And this definition itself was produced by earlier focus groups. And in those earlier focus groups, participants agreed, it was not controversial among participants, that in Singapore today, a basic standard of living must go beyond subsistence, it must go beyond survival. People said obviously housing, food and clothing; but we are a wealthy society, it’s not acceptable to stop at there. But that a more reasonable definition of ‘basic’ must include things like opportunity to work, to education. And they also stressed intangible aspects of a basic standard of living. They talked about belonging, respect, security and independence. They talked about the ability to take part in social, cultural and religious activities. And all of these things, so these wordings and language, came from earlier focus groups. They stressed these must, today in Singapore, go into a definition of ‘basic’.

Focus group participants talked about participation in social, cultural and religious activities as part of a basic standard of living.

BJ: Some may say, you know, this is an argument between those who are ideological and the others who prefer to take a technocratic approach to determining what is basic and how much do you really need in order to thrive, not just survive in a country. What’s your argument to that? I mean, which is the better approach? What is the balance?

KH: We are of course very glad that people are paying so much attention to this study. I didn’t know there were polls happening online, so Elliot is more up-to-date than I am. We do want this study to generate discussion and for people to think about their own circumstances and situations through it. We don’t think of this approach as ideological. Maybe to some extent it is conceptual because, as I said, it starts from a definition. But if by technocratic you mean having experts decide what people need, then I do agree that’s what we consciously want to avoid. In fact, this method, when it was first pioneered in the UK more than a decade ago, it is to precisely provide an alternative to having experts say “you need this, you don’t need that, so this is the basket of basic needs because I, expert, say so, and this is how much the basket costs, and so this is what we use”. I mean experts are fine maybe in areas like nutrition and vaccination and so on. But when it comes to more social aspects of spending, I don’t know if there is an expert on whether people should be allowed to wear perfume and how much is reasonable to put in an angbao or spend for festivals. There are no experts in these domains. So this method says, let’s talk to ordinary members of public, have them agree, have them debate, and then we challenge them for these rationales. I mean, if they can agree, then that goes into the basket.

ED: Okay, okay. I think a fair point you bring up, Dr Ng. And I like how you have helped to sort of align how you should receive these, by saying it’s being very conceptual. One thing that stood out to me is that, a single elderly person needs $1,421 a month to meet basic standard of living. I wanna expand on this, or if you can help me out here. I mean, what does it mean for a lot of people in the sandwich group, with an ageing population and there’s a worry that this number could increase. What did the findings say?

KH: So this number is in fact an update from the previous edition of the study that we published in 2019. This time round for the elderly budget, we updated it based on price inflation. So it went up slightly. The concern with the elderly generation is always demography, right? So we know that the CPF produces an amount that is not enough for them to meet their basic needs.

ED: Yeah.

The 2019 MIS report addressed budgets for elderly households. See also Ng Kok Hoe’s op-ed on retirement adequacy at AcademiaSG.

KH: So the strategy has long been, for elderly people, adult children to provide for their needs. I mean, I have been studying this area, CPF income, for some time. And in fact the pillar of retirement income security in Singapore is not the CPF but adult children.

ED: Yeah.

KH: The concern here is very much, as you have put it, with the sandwich generation. Because elderly people in future are going to have fewer adult children, and many of them will not have any children.

ED: Yeah.

KH: So the report flags this concern that we do need to reinforce our retirement income system. And in fact go back even earlier, make sure wages are adequate, make sure people are paid decently, so that they are able to save for retirement.

BJ: Speaking of wages, I mean, recently several measures have been taSpeaking of wages, I mean, recently several measures have been taken to help with social spending in order to help those who need help, financial help, as well as wages with the Progressive Wage Model being enhanced and widened as well. To what extent are these measures enough? Are they at least a good beginning? And how do they need to be developed further in order to make a real dent here?

KH: Wages is really key. So in our report, we flag that, I mean, we say that money must come from somewhere, so it’s either wages or state support. So, even if we say family, their money must come from somewhere, the state or the market. So wages is key. I know the figure of $6,000-odd has been highlighted in headlines, so it’s a distracting one. But the study produced many different calculations. About 70% of households have work incomes above the level that they need, already. And when we look at households with children at different ages, and then deduct government subsidies, the average that two-children households need for a basic standard of living actually falls below $6,000. And if we divide that between two earners, then each earner must earn $2,906. That’s for us a much important figure. And that’s a starting point we recommend for talking about a living wage in Singapore. So for adults with two children, each parent must earn $2,906 for their family to be able to meet basic needs. This number, and if you take away CPF, the gross is $2,484. It’s below $2,500. The median is in fact 56% higher. I don’t know whether most Singaporeans realise how high-earning our society already is. But PWM, as Bharati highlighted, falls grossly short. It’s about 40-50% short of this amount. So this is the figure that we hope we can start discussing as a society, a decent wage that allows households to meet their basic needs.

ED: Oh yeah. That discussion is going to continue for a long time more. We are really glad that we had this conversation. We’ve been speaking with Dr Ng Kok Hoe, who is Senior Research Fellow, Head, Case Study Unit and Social Inclusion Project, Lee Kuan Yew School of Public Policy at the National University of Singapore. Dr Ng, thank you for your time this morning. You take care and stay safe.

KH: Thank you.

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