THE world in 2030 will likely look very different from today. Within a little more than a decade, the global economic centre of gravity will shift toward the East and remain centred there.
The process of globalisation will now be supercharged by the twin phenomena of the artificial intelligence and automation revolution - two concepts whose implications societies are still struggling to fully understand.
As a small island in a sea of change, Singapore must continue to evolve its economy. This much is recognised by the government's 2019 Budget, which seeks a "vibrant and innovative economy" and a "caring and inclusive society".
But it is also imperative that we treat these two pillars as a joint objective, rather than separate and distinct. This calls for policies that ensure the fruits of economic growth are widely shared, and that our pursuit of economic vitality does not leave behind those less able to quickly adapt to the new economic landscape.
This is all the more necessary because the sorts of challenges the country will face will be fundamentally different from those we faced at the time of independence. Back then, Singapore enjoyed a growing but under-skilled, working-age population, and limited access to financing. The goal, then, was to raise educational levels while building our industrial capital, which we did admirably by offering a sound, rule-of-law-led investment climate that attracted foreign multinationals.
Provide ample opportunities
Today, our circumstances are different. As a post-industrial, high-income economy, the need to import financial capital is no longer pressing, and our well-trained but aging labour force means that there is less room to grow by relying on schooling alone.
Instead, the goal is to provide an environment that is able to identify and leverage creative ideas, attract world-class talent, and ensure that our people and companies are provided ample opportunities to succeed - all while ensuring that we are able to confront changing realities.
Consider, first, strategies for enhancing Singapore's human capital. Recent policies have begun a move away from examinations and rankings, and now seek to inculcate a more inquiring mindset among our students. This is required if we wish to develop a competitive 21st century workforce. However, "good conduct" remains an important criterion for assessment.
But what constitutes good conduct? Very often, creative minds are so because they chose to buck the trend. Evaluating a student's potential based on good conduct could easily backfire. After all, the knowledge economy requires all of us to exercise the intellectual flexibility to question, challenge, and argue unpopular points of view.
We need to go beyond de-emphasising grades, to embracing a fundamentally more accommodative mindset. It requires accepting that there are different paths to academic success, like representing the nation in the Olympics or performing a musical composition of one's own at Victoria Concert Hall. Only when we truly value and reward such achievements can we reasonably expect productivity boosts from home-grown creative human capital.
By a similar token, our policies for building businesses need to extricate themselves from the historical shadow of catering to large, multinational corporations.
While recent corporate tax incentives have made it easier for small and mid-sized firms to manage their tax burden, modern, technologically-oriented businesses often face greater uncertainty. Extending the tax honeymoon for local startups from the present three years to five, and instituting a gradual subset in tax exemptions - instead of the current, hard cut-off - will help more small businesses take the sort of risks we need them to take in an innovation-driven, entrepreneur-centric economy.
Even as we refine our financial support strategy for young enterprises, we also need to simultaneously examine non-pecuniary drivers of small-firm success. Such firms often lack the expertise and training necessary to run efficient, profitable enterprises. To raise productivity, new entrepreneurs need to attract capable, skilled trainees, while honing their own managerial skills to better understand global best practices.
Singapore's government can play a critical role as a trusted convener. The Ministry of Manpower can establish a national-level platform designed to match graduates from across all levels of post-secondary education with universal internship programmes rolled out at the beginning of their educational journey. While SkillsFuture already has a range of such enhanced internship schemes - and internships likewise constitute an integral part of many professional fields such as law and medicine - existing efforts remain selective and piecemeal. Expanding internships to all areas of study can vastly improve post-graduation job placement.
Going beyond brief stints
To limit risks for employers, the universal scheme can be partially subsidised by incorporating such on-the-job training into the student's formal curriculum, with additional financial support from the government to assist smaller hiring firms.
On-the-job training must, however, go beyond the notion of brief stints at a company. True apprenticeship schemes entail a lifetime of training and certification, and enable high levels of specialisation in non-traditional disciplines as diverse as the culinary arts, digital animation, elderly care, and fields that we have yet to conceive of. The model is a tried-and-tested one for helping lift the wages and prospects of workers less inclined toward office-based or professional careers.
Of course, we must never forget that in pushing the frontier of economic progress, there will be those inadvertently left behind. Many schemes currently exist to support reskilling and retraining, but resources for coping with the shock of displacement remain scarce. A government-run unemployment insurance scheme, financed jointly by workers and fiscal expenditures, would provide an important cushion for those made redundant by rapid shifts in the employment landscape.
In the long run, we should consider the implementation of a nationwide minimum wage. Such minimum wages are an important complement to existing workfare schemes, because they can foster incentives to seek employment, while remaining a far more practical (and affordable) supplement than universal basic incomes.
Abundant research has challenged the commonly-held notion that minimum wages must necessarily give rise to adverse unemployment effects, so long as thresholds are not set too high. As a nation of pragmatists, it is not difficult to envision a series of experimental tweaks to legally-mandated minimums that would maximise the labour ethic, while minimising jobs forgone.
This year's Budget has laid many more foundations for building the Singapore of tomorrow. But to create a truly vibrant yet inclusive economic engine, we must reimagine public policy and take even bolder steps towards reaching that goal.
- The writer is an associate professor of economics at ESSEC Business School and the chief economist at Thirdrock Group.