Tan Kin Lian's Blog: Level the playing field

Wednesday, November 25, 2009

Level the playing field

Life is difficult for young people. Jobs are hard to find and wages are low. The cost of living is high, especially the cost of housing. If they have studied in university, they have to repay a hefty study loan.

If they come from a poor family, they start life with $0. If they have to borrow, they pay a high interest rate, that goes towards the large profit of the banks. Those who come from wealthy families do not have to face this burden, as they can get the starting funds from their parents.

I have been toying with the idea of giving every young person a good start in life. Each person should be allowed to get access to credit, up to a certain limit, from the state at a low rate of interest, say 2.5% per annum. The credit should be for specific purposes, such as to meet living expenses during unemployment, unexpected medical bills, marriage or childbirth expenses. This limit can be set at one or two years of the average annual earnings.

The access to this credit will avoid the need for people to borrow money from loan sharks and pay exorbitant interest. Borrowing from the banks at 2% per month is not cheap either. Someone said that it is loan sharking by another name.

There are risks of abuse, but they can be managed and prevented. The benefits can outweigh the risks. Such a credit facility should only be given to citizens. This will give a level playing field to the people from poor families.

Tan Kin Lian

9 comments:

dsowerg said...: Mr Tan, your views are kind but may be misplaced. A lot of working adults today faced similar disadvantageous situations back then. I had to borrow and work during vacations to fund my university education. I know several others who had to do the same.

It certainly meant missing out on things like overseas attachments, internships, computers and other indulgences that other considered basic, but to me these were not major setbacks. You still gain experience at your vacation jobs, and you can go to the computer labs if you need to do work.

Maybe, when I just graduated (about 15 years ago), university fees were lower. But it was still a hefty sum for me ($8K plus) and I really scrimped and saved to pay the loan off. If you take the Tuition Fee Loan, interest is waived for the first year. I put all my extra money (AWS; yearly bonus) into paying the loan and paid it off in slightly over two years. I managed to give my mom an allowance and bought a resale flat.

Indulgences like new clothes, travel, expensive food and car were definitely out. My clothes were from Chinatown and Robinson sales and I had only two pairs of work shoes.

Today, things are definitely more expensive, but it means you have to think of different ways to cope. For example, I would never have been able to buy a resale flat today with my starting salary. So I have to either stay with my parents after marriage, or delay marriage while saving up or waiting for a new flat. These are choices one can make.; November 25, 2009 12:02 PM
Anonymous said...: We don't bank on this Govt in favour of such a scheme, as the costs of managing it is costly, and even if they reluctantly agree to the idea, would most probably push it to the banks to administer and fund it.
And the banks? They have better use of the funds to generate more benefits and profits for their CEOs and shareholders.
FIs are here purely for commercial interests, not charitable banking.
The same with the Govt.; November 25, 2009 1:32 PM
Anonymous said...: High standard of living, higher interest rate, highest tution fee...lead to less local University graduates, minimium risk of revolution !; November 25, 2009 10:43 PM
Tan Kin Lian said...: I am not surprised that many people who disagree with this idea. We have all been brought up in the Singapore environment, and believe in the concept that each person should take care of himself, and that people cannot be trusted.

This is fine, for people who come from well off background. They do not know the obstacles that the poorer people have to face. Of course, they are some people who can cope in these circumstances, but not everyone has the strength.

We are also distrustful of people. We fear that people can take advantage of any scheme and behave in the worst possible way. We look at the negative aspects, rather than the positive aspects. This is part of our Singapore character.

I want to point out that there is also the positive aspects and that we have to consider the positive and negative and strike a balance.

Some people commented, "the government will never support this idea". I find this statement to be irrelevant. Each of us must ask if we, ourselves, like the concept.; November 26, 2009 12:34 AM
dsowerg said...: I want to clarify that I do not come from a well-off environment. I was from a single-parent family (father died when I was 10) and my mother worked as a seamstress earning $400 per month. One thing in our favour was the flat we were living in was fully paid for. My pre U education was funded mostly from bursaries and vacation jobs.

My view is that things may not be as bleak as painted. You do have to make some choices but it's not as if you cannot get a university education or survive.

Maybe it was because it's been 15 years since I had to go through those times myself. I may not have been able to remember how difficult it was for me. But when I see myself today, I've made it, despite all the so-called disadvantages. Me sharing my experience was not to belittle the real problems faced by young people today, but to offer them an encouragement that it's possible to put an end to this with your own efforts.; November 26, 2009 8:03 AM
A Singaporean said...: The idea is generally good. My biggest concern is that it might be too easy for today's youngsters to borrow the money and then waste it on lifestyle expenses. If this can be controlled, then this idea seems to be fine.

$8000+ for undergraduate education sounds really cheap even when adjusted for inflation (there is an inflation calculator at http://www.mas.gov.sg/eco_research/Inflation_Calculator.html). I completed my own undergraduate education in 2005, my tuition fees were $5000+ per year for four years. Now the tuition fees are $6000+ per annum, or more for certain faculties.; November 26, 2009 2:15 PM
Anonymous said...: 1st Anon: "These are choices one can make."

And these choices have social implications. Delaying marriage for example is the main reason behind our falling birth rate. These are consequences we are already witnessing.

Encouragement aside, one needs to face up to the stark reality today. Today's graduates face an unlevel playing field in competing for jobs against the foreign hordes let in by the PAP govt.; November 26, 2009 7:20 PM
Anonymous said...: Thailand - a poor government with a heart and simple problem solver:

- register debters nationwide who borrowed money from loanshark

- government negotiate with loanshark

- transfer debts to Goverment Saving Bank

- debtor to deal with GSB in future

- debtor to attend person finance course

http://www.bangkokpost.com/breakingnews/161155/gsb-ready-for-debts-registration; November 26, 2009 9:03 PM
dsowerg said...: Yes, delaying marriage has widespread implications. This is a case of everyman for himself. I don't see any reason why we should do favours for the government if it refuses to do anything about the cost of tertiary education, housing and living in general.; November 27, 2009 1:27 AM