We’ve just released a new working paper that looks at Singapore’s Central Provident Fund, which provides the backbone to that country’s social policy system. Our paper, authored by Vernon Loke (soon to be a freshly-minted Ph.D. from Washington University in St. Louis) and myself, presents an overview of the CPF, describes how it supports a range of policy objectives throughout the life course, and then discusses the implications of these findings for national policy efforts in other countries, such as the U.S.
A number of things are interesting about the CPF, and you’ll have to read the paper to learn about them all, but fundamentally it represents one particular form that an asset-based approach to social welfare can take. Although it was initially designed to facilitate retirement security while minimizing welfare transfer payments, it has evolved into a comprehensive social security savings plan with various pre-retirement uses such as financing healthcare, child development, post-secondary education, home ownership, and asset building. In other words, the CPF is an integral part of the continuum of asset-based policies in Singapore that extend throughout the life course. It is an innovative policy that offers many instructive lessons, especially for other countries considering how to organize social policy efforts to support savings, promote asset-based welfare, and design a lifelong and multi-purpose yet coherent system.
In my conception of how the U.S. would pursue such an approach, something I call the American Provident Plan, everybody would have access to an account in a savings plan structure that spans the life course. It would be a supplemental system to the basic provisions of Social Security; we would begin it at birth with an account for every newborn and current workers would be able to open accounts as well and make contributions directly through automatic payroll deductions, among other means. Like in Singapore, the American Provident Plan will have retirement security objectives but will also facilitate savings that can be deployed for other purposes, such as asset investments and even precautionary savings. More on this tri-furcated system later, but for now enjoy a policy trip to Singapore…