Just as America has the American Dream (of a wealthy lifestyle through hard work), we similarly have the Singaporean Dream in Singapore. While I do not profess to be a source of authority on what exactly is the Singaporean Dream, I think that the Singaporean Dream can roughly be described as such:

Study hard and get good grades in primary and secondary school. Again, study hard and get good grades in polytechnic or junior college so as to enter a good university. Once again, study hard in university and get top honours to land a well-paying and stable job. After that, expect good career progression, income and lifestyle until retirement. The CPF will take care of everything until retirement.

Perhaps it is this romantic notion of the Singaporean Dream that is causing the phenomenon that has been termed as either “New Poor“, “The Middle Class Squeeze” or “The Sandwiched Class”. In the past, this dream did become reality for many Singaporeans, creating the middle class that we see today. However, for the middle-class that has been created by the Singapore Dream, the sweet dream is over thanks to the relentless assault of globalisation.

However, many middle-class Singaporeans are probably either not awake or refusing to wake up to the new reality. The middle-class is still maintaining high consumption despite increasing job instability and shrinking real wages. They keep upgrading to more expensive properties, maintain cars, employ maids, send kids to expensive pre-schools and spend a bomb on tuition and more tuition. It’s small wonder that the upcoming GST increase is going to hit this group pretty hard because their consumption is way too high.

What then can be done? The obvious answer is to get all those who are still in a slumber to wake up to the harsh reality, and subsequently to get them to moderate their lifestyle . What is not obvious is how to put the answer into practice. The only solution I can think of is to greatly expand the reach of MoneySENSE, the national financial education programme.

The idea behind MoneySENSE is sound, but the reach is not probably wide enough. I am not sure why this is so, but I think it is necessary for all Singaporeans to be somewhat educated about financial planning, as well as to go for a financial health check. Perhaps there needs to be a “Check your financial health today” campaign. I think that many Singaporeans are not fully aware of their financial health status, and even if they are aware that financial health is a big concern, they might not know how to go about dealing with the issue.

Community groups and grassroots organisations can assist in encouraging Singaporeans to do a financial health check. In fact, these groups can organise free financial health check sessions. Of course, any financial advisor you see at roadshows in town or other places with high traffic flow will be able to dispense a free financial healthcheck but naturally, most of these people would want to try and sell a product, which might actually cloud their objectivity. Community groups and grassroots organisations can play a part by regulating the financial health check sessions that they organise, such as banning of sales during the consultation session so that a more objective assessment can be carried out.

Of course, knowledge does not translate into action. However, I am always of the opinion that it is better to make people aware of issues so that they know where they are heading. No one can help those who can clearly see that they walking the road to hell, but we can help the blindfolded ones who are walking the road to hell by taking off their blindfold.

However, there is a limit to how much the individual can cut their expenditure. If the cost of living continue to rise at rapidly, no amount of belt tightening can solve the problem. The government has to help keep the price of key essentials affordable, such as education, public housing and public transport. As for the increase in the prices of other goods and services, the government need not bother too much. There is absolutely no reason for the government to keep the prices of big cars, condominiums and special enrichment classes affordable to the middle class. It is the responsibility of the middle class to adjust their lifestyle to one that they can afford.

That being said, it does not mean that the government should freeze or force a cut the current cost of education, housing and transport. What should be done is to monitor the increase in the cost of key essentials and the increase in real wages, making sure that the rise in such costs is not at a rate that’s way above the rate of increase of real wages. I would think that 1 to 2 percentage point above the rate of increase of real wages is acceptable (i.e. if real wages grew by 3% this year, cost of key essentials should not grow more than 5%).

It is a fact that cost of living will always increase and it is unreasonable to expect the government to cushion every increase. If the government tries to do that, there will be a big problem. For example, some of our neighbouring countries subsidise fuel despite soaring fuel prices. The subsidies bled these governments so much that they do not have funds for other projects. However, because people were used to the subsidies, these governments cannot increase fuel prices to market levels without facing a revolt by the populace.

Therefore, it is more prudent to keep increase in costs of key essentials manageable rather than to overly cushion the increase. This way, no one is deprived of an education, a house and a reasonable ability to get around and the government will not bleed to an extent where it will be incapacitated.

The middle class is more than capable of taking care of their day to day living if they realise that the Singaporean Dream is no longer realistic and are willing to cut down on some excesses. On the part of the government, it should play the role of a watchdog on increase in cost of essentials that can negatively impact the development of human capital, which is Singapore’s only asset. If the middle-class and the government can dance in tandem, the so-called middle-class squeeze will not suffocate any of the middle class.

Note: This piece is written based on the assumption that the government has altruistic intentions of helping Singaporean citizens lead better lives. Therefore, this entry will only make sense to you if you accept that assumption. If you don’t, this entry is of no relevance to you and please refrain from trolling the comments section.