Rethink scholarships, give only to needy to help them climb up

by Leong Ching, 12 July 2007, Comment, The Electric New Paper (Published on 11 July in the print edition)

THE rich give their children a leg up the beanstalk to wealth by making sure their children are well-educated – the best pre-school, private tuition, enrichment classes, overseas exposure.

Others chug along with budget tuition centres in void decks and PCF (PAP Community Foundation) kindergarten classes.

Is there a way to give more people the chance to move up the education beanstalk in pursuit of their share of ‘golden eggs’?

Financial expert Leong Sze Hian has an idea: Reshuffle the chips for each generation by giving scholarships only to the poor.

‘Be like the United States – the rich are awarded scholarship with honours – meaning no money, in name only.’

He pointed out that in Harvard, since three years ago, deserving students who come from homes earning less than US$40,000 will get a full scholarship.

Explaining this, then President Lawrence Summers had said: ‘We want to send the strongest possible message that Harvard is open to talented students from all economic backgrounds.’

In Singapore, most scholarships, from private companies and from the Government, are based on students’ abilities and potential, not on their socio-economic background.

Last year , it was revealed that students from better-off families made up about half of government scholarship holders last year.

The Government’s view is that restricting scholarships to poorer students would not be in line with Singapore’s principles of meritocracy and equal opportunity.

Finite Resources

But public resources are finite.

I would argue it this way: Why pay for the overseas education of a bright, wealthy young man when his family can jolly well pay for it themselves?

Giving more young people from humble backgrounds a chance to study in the best schools is not just a matter of satisfying some lofty goal like social justice.

It is a common sense act of collective self-preservation.

If the poor or middle-class remain poor, or worse, become poorer, if they think that only the rich get richer, they will feel angry, resentful, and disenchanted.

And if enough of them feel this way, it is a recipe for a social tension – surely a nightmare to all, including the rich.

A recent column in the International Herald Tribune had an alluring headline: ‘The filthy rich are different from you and me’

Columnist Roger Cohen writes of hedge fund managers: ‘Who would have dreamed this ultimate refinement of making money out of money would make them masters of the universe?’

Such alchemy, he implies, is hard for many to accept. But I, for one, don’t care how money is made – as long as we all have a fair chance of getting our hands on some of it.

How to get more money

In their multi-coloured Housing Board flats, Singaporeans dream of selling their homes for the magic figure of $700,000.

Or $150,000 above valuation, whichever is the higher.

But, with some 3,000 people on public assistance of a mere $260 a month, and many others earning less than $1,500 a month, not all of us can reach the top of the beanstalk.

How many people have an extra home to sell to cash in on the rising property market?

Like many other countries, there is a substantial income gap here, and it’s getting bigger. Now, the top 20 per cent of employed households earn 12 times the wages of the bottom 20 per cent.

The Government’s Workfare and Progress Package do help the disadvantaged.

But what of the middle-class, often called the sandwiched class? What can they do to pull themselves up?

The question can’t be ignored when the rich get richer inexorably.

Cohen wrote: ‘With $1 billion in the bank you have to try hard to avoid getting richer. Assuming a 10 per cent rate of return, your arduous task is spending $100 million a year, or about $274,000 a day.’

My question is: ‘Who gets 10 per cent returns?’

Certainly not the thousands of people retiring each year on their CPF. Our Ordinary Account begets a niggardly 2.5 per cent. Banks offer savings interest rates of only less than 1 per cent.

During the Budget debate this year, MP Ong Kian Min worked out the sums.

‘Over the long term of 40 years to retirement, an initial sum of $10,000 at 4 per cent a year will only become $48,000. But 10 per cent a year compounded will see it growing to $453,000, almost 10 times more. This will surely make a very significant and meaningful difference to our retirement.’

His point: The rich have superior returns because they can hire the best to manage their money for them.

He asked: ‘Can the CPF Board help the ordinary CPF depositor grow his money by 8 to 10 per cent per year?’

Good question.