Of government scholarships and signing bonuses

(Sheung Wan, Hong Kong island) Names matter.

Those of my readers from Singapore or familiar with its customs should be aware of a particular social institution known as, among other similar names, the ‘government scholarship’. However, this term is highly misleading, not only to foreign observers but also many Singaporeans, as the institution has only a passing resemblance to what the rest of the world understands the term ‘scholarship’ to mean. Here I propose a different name.

First note that the first part of its name is accurate. The ‘government scholarship’ is administered by several branches of the state bureaucracy, that is, the various ministries, the subministerial agencies (known as ‘statutory boards’, a peculiar term I have not found elsewhere), and the state-owned enterprises, by which I include the so-called ‘government-linked companies’ i.e. firms partly owned by the state investment vehicle, Temasek Holdings, or its subsidiaries. Some of which were originally subministerial agencies subsequently ‘privatized’, some of which were originally ‘private’, insofar as a large local firm can be said to be private. Which large local firms are private in the sense of being independent from the state I leave as an exercise for the reader. Those thus considered private which may offer a similar ‘scholarship’ only do so to compete with the state’s recruitment practices. My point here is that the social institution is primarily the domain of the state, and it is generally funded directly or indirectly with taxpayer money. There is an entire branch of the state whose sole function is to administer it.

Since the agencies that offer this ‘scholarship’ are numerous and go by many names, and the precise terms and conditions offered by each will vary, I will offer a generic description that should apply to most cases. Typically, prospective candidates apply shortly after the release of the A-level examination results to their organization of choice. Those selected sign a contract to work for the respective agency for a period of four to six years after graduation. The contract stipulates that the agency will cover full undergraduate tuition fees and related expenses at most universities around the world. Some will even cover graduate school.

The actual amount payable depends on which university the agency has decided the prospective candidate will attend. Some are offered coverage at universities abroad (e.g. ‘overseas merit scholarship’) and some at the local public universities (e.g. ‘local study award’). If the terms are acceptable, the contract is signed, and the new hire proceeds to university. For male citizen hires, some state agencies (the ministries) facilitate a deferment of conscription to after graduation, and include the term of military service within the service obligation. For male non-citizens, the contract includes acquiring citizenship and serving the draft first.*

Sound like a good deal? It does to many, and many apply. Thus the selection process must begin with a screening phase, to reduce the number of applications to a manageable level. This screening mechanism is academic merit, that is, A-level results. Those that make the first cut are called for interviews to assess their personal characteristics. Final offers are made to those candidates perceived most suitable for employment, and conversely, accepted by candidates with preferences for a career with that agency, with all its contractual benefits, relative to all other possible careers.

As the primary criteria for being a ‘government scholar’ is not academic merit or personal achievement but career preference, I believe the term ‘scholarship’ is inappropriate. It more closely resembles a practice in recruitment known as the signing bonus, and is better understood as such.

Signing bonuses are typically part of recruitment strategies where firms competing for new hires, but their compensation packages do not differ very much. The signing bonus, a one-time payment, provides an additional incentive for the candidate to choose firm X over firms Y and Z, which could be the make or break factor if everything else is similar. A one-time payment is much easier and less of a risk than raising the offered wages (due to wage stickiness) and benefits, or improving the working conditions, company culture etc.

Similarly, the ‘government scholarship’ is a signing bonus. Since government compensation packages are more heavily weighted on benefits than wages, and the culture and internal practices of a large bureaucracy are usually harder to change, this is the easiest way to incentivize candidates to choose the civil service over all other possible employers in the world. For the scholars pursuing their undergraduate degrees in the US, it’s a ~200,000 USD taxpayer-funded signing bonus paid out over four years before the first day at work. In comparison, the typical signing bonus for entry-level investment bankers was about 10,000 USD during the good years.

Whether such large signing bonuses are a sound use of taxpayer money is beyond the scope of this post, and I leave it as an exercise for the reader. Many others have written extensively on the benefits and harms of this social institution, and I will discuss my perspectives on those at some other time.

Stop calling it a scholarship! Now that I have divined its true name, my hope is that people will start using it, and that when they do they will notice the absence of anything resembling a real scholarship in Singapore, that is, one awarded purely on merit alone, or on financial need – see my previous post on means-testing.

In the interests of full disclosure, I did apply to a few agencies with my peers, and being a slow kid did not even make it to the interview phase. As you can tell, I’m still pretty slow.

Update: Mo-ha-med asks about the up-front military service requirement for male non-citizens. This may seem like a horribly unattractive deal, but it is not intended for foreigners who would otherwise have no obligation to Singapore, but male 2nd generation permanent residents born and raised on the island, who would have the same military service liability as natural born citizens.

Having them serve the draft up front, instead of the usual practice of deferring scholar draft terms to after graduation, is 1) due to the perception that male 2GPRs have a lower ‘loyalty/patriotism/no alternative’ threshold to well, dodging the draft and ‘running off with the money’, than natural born citizens do (I don’t know if this perception is justified), and 2) to assuage popular grouses that non-citizens get all the benefits of residency without paying in as much (this perception being somewhat justified).

Does the up-front service clause dissuade male 2GPRs? Probably not, they would have had to serve it out anyway, and a 200,000 USD signing bonus may well be worth the delayed suffering foregone. Anecdotally, I know several male 2GPRs who signed up.