Population policy requires compromise

Updated: 2013-12-12 07:19

By Raymond So (HK Edition)

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The government began its consultation on population policy some time ago. The reason for this was to examine ways to deal with a growing aging population. According to government estimates, by the year 2018, the working population of Hong Kong will fall. Together with increases in the longevity of people, taking care of the elderly will become a heavier burden. In 25 years or so, more than a third of Hong Kong's population will be over 65. The need to address this problem is very pressing.

This is the first time in human history we have had such a large percentage of old people in the population. A century ago, the life expectancy of men in the US was only 50, while for women it was 55. The numbers today are 76 and 81, respectively. We do not have similar statistics in Hong Kong, but life expectancy increases with advancements in medicine and nutrition. Hong Kong now has one of the highest life expectancies in the world. This, however, becomes a major problem when fertility rates decline. Society simply does not have enough young people to replenish the workforce.

When we examine the situation in Japan, the challenges arising from a growing aging population are alarming. Japan was once a leader in the global economy and many popular goods were manufactured there. However, an aging population is hurting Japan's creativity and hindering its economic recovery. This is because older people tend to be more conservative, which could affect the development of new ideas. Retired people also need to live on their savings and spend less, which reduces economic activity. This lack of creativity may also affect Japan's ability to recover from future economic downturns. This is the cause of the current lack of direction in the Japanese economy.

Hong Kong's population is now becoming more like Japan's. The government's consultation paper aims to address this, but there are no concrete solutions. The real problem is the workforce is too small to support the economy. The logical answer is to increase its size; but doing this, in reality, is difficult. The government has suggested five options, which are: encouraging young people to have more children; encouraging housewives to return to work; attracting more skilled workers; encouraging overseas Hong Kong people to return; and extending the retirement age. These are sensible suggestions, but they may prove ineffective, as well as hard to implement.

Population policy requires compromise

When examining international statistics, we can see that fertility rates decrease with rises in GDP. Once a society's per capita GDP reaches US$5,000, the fertility rate starts to decline. This is not hard to understand. With a higher standard of living, people's priorities change. Child bearing, for instance, becomes regarded as a burden by many young people. Global experience suggests governments can do very little to increase fertility. Economic incentives do not really work.

A growing aging population is not a problem confined to Hong Kong. Many rich countries and regions face the same situation and they all want more skilled workers. But can Hong Kong attract them? Can we encourage overseas Hongkongers to return? There are serious doubts about achieving this because of global demand for talented people. But we need to try harder. This is also a sensitive political issue. Unions will not welcome it and other groups may also oppose it.

Getting housewives back to work may help. But the problem is that support facilities need to be in place. More child-care facilities and domestic help are needed. The government needs to create more of these facilities, and the increase in resources could be considerable.

Raising the retirement age is also controversial. It can boost the workforce, but also lower the upward mobility of younger workers. Young people already complain about a lack of upward mobility.

The picture does not seem rosy when we look at the government's suggestions. The issue will be a great challenge for society. Every solution comes at a cost and population policy is no exception. The key is finding a way to reach a compromise. While this will be very difficult, it just has to be done. We must have the courage and vision to do it.

The author is dean of the School of Business at Hang Seng Management College.

(HK Edition 12/12/2013 page1)