An economic and social vision is key to Hong Kong’s population policy

20 Feb

Press release

(20 February 2014) The Bauhinia Foundation Research Centre today released a study on population policy, highlighting the importance of an economic and social vision in encouraging and enabling Hong Kong’s population and labour market to achieve their optimal state.

In an attempt to examine the city’s future population and manpower needs to 2030, the study reviews the available evidence on population dynamics in Hong Kong and their impact on the growth of the labour force, and maps out areas for deliberating the future direction in order to secure and nurture a population that sustains Hong Kong’s long-term competitiveness.

Noting the pressing population challenges that Hong Kong is facing, Chairman of the Centre Dr Donald Li said, “According to the World Economic Forum, the United States will need to add 25 million workers to the labour force by 2030 in order to sustain its current level of economic growth. Obviously, we are heading towards an era of global competition for labour and skills, and the quality and quantity of human power will be key to the future development of our city. Inaction will only weaken Hong Kong’s competitiveness and undermine our position as a world class city.” 

While dismissing the idea of an optimum ideal population, the report states that low fertility rate, ageing population, high dependency ratios, a ‘churn’ of the highly skilled and a shrinking labour force are among the many population challenges that require immediate attention.

Fertility rate falling well below replacement level
The report finds that the total fertility rate of the city will be consistently falling well below the replacement level of 2.1 children per woman (1.19 in 2031), and the projected population growth rate will be just 0.6% in 2031.

Overseas experiences show that initiatives which were less directive in nature and which focused on improving the environment for having children tended to have a more positive impact on fertility. “In the case of Hong Kong, the availability of affordable housing of an appropriate size may be an important consideration,” said Dr Li.

Natural increase of population is important even in the era of low fertility. However, a significant proportion of the total number of births in Hong Kong in recent years was to parents who were not Hong Kong permanent residents (Type II babies). The report points out that any policy to restrict this number is going to accelerate the city’s ageing process, and therefore be counterproductive over the long term.

“Evidence suggests that parents of Type II babies were increasingly well-educated with around 60% of them having attained post-secondary education.

“Along the lines of our recommendations in 2008, if arrangements can be made to encourage and facilitate the orderly entry of Type II babies at a young age with their parents in a manner consistent with Hong Kong’s ability to absorb them, it could help alleviate population ageing of Hong Kong,” said Lau Ming-wai, the Centre’s Vice-chairman and Convenor of the study.

Ageing population and rising dependency ratios
Hong Kong should also get prepared for an ageing population and the increasing dependency ratios. Seventeen years from now, persons aged 65 and above will amount to 26% of the total population. By then, every 1,000 persons aged between 15 and 64 will have to support 578 persons aged below 15 and aged 65 and above.

In this regard, the supply of carers and the funding for care homes are going to be critical policy areas. The report suggests an alternative source of carers from foreign domestic helpers who, after receiving recognised training, could become registered carers for the elderly.

More importantly, Hong Kong should strengthen and promote primary care, active ageing and retirement financing, and review the recruitment system of the health sector.

Dr Li said, “Our health sector remains closed to foreign recruitment, which may not be in the city’s interest as the population ages. However, we should always put patients’ interests first and any policy changes will require careful consideration and thorough discussion.”

Shrinking labour force  
Besides, the report also looks at the potential challenges of a shrinking labour force. With about 3.6 million workers in the market, Hong Kong now enjoys a labour force participation rate of 60%. The report shows that the labour force will peak at 3.7 million in 2018 and then decline to 3.5 million in 2031, during which the participation rate will also drop to 51.9%. An addition of 500,000 people in the labour force will be required in order to maintain the 2013 participation rate.

In the face of a slow-growing and ultimately declining labour force, the report highlights the importance of policies that could slow this process and encourage increased participation among the elderly and women where the rates are currently low.

“However, it will be hard to strike a balance between encouraging younger women into the labour force and the need to support a child-friendly environment that might encourage the future reproduction of the population. We just cannot have both without making much effort,” Mr Lau said.

He emphasised the importance of providing large-scale and high quality childcare services, a topic that the Centre will further look into in its 2014 research agenda.

To offer incentive for elderly persons to continue contributing to the workforce, the Centre has advocated, in its Budget submission in 2012, an increase in tax allowances for those aged 60 and above.

Immigration and integration
Looking towards 2030, with continued low fertility, net migration is expected to make up an increasingly expanding component of the overall growth. The report sees a high degree of ‘churn’ of migrants who come in for relatively short periods before leaving again. Though high mobility is a characteristic of the highly skilled worldwide, policy will need to take this high turnover into consideration.

Commenting on the findings, Dr Li said, “Against the backdrop of a low fertility rate, immigration of all varieties should be proactively encouraged.”

“To reduce the ‘churn’ rate, integration of immigrants cannot be emphasised more. This will help instill a greater sense of belonging,” Mr Lau added.

Hong Kong should not forget the 800,000 Hong Kong-born people who are currently living outside Hong Kong. Mostly highly educated, skilled and affiliated with Hong Kong in terms of language and culture, this population has the potential to make a continued contribution to Hong Kong’s future and should be lured back, especially for those experiencing declining standards of living or economic uncertainties elsewhere.

Planning beyond the boundary
The report also examines the increasing economic and population linkages with the Mainland. Some 235,000 Hong Kong residents were living in Mainland China in 2010, among which three-quarters were in Guangdong Province, contributing to the formation of an emerging mega-urban region.

“Clearly, the Hong Kong-Mainland integration is as much social as economic. Much of Hong Kong’s future reproductive capacity and retirement services lie beyond our immediate boundary. So when we plan for our future population, we must plan well beyond the boundary,” said Dr Li.

A population policy that costs 
Considerable attention should be given to the cost implications of population policy. The report points out that the current spending on tertiary education, which is so central to the production of skills, has not kept pace with the overall spending on education, and should be raised in order to preserve our competitive edge.

To assess the city’s progress towards a sustainable future, a set of socioeconomic indicators should be discussed. “Economic productivity figures, Government expenditure to revenue ratio, healthcare manpower to population ratio and elderly care home places, etc. are examples of indicators that can be used to technically measure the ‘fitness’ of our population structure,” said Mr Lau.

“Population policy is a topic whose breadth is as wide as its time horizon is long. Our report is not aiming at giving immediate solutions that Hong Kong can adopt straight away. It is more important to try to draw up a coherent and integrated overall policy agenda,” he added.