and the empty nest
SCMP February 25
Now that the re-election farce is behind him, there are
signs that Tung Chee-hwa and his government are finally facing up to
some fundamental issues from which they had shied away due to inertia
and timidity. The study of the roots of Hongkong's fiscal deficits has
at last come to the conclusion - which has been obvious for at least
three years -- that the problem is more structural than cyclical. The
government is also looking at though it will bite the bullet and make
a decision on what kinds of new or improved taxes it intends to help
remedy the problem. Finally, Mr Tung himself has pointed to the importance
of an issue often mentioned in this column: population policy.
The 150 a day issue of one way permits has its roots
deep in Sino-British relations and has absolutely no relevance to today's
One Country Two Systems concept, or to Hongkong's economic needs. It
is imperative that Hongkong regain control of both the numbers and identity
of those arriving from the mainland. The only mainlanders who could
reasonably object to such a transfer of responsibility are the corrupt
officials who make money out of the permits.
For Hongkong, control of the permits is the best possible
way of attracting needed skills from the mainland, and developing links
with mainland regions which lack traditional family links to Hongkong.
Immigration policy should be as much an economic tool here as it is
in Canada and elsewhere. At present, most mainland immigrants have low
skills and can only be absorbed into this labour force by paying wages
which depress unskilled labour rates and thus widen the already horrendous
income differentials which exist here. They are also a factor in the
increase in longer term unemployment.
The issue of foreign domestic helpers also needs to be
addressed. The brutal fact is that they are allowed in not because they
bring variety and a touch of internationalism to Hongkong's ethnic mix.
They are welcome because they provide a huge income subsidy to most
of the rest of the population, particularly the middle class which employs
them. Almost one household in eight now has a full time, live-in maid
- which is probably a world record for any economy outside the oil enclaves
of the Gulf. It is not necessarily a statistic of which Hongkong should
be proud - though there is no doubt that the relationship is profitable
for employees as well who generally have higher wages and meet less
exploitation here than other Asian destinations.
The helpers not only provide labour at rates approximately
one third the median wage. They also provide the only source of cheap
English-speaking labour for shops, restaurants, media concerns etc catering
primarily to non-Chinese. They do all this without making any demands
on government educational and welfare services, and only a slight one
on health. However, valuable though they are they not a long term alternative
to immigration - unless they are to be encouraged to marry and have
children here which is unlikely to be the case for a territory with
a long history of legal and overt discrimination against non Chinese.
Immigration is probably more needed than the government
itself believes. A look at the 2001 Census, and at the latest Population
Projections, reveals some worrying statistics and debatable assumptions.
Firstly, the aging process. The median age has risen from 31 to 36 in
just ten years and will hit 40 by the end of this decade. This is a
quite extraordinary rate of aging and would have been higher but for
the fact that most one way permit entrants are well under the median
age, as are most of the foreign domestic helpers.
The largest single age male cohort is the 40-44 group.
There is a small up-blip in the 15-19 group but otherwise each age cohort
is smaller than its predecessor. Those in the under five group total
just 276,000 compared with 450,000 in the 15-19 group. This latest collapse
in the fertility rate may prove temporary but has alarming implications.
There are now more people over 75 in Hongkong than under 5. Only Japan
can beat that!
The situation is even worse if one looks at some of the
details. Although there is here a slight preference for male children
there are in fact 22% more girls than boys in the 25-34 bracket, the
range which accounts for most marriages. Most of the 110,000 gap comprises
female domestic helpers who probably will not get pregnant. Given this
data it seems unlikely that there is going to be sharp pick up in the
birth rate any time soon. The economic consequences have not yet been
Indeed, in addition to the boost to prosperity provided
by the foreign maids, Hongkong has been enjoying a period of very low
dependency rates. The number of young dependents has fallen while the
number of old ones has yet to escalate. This trend will continue to
the end of this decade with the overall dependency ratio, now around
380 per thousand will fall to 340 then sharply reverse, rising to 561
by 2029, according to official projections which are already optimistic
as they assume a sharp recovery in the birth rate. The implications
of these in terms of demand for housing, land prices, amount of disposable
income and disposition of that income are immense.
These numbers again put into perspective the deliberate
phony figures concocted by the government to stir up popular sentiment
against the Court of Final Appeal's ruling on entry of mainland born
children of Hongkong permanent residents. The number of potential arrivals
was absurd, bringing the Census and Statistics department into disrepute.
But even if the potential numbers of mainland children were accurate,
the suggestion that they would swamp the schools was known then to be
ridiculous given the collapse in the numbers of locally born children.
There are now only 671,000 children under ten compared with 881,000
in the 10-19 group.
These figures ought to have big implications for future
budgets and the structure of the education system as well as spark proper
discussion of Hongkong's demographic situation. They may not do if the
government believes its own population projections. I may be wrong,
but Mr Tung has given the impression that we need to bring down the
rate of population growth to take account of limited space etc. Perhaps
he has been looking at the government's own Population Projections,
2000-2029, which suggest that the population will grow at around 1%
a year to reach 9.05 million by 2029.
I hesitate to criticise any effort to forecast population
growth. Fertility rates are notoriously fickle and unpredictable almost
everywhere. Hongkong's population is also heavily influenced by migration
and labour inflows and outflows which are determined by various economic
and political factors. It also now has a peculiar category of so-called
mobile residents. These are permanent residents who live here only part
of the time - more than one but less than three months out of six. There
are currently 200,000 in this new category but it is expected to rise
rapidly as more people work on the mainland but keep a residence here.
However, the growth figures could prove far too high.
Broadly, the migration assumptions are for little change. The projection
assumes the intake from the mainland will remain static, the net intake
of domestic helpers and foreign workers will fall sharply but overall
net migration will be within the 50-65,000 range. So no assumption surprises
there, which is reasonable given that policy on mainlanders will be
the main determinant. Migration already accounts for 80% of net increase.
The big surprise is in the natural projections. If current
birth rates continued, the population, excluding migration, would begin
to fall. But the government is forecasting that the fertility rate will
rise from a current 950 per 1,000 women back up to 1,600 by 2029. This
is a huge leap. Interestingly, back in 1997 the government forecast
a rise in fertility to 1,290 by 2001. In fact it continued to fall.
The reasons put forward for such a turn-around are not very convincing.
The recession may have been one factor in the latest decline but hardly
accounts for the long term downward trend. (Domestic helpers were excluded
from numbers of women of child-bearing age).
In other advanced countries, such as Denmark there has
been some recovery in birth rates from their low points. Even if the
Hongkong rate recovered to 1600 that would still not only be below the
replacement rate but below the current level for countries such as the
UK and Australia. But it is a very bold prediction which, of wrong,
could lead to major policy errors.
Stabilising population may be an appropriate long term
goal for Hongkong as it is for China generally. But unless the process
is more gradual than the collapse in birth rates implies, the social
and economic costs will be very high. The government would do better
to base its population projections on current birth rate realities.
Otherwise it is going to be planning for a lot of needs which never
eventuate or curtailing immigration, thus leaving Hongkong like Japan,
with scant way of retaining any youthful vigour.