Jump to ContentJump to Main Navigation
Fixing Inequality in Hong Kong$

Yue Chim Richard Wong

Print publication date: 2017

Print ISBN-13: 9789888390625

Published to Hong Kong Scholarship Online: January 2018

DOI: 10.5790/hongkong/9789888390625.001.0001

Show Summary Details
Page of

PRINTED FROM HONG KONG SCHOLARSHIP ONLINE (www.hongkong.universitypressscholarship.com). (c) Copyright Hong Kong University Press, 2022. An individual user may print out a PDF of a single chapter of a monograph in HKSO for personal use. Subscriber: null; date: 30 June 2022

The Population Numbers Challenge

The Population Numbers Challenge

Chapter:
(p.20) 2 The Population Numbers Challenge
Source:
Fixing Inequality in Hong Kong
Author(s):

Yue Chim Richard Wong

Publisher:
Hong Kong University Press
DOI:10.5790/hongkong/9789888390625.003.0002

Abstract and Keywords

What is the most important challenge Hong Kong is facing? It is not the political elections in 2017. It is not the saturation of our landfills. It is not Hong Kong Television losing its bid for a license. Rather, it is the serious population challenge that could have consequences up to the end of this century if best policies are not adopted soon and sustained for a long period. Inaction would mean the gradual demise of Hong Kong as a world-class metropolitan center. The people of Hong Kong have not fully recognized the seriousness and urgency of this challenge. The best analogy is the classic scenario of “slowly boiling a frog in warm water.” The frog is not aware of the water warming up until it is too late to reverse its fate.

Keywords:   Birth rates, Labor force, Singapore

What is the most important challenge Hong Kong is facing? It is not the political elections in 2017. It is not the saturation of our landfills. It is not Hong Kong Television losing its bid for a license. Rather, it is the serious population challenge that could have consequences up to the end of this century if best policies are not adopted soon and sustained for a long period. Inaction would mean the gradual demise of Hong Kong as a world-class metropolitan center.

The people of Hong Kong have not fully recognized the seriousness and urgency of this challenge. The best analogy is the classic scenario of “slowly boiling a frog in warm water.” The frog is not aware of the water warming up until it is too late to reverse its fate.

In this essay I will concentrate on the quantity aspects of the population challenge. My next essay considers the quality aspects, whereby I will deal with the usefulness of various remedies.

To gain some real appreciation of the severity of our predicament, I will compare Hong Kong with Singapore. These two city economies have commensurate population numbers and geographic areas and are at similar levels of economic development. In 2012, the populations in Hong Kong and Singapore were, respectively, 7.2 and 5.3 million; their GDPs per capita were US$36,798 and US$52,051; and their geographic sizes were 1,104 and 716 square kilometers.

The population growth rates of these two cities have followed rather different trajectories in the past 60 years. From the 1950s to the 1970s, Hong Kong’s population grew at 3.2% a year and Singapore’s at 2.9% a year (see Figure 2.1). But from the 1980s until the present, Hong Kong’s population has been growing at a much lower 1.1% a year compared to Singapore’s 2.5%.

These different trajectories have impacted the number of employed persons in each economy. From the 1960s to the 1970s, the number of employed persons in Hong Kong grew faster than Singapore’s, rising, respectively, 6.6% and 3.9% a year. But from the 1980s to the 1990s, Singapore began to edge ahead, experiencing 3.2% annual growth in employed persons against Hong Kong’s 1.9% (see Figure 2.2). The difference has (p.21)

The Population Numbers Challenge

Figure 2.1 Population in Hong Kong and Singapore, 1960–2012 (Millions)

Source: Penn World Tables, Version 8.0.

The Population Numbers Challenge

Figure 2.2 Persons Employed in Hong Kong and Singapore, 1960–2011 (Millions)

Source: Penn World Tables, Version 8.0.

(p.22) become even greater since the beginning of the 21st century, Singapore’s labor force growing at a very fast rate of 4.0% a year compared to 0.8% in Hong Kong.

Many developed economies today are facing a declining workforce due to the aging of their postwar baby boom generation. Singapore has been the most aggressive developed nation in using immigration policy to sustain its population growth and alleviate pressure on labor markets. Hong Kong, by contrast, has primarily admitted immigrants passively through family reunion from cross-border marriages. By 2012, Singapore had a labor force of 3.4 million in a population of 5.3 million. In the same year, Hong Kong had a labor force of only 3.8 million in a population of 7.2 million.

Figure 2.3 gives population projections estimated by the United Nations. The projections start in the year 2010 and continue until the year 2100. Hong Kong’s population is projected to peak at around 8 million beginning in the 2030s, less than 20 years from now. Singapore’s population will peak at over 7 million beginning in the 2050s, 40 years from now. Hong Kong’s population will stagnate almost 20 years before Singapore’s.

The Population Numbers Challenge

Figure 2.3 Actual and Projected Population in Hong Kong and Singapore, 1950–2100 (Millions)

Source: UN Population Projection.

Aging Is a Problem Here for the Long Term

It is worth noting that, until the 1990s, Singapore’s population was around 50% of that in Hong Kong but is now about 75%. This percentage is projected to continue to rise (p.23) until it peaks around 90% in the 2050s. Singapore is successfully using immigration policy to catch up with Hong Kong.

Hong Kong’s future population will obviously include a higher proportion of elderly persons than Singapore’s (see Figure 2.4). The projected ratio of elderly (defined as 65 or above) to working-age population (defined as those 20–64 years) will rise rapidly from the 2010s onward in both cities. But in Hong Kong, it will peak around 80% after the 2050s, while in Singapore it will peak at a much lower 50%.

The Population Numbers Challenge

Figure 2.4 Actual and Projected Percentage of Elderly to Working-Age Population in Hong Kong and Singapore, 1950–2100

Source: UN Population Projection.

There are two reasons why Hong Kong’s aging population situation is far more serious than Singapore’s. First is Singapore’s aggressive immigration policy, which has targeted immigrants from the Chinese Mainland in particular. Hong Kong, although a natural destination for Mainlanders, has refrained from formulating a similar policy. Instead, it has chosen to accept immigrants through family reunion combined with a minimalist scheme to attract talented persons.

Second, the changing structure of Hong Kong’s population will place a greater burden on a smaller number of people to support their elders. It helps to understand the root cause of this problem. Hong Kong has experienced population influxes over the years, first in 1945–1951, when numbers swelled from 600,000 to 2.1 million, and second in 1978–1980, when 300,000 persons entered the territory over a span of (p.24) 18 months. Both waves had long-lasting impacts on the age structure of our population. This is best illustrated using figures. Table 2.1 shows the percentage change in population numbers for every decade from 1950 to 2099 by ten-year age groups.

The first immigration wave is by far the most important. This group was not only large but also had high fertility rates. The combined effects created a huge postwar baby boom generation that became the main driver of Hong Kong’s industrialization and economic development in the 1960s and 1970s.

From Table 2.1 we find that the number of persons aged 0–9 years increased by 106.6% between 1950 and 1959. This population effect cascades down diagonally towards the right-hand side in the table, as seen in the first diagonal shaded in light-gray. We can see the number of persons aged 10 to 19 years increased by 85.2% in the 1960s, and those 20–29 years increased by 105.7% in the 1970s. Members of this second generation of baby boomers swelled the labor force during Hong Kong’s era of export-led industrialization.

Continuing on the diagonal, the number of 30–39-year-olds increased by 88.3% in the 1980s, and 40–49-year-olds increased by 94.7% in the 1990s. During this period, they had a major role in jumpstarting the industrialization of the Pearl River Delta and transforming Hong Kong into an international financial and producer services center.

Birth Rates in Decline

The postwar baby boomers will start to enter their retirement years in the period 2010–2019 and continue to swell the ranks of the elderly for another three decades. But their descendants—the third generation—will be much fewer in number because of low fertility rates. This third generation begins to appear in Table 2.1 as 0–9-year-olds in the period 1970–1979. The ten-year growth rate for this group is negative at –13.4%.

The third generation entered the labor force when the economy was booming from China’s opening, and wages in Hong Kong advanced rapidly because of an enormous labor shortage. But their careers came to a halt in the Asian financial crisis and the subsequent economic recession. Some of the less fortunate ones were saddled with huge mortgage debts and negative equity. This dulled their confidence and willingness to take on risk.

The fourth generation made its appearance in the period 2000–2009. Their numbers are even smaller as fertility rates have continued to decline. A growing number of this generation will grow up in divorced families and many will be from low-income households.

What is particularly revealing in the projections in Table 2.1 is their long-lasting effect on population numbers across generations every 20 to 30 years. (p.25)

Table 2.1 Ten-Year Percentage Change of Population by Age Group

Age group

1950–1959

1960–1969

1970–1979

1980–1989

1990–1999

2000–2009

2010–2019

2020–2029

2030–2039

2040–2049

2050–2059

2060–2069

2070–2079

2080–2089

2090–2099

0–9

106.6

5.4

–13.4

–1.8

–9.8

–31.7

38.2

–7.3

–11.5

9.8

5.9

–6.8

–1.3

1.5

–6.9

10–19

36.3

85.2

13

–18.5

5

–13.8

–32.4

36.3

–7.2

–11.1

8.6

5.0

–7.2

–2.1

0.8

20–29

–0.4

22.1

105.7

–0.4

–13.4

3

–11.1

–28.8

30.6

–6.2

–11.6

4.6

1.7

–9.7

–4.9

30–39

43.1

–4.1

25.7

88.3

17.8

–14.5

–4.8

–10.2

–26.3

27.0

–6.9

–12.7

2.1

–0.5

–11.5

40–49

84.3

27.9

10.7

21.1

94.7

2.9

–7.9

–4.5

–9.8

–25.2

25.0

–7.4

–13.3

0.9

–1.6

50–59

105.9

57.2

43.7

11.3

31.5

62.1

11.9

–7.5

–4.2

–9.5

–24.8

24.2

–7.7

–13.3

0.7

60–69

134.1

70.9

74.4

38.8

21.1

18.2

75.4

12.8

–6.7

–3.8

–9.2

–24.5

24.1

–7.5

–13.1

70–79

52

78.9

89.7

82.2

50.6

22.6

23.7

78.8

14.8

–5.1

–3

–8.6

–23.8

25.0

–7

80+

33.3

12.5

277.8

129.4

76.9

71

55.1

39.3

78.4

36.6

10.2

4.4

–0.8

–11.6

7.3

Total

55.6

28.7

27.7

14.6

17.9

3.1

7.1

4.5

1.5

0.0

–1.6

–3.1

–3.5

–3.3

–3.4

Source: UN Population Projection.

(p.26) The effect of the first generation on the second generation is reflected in the first light-gray shaded diagonal. The subsequent effect on the third generation is reflected in the first dark-gray shaded diagonal in Table 2.1. Their projected numbers can be traced up to 2100 and show that the population influx of 1945–1951 will have had an amazingly long-lasting effect of almost one and a half centuries.

The later 1978–1980 population influx has had a much smaller and short-acting effect. Its positive effect on population growth can be identified in the other two downward-sloping diagonals with light-gray shaded cells. The effect of the second generation of this influx can be seen by crossing over to 2010–2019 and the effect of the third generation by crossing over to 2040–2049, when the impact becomes negligible.

Table 2.1 shows clearly that Hong Kong’s population will decline in almost every age group over the next century, except for the elderly. Population aging raises many questions relating to the provision of health and medical care, income and support services for old age retirement, household downsizing and housing demand, employment, and the sustainability of economic growth.

All these issues have interrelated and sometimes conflicting economic and social dimensions. They also have political dimensions and consequences for the way our political system could evolve. These issues are also considered in this volume, but for the present essay, I focus only on employment.

Competitive Advantage Falls with a Declining Workforce

The overall labor force participation rates in Singapore and Hong Kong are 66.1% and 57.9%, a difference of 8.8%. Singapore has a higher participation rate for almost every age and sex group, as Table 2.2 shows. The exceptions are men and women aged between 15 and 24. It is likely that the reason is that more Singaporean men and women are at school and therefore not in the labor force. Among men aged 25

Table 2.2 Labor Force Participation Rates in Hong Kong and Singapore in 2011 (Percentages)

Age

Both sexes

Men

Women

Hong Kong

Singapore

Hong Kong

Singapore

Hong Kong

Singapore

15–19

15.5

12.3

15.8

14.6

15.2

9.8

20–24

64.6

62.8

64.5

63.2

64.6

62.5

25–34

85.7

88.9

92.1

94.8

79.9

83.7

35–44

79.8

86.1

92.1

97.4

69.7

75.8

45–54

75.0

81.1

89.2

94.8

61.8

68.9

55–64

49.2

63.3

64.9

79.3

33.4

47.6

65+

7.0

19.9

11.5

30.2

3.0

11.6

Overall

57.9

66.1

67.0

75.6

49.6

57.0

Note: Hong Kong, excluding foreign domestic helpers; Singapore, resident population.

Source: Hong Kong Population Census, 2011, and Singapore Population, 2013.

(p.27) to 54 the rate is 95.7% in Singapore versus 91.0% in Hong Kong. For women the corresponding figures are 75.9% and 69.6%.

The reasons behind Singapore’s higher labor force participation rates have not been investigated, but there can only be two possible reasons. One is a demand-side explanation: Hong Kong has fewer job opportunities than Singapore, so Hongkongers prefer to stay at home. Another is a supply-side explanation: Hong Kong has more generous welfare support, so more people are encouraged to stay out of the labor force rather than choose to work for low wages.

The demand-side explanation is not credible on its own because Hong Kong has a free labor market; therefore, wages would adjust and markets would clear.

I surmise the real reason for Hong Kong’s low labor force participation rate has to be generous welfare benefits affecting the supply of labor. My colleague at the University of Hong Kong told me he recently counted 221 government programs in Hong Kong providing different benefits to people who are presumably in need of assistance. Essays 6 and 37 consider the effects of such benefits on labor force participation behavior.

The UN population projections that I have used in this essay produce forecasts of the working-age population and the labor force on the assumption that future labor force participation rates will be the same as those in 2011 (see Figure 2.5). Hong Kong’s labor force has already peaked, but Singapore’s is still growing. By 2030,

The Population Numbers Challenge

Figure 2.5 Actual and Projected Working-Age Population and Labor Force in Hong Kong and Singapore, 1950–2100 (Millions)

Source: UN Population Projection and author’s estimates.

(p.28) Singapore’s labor force will have overtaken that in Hong Kong. The labor force in Hong Kong will continue to decline until the end of the century, when it is projected to reach the level that existed in the 1980s. By then, Hong Kong will have become just another city, and tens if not hundreds of other cities in the world would have eclipsed its once bright lights. Perhaps it would still be an interesting place for tourists to visit but only as a museum of past accomplishments like Venice is today.

A government consultation document on population policy in 2013 entitled Thoughts for Hong Kong tried to address this important issue. I will look more closely at this document in Essay 4. But I fear it has presented our dire situation in such a moderate light that the frog still feels too comfortable in its pot of warm water to have stirred.