HKU Bulletin November 2009 (Vol. 11 No .1)

Cover Story 7 November 2009 Similar dilemmas are cropping up in most developed countries and in China, where the one-child policy means every adult in future will have to support two parents and four grandparents. In fact, fertility is a factor in Hong Kong too because the fertility rate in 2008 was only one birth per woman, well below the replacement rate for a population. Dr Paul Lau Sau-him, Associate Professor in the School of Economics and Finance, has been looking at how fertility and mortality changes affect savings, retirement age and capital accumulation. “It really depends on how many mouths you have to feed versus how many pairs of hands that are working in the society. It’s very intuitive and it’s related to a basic feature of the human economic life cycle. Most of us begin and end with periods of dependency, with a long duration of producing more than consuming in between,” Dr Lau says. The sight of an old woman struggling to push a trolley laden with paper and cardboard boxes that she will sell to recyclers for a few dollars, is a sad reminder that growing old in Hong Kong can be a hardship. Fifteen per cent of residents are aged 60 and over – more than one million people, of whom 200,000 depend on government social assistance. The proportion of over 60s is expected to rise sharply over the next two decades, to 25 per cent by 2021 and nearly one-third by 2036. What worries people is that individuals and the government have not made the necessary preparations to financially support this army of elderly. “Hong Kong didn’t introduce the Mandatory Provident Fund until 2000 so the majority of people retiring over the next 20 years will not have enough protection for their old age,” says Nelson Chow Wing-sun, Henry G Leong Professor in Social Work and Social Administration, Associate Director of HKU’s Sau Po Centre on Ageing and a long time advocate for the elderly. “A lot of people in Hong Kong are earning really from hand to mouth and have nothing to save. The vast majority expect their children to support them, but they don’t have as many children as before, and with social mobility a lot of these children have migrated to other countries or even if they live in Hong Kong, they’ve moved to new towns. So both the financial and personal care support is not as available as in the past.” More mouths, fewer hands to feed them Last year every elderly person in the city was supported by six people of working age, but that ratio will drop by more than half by 2036, so every two elderly people will be supported by five workers, according to government estimates. How can society afford to look after its old? What worries people is that individuals and the government have not made the necessary preparations to financially support this army of elderly. “As the birth rate decreases, there are not as many resources coming in. On the other hand, mortality reduction means that more people are in the old-age dependency stage. If individuals expect to live longer but the working versus retirement periods of their lives don’t balance out, either their standard of living will be reduced or they will have to rely on resource transfers from their children or the government. Eventually there will be some constraint on the individual or the government.” “The trends of declining fertility and improving longevity are very clear in many societies. This situation doesn’t move as fast as a financial crisis, where everybody reacts immediately, but you still can’t delay making the right decision.” People could work longer One obvious response would be to raise the retirement age. This is happening in other developed countries, where retirement ages are being nudged up to 67 or even 70. Hong Kong’s civil service and most private companies set retirement at only 60 – considerably younger than the expected life spans of 79 years for Hong Kong men and 85 years for women. Delayed retirement is being promoted at the policy level by the Sau Po Centre on Ageing and at the community level by Cadenza, a five-year project for the elderly initiated by The Hong Kong Jockey Club Charities Trust in collaboration with HKU and the Chinese University of Hong Kong. Cadenza has set up the Elderly Friendly Employer Practice programme to encourage businesses and the government to retain elderly employees or create job opportunities for them, as much for the individual’s well being as for the economy. “When you get to 50-something, people are waiting for you to disappear from your job. And when you retire and stay at home, you are in the way. You lose your self-esteem. You don’t want to just learn an instrument or play golf. You want to do something more substantive so you can contribute to society,” says Professor Jean Woo, Cadenza’s Director, Honorary Professor in HKU’s Faculty of Social Sciences and Chair Professor of Medicine of the Chinese University’s medical faculty. The retirement issue is starting to be discussed by the government. The Commissioner for Census and Statistics, Fung Hing-wang, recently said a statutory retirement age should be considered as he released statistics plotting the growth in elderly numbers over the coming years. This could ease the pressure on government resources, but it does not provide much of a solution to older people who are poor. PREPARING FOR AN ageing society Hong Kong’s population is getting older, a situation that is becoming increasingly costly for individuals and the government. HKU scholars have been in the thick of efforts to address this challenge.