Dsd

Solving the economic

challenges of population aging in contemporary

Hong Kong

Members:Alan, Au Wai Lun (51867690)

Kevin, Wong Tsz Wai (52569960)Anthony, Chow Lai Yin (52621822)

Thomas, Lai Chung yam (52569984)

Content

1. “Population aging” in Hong Kong2. Causes of “Aging population” 3. Induced economic challenges of

aging population Social welfare expenditure Medical expenditure Impact on overall economic prospect

4. Solution?-----Conflicting views5. Our suggestions

Population aging in Hong Kong

Definition of Population Aging

According to World Health Organization (WHO):

1. When population aged 65 or above ≥ 7% of the total population

2. When population aged 65 or above ≥ 14% of the total population

Aging Society

Aged Society

Current Situation in HK

According to “The Profile of Older Persons, 2006” published by Census and Statistics Department:

“Over the past 45 years, the proportion of older persons (aged 65 or above) in the total population rises from 2.8% in 1961 to 12.4% in 2006.”

Aging society

Aged society

Hyper-aged

society

Future Demographic Trend in HK

Refer to the “Projection of Population Distribution” and “Hong Kong Population Projection” published by Census and Statistics Department:

“In 2019, population of older persons will jumped from 890,000 in 2009 to 1,320,000 in 2019 (13% to 17.2%)”

“In 2039, the proportion of the population aged 65 and over is projected to rise markedly from 13% in 2009to 28% in 2039”

Causes of Population aging in HK

Two main factors (1)1. Low birth rate (1933 in 1981 to 987 in 2006)

Delay in marriage (23.9 to 28.2)

High divorce rate (0.4 to 2.5)

High child-raising cost Changed mindset (family individual) Industrial financial Postponement of first birth (25.1 to 29.2) Increased woman participation in labour market

Source: Demographic Trends in Hong Kong 1981-2006

Two main factors (2)2. Long life span (79.4 for men, 85.5 for women)

Improved health care services Improved social welfare Improved social condition

Source: Demographic Trends in Hong Kong 1981-2006

Induced economic challenges of population aging

Three Dimensions

1. Social Welfare expenditure

2. Medical expenditure

3. Impact on overall economic

condition

Social welfare expenditure

Examples of social welfare for elderly in HK

1. Community Support Services for the Elderly

2. Residential Care Services for the Elderly

3. Old Age Allowance4. Public Housing5. Senior Citizen Residences Scheme

2012–13 Government expenditure for elderly

Social welfare expenditure for 2012–13: $44 billion ,about 30% used for elderly

Comparing 2012-13 Budget with 2010-11, expenditure for Elderly services has increased for -16%

Why expenditure increase?

Make improvement of elderly services

Allocate extra $900 million to improve quality of 250 district elderly community centers

Additional 1,000 subsidized residential care places

Public transport concessions for the elderly and eligible people

Old Age Allowance and CSSA

More than 10 billion is used

In 2039, elderly population is about 28% of total population

Money for Comprehensive Social Security Assistance( 綜援 ) and Old Age Allowance

Housing Burden

67% of total population of elderly live in public housing in 2010

Senior Citizen Residences Scheme is carried out because of the increasing need of house.

Land used for public housing

Gov. bear the construction cost

Government land selling income

Brief Summary

The rate of growth of aging population keep accelerating

With the increasing need of social welfare, Old Age Allowance, CSSA etc. the money used for elderly will be doubled or tripled.

The tax income may not afford the burden of these needs.

Medical Expenditure

Medical Expenditure2 parts: 1. Expenditure of Hospital Authority

2. Reasons that population aging increases medical expense 　　 └ Chronic disease

　　 └ In-patients Staying ( 病人日數 )

Expenditure of Hospital Authority

90% of incomes comes from government HKD39.9 billion 2011-2012 for Medical (17% of recurrent

Government expenditure, 27% in 2033)

Expenditure prediction 2011 - 2012 39.9 billion 2012 - 2013 45.0 billion (+8%) 2032 - 2033 186.6 billion (+367.6%)

Two main Expenditure (09-10) Staff costs (26.7 Billion, about 73%) Drugs + Medical supplies and equipment (HKD4.4 Billion,

About 12%)

Source: Hospital Authority Statistical Report

Why population aging increases medical expense?

• About 90% of the old people rely on the public medical service (50% of Hospital Authority expense)

• 72% old people are Chronic Illness

• Chronic disease • Drugs Expensive (Samaritan Fund for Drug Items)

• Number of In-patients Staying about 50% is aged 65↑

• The amount of the drugs expenses have obvious increase. (2012 – 2013 Inject $10 billion into the Samaritan Fund )

• Number of old people have increased and will have a great jump in year 2019 (13% to 17.2%)

Impact on overall economic prospects

Burden on next generation

In 2033, the elderly (aged >65) will account for 27% of total population Cf. 13.2% currently

Source: Census and Statistics

Department

Increase proportion of aged pop. ( retired) Increase burden of working pop.( nearly every 4 labours support 1 elderly ppl.)

Slow down in economic growth

Gross domestic product (GDP) , a main measure of level of production (econ. growth) of a region.

Labour population in 1996, 2001 and 2006 - By Age Group

Age1996 2001 2006

No. % No. % No. %15 - 24 462 885 14.5 444 244 12.9 433 746 12.125 - 34 1 011 015 31.8 953 725 27.7 912 351 25.535 - 44 910 170 28.6 1 066 020 31.0 999 188 28.045 - 54 504 866 15.9 701 551 20.4 878 393 24.655 - 64 232 173 7.3 218 462 6.4 288 960 8.165+ 61 388 1.9 53 990 1.6 59 746 1.7Total 3 182 497 100.0 3 437 992 100.0 3 572 384 100.0

Source：

Census and Statistics Department

GDP growth greatly depend on working population

proportion of elderly people Relative in working population Slowdown in GDP growth

E.g. During 2025-2050, GDP growth in USA, Japan and Europe is expected to fall by 1.5%, 0.6% and 0.5% respectively source: John Mauldin – www.hjej.com

Shrinking tax revenue

In 2007, salary tax account for 23% of total gov. income

proportion of elderly source: Inland and Revenue Department

relative in working population in salary tax revenue

人口金字塔 Population Pyramid

400 300

200

100

100

200

300

400 0

400 300

200

100

100

200

300

400 0

年齡組別 Age group

二零零一年年中 (基準)

Mid-2001 (Base)

千人 Thousand persons


二零一六年年中 Mid-2016



二零三一年年中 Mid-2031


男性 Male

女性 Female

男性 Male

女性 Female

85+

80-84

75-79

65-69

70-74

60-64

55-59

50-54

45-49

40-44

35-39

30-34

25-29

20-24

15-19

10-14

5-9

0-4

400 300

200

100

100

200

300

400 0

外籍家庭傭工 Foreign domestic helpers

男性 Male

女性 Female

85+

80-84

75-79

65-69

70-74

60-64

55-59

50-54

45-49

40-44

35-39

30-34

25-29

20-24

15-19

10-14

5-9

0-4

85+

80-84

75-79

65-69

70-74

60-64

55-59

50-54

45-49

40-44

35-39

30-34

25-29

20-24

15-19

10-14

5-9

0-4

Tax revenue is the base of public cost (e.g social welfare for the elderly, infrastructure…)

Example: ~ 90% operation cost of the public hospitals is subsidised by SAR government (Source: Hospital Authority Statistical Report 2009 –

2010)

aged population demand for long-term care service gov. expenditure

proportion of ederly gov. tax income In the long run, gov. expenditure may keep

falling short of its revenue

Solutions?-----

Conflicting views

1. Broaden the tax base by introducing GST

Purpose: to maintain budget balance and the quality of public elderly services

Government supports the idea

In 2006, Financial Secretary Henry Tang Ying Yen said “…….. the rapid ageing of Hong Kong's population will be accompanied by higher spending pressures on healthcare and services for the aged…….. the introduction of a GST (Goods and Service Tax) is a viable option for Hong Kong. This would secure the long-term sustainability of our revenue base and our capacity to meet public expenditure needs.”

1. Broaden the tax base by introducing GST

However, The Democratic Party( 民主黨 ), League of Social Democrats ( 社民連 ), the tourism and retailing sector all oppose the idea because

The living of citizens will become more difficult GST will degrade the business environment of HK

2. Boost fertility rate

Purpose: to lower the proportion of elderly ppl. in Hong Kong and secure future labour force

Government supports the idea

According to an interview with The Financial Times in June, 2007 “……..Chief Executive Donald Tsang has called on Hong Kong couples to step up reproduction - at an astonishing rate of three children per family……..Tsang also set out his vision of Hong Kong as a city of 10 million people that rivals London and New York as an international financial center.”

Since 2006, the child allowance has increased from $4,0000 to $63000 in 2012 (Source: Inland Revenue Department)

2. Boost fertility rate The Democratic Party and The Family Planning

Association of Hong Kong do not support the idea

Member of The Democratic Party, Lo Chi Kwong said, “…….Population aging is an irreversible progress. Therefore, it is more rational to focus on solving the accompanied economic challenges than to increase the birth rate.” (Source: Suggestions of The Democratic Party on population policy, 2006)

The Family Planning Association of Hong Kong: It is a personal decision to have children or not Quality > Quantity

Purpose: Working group and the government put money into a pool collectively, which will be used as pensions

Government does not support the idea

Secretary for Health, Welfare and Food Chow Yat-ngok said in a Legislative Council Discussion in 2006

” ……with rapid population aging, Universal Retirement Pensions is not a viable option for Hong Kong…….it will cause unfairness to the 2 million workers who currently participating MPF( 強積金 )…….the business environment of Hong Kong will be profoundly damaged…….The government has much reservation on the feasibility of Universal Retirement Pensions.”

3. Universal Retirement Pensions(URP)

The business sector also strongly opposes the idea

Affect their own interest Resource is limited, should be given to those in

need, not indiscriminately

The Lion Rock Institute ( 獅子山學會 ) Elderly support is family responsibility, not society

responsibility URP places high pressure on younger generation URP is not sustainable as working force keep

dropping


However, many grassroots organizations (eg. the Alliance for Universal Pensions), Hong Kong Federation of Trade Unions( 工聯會 ), The Democratic Party( 民主黨 ), League of Social Democrats ( 社民連 ), Hong Kong Confederation of Trade Union ( 職工盟 ) etc. all strongly support the idea

MPF’s return is very susceptible to the economic condition

A large group of workers are excluded from MPF Everyone’s responsibility to take care elderly people


4. Medical reform Purpose: To reduce the medical expenditure of the

government by means of “Voluntary Medical Insurance Scheme” ( 自願性醫療保險計劃 )

Government supports the idea More people will choose private hospital relieve

the pressure and expenditure of public hospital

The Insurance sector also supports the idea More income Government provides subsidy to the insurance

sector

4. Medical reform However, the Society for Community Organization,

The Democratic Party, the Lion Rock Institute, the Neighborhood & Worker's Service Centre and a portion of citizens all oppose the idea

Main source of pressure of public hospital is chronic disease patients, but their insurance payment is very high

The quality of public hospital will be worsened lower class suffer

Government should lower the salary of admin. staff instead of ask citizens to buy insurance (eg. 4 billion is used as staff cost, only 3 billion is used to buy drugs)

Quality Migrants Admission Scheme

http://www.youtube.com/watch?v=R6n8ig7bvao




5. Attract youthful immigrants

Purpose: young population, maintain or even enhance quality of workforce market competitiveness

Gov. supports the idea: first introduced Quality Migrant Admission Scheme in 2006, further modification has been made in 2007 Nicole Alpert: a research associate for The Lion Rock Institute

1. “The Lion Rock study makes an important point: ``For resource-poor city- states like Hong Kong, Singapore, Dubai and Shenzhen, human resources are probably the only resource that can render their economic growth sustainable.”

2. “Even with immigration, we cannot “escape” an aging population and its transformation of society - migrants age too - but open immigration policies will help us make these changes more comfortably.”

Opposing views Mr. Ma Kwok-ming, Lingnan University part time lecturer

Immigration of mainland talents more intense competition among work force Helen Chan Wing-mui, Assistant Director of Immigration

“We want to protect our local graduates, not increase competition for them.”

Leslie Kwoh, The Standard

“Illustrating the disadvantages of such an arrangement, however, the scheme has come under fire in recent months for allowing thousands of foreign workers to come into Australia at below-market rates while many local graduates still struggle to find work.”

6. Babies of non-local parents

Purpose: Solve population aging in the long run

Government: Automatically giving babies of non-local parents permanent residency

A spokesman for the Labour and Welfare Bureau: By 2018, Hong Kong will have about 300,000 postwar baby boomers who have retired. Many of these vacancies will not be filled as the city's birth rate has been decreasing at an increasingly alarming speed since the 1970s.

A government manpower study: Hong Kong's workforce will be too small to power its economic growth by 2018 because of an ageing population,

6. Babies of non-local parents

Citizens: oppose the idea

Non-local parents are not tax payers but they occupy the resources of Hong Kong Citizens

Chance of Babies of non-local parents taking their parents to HK after they grow up

Non-local parents usually take their babies back to Mainland, no contribution to HK

Our thoughts and

suggestions

Our suggestions

1) Proper Allocation of resources2) Flexible retirement age3) Import foreign medical staff4) Increase availability of tertiary

education5) Provide more incentives to

encourage parenthood6) Enhance open immigration policy

1. Proper Allocation of resources

Joyous Living scheme waste of resources

Target customers : Rich elderly

Over ten thousand management expenses per month

The Hospital Authority: Spend more money on salary than on drugs

More resources should be put on medical and social welfare sector

14.1

9.87.2

64.3 62.8 61.4

0

10

20

30

40

50

60

70

1991 1996 2001

perc

enta

ge

Older Persons Whole Population

Labour Force Participation Rate

Source: Elderly Commission

2. Flexible retirement age

2. Flexible retirement age

USA - being gradually raised to 67 years old

Japan – 69 years old Korea - 67 years old Flexible or part-time work arrangements

for older persons Retire age depends on work type Would not block the advancement of

younger workers, while retaining valuable insight and expertise for the employer

3. Import foreign medical staff

Follow our Asian neighbour – Singapore

import more foreign medical servants (e.g. nurses, health assistants or even doctors)

Reduce burden of local medical staff in public hospitals

Maintain quality of public medical service Lower the risk of medical accident

4. Increase availability of tertiary education

Availability of government-funded tertiary education programmes ( esp. degree prog.)

Maintain and enhance competitiveness of local workforce amid contemporary knowledge-based economy

Offset the economic influence of population aging (eg. GDP)

Well- educated labours are essential human resources in H.K. !!!

5. Provide more incentives to encourage parenthood

Offer more economic lure to encourage citizens to give birth to babies

One-off tax allowance of new born babies family

Continuous and direct subsidy for children-raising

Lengthen maternal leave (eg. 10 weeks to 24 weeks)

Setting up babies care centers… etc.

Fertility rate

6. Enhance open immigration policy

Now operating base on a “point system” ( 分數制 )

Focus on attracting relatively young workforce from worldwide

By focusing on age limit –introduce bonus points in 15-30 age category

By offering incentives to young immigrants-e.g. housing allowance,

Encourage them to settle down ( Morgan as an successful case)

Universal Retirement Pension

Good intention Will not be implemented It involves wealth redistribution Against Hong Kong’s political

ideology: neo-liberalism Social trend: Individualized Too many uncertainties

Conclusion

Hong Kong is not a welfare state

All solutions are economically driven

Solving population aging is only the

presenting goal

Underlying goal maintain

competitiveness and economic growth

Reference http://www.bycensus2006.gov.hk/tc/data/data3/statistical_tables/

index_tc.htm#C1 http://www.ird.gov.hk/dar/2009-10/table/tc/revenue.pdf http://www.hkcss.org.hk/60/souvenir_bk/p90-123.pdf http://www.britannica.com.ezproxy.cityu.edu.hk/EBchecked/topic/246647/gross-

domestic-product-GDP/ http://www.elderlycommission.gov.hk/cn/library/ Youtube: http://www.youtube.com/watch?v=mMWHNhGo7j4

http://www.censtatd.gov.hk/hong_kong_statistics/statistical_tables/index_tc.jsp?charsetID=2&tableID=002&subjectID=1 (2011 pop.)

http://www.censtatd.gov.hk/major_projects/2001_population_census/key_statistics_of_the_2001_population_census/index_tc.jsp

http://www.censtatd.gov.hk/hong_kong_statistics/statistical_tables/index.jsp?charsetID=1&tableID=008&subjectID=2 ( labour participation)

Reference http://www.swd.gov.hk/tc/index/site_pubsvc/page_socsecu/

sub_statistics/

http://oklink.org.hk/index.php?option=com_content&view=article&id=75&Itemid=120

http://www.lwb.gov.hk/chi/legco/14012009_2.htm

http://www.swd.gov.hk/tc/index/site_pubpress/page_speeches/sub_speech2010k/

http://specials.mingpao.com/cfm/News.cfm?SpecialsID=166&Page=1&News=ae8a006515d34065ceaca26776995143ebee00cf7c90414ba7ba8a48

http://news.sina.com.hk/news/2/1/1/2032100/1.html

Reference http://www.swd.gov.hk/doc/finance/2011-12%20COR_Printed_SWD_Chi.pdf

http://www.swd.gov.hk/tc/index/site_pubsvc/page_elderly/

http://www.budget.gov.hk/2012/chi/highlights1.html

http://www.swd.gov.hk/tc/index/site_pubsvc/page_socsecu/sub_ssallowance/

http://www.swd.gov.hk/tc/index/site_pubsvc/page_socsecu/sub_socialsecurity/

http://www.budget.gov.hk/2012/eng/pdf/head170.pdf

http://www.hkhs.com/sen_20040903/chi/cheerful_court/news/news_tko.htm

http://www.swd.gov.hk/tc/index/site_pubsvc/page_elderly/sub_residentia/id_enhancedbo/

http://www.swd.gov.hk/tc/index/site_pubsvc/page_socsecu/sub_socialsecurity/#SSAla

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