Why our demographic dilemma need not mean doom

Elisha M. (Shan) Sonthra and Alex Jingwei He say smart policies can mitigate coming changes

In the face of a persistently low total fertility rate of 0.8 births per woman – currently the lowest in the world – Hong Kong has reached a demographic crossroads. The experience of Japan and South Korea has taught us enough about how inevitable and irreversible the decline is. The absence of a magic bullet, however, should not become the reason for policy inertia because a passive stance would exacerbate an already grave situation.

The Hong Kong government has implemented a suite of incentives in a series of recent policy measures. They include a one-off baby bonus of HK$20,000, increased accommodation-related tax deductions, prioritised allocation of public rental housing flats and reinforced support for assisted reproductive services.

These policies, while commendable in their intent, might not be sufficient in even significantly mitigating Hong Kong’s demographic downturn. Instead, an incremental and innovative policy approach that balances ambition with feasibility is required to make a tangible difference.

To alleviate the financial strain on families, a balanced enhancement of tax allowances for child-rearing is necessary. A large increase to match the full cost of raising a child – an estimated HK$6 million to support a child until they are 22 years old, according to a bank’s survey of people with assets of more than HK$1 million – might be beyond reach, but a meaningful uplift from the current levels can provide significant financial relief without straining the public coffers.

For lower-income families who might not reap the benefits of tax deductions, we suggest implementing designated credits that cater specifically to child-related expenses rather than a simple cash allowance. These credits would be specifically applied to child-related expenses such as education, healthcare and childcare. The implementation would be through a controlled electronic platform, ensuring the credits are used for their intended purpose.

The value of the credits must be balanced to be substantial enough to make a real difference yet maintain fiscal affordability. For example, the credits could cover a significant portion of the average annual cost for childcare and education until a certain age.

The amount should be means-tested to ensure it is targeted at families in need and scaled according to the number of children and family income. Existing programmes such as the Pre-Primary Education Voucher Scheme and Kindergarten and Childcare Centre Fee Remission Scheme can be integrated into this system to avoid policy duplication.

Hong Kong’s lacklustre approach to childcare policy has placed undue strain on young families, signalling a critical need for a paradigm shift to alleviate the concerns of prospective parents. The current patchwork of childcare services which consists of basic day care centres, neighbourhood support childcare projects and mutual help childcare centres is by no means able to provide adequate support to young families.

Significantly expanding governmentsubsidised childcare facilities would greatly reduce the financial strain on parents. A voucher system could empower parents with choice and provide access to diverse childcare services. The injection of funding will also foster the growth of service providers, which is still underdeveloped in Hong Kong.

The comprehensive childcare systems of the Nordic countries can serve as a model for Hong Kong. A statutory public fund could support the establishment and maintenance of subsidised childcare facilities, fund a robust voucher system and finance parental leave policies. In essence, it would be the backbone of a reimagined childcare system that supports families and nurtures future generations in Hong Kong.

This move away from piecemeal reforms would require strong political determination and fiscal backing. By adopting these innovative policies, Hong Kong can demonstrate a profound commitment to its families, laying the groundwork for a supportive familycentred infrastructure.

To truly nurture a family-friendly workplace, legal reforms are pivotal in providing substantive support to working parents. Emulating the generous parental leave policies of countries such as Sweden, Hong Kong could significantly extend the current duration of parental leave. Introducing shared parental leave policies can also promote gender equality in parenting responsibilities.

These incremental yet vital changes in public policy could greatly improve work-life balance, making the journey of parenthood a more feasible and appealing choice for the current and future workforce. Resistance from firms is likely, and the government must steer consensus-building in the society with a clear policy vision as well as astute management of public opinions.

While we must recognise the inevitability of demographic decline, innovative and strong policy design can still mitigate its effects. By combining a moderated increase in fiscal support with strategic investments in family-friendly infrastructure and legal reforms, Hong Kong can build a society that values and actively supports family life.

Government must steer consensus-building with a clear policy vision and astute management of public opinions