Opinion | Facing the challenges of declining birthrates

By Dr. Kevin Lau

Hong Kong has confronted persistently low birth rates for an extended period of time, representing an ongoing demographic challenge. According to the most recently available data, the average number of children born per couple fell to a new record low of 0.9 in the past year, signaling that fertility rates continue to decline at an alarming rate.

In response to these troubling population trend lines, the Chief Executive's newly released Policy Address outlined a package of ambitious new measures aimed at incentivizing childbirth and family formation. This includes a substantial cash subsidy of $20,000 for each newborn baby, which aims to defray some of the substantial costs of raising children in today's high-cost urban environment. Additional proposals that enhance support for families include allowing households with newborns to be allocated public housing a full year earlier than normal wait times. Younger couples seeking to purchase their first subsidized housing unit under the city's Home Ownership Scheme may also benefit from increased ballot odds and priority selection when flats become available.

While decisions around family planning and reproduction are deeply personal, demographic experts and economists warn that persistently low fertility over the long term will have profound and wide-ranging negative impacts on Hong Kong's future economic and fiscal sustainability if left unaddressed. Declining birth rates directly lead to a gradual erosion of the working-age tax base that funds public services and pensions through payroll contributions. An aging and shrinking workforce poses serious risks to the growth potential of key industries by constraining available labor resources. The phenomenon of labor shortages has already emerged as a constraint on economic activity and competitiveness in aging societies like Japan and parts of Europe. Hong Kong could well face similar structural headwinds in the years ahead without a reversal in population trends.

Beyond impacts in the labor market, fewer children being born each year also translates directly to a declining future consumer base that is the lifeblood of domestic demand and local business activity. As populations age in place without renewal from new births and young families, opportunities for sustainable growth across many local industries may progressively narrow. If fewer residents are even participating in the purchasing of goods and services, questions arise around the prospects for robust domestic economic expansion.

Unless actively countered through policy, these demographic pressures from below-replacement fertility will be exacerbated over time by simultaneous increases in longevity. Combined with falling birth rates, rising life expectancies ensure the average age of Hong Kong's citizenry will continue skewing higher indefinitely into the future. Unless retirement-age individuals remain economically productive participants, this aging shift will inevitably translate to a growing fiscal burden in healthcare expenditures and pension funding relative to the tax base. With a decreasing working-age support ratio, these long-term care obligations become more acute and unsustainable pressures for government budgets and future generations to shoulder.

It remains to be seen whether the suite of pro-family initiatives recently announced will achieve the intended effect of reversing Hong Kong's downward population spiral. But with similar challenges now facing many developed peers, bolstering local birth trends has become a policy imperative that the HKSAR government cannot afford to ignore for the sake of Hong Kong's continued prosperity in the decades ahead.

The author is a specialist in radiology with a Master of Public Health from the University of Hong Kong, and an adviser of Our Hong Kong Foundation.

The views do not necessarily reflect those of DotDotNews.