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Tuesday, Apr 23, 2024

Tax incentives ‘not enough’ to reverse Hong Kong’s declining birth rate

Tax incentives ‘not enough’ to reverse Hong Kong’s declining birth rate

Latest budget raises child allowance, but academics say effect of financial aid on encouraging people to have more babies is limited.

Hong Kong will need more than tax incentives to tackle its low birth rate crisis, even if the government is willing to offer more than it pledged in its budget blueprint, experts in population studies have said.

The question over how to tackle one of the biggest challenges facing most advanced economies gained fresh urgency in Hong Kong after Financial Secretary Paul Chan Mo-po announced in his budget on Wednesday he would raise the child allowance by HK$10,000 (US$1,275) to HK$130,000.

From politicians to residents, the increase was lambasted as far too little given the cost of raising a child in the city.

Academics who track birth rate trends around the world said financial aid would at best only encourage those already planning to have a child to do so sooner, and so long as the assistance was significant enough.

Hong Kong families must contend with expensive education, cramped and costly living conditions and an unfriendly culture for working mothers, they argued.

“There is international evidence suggesting that financial incentives including tax incentives have a positive impact on fertility, and at least, may encourage couples to give birth earlier,” said assistant professor Tan Poh Lin, who studies Singapore’s low birth rate at the Lee Kuan Yew School of Public Policy in the city state.

But the sociologist said the evidence, mostly coming from France, Canada and America, might not be as convincing in East Asia, where competition for school spots was much more intense, and social expectations and responsibilities placed on parents significantly greater.

Stuart Gietel-Basten, director of Centre for Aging Science at the Hong Kong University of Science and Technology, said it was a cultural norm in Hong Kong for children to work extremely hard in a competitive schooling environment to ensure better job prospects later in life.

“If you’re a woman, you’ve worked your way up, you’ve got yourself a decent job. If you have kids, your career is going to be in jeopardy,” he said, adding that money was “never enough” to compensate for what the mothers gave up.

He said northern European countries such as Sweden and Finland had long identified the differential treatment women faced and made adjustments accordingly. The two countries, hailed for their birth policies a decade ago, have started to face challenges in recent years due to economic uncertainties.

Singapore currently has one of the lowest fertility rates in the world despite its annual spending to boost its birth rate quintupling to HK$14.1 billion from 2001 to 2017. The rate was 1.12 in 2021.

South Korea offers the equivalent of more than HK$4,000 a month to families with children under the age of one, with the payment expected to rise to more than HK$6,000 next year.

It is the only country in the world where the fertility rate is below one, dropping to 0.78 in 2022, a fall of 4.4 per cent over the previous year.

According to the Census and Statistics Department, the city’s fertility rate dropped from 1,080 in 2018 to 772 in 2021. The rate refers to the average number of babies born alive to 1,000 women during their lifetime, with the figure excluding domestic helpers.

Hong Kong’s birth rate was a hot issue at the Legislative Council on Thursday, when lawmakers grilled the financial secretary on the policy decisions in his budget.

Chan said the government was aware of the consequence of a declining population and birth rate, which would affect the city’s economic development, saying it had made “slight” adjustments to the tax deduction for parents.

But he defended his decision not to spend more on the problem.

“We had four years of deficits in the past five years, the year before last year it was around HK$200 billion, this year it is HK$140 billion, so we really need to spend within our means,” he said.

Paul Yip Siu-fai, the chair professor in population health of the University of Hong Kong, said the government had yet to treat the low birth rate as “a matter of life and death” as the Singaporean government had

“It will not work unless you invest a very large sum of money,” he said.

Instead, the government should focus on improving people’s quality of life to make them happier while improving work conditions for women, Yip suggested.

According to official figures released earlier this month, the city’s population dipped 0.9 per cent from the year before to 7,333,200 in 2022, while births plunged to a record low of 32,500. The overall population drop was deeper than the previous year’s 0.3 per cent decrease.

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