(Reprinted from HKCER Letters, Vol. 50, May 1998)

 

Families in the 21st Century: The Economic Perspective

Yiu-Kwan Fan

 

Introduction

Although the twenty-first century is just around the corner, in light of the rapid pace of change taking place in the modern world it is hard to predict what the coming millennium will bring. In this paper, I attempt to outline some likely developments that will impact Hong Kong families in the twenty-first century, and to examine their economic implications. My viewpoints are somewhat speculative; they are casual observations unsubstantiated by empirical findings. They are also personal, coming from the perspective of this one economist, and they do not claim to represent the viewpoint of the economics profession in general.

In Hong Kong, the globalization of economic activity and the aging of the population are the two major forces responsible for reshaping the family as an economic unit. The concepts of the "household"; household income, expenditure patterns, and production and consumption activities; the family decision-making process; the inter-generational transfer of resources, etc., have to be reexamined in light of the trend toward (1) the family becoming more and more "internationalized," and (2) people living longer and leading healthier lives.

The microeconomic changes in the family will have profound effects on the macro economy. As human capital becomes increasingly mobile and internationalized, the direction in which this capital flows will affect the growth and performance of Hong Kong's economy. The expansion of the family network across national and cultural boundaries will help business development. The aging of the population will call for a thorough review of the provisions of public health care, housing, recreational facilities, public transportation, and social welfare. It will be necessary to reexamine the meaning of the terms "working life" and "retirement" so that healthy "golden-agers" can continue to be productive members of society.

Modern Sojourn Workers

Since the early 1980s the economic integration of Hong Kong and the Chinese Mainland has been progressing steadily and rapidly. The Hong Kong manufacturing sector has virtually disappeared as manufacturers move their production processes to the Mainland. According to the 1996 Population By-census, the proportion of the working population in the manufacturing sector decreased from 36 percent in 1986 to 19 percent in 1996.

The Hong Kong manufacturing industry has not withered, however. In fact, it has expanded both in scale and in geographical spread. Most of the "lost jobs" have been relocated to the Mainland and have been instrumental in the creation of many additional jobs there. Many manufacturing workers have changed their occupation and continue to work in Hong Kong, but many more have become foremen, supervisors, and managers working in the manufacturing plants owned (wholly or partly) by Hong Kong enterprises. These "commuters" typically keep their families in Hong Kong and in the 1996 Population By-census would have been listed as "managers and administrators," "professionals," and "associate professionals." This group of occupations showed a marked increase, rising from 8.5 percent of the working population in 1981 to 12 percent in 1986, 23 percent in 1991, and 29 percent in 1996.

As has been duly pointed out by Mr. Frederick W. H. Ho, the Commissioner for Census and Statistics, we must exercise caution in interpreting the census findings, because in the 1996 Population By-census the de jure enumeration approach was used, whereas in the 1991 Population Census and in previous censuses/by-censuses, the de facto enumeration approach was used. Thus, the percentages and proportions mentioned above are, strictly speaking, not directly comparable. However, the rationale for the change to the enumeration approach is itself revealing: "[in previous years] as residents who were temporarily away from Hong Kong constituted only a small proportion of the resident population (1.8% in the 1986 Population By-census and 2.7% in the 1991 Population Census), findings pertaining to the residents present in Hong Kong could still be regarded as reflecting the characteristics of the resident population as a whole. In view that there were more residents temporarily away from Hong Kong or usually working in Mainland China/Macau in recent years, the de jure enumeration approach was adopted in the 1996 Population By-census."¹ At the 1996 By-census reference moment (3:00 a.m. on 15 March 1996), 200,582 residents, or 3 percent of the census population of 6,217,556 residents, were temporarily away from Hong Kong.

Global Business Development

The economic integration of Hong Kong and the Mainland is only a part of much larger picture--the globalization of business and economic activity. To many business corporations, "going international" has long been a business strategy vital to survival and growth. The facilitation of multinational business operations has been greatly enhanced by the rapid development of telecommunication. More liberal trade policies have allowed capital and people to flow more easily across national boundaries, reflecting the general desire and need of almost all nations for international economic cooperation. Business executives are expected to develop cross-cultural skills and to be able to coordinate multinational projects. A multicultural and multilingual education, international experiences, and the development of an international profile have become important to a successful corporate career. Parents are more willing to send their young children overseas for education. It is estimated that 14,000 Hong Kong students go overseas for secondary and tertiary education each year.

The impact on the family of this far-reaching globalization is profound. It is not uncommon to find a household the head of which is an international worker who travels regionally and internationally and in which the children are studying overseas, coming home only for holidays and family occasions. Such a family is "internationalized." With members of the family and/or relatives working and living outside Hong Kong, it can be described as an internationally extended family.

The Internationally Extended Family

The internationally extended family is a new concept in terms of household composition. This concept is different from the established ones of the vertically extended family and the horizontally extended family. It is also different from the household arrangement whereby a person works overseas as a migrant or a contract worker and remits income home to support the family. The internationally extended family has a home base (Hong Kong), but conducts its family affairs over international (and cyber) space; its members are highly mobile and are located in various parts of the world, and yet they are well connected by way of frequent gatherings and modern means of communication.

It is my prediction that the internationally extended family (which, for convenience, subsumes the regionally extended family) will become a common form of household composition in the twenty-first century. This development will have social and economic implications. I shall leave the social implications to sociologists and other social scientists and shall return to the economic implications after discussing another major force that is profoundly impacting the family—the aging of the population.

An Aging Population

Hong Kong's population is aging. Citing the findings of the 1996 By-census: "The median age rose from 28 in 1986 to 34 in 1996. This is attributable to the continuously low level of fertility rate and mortality improvement experienced by the population, thus leading to a reduction in the proportion of children aged under 15 and an increase in the proportion of elderly people aged 65 and over."² The percentage of the population aged sixty-five and over increased from 7.6 percent in 1986 to 8.7 percent in 1991 and to 10.1 percent in 1996. This trend is likely to continue into the twenty-first century.

The admittance of Mainland-born children of Hong Kong residents into the SAR, the return migration of young professionals, the importation of workers from the Mainland, and the possibility of more and more elderly people wanting to retire in the Mainland may slow the rate of the aging of Hong Kong's population. However, these things will not reverse the trend. We have seen a steady increase in the elderly dependency ratio (the number of persons aged sixty-five and over per 1,000 persons in the fifteen-to-sixty-four-year-old age group), which rose from 109 in 1986 to 124 in 1991 and to 142 in 1996. The increase in the elderly dependency ratio is expected to continue and to reach its peak by the end of the first decade of the twenty-first century.

Implications for the Family

The regionalization/internationalization of the family and the aging of the population will together act to reduce the de facto size of the household in Hong Kong, to raise the average age of household members, and to create new challenges for the SAR. Traditional family ties, as we understand them, will weaken. There will be implications for the roles and functions of the family in preserving traditional values, socializing the young, providing material and emotional support for the old, and building a community of shared ethical values. As is mentioned above, I am leaving these issues to sociologists and other social scientists.

From the economic perspective, there are interesting implications as well. Along with the regionalization and internationalization of the family comes the regionalization and internationalization of family income and expenditure. Family income is generated by production activities outside the domestic economy; a significant proportion of family expenditure is directed toward items consumed outside the domestic economy, e.g., overseas tuition fees, air transportation, etc., in addition to the consumption items needed to maintain the home base. Family decision-making becomes more decentralized. Among internationalized families there is a tendency to transfer family resources and endowments to the next generation much earlier than does the traditional nuclear family, resulting in greater economic freedom and independence of the younger generation.

The Internationalization of Human Capital

As the family becomes internationalized and regionalized, the formation, accumulation, and application of human capital are also internationalized and regionalized. Thus, country A's human capital can be formed (through education), accumulated as a productive factor, and applied to productive activities in country B. Human capital becomes increasingly mobile. The world economy will benefit from the freer movement of human capital and other factors of production, but the growth of the individual national economy may be enhanced or deterred depending on the direction of this movement.

This new phenomenon is different from "brain drain," which has been discussed extensively in the development economics literature. While brain drain implies an outward movement of human capital from the economy, the internationalization of human capital refers to a multidimensional and multistaged flow of human capital, embodied in the occupation group known as "professionals," among different economies. Unlike brain drain, which has a negative connotation, the interregional and international flow of human capital can improve economic efficiency in resource allocation and can promote global economic development.

The internationally extended family forms an important part of the kinship network. Various studies have shown that small and medium-sized enterprises rely heavily on their kinship networks to set up their global business operations and to develop their international markets. The kinship network serves as an important source of information, financial capital, human capital, business connections (guanxi), and local political support. It provides the basis for a trusting relationship that binds the different operations and activities into an integrated global business.

Rethinking the Meaning of the Terms "Working Life" and "Retirement"

As people live longer and lead healthier lives, an increasing number of them will live many years beyond the institutional retirement ages. This will post new challenges to society. On the one hand, it will have to provide more specialized facilities and services--public health care, housing, recreational facilities, public transportation, and social welfare--to retired people. On the other hand, since many retired people are still active, healthy and mobile, society will have to come up with new ways to keep them physically, psychologically, and financially independent. This independence is particularly important in light of the internationally extended family, in which the old cannot expect companionship and care from other family members.

The best way to keep retired people physically, psychologically, and financially independent is to offer them the opportunity to take up "meaningful" and "worthy" employment. Employment should be "meaningful" in the sense that the retired person can continue to be a productive member of society, and it should be "worthy" in the sense that it provides adequate monetary and non-monetary incentives for the work performed.

Indeed, given the demographic changes and the increasing mobility in the labor market, it is time for us to reexamine the meaning of the terms "working life" and "retirement." Retirement should not be considered as either a reward (if it is planned for well) or a curse (if it is prepared for poorly) at the end of one's working life. Instead, one should be able to choose "retirement" in the form of "re-energizing periods" throughout one's working life, which can be as long as one's adult life. It is conceivable that by matching different job categories with different age groups and by solving the stigma problem associated with social and occupational ranks, society could keep all its people who are willing and able to work, regardless of age, engaged in meaningful and worthy employment. The burden imposed by the aging of the population could be lightened considerably if retirement (i.e., not working) was the choice of the individual and was not mandated by some age limit set down historically or institutionally and applied to all.

This may sound too utopian to be possible. But I am optimistic that the institution of mandatory retirement will be abolished during the twenty-first century. I feel safe in making this prediction; I have one hundred years to be proven wrong.

Note:

¹1996 Population By-census Summary Results, Census and Statistics Department, Hong Kong. p.1.

2Ibid. p.3.

Professor Yiu-Kwan Fan is Dean of School of Business, Hong Kong Baptist University. This article is presented at the Symposium on Families in the 21st Century--Values, Challenges and Opportunities, organized by the Social Welfare Department, Hong Kong Special Administrative Region Government, 12 February 1998.

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