(This essay was published in Hong Kong Economic Journal on 24 April 2019.)

 

Recent immigrants from the Mainland have been blamed for putting pressure on public housing and crowding our public hospitals. This is a highly one-sided view of the impact of immigrants in Hong Kong. It focuses exclusively on their consumption of public resources.

 

Yet immigrants also contribute to economic production and therefore increase the supply of resources. At the very least, they contribute to the economic workforce and those who are not economically active contribute to much unpaid household work, for example, by caring for young children. Children born to immigrant parents are an important contribution to our future workforce at a time when Hong Kong is experiencing exceedingly low fertility rates.

 

In what way have recent immigrants contributed economically to Hong Kong? The idea of who is an immigrant is not precise. Most people in Hong Kong are immigrants or their descendants. A working definition of recent immigrants would include those who arrived from the Mainland after the fall of the Gang of Four or China’s opening in late 1978. This is a period of forty years.

 

According to census data, if we assume all those who arrived since 1976 were still alive and living in Hong Kong in 2016, then recent immigration from the Mainland would have totaled as many as 1,639,000 persons or up to 23.4% of the population in 2016.

 

If we include the children born in Hong Kong to parents who were recent immigrants, then we would have to add another 640,000 persons – meaning up to 32.5% of the population in 2016 were recent Mainland immigrants and their children.

 

These are very large numbers. There is some overestimation but not by much because not many of those who arrived between 1976 and 1996 have left Hong Kong or passed away. It is likely that at least one-fifth of our present population are recent immigrants from the Mainland. And if their children are included, then at least one-quarter of are directly connected with recent immigrants from the Mainland.

 

The contribution of recent immigrants to the economy could be directly examined in terms of their participation in the labor market. The proportion that is economically active, their education attainment, and their age are all relevant considerations.

 

Economic Activity of Recent Immigrants

 

Among immigrants that arrived between 1976 and 1996, the labor force participation rate in 1996 was 56.9%, higher than the rest of the population at 49.3%. This was true for both men and women. Men’s labor force participation rate was 72.7 percent among recent immigrants and 60.5% for the rest of the population. Women’s labor force participation rate was 42.3% among recent immigrants and 37.6% for the rest of the population.

 

A similar pattern is found for recent immigrants that arrived between 1996 and 2016. The labor force participation rate in 2016 was 55.6% among recent immigrants versus the rest of the population at 51.3%. Men’s labor force participation rate was 66.1 percent among recent immigrants and 59.3% for the rest of the population. The women’s rate was 50.5% among recent immigrants and 43.2% for the rest of the population.

 

Throughout the period 1976-2016, we can therefore see that recent immigrants were economically more active than the rest of the population for both men and women. Such evidence rejects the view that recent immigrants are free-riding on public resources.  If anything, they are more willing to work and contribute to the economy.

 

Education of Recent Mainland Immigrants

 

Recent immigrants from the Mainland are generally less educated than the rest of the population, but the gap is not large. For those that arrived between 1976 and 1996, 10.5% had tertiary level education compared to 12.3% for the rest of the population. This figure was consistent among both recent immigrant men and women.

 

For those that arrived between 1996 and 2016, an estimated 23.9% had received tertiary level education compared to 29.9% in the rest of the population. The difference in education levels between recent immigrants and the rest of the population is largely accounted for by the greater difference in women’s education levels. An estimated 21.4% of recent immigrant women had received tertiary level education compared to 29.2% for the rest of the population. But among men, 29.0% of recent immigrants had tertiary level education, which is only slightly lower than the estimated 30.7% in the rest of the male population.

 

It appears, therefore, that the proportion of recent female immigrants who were well-educated grew more slowly than both male immigrants and the rest of the population in the period 1996-2016.  Overall, recent immigrants from the Mainland were less educated than the rest of the population.

 

Age of Recent Mainland Immigrants

 

Unsurprisingly, recent immigrants are younger than the rest of the population. Among recent immigrants arriving between 1976 and 1996, 47.7% were in the prime working age years of 25-44, but in the rest of the population that share was only 35.7%. Among recent immigrant men the figure was 46.2% and among women 49.1%, versus the corresponding shares in the rest of the population of 35.4% and 35.9%.

 

The gap was even bigger among recent immigrants arriving between 1996 and 2016: 43.0% were in the prime working age years of 25-44, against only 26.0% of the rest of the population. Among recent immigrant men the figure was 38.9% and among women 45.0%, while the corresponding values for the rest of the population were 26.3% and 25.7%.

 

If we were to take into account the children born to recent immigrant families, then the contribution of recent immigration to slowing the ageing of our population would be even greater, especially among those under the age of 25. In 2016, 43.1% of recent immigrants and their children were under the age of 25, but in the rest of the population it was a mere 18.9%.

 

Expanding the youthful population through immigration is incredibly important for sustaining economic growth as Hong Kong rapidly ages. To a considerable degree, the slower economic growth our city has experienced in the last decade, if not longer, has been to the ageing of our population. Had it not been for the constant stream of recent immigration from the Mainland, the ratio of elderly population to working age population would have worsened even further and our economic performance would have been more challenging.

 

Work and Entrepreneurial Capacity

 

One of the obvious weaknesses in our economy has been the decline of entrepreneurship over the past two decades. According to census figures, the share of employers in the workforce among 30-39-year-olds increased from 4.0% in 1976 to a peak of 7.1% in 1996, but subsequently declined to 2.5% in 2016. Using annual figures from the quarterly General Household Survey, the percentage peaked at 7.9% in 1993 and stood at only 2.0% in 2018.

 

The share of employers among those aged 30-39 is a good measure of the amount of new business formation in an economy. Setting up a new business successfully requires both creativity (usually found among those who are young) and business acumen (usually acquired through high-level work experience). Individuals in that age group are in their prime for combining both attributes.

 

Had it not been the infusion of recent immigrants, the entrepreneurial capacity of our economy might have been worse.  This is not to claim that recent immigrants are more entrepreneurial than the rest of the population – they are usually not, as they are often less educated and have less familiarity with the local economic environment. Rather, I am merely claiming that their youthfulness might have made a positive contribution in slowing the economic decline due to an ageing population.

 

Entrepreneurship aside, recent immigration has certainly bolstered the workforce in a major way. At the very least, 20-25% of our population and workforce is made up of recent immigrants. While they are not as educated as the rest of the population, they are more hard-working and youthful – both are important attributes.

 

Viewing recent immigrants as consumers of public resources without appreciating their enormous economic contributions to Hong Kong’s economy is an extremely incomplete and partial picture.

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