(This essay was published in Hong Kong Economic Journal on 20 January 2016.)

Charles Murray’s book, Coming Apart: The State of White America, 1960-2010, shows that middle white America is falling apart, but college graduates in highly skilled occupations are doing well. Between 1960 and 1980, the divorce rate of working class whites rose from about 5% to about 15%. The trend continued and by 2010 had increased to 35%.

 

The well-educated saw a parallel rise between 1960 and 1980: their divorce rate rose from about 1% to about 7.5%. No big surprise. The shocker is that this was flat from 1980 to 2010. The difference between the two groups is reflected in the rates for children growing up in broken homes: a steady increase for the working class, a low plateau for the well-educated. Murray actually shows that the percentage of well-educated people in happy marriages has sharply rebounded, while the percentage of working class in happy marriages has crashed.

 

Murray develops his analysis through the narrative of two fictional towns: Fishtown is the working class town and Belmont is the town of professionals. Children in these two towns grow up in very different neighborhoods, leading very different lives, and end up inheriting the economic and social characteristics of their parents. The life fortunes are very different for people in the different neighborhoods.

 

Murray claims that class divisions have vastly expanded over the last half century. College graduates in high skilled occupations are not just doing well economically; they stay married and continue to be industrious, honest, and religious. The working class, in contrast, has fallen apart. Never mind their stagnant wages; they have almost completely lost touch with how to live successful, meaningful lives. And lots of these men were dropping out of the labor force long before the big economic downturn in 2007-09. The consequence for intergenerational poverty is ominous to say the least. A permanent underclass is in the making.

 

Murray’s findings on the demise of the white American working class do not surprise me. What is powerful about his thesis is the unusually high degree of family breakdowns associated with the origin and intergenerational transmission of poverty among unskilled low-income families. Their children suffer as a consequence and end up in poverty themselves.

 

By contrast college graduates do well not only economically but also in their family life. Their children have nurturing and secure childhoods, and lead productive, successful and fulfilling lives when they grow up. Rising intergenerational inequality is produced when the poor have broken families and stay in bad neighborhoods, while the rich having intact families and live in good neighborhoods.

 

Murray’s study of white America has important parallels in Hong Kong. In the past 30 years, the socio-economic divide between low-income and high-income households has grown progressively wider, exacerbated by rising property prices. The divide is fueling polarization and political discontent. It is being driven by the rising incidence of family breakdown, which is affecting low-income households more than high-income ones.

 

Contributing to this process has been China’s opening and Hong Kong’s public rental housing policies. The former has resulted in an increase in cross-border marriages (including remarriages) that have accelerated family breakdowns among low-income local households.

 

The latter has led to the concentration of low-income families, including both broken local families and intact recent immigrant families, in public rental housing units. Hong Kong’s Fishtowns are our public housing estates, many of them located in the more remote areas. Our Belmont neighborhoods are in the high-priced private housing areas of the city.

 

The scale of cross-border marriages (including remarriages) is staggering. In 2014, out of a total of 56,454 marriages, 20,698 were cross-border marriages of which 11,839 were remarriages (for at least one partner). The cumulative total number of all cross-border marriages in the years 1986-2014 was 680,635. Cross-border marriages constituted 40.3% of all marriages during this period. The cumulative total number of cross-border remarriages over the period 1986-2014 was 129,927 and constituted 46.2% of all remarriages.

 

In earlier years, most cross-border marriages involved a Hong Kong groom, mostly elderly, single, and relatively poor, finding a bride from the Mainland. The quota-system regulating one-way permits led to long delays before families separated across the border could be reunited. Children’s upbringing became adversely affected. When families were finally reunited, many had domestic problems and most lived in public housing estates in the remote areas.

 

The number of divorces increased steadily, rising from 4,257 in 1986 to 20,019 in 2014 with a cumulative total of 365,229 divorces. Over time an increasing proportion of cross-border marriages involved younger, divorced, and low-income men from Hong Kong marrying a Mainland bride. This has had two serious consequences.

 

First, a growing proportion of low-income households consists of divorced single parents, mostly Hong Kong women, many of whom live in public rental housing units. Second, many divorced low-income men soon remarry a bride from the Mainland and are eligible and admitted into the public rental housing program. The public rental housing estates, especially newer ones in the remote areas, have a concentration of divorced parents with children and remarried households with recent immigrant members.

 

The total number of divorced households, single parent households, and households with recent immigrant members have been rising over time among households in the lower income quartiles (see Figure 1 and Tables 1-3). These households predominantly live in public housing estates.

 

 

 

The number of divorced individuals in public rental households belonging to the lowest income quartile rose from 1,000 in 1976 to 66,000 in 2011. This is in sharp contrast with the number of divorced individuals living in other housing types belonging to the highest income quartile, which rose more modestly from 3,000 in 1976 to 25,000 in 2011.

 

The percentage of divorced households living in public rental housing belonging to the lowest income quartile increased from 1.6% in 1976 to 31.1% in 2011. The percentage of those living in other housing types belonging to the highest income quartile increased only from 1.8% in 1976 to 6.3% in 2011.

 

The number of single parents in public rental households belonging to the lowest income quartile rose from 3,000 in 1976 to 34,000 in 2011. This is in sharp contrast with the number of single parents living in other housing types belonging to the highest income quartile, which rose from 2,000 in 1976 to 6,000 in 2011.

 

The percentage of single parent households among households living with children, living in public rental housing and belonging to the lowest income quartile increased from 6.0% in 1976 to 33.7% in 2011. The percentage of single parent households among households living with children, living in other housing types and belonging to the highest income quartile, remained largely unchanged at 2.4% in 1976 and 3.3% in 2011.

 

The number of households with recent immigrants who arrived within the previous 20 years has been very large. In 1996 there were about 440,000 such households, which fell to 397,000 households in 2001, but then rose to 483,000 households in 2011. Prior to 2001 most of these households involved a cross-border marriage where the groom was single and many had arrived in the 18-months just before the “touch base” policy ended in 1980.

 

After 2000, the number of more recent immigrants picked up as a result of the accelerating pace of divorce and cross-border remarriage. This was in part triggered by the liberalization of public rental housing allocation rules for recent immigrant households in 1998, which led the number of recent immigrant households living public rental housing units to rise from 129,000 in 1996 to 203,000 in 2011. Those living in other types of housing reduced from 310,000 in 1996 to 280,000 in 2011.

 

By 2011, the percentage of recent immigrant households living in public rental housing had increased to 39.3% from 27.5% in 2001. The share of recent immigrant households living in other types of housing actually decreased to 20.3% in 2011 from 23.3% in 2001. In general, a larger proportion of recent immigrant households is found among the lowest income quartile, especially among those living in public rental housing.

 

The success of the public housing program in accommodating recent immigrants is a commendable policy achievement. Unfortunately, public rental housing allocation rules (which favor married households without distinguishing between first and subsequent marriages) have inadvertently created perverse incentives for low-income households to initiate divorce and remarry across the border, where marital opportunities are relatively abundant.

 

This rewards those who are divorced and later remarry with another public rental housing unit. As a consequence, the combined effects of our public housing program, cross-border marriage opportunities and family breakdowns are forging powerful incentives that worsen economic inequality, create bad neighborhoods in public housing estates, and lower upward mobility prospects for the poor.

 

A growing number of our children raised in public rental housing neighborhoods have poor role models. Almost one-third of public rental households are headed by an elderly person aged over 65. Many children in broken families grow up with their mothers (some are on welfare). They seldom see their fathers (some may have remarried and live in another public rental housing unit with a cross-border bride). Siblings in broken families are sometimes separated with custody assigned to different parents so that both parents can be eligible to apply for public rental housing.

 

The experience of growing up in poor broken families is heavily tied up with government public housing policy rules and cross-border marriages that leave a permanent scar on their childhood experience. Most of the memories are bitter and painful. For these children, Hong Kong’s prosperity and China’s emergence is not a source of pride, but of alienation.

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