(This essay was published in Hong Kong Economic Journal on 30 January 2019.)


Children learn from their parents simply by being around them. A great deal of human capital that a child possesses is acquired at home and from parents. Alfred Marshall, in his Principles of Economics (1880), wrote: “The greatest capital that you can invest in is human capital, and, of that, the most important component is the mother.”


Marshall’s observations turned out to be prescient. Research in the past decades has shown that a mother’s education is a far more significant predictor of the future success of a child, in terms of earned income or schooling achievement, than a father’s education. This is not surprising because usually children spend more time with their mothers. Time spent together is a necessary condition for parents to affect human capital investments.


In this connection, medical research has found that children are more likely to become schizophrenic if their parents are so, and more so if their mothers are schizophrenic. This corroborates the significant role that time together plays as an important glue for the transfer of human capital.


Some kids grow up in the worst circumstances financially, living in some of the worst ghettos, and still they succeed. This is because an adult figure, typically a mother, maybe a grandmother, nourishes the kid, supports the kid, protects the kid, encourages the kid to succeed.


Nourishing a child is a very time-intensive activity. Such nourishment can overcome a bad family and bad neighborhood environment.


The importance of this can be seen in the shortcomings of the U.S. War against Poverty, a massive social program initiated by President Lyndon Johnson in 1960s and 1970s to end poverty primarily by giving money to parents. The hope was that this would raise the standards of living of the next generation, but it did not make a lasting difference.


What the War on Poverty failed to recognise was that the real cause of poverty was the lack of a parent or other caregiver who was willing to spend time with the child, and lots of time. Nourishing children is one of those challenges that cannot simply be solved by throwing money at it. Former U.S. President Barack Obama claimed that his grandmother played a pivotal role in his upbringing when his mother was largely absent.


Research has shown the value of nourishing children when they are young. The University of Chicago Nobel economist James Heckman evaluated numerous programs and concluded that early childhood interventions make a huge difference on the future life circumstances of a child, affecting their IQ which becomes more difficult to change after age 10, and other non-cognitive skills like conscientiousness and motivation that also play a huge role in future success.


Issues like work ethics, family values, extra marital behavior, teenage pregnancies, crime, religious attitudes, trust, and happiness are also often influenced by family upbringing. A stable nourishing family is an important bedrock for a child’s future achievement in life. Since children cannot choose their parents, there could be a role for policy intervention to support families to stay together and provide a more stable and nourishing environment for children when they grow up.


Hong Kong now has a worrying situation of family instability that is impacting teenagers.  According to the 2016 Census of Population, 4.1% of 12 to 18 years olds did not live with their parents and 18.3% lived in single parent households. This is not a new phenomenon. According to the 1976 Census of Population, as much as 11.5% of 12 to 18 years olds did not live with their parents and 16.1% lived in single parent households.


The scale of family instability is far more serious among long-term Hong Kong residents than recent immigrants. In 2016, 1.5% of 12 to 18 year olds in single parent families lived with a parent (either a father or mother) who is a recent immigrant from the Mainland, who arrived within the past 20 years, but 16.9% lived with a single parent who is a long-term Hong Kong resident.


Harvard economist Raj Chetty has found that the percentage of single parents in a community is the strongest predictor of upward mobility of children in America. Children of married parents also have higher upward mobility if they live in communities with fewer single parents. So there is possibly also a neighborhood effect.


What do teenagers learn from their parents? Stable families are important for human capital investments and mothers’ role in particular will be critical. But in the area of career opportunities, parents often act as role models for children. This is confirmed in numerous studies on the propensity for children, especially sons, to follow in their fathers’ footsteps in career choice.


In a changing economic world, fathers are also likely to provide better advice on job market opportunities than mothers, as they are usually better networked in the workplace. In 2016, 17.5% of 12- to 18-year-olds did not live with their fathers. Another 2.1% lived with fathers who had arrived from the Mainland only within the past 10 years, and were likely to be less familiar with local career opportunities.


In a globalized world with disruptive technological shocks and shifts in the geographic location of jobs, even teenagers living with parents are having a hard time identifying appropriate career opportunities. Those teenagers that do not live with their fathers are further disadvantaged. Furthermore, they are overwhelmingly from low-income single parent families.


Schools are not normally good sources for career advice. Schoolteachers are typically the most isolated profession in terms of knowledge of market workplace opportunities. Career placement offices are not the solution. What is needed is knowledge of career opportunities that can help teenagers to become aware of careers that fit their aspirations and circumstances. This is not the same as job placements.


This gap in career development advice could be filled by employers and employer associations. For teenagers who are only starting to think about their future and are only beginning to know themselves, internships and job camps, especially during summer time, could give them relevant experiences to learn about their interests and explore different workplaces.


Parents of well-to-do families have long used their market networks to find such opportunities for their children. There is no lack of teenage talent among the less well-to-do and single or no-parent households, but they are far less able to have access to such opportunities.


Indeed, lacking good advice and internship opportunities, many isolated parents and their children often fall into the trap of believing that the best strategy to advance their children’s life chances is to pursue academic studies rather than vocational ones – an approach that fails many teenagers and is not in the interest of employers.  A coordinated effort, perhaps with some public leadership participation, in which employers and employer association provided internships and job workshop opportunities for teenagers with interest and talent, would be enormously helpful.


Policies to promote family stability would also help in the long run. There is a lot of evidence in Hong Kong that homeownership plays a central role in promoting marital stability and reducing family separation and divorce.


Two policy measures could help in this area. In the area of divorce settlements and personal bankruptcy, the law and courts should protect the matrimonial home, if there is one, for the sake of the children. If such provisions were present in law, they would act as deterrence to some divorces and a disincentive to creditors when making loans to persons because they would be prevented from going after the matrimonial home.


In the area of public housing policy, one should encourage homeownership rather than rental tenancy so that families will have a greater stake in staying together rather than risk breakup.


Economic prosperity and social upward mobility, in an uncertain and changing globalized world  driven by new technologies, depend on preparing teenagers with robust cognitive and non-cognitive skills. It also means preparing them to make good career choices. If an increasing number of families are ill-prepared to assume this role and schools are unable to do so, then the business community must take up the challenge. Government should encourage this, and in addition, look into how our laws and public housing policies can reduce family instability and its negative consequences.


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