Resilience Through Reform: Strengthening Hong Kong's Welfare System for a Sustainable Future

Abstract

Hong Kong faces significant social and economic challenges from demographic shifts, rising living costs, and labor market disruptions. This article examines three critical areas of reform within the city's welfare system: addressing the aging population, managing rising housing costs, and tackling employment challenges such as automation and underemployment. In an aging society, the sustainability of healthcare, long-term care, and pension systems is analyzed, with recommendations for community-based eldercare and universal pension schemes. The housing affordability crisis is explored through overcrowding, public housing shortages, and high rental costs, highlighting the need for expanded public housing programs and enhanced rental assistance. Labor market disruptions due to automation and underemployment are evaluated alongside the importance of retraining, upskilling, and employment insurance to mitigate instability. Drawing on international best practices, this article proposes evidence-based reforms to create a more equitable and resilient welfare system in Hong Kong, ensuring social and economic stability for all residents.

Introduction

Hong Kong's unique socio-economic landscape faces increasing pressures from rapid demographic changes, escalating living costs, and evolving labor market trends. By 2039, over one-third of the population will be 65 or older, placing unprecedented strain on healthcare systems, pension schemes, and eldercare services. Simultaneously, housing affordability remains one of the city's most pressing social issues, with property prices and rental costs creating widespread insecurity. Furthermore, the rapid advancement of automation and the rise of underemployment threaten job stability and income equality. These interconnected challenges underscore the urgent need for welfare system reforms that address the root causes of inequality while building resilience for future generations.

This article comprehensively analyzes these challenges, focusing on healthcare, housing, and employment. Using international benchmarks from countries like Japan, Sweden, and Singapore, it offers actionable policy recommendations to ensure sustainable development. Central to the discussion is the need for bold investments in community-based healthcare, universal pension schemes, public housing expansion, and robust retraining programs. By addressing these areas, Hong Kong can safeguard its social equity and foster a more inclusive future.

Keywords

Aging Population, Automation, Community-Based Healthcare, Economic Productivity, Housing Affordability, Long-Term Care, Pension Sustainability, Public Housing, Retraining Programs, Underemployment

A. Demographic Pressures

Hong Kong is experiencing significant demographic pressures due to its rapidly aging population, with over one-third of residents projected to be aged 65 or older by 2039 (Census and Statistics Department, 2021). This demographic shift places immense strain on the healthcare system, long-term care services, and pension schemes, raising concerns about their sustainability. Rising healthcare demands, coupled with inadequate long-term care capacity and pension insecurity, risk compromising the welfare of elderly residents and exacerbating inequality. Drawing on global examples like Japan and Sweden, this section explores potential reforms to address healthcare costs, expand eldercare services, and establish sustainable pension systems to meet the needs of an aging society (Esping-Andersen, 1999; MPF Authority, 2021).

1. Aging Population

Hong Kong is facing a rapidly aging population, which has profound social and economic implications. By 2039, more than one-third of Hong Kong’s population is expected to be aged 65 and above (Census and Statistics Department, 2021). This demographic shift places significant strain on healthcare systems, long-term care services, and pension schemes, raising questions about the sustainability of the region’s welfare system. This section examines the dual challenges of rising healthcare costs and the sustainability of long-term care and pension systems within the context of an aging society.

1.1. Healthcare Needs and Costs for the Elderly

An aging population inevitably increases the demand for healthcare services, particularly for chronic disease management and geriatric care. In Hong Kong, elderly individuals account for a disproportionate share of healthcare utilization, with public hospitals providing over 90% of inpatient services for this demographic (Hospital Authority, 2021). The prevalence of age-related conditions such as cardiovascular diseases, diabetes, and dementia has surged, leading to higher healthcare costs and longer hospital stays.

Rising Healthcare Expenditures:

To address the growing needs of elderly residents, the Hong Kong government’s healthcare spending has risen steadily. In 2021, public healthcare expenditure accounted for 5.9% of GDP, a modest increase from previous years but still lower than many developed economies (Ng, 2020).

Figure 1: Healthcare Spending Comparison of Hong Kong, Japan, and Sweden (2021)

Source: Hospital Authority. (2021).

Figure 1 compares the healthcare spending of Hong Kong with other aging economies such as Japan and Sweden. The data reveals that Hong Kong’s healthcare spending, at 5.9% of GDP, is considerably lower than that of Japan and Sweden, despite the city’s rapidly aging population. This underinvestment in healthcare could lead to compromised services for the elderly, potentially straining Hong Kong’s healthcare system further as the population continues to age. The figure underscores the need for increased government investment in healthcare to ensure sustainable care for the growing elderly population.

Healthcare System Strain:

The rising demand for elderly healthcare services has overwhelmed Hong Kong’s public hospitals, leading to chronic overcrowding and long waiting times. A 2020 report by the Hospital Authority revealed that elderly patients often wait over 10 hours in emergency departments and several months for specialist consultations (Hospital Authority, 2020). These delays not only jeopardize the health outcomes of elderly patients but also increase the burden on caregivers and families.

To address these challenges, Hong Kong must invest in preventive care and community-based healthcare services. International best practices, such as Japan’s long-term care insurance system, demonstrate the benefits of shifting from hospital-based care to community and home-based models. By expanding access to outpatient services, subsidizing home care, and increasing the availability of geriatric clinics, Hong Kong can alleviate pressure on public hospitals while improving elderly care outcomes (Esping-Andersen, 1999).

1.2. Long-Term Care and Pension Sustainability

In addition to healthcare, long-term care and retirement security are critical concerns for Hong Kong’s aging population. The rising demand for eldercare services, combined with the inadequacy of existing pension systems, poses significant challenges to the sustainability of the welfare system.

Demand for Long-Term Care Services:

The number of elderly individuals requiring long-term care is projected to increase sharply in the coming decades. Hong Kong’s current long-term care system, which includes residential care homes and home-based support services, is already under strain. As of 2021, over 30,000 elderly residents were on the waiting list for subsidized residential care, with average waiting times exceeding three years (Social Welfare Department, 2021).

To address this gap, the government must increase funding for long-term care facilities and expand subsidies for home-based care services. Additionally, incentives to train and retain eldercare workers, such as higher wages and career development programs, are essential to meet the growing demand for skilled caregivers.

Pension Sustainability Challenges:

Hong Kong’s pension system, centered around the Mandatory Provident Fund (MPF), has faced criticism for its inability to provide adequate retirement income. The MPF, introduced in 2000, requires employers and employees to contribute 5% of monthly income, capped at HKD 1,500. However, the system’s reliance on private investment returns has left many retirees with insufficient savings, particularly low-income workers and individuals with irregular employment histories (Ng, 2020).

A 2021 study revealed that the median MPF balance for retirees was only HKD 215,000, which is equivalent to less than two years of living expenses for an average elderly individual (MPF Authority, 2021). To ensure pension sustainability, Hong Kong must explore reforms to supplement the MPF with a universal pension scheme. Countries such as Sweden and Japan offer universal or earnings-related public pensions that provide a stable income floor for retirees, reducing reliance on private savings and family support (Esping-Andersen, 1999). Introducing non-contributory pensions for low-income elderly residents in Hong Kong could significantly improve retirement security while addressing inequality.

Conclusion

Hong Kong’s aging population presents significant challenges to the sustainability of its welfare system, particularly in the areas of healthcare, long-term care, and pensions. The rising demand for elderly services, combined with the inadequacy of existing programs, underscores the need for bold policy reforms. Investments in preventive healthcare, community-based eldercare, and universal pension schemes are essential to meet the needs of an aging society while ensuring the long-term viability of the welfare system. International best practices provide valuable insights into addressing these challenges, offering Hong Kong a roadmap for building a more equitable and resilient future. Subsequent sections will explore additional social and economic challenges and propose evidence-based strategies for reform.

2. Declining Birth Rates

Hong Kong’s persistently low birth rate presents a significant demographic challenge that threatens the long-term sustainability of its economy and social systems. With a fertility rate of just 0.77 births per woman in 2021—among the lowest globally—Hong Kong faces an impending population decline that will exacerbate labor shortages, reduce economic productivity, and strain public finances (Census and Statistics Department, 2021). This section explores the economic and social implications of declining birth rates, focusing on the impact on workforce and productivity, and evaluates policies to incentivize family growth.

2.1. Impact on Workforce and Economic Productivity

The declining birth rate directly impacts the size of the working-age population, leading to labor shortages and slower economic growth. As fewer children are born, the dependency ratio—the number of dependents (children and elderly) relative to the working-age population—increases, placing a growing burden on a shrinking workforce.

Workforce Shrinkage:

Between 2010 and 2020, Hong Kong’s working-age population (ages 15–64) declined by 4%, while the elderly population grew by over 50% (Census and Statistics Department, 2021). This demographic shift has reduced the labor supply in key industries such as healthcare, construction, and education, leading to higher labor costs and reduced competitiveness.

Economic Productivity Decline:

The declining birth rate also undermines economic productivity by reducing the number of young, innovative workers entering the labor market. A shrinking workforce results in slower GDP growth and weaker investment in industries that rely on a robust labor supply. A study by Ng (2020) estimated that Hong Kong’s GDP growth rate could fall below 1% annually by 2035 if the current fertility trends persist, significantly below the historical average of 3–4% growth.

Moreover, the reduction in younger workers places additional pressure on the remaining labor force to support an aging population. This "sandwich generation" faces the dual burden of caring for elderly relatives while maintaining productivity, often at the expense of their own financial and emotional well-being (Chui & Chan, 2012). The growing strain on families highlights the need for targeted policies to address the root causes of declining fertility.

2.2. Policies to Incentivize Family Growth

To combat declining birth rates, many governments have implemented policies aimed at incentivizing family growth. Successful approaches from other countries provide valuable insights for Hong Kong to design effective strategies tailored to its unique social and economic context.

Financial Incentives for Childbearing:

One common approach to boosting fertility is offering financial incentives to reduce the economic burden of raising children. For example, Singapore provides baby bonuses of up to SGD 10,000 (HKD 57,000) per child, along with monthly childcare subsidies and tax rebates for parents (Asian Development Bank, 2020). Similarly, France offers generous family allowances and tax benefits, resulting in one of the highest fertility rates in Europe (1.83 births per woman) despite its aging population (OECD, 2021).

In Hong Kong, the financial cost of raising children is a significant deterrent to family growth. A 2020 survey found that the average cost of raising a child from birth to university exceeds HKD 6 million, discouraging many young couples from starting families (Ng & Yu, 2020). Introducing subsidies for childcare, education, and healthcare, as well as direct cash payments for new parents, could alleviate these financial pressures and encourage higher fertility rates.

Work-Life Balance and Family-Friendly Policies:

In addition to financial incentives, creating a supportive work environment is crucial to encouraging family growth. Many young couples in Hong Kong cite long working hours, lack of parental leave, and insufficient childcare options as barriers to starting families (Chui & Chan, 2012).

Internationally, Nordic countries such as Sweden and Norway have achieved relatively high fertility rates through policies that promote work-life balance. These include generous parental leave (up to 480 days in Sweden) and flexible work arrangements that allow parents to balance their careers and family responsibilities (Esping-Andersen, 1999).

Hong Kong’s current parental leave policies are far less generous, offering only 14 weeks of maternity leave and 5 days of paternity leave (Labour Department, 2021). Expanding these entitlements and introducing flexible work policies could encourage couples to have more children while maintaining their careers.

Affordable Housing and Education:

The high cost of housing and education in Hong Kong is another major deterrent to family growth. With median home prices exceeding HKD 12 million and private school tuition averaging HKD 200,000 per year, many couples feel financially unprepared to raise children (Ng, 2020). Addressing these issues requires a multi-faceted approach, including expanding public housing programs, increasing subsidies for education, and providing affordable childcare facilities.

Public Awareness Campaigns:

Finally, raising public awareness about the benefits of family growth and addressing cultural barriers to childbearing can complement financial and structural incentives. For example, Japan’s “Ikumen” campaign encourages men to take a more active role in parenting, challenging traditional gender norms and reducing the caregiving burden on women (Asian Development Bank, 2020). Similar campaigns in Hong Kong could promote shared parenting responsibilities and highlight the social and economic importance of raising children.

Conclusion

Hong Kong’s declining birth rate poses significant challenges to its economic and social stability, undermining workforce sustainability and productivity. While the government has yet to implement comprehensive policies to address this issue, international best practices provide valuable lessons for incentivizing family growth. Financial incentives, work-life balance initiatives, affordable housing and education programs, and public awareness campaigns are all critical components of a holistic strategy to reverse fertility decline. By investing in these measures, Hong Kong can build a more equitable and resilient society capable of addressing its demographic challenges. Subsequent sections will explore additional social and economic challenges and propose actionable reforms to enhance the effectiveness of Hong Kong’s welfare system.

B. Rising Living Costs

Rising living costs, particularly in housing, have emerged as a critical social challenge in Hong Kong. The city consistently ranks as one of the least affordable housing markets globally, with a home price-to-income ratio of 20:1 and over 220,000 residents living in overcrowded subdivided flats (Census and Statistics Department, 2021; Demographia, 2022). Public housing shortages, long waiting times, and escalating rents exacerbate economic insecurity for low-income families. Addressing these issues requires reforms such as expanding public housing programs, enhancing rental assistance, and implementing tenant protections to ensure access to affordable and secure housing (Housing Authority, 2021).

1. Housing Affordability

Housing affordability remains one of the most pressing social challenges in Hong Kong, where high property prices and rental costs have exacerbated income inequality and contributed to widespread housing insecurity. In 2022, Hong Kong’s median home price-to-income ratio exceeded 20:1, making it one of the least affordable housing markets globally (Demographia, 2022). The challenges of overcrowded living conditions and a shortage of public housing exacerbate social tensions and highlight the urgent need for reforms in welfare policies addressing housing insecurity.

1.1. Overcrowded Living Conditions and Public Housing Shortages

The extreme lack of affordable housing in Hong Kong has forced many low-income families to live in overcrowded or substandard accommodations, such as subdivided flats. These "cage homes," typically no larger than 100 square feet, house entire families in spaces that lack basic amenities, contributing to poor mental and physical health outcomes. A 2020 survey found that approximately 220,000 people—about 3% of Hong Kong’s population—live in subdivided flats (Census and Statistics Department, 2021).

Overcrowding and Social Inequality:

The concentration of wealth in Hong Kong’s property market is a significant driver of social inequality. As homeownership becomes increasingly unattainable for middle- and low-income families, these groups are forced into overcrowded rental housing, often with unsafe or unhygienic conditions.

Table 1. Median Housing Costs as a Percentage of Household Income in Selected Cities (2021)

City

Median Housing Costs (% of Income)

Median Monthly Income (HKD)

Average Monthly Rent (HKD)

Hong Kong

55%

25,000

13,800

New York

36%

35,000

12,600

Tokyo

28%

28,000

7,800

Source: Demographia (2022); Census and Statistics Department (2021)

Table 1 compares the housing affordability in three cities—Hong Kong, New York, and Tokyo—in terms of the median housing costs as a percentage of household income. The data shows that residents in Hong Kong allocate a much higher proportion of their income to housing (55%) compared to those in New York (36%) and Tokyo (28%). This disparity highlights the extreme affordability crisis in Hong Kong's housing market, where rents consume more than half of the average household income. In contrast, housing costs in New York and Tokyo are relatively more manageable, making it clear that the housing affordability issue in Hong Kong is much more severe.

Public Housing Shortages:

Public housing programs, which house nearly 45% of Hong Kong’s population, have historically provided a safety net for low-income families. However, a severe supply-demand imbalance has resulted in long waiting times for public rental housing. As of 2021, the average waiting time for public housing was six years—the longest in nearly two decades—while over 150,000 applicants remained on the waiting list (Housing Authority, 2021).

The root causes of the public housing shortage include limited land availability, protracted development timelines, and insufficient government investment in new housing projects.

Figure 2. Annual Public Housing Supply vs. Demand in Hong Kong (2010–2020)

Year

Annual Housing Supply (Units)

Estimated Annual Demand (Units)

Supply-Demand Gap (Units)

2010

20,000

40,000

-20,000

2015

15,000

45,000

-30,000

2020

13,000

50,000

-37,000

Source: Housing Authority (2021); Census and Statistics Department (2021)

Figure 2 illustrates the mismatch between public housing supply and demand in Hong Kong from 2010 to 2020. Over the years, the gap between the number of public housing units supplied and the number required has steadily widened, with the gap reaching 37,000 units by 2020. This growing shortage exacerbates housing insecurity, especially for low-income families, who face prolonged waiting times for public housing. The figure emphasizes the urgent need for policy reforms to address the public housing crisis, including increasing the supply of units and accelerating the construction process.

The growing supply-demand gap demonstrates the government’s inability to keep pace with rising housing needs, contributing to prolonged waiting times and worsening housing insecurity.

1.2. Welfare Policies Addressing Housing Insecurity

Hong Kong’s welfare policies have long sought to mitigate housing insecurity through public housing programs and financial subsidies for low-income families. While these measures have provided critical support for many residents, they remain insufficient to address the scale and complexity of the housing crisis.

Public Housing Programs:

The Public Rental Housing (PRH) scheme, managed by the Housing Authority, is the largest public housing initiative in Hong Kong. PRH units are heavily subsidized, with rents set at approximately 10% of household income, making them affordable for low-income families (Housing Authority, 2021). However, as noted earlier, the chronic undersupply of PRH units limits the scheme’s reach, leaving many eligible applicants without access to affordable housing.

In addition to PRH, the government launched the Home Ownership Scheme (HOS) to assist middle-income families in purchasing subsidized flats. While the HOS has helped some families transition from rental housing to homeownership, its benefits are limited by the high prices of subsidized flats and the lack of available units. A 2020 report by Ng and Yu found that only 25% of eligible applicants for HOS units were successful in purchasing a flat, highlighting the program’s limitations.

Rental Assistance Programs:

To address the immediate needs of low-income families in the private rental market, the government introduced the Community Care Fund (CCF) Rental Subsidy Scheme, which provides cash subsidies to tenants living in subdivided flats. While the program offers temporary relief, critics argue that it fails to address the root causes of housing insecurity, such as skyrocketing rents and limited tenant protections (Ng, 2020). Moreover, the subsidy amounts are often insufficient to cover the full cost of rent, leaving many families in financial distress.

Proposed Reforms:

To tackle housing insecurity more effectively, experts have called for a multi-pronged approach that includes increasing public housing supply, reforming land allocation policies, and strengthening rental assistance programs. For example, reallocating underutilized government land for public housing development and streamlining bureaucratic procedures could accelerate construction timelines and reduce the supply-demand gap. Additionally, introducing rent control measures and expanding the CCF Rental Subsidy Scheme would provide greater protection for low-income tenants in the private market.

Conclusion

The housing affordability crisis in Hong Kong represents a critical challenge to the city’s social and economic stability. Overcrowded living conditions, a severe public housing shortage, and rising rental costs have left many families struggling to secure safe and affordable accommodations. While existing welfare policies, such as public housing programs and rental subsidies, have provided some relief, they remain insufficient to address the scale of the crisis. Moving forward, Hong Kong must adopt bold and innovative reforms to expand public housing supply, enhance rental protections, and ensure that all residents have access to secure and affordable housing. These measures will be essential in fostering a more equitable and resilient society. Subsequent sections will explore additional strategies to address rising living costs and their implications for Hong Kong’s welfare system.

2. Healthcare Expenses

Healthcare expenses in Hong Kong represent a significant financial burden for many residents, particularly low-income families. While the public healthcare system provides subsidized services, accessibility challenges persist, leaving vulnerable groups underserved. Rising healthcare costs, coupled with insufficient subsidies, have further exacerbated inequality in accessing essential medical services. This section explores the barriers to healthcare accessibility for low-income families and evaluates policy initiatives aimed at expanding subsidies and improving affordability.

2.1. Accessibility Challenges for Low-Income Families

Hong Kong’s dual-track healthcare system, consisting of public and private providers, is lauded for its efficiency and affordability. However, despite the heavily subsidized public healthcare system, accessibility challenges persist for low-income families, particularly those requiring specialized care or timely medical attention.

Overdependence on Public Hospitals:

Public hospitals in Hong Kong provide 90% of inpatient services but suffer from chronic overcrowding, leading to long waiting times and reduced quality of care. A 2021 report by the Hospital Authority revealed that the median waiting time for specialist outpatient services exceeded 80 weeks for non-urgent cases (Hospital Authority, 2021). For low-income families who cannot afford private care, these delays often result in deteriorating health outcomes.

Out-of-Pocket Costs:

Although public healthcare services are subsidized, out-of-pocket costs for medications, diagnostic tests, and follow-up care remain a significant burden for low-income households. For instance, many essential medications are not covered under public subsidies, forcing patients to purchase them at full price from private pharmacies. A 2020 study estimated that out-of-pocket healthcare expenses accounted for 12% of monthly income for families in the bottom income quintile, compared to just 5% for higher-income households (Ng & Yu, 2020).

Barriers to Preventive Care and Healthcare Disparities in Hong Kong:

Low-income families in Hong Kong face significant barriers to accessing preventive healthcare services, such as regular check-ups and screenings. Financial constraints and time limitations often prevent these families from seeking early medical attention, which can lead to higher rates of chronic illnesses and more severe health complications. As a result, the lack of preventive care places additional strain on the public healthcare system, which must address these conditions at more advanced stages.

Disparities in Healthcare Utilization Between Income Groups in Hong Kong:

The disparities in healthcare utilization between different income groups in Hong Kong illustrates how financial limitations impact access to both preventive care and timely treatment.

Table 2. Healthcare Utilization Rates by Income Group in Hong Kong (2020)

Income Group

Percentage Receiving Preventive Care (%)

Percentage Delaying Treatment Due to Costs (%)

Lowest Quintile

15

42

Middle Quintile

35

20

Highest Quintile

65

5

Source: Census and Statistics Department (2021); Ng & Yu (2020)

Table 2 illustrates significant disparities in healthcare utilization among different income groups in Hong Kong. Individuals in the lowest income quintile receive much less preventive care (15%) compared to those in the highest income quintile (65%). Moreover, 42% of individuals in the lowest income group delay treatment due to costs, which contrasts sharply with only 5% in the highest quintile. This data emphasizes the unequal access to healthcare services in Hong Kong, where lower-income households are both less likely to receive preventive care and more likely to experience delays in treatment due to financial barriers. These disparities reflect the need for broader healthcare accessibility and affordability reforms.

Private Healthcare Exclusion:

The high cost of private healthcare further limits options for low-income families. Private consultations often cost HKD 1,000–2,000 per visit, placing them beyond the reach of most households. This exclusion from private healthcare exacerbates inequalities in health outcomes, as wealthier families can access faster and higher-quality services.

2.2. Expanding Subsidies and Affordable Healthcare Initiatives

To address healthcare accessibility challenges, the Hong Kong government has implemented several subsidy programs and initiatives aimed at reducing the financial burden on low-income families. However, gaps remain in the scope and adequacy of these measures, necessitating further reforms.

Elderly Health Care Voucher Scheme:

The Elderly Health Care Voucher Scheme, introduced in 2009, provides annual subsidies of HKD 2,000 to residents aged 65 and above for private healthcare services. While the program has improved access to primary care for elderly individuals, its impact is limited by the low voucher amount, which often covers only a single consultation. Increasing the value of vouchers and extending the scheme to younger low-income individuals could enhance its effectiveness (Social Welfare Department, 2021).

Community Care Fund (CCF) Medical Assistance Programs:

The CCF provides financial assistance to low-income families for specific medical expenses not covered by the public healthcare system, such as self-financed cancer treatments and advanced diagnostic tests. However, the program’s eligibility criteria are restrictive, excluding many middle-income families who face significant healthcare costs but do not qualify for subsidies (Ng, 2020). Expanding the CCF’s coverage and simplifying the application process could improve accessibility for underserved populations.

Subsidized Clinics and Preventive Care:

The government has recently increased investments in community health centers to provide affordable primary care services. These centers offer subsidized consultations, health screenings, and chronic disease management programs, targeting low-income families who rely heavily on public healthcare.

Figure 3. Annual Utilization of Community Health Centers in Hong Kong (2015–2020)

Year

Number of Visits (Million)

Percentage Increase from Previous Year (%)

2015

1.2

—

2016

1.5

25

2020

3.0

100

Source: Social Welfare Department (2021)

Figure 3 shows the annual utilization of community health centers in Hong Kong from 2015 to 2020. The number of visits to these centers has steadily increased, with a significant jump in 2020, reflecting a growing reliance on community-based healthcare services. This rise in utilization highlights the importance of expanding and investing in primary care options, especially for low-income families who may face barriers in accessing more expensive hospital-based care. The figure suggests that community health centers play a crucial role in providing affordable healthcare and reducing the strain on Hong Kong’s public hospitals.

The utilization of community health centers has doubled over five years, reflecting their growing importance in providing affordable healthcare for low-income families.

Proposed Reforms and Best Practices:

To further enhance affordability and accessibility, Hong Kong could adopt reforms modeled on successful international practices. For example, Singapore’s MediShield Life program offers universal healthcare coverage for catastrophic illnesses, funded through mandatory contributions and government subsidies (Asian Development Bank, 2021). Introducing similar universal health insurance in Hong Kong could reduce out-of-pocket expenses for vulnerable groups while ensuring equitable access to essential care.

Additionally, expanding the scope of public healthcare subsidies to cover essential medications and preventive services would alleviate financial barriers for low-income families. Public-private partnerships could also be leveraged to provide subsidized private healthcare services, reducing pressure on public hospitals and improving service quality.

Conclusion

Healthcare expenses remain a significant barrier to social equity in Hong Kong, particularly for low-income families who face challenges in accessing timely and affordable care. While initiatives such as the Elderly Health Care Voucher Scheme and Community Care Fund have provided some relief, their limited scope and accessibility highlight the need for more comprehensive reforms. Expanding subsidies, investing in preventive care, and adopting universal health insurance are critical steps to ensure that all residents can access quality healthcare without financial hardship. By addressing these challenges, Hong Kong can move closer to building a more equitable and resilient welfare system. Subsequent sections will explore additional strategies to tackle rising living costs and strengthen social protections for vulnerable populations.

C. Employment Challenges

The rapid advancement of automation and the rise of underemployment are reshaping Hong Kong’s labor market, disproportionately impacting low-skilled and younger workers. Automation threatens 28% of jobs, particularly in manufacturing, logistics, and retail, while underemployment has grown due to the prevalence of part-time and precarious work arrangements (International Labour Organization [ILO], 2020; Census and Statistics Department, 2021). These disruptions contribute to widening income inequality and job insecurity. This section explores the importance of retraining programs, such as those provided by the Employees Retraining Board, and draws on international best practices, such as Singapore’s SkillsFuture initiative, to address these employment challenges and support workforce resilience (Ng, 2021; Employees Retraining Board, 2021).

1. Automation and Labor Market Disruptions

The rapid advancement of automation and artificial intelligence (AI) is transforming global labor markets, with significant implications for employment in Hong Kong. While automation has the potential to improve productivity and drive economic growth, it also disrupts traditional labor structures, disproportionately affecting low-skilled workers. As industries increasingly adopt automation technologies, the demand for low-skilled, repetitive jobs is declining, creating widespread employment challenges. This section explores the impact of automation on low-skilled workers and evaluates the effectiveness of retraining and upskilling programs in mitigating these disruptions.

1.1. Impact on Low-Skilled Workers

Automation poses a significant threat to low-skilled workers in Hong Kong, particularly those employed in industries such as manufacturing, logistics, and retail. As companies adopt technologies such as robotic process automation (RPA) and machine learning, tasks that were traditionally performed by humans—such as inventory management, data entry, and customer service—are increasingly being automated (Autor, 2019).

Job Displacement in Key Sectors:

A 2020 study by the ILO estimated that 28% of jobs in Hong Kong are at high risk of automation, with low-skilled positions accounting for the majority of vulnerable roles.

Widening Income Inequality:

The displacement of low-skilled workers due to automation exacerbates income inequality, as high-skilled workers benefit from increased productivity and demand for advanced technical skills. A 2021 report by Ng and Yu found that automation contributed to a 20% wage gap increase between high-skilled and low-skilled workers in Hong Kong over the past decade. Without targeted interventions, these disparities are likely to widen, further marginalizing vulnerable populations.

Underemployment and Job Polarization:

Even workers who are not entirely displaced by automation face the risk of underemployment. As routine jobs are automated, low-skilled workers may be forced to accept lower-paying, part-time, or precarious employment. This "job polarization" phenomenon results in a hollowing out of middle-income jobs, creating a bifurcated labor market with fewer opportunities for upward mobility (Autor, 2019).

1.2. Role of Retraining and Upskilling Programs

To mitigate the employment challenges posed by automation, governments and organizations worldwide have implemented retraining and upskilling programs to help workers adapt to the changing labor market. In Hong Kong, such initiatives are critical to equipping low-skilled workers with the skills needed to transition into emerging sectors and reduce the risk of long-term unemployment.

Existing Retraining Programs in Hong Kong:

The Hong Kong government has launched several initiatives to address the need for reskilling, with the Employees Retraining Board (ERB) playing a central role. The ERB offers over 700 retraining courses in fields such as healthcare, technology, and logistics, targeting low-skilled workers and unemployed individuals. Between 2015 and 2020, over 140,000 individuals completed ERB courses, with a reported employment rate of 80% among program graduates (Employees Retraining Board, 2021).

Additionally, the Reindustrialisation and Technology Training Programme (RTTP) provides subsidies to companies for employee training in advanced manufacturing and technology. This program aims to promote the adoption of Industry 4.0 practices while ensuring that workers can transition into higher-value roles.

Challenges in Program Effectiveness:

Despite these efforts, the scale and scope of retraining programs remain inadequate to address the full impact of automation. A 2021 survey revealed that only 15% of displaced workers had participated in retraining programs, citing barriers such as lack of awareness, high course costs, and mismatches between training content and labor market demands (Ng, 2021).

1.3. Proposed Reforms and International Best Practices

To enhance the effectiveness of retraining programs, Hong Kong can draw on international best practices. For example, Singapore’s SkillsFuture initiative provides lifelong learning credits to all citizens, enabling workers to pursue courses aligned with emerging industry needs. The program also includes sector-specific training roadmaps and partnerships with employers to ensure that training content remains relevant (Asian Development Bank, 2020).

Additionally, integrating digital literacy and soft skills training into existing programs can better prepare workers for jobs in the technology-driven economy. Germany’s Dual Vocational Training System, which combines classroom instruction with hands-on apprenticeships, offers a successful model for equipping workers with practical skills and improving employability (OECD, 2021).

Strengthening Public-Private Collaboration:

Partnerships between the government, industry leaders, and educational institutions are essential to scaling up retraining efforts. For instance, Hong Kong could expand collaboration with tech companies to design training modules focused on AI, robotics, and data analytics. Subsidizing employer-led training programs would also incentivize companies to invest in workforce development and reduce the financial burden on individual workers.

Conclusion

The rise of automation presents both challenges and opportunities for Hong Kong’s labor market. While low-skilled workers face significant risks of displacement and income inequality, targeted retraining and upskilling programs offer a pathway to adaptation and resilience. Expanding the scope and accessibility of these initiatives, alongside fostering public-private partnerships, is critical to addressing automation-driven disruptions and ensuring that all workers can thrive in the evolving economy. By learning from international best practices and prioritizing workforce development, Hong Kong can build a more inclusive and equitable labor market. Subsequent sections will explore additional employment challenges and propose evidence-based strategies for reform.

2. Underemployment

Underemployment has become a growing concern in Hong Kong’s labor market, reflecting the rise of part-time and precarious work arrangements. Although the official unemployment rate has remained relatively low in recent years, the prevalence of underemployment—where individuals work fewer hours than they desire or in jobs that do not utilize their skills—has increased. This trend highlights deep-seated labor market instability, which disproportionately affects low-income and younger workers. This section examines the causes and consequences of underemployment, focusing on the rise of part-time and precarious work, and explores welfare measures to address these challenges.

2.1. Rising Rates of Part-Time and Precarious Work

The rise of part-time, temporary, and gig work in Hong Kong reflects broader global trends toward more flexible labor markets. While these arrangements can offer greater flexibility for some workers, they also result in income instability, limited access to benefits, and reduced job security for many, particularly in the context of economic uncertainty and rising living costs.

Trends in Part-Time and Precarious Work:

The percentage of workers engaged in part-time or precarious work in Hong Kong has steadily increased over the past decade. According to the Census and Statistics Department (2021), approximately 14% of the workforce was employed in part-time or temporary positions in 2021, compared to 10% in 2011. This trend has been driven by the proliferation of the gig economy, which includes jobs in ride-hailing, food delivery, and freelance digital services. While the gig economy provides income opportunities for some workers, it also lacks the protections associated with traditional employment.

Industries Most Affected by Precarious Employment:

Certain sectors, particularly retail, hospitality, and logistics, rely heavily on part-time and temporary workers. As shown in Table 3, these industries are more likely to employ workers in precarious jobs, a trend observed across key sectors in Hong Kong.

Table 3. Distribution of Part-Time and Precarious Workers by Industry in Hong Kong (2021)

Industry

Percentage of Workforce in Precarious Jobs (%)

Retail and Hospitality

25

Logistics and Transport

18

Administrative Services

15

Education and Health

12

Source: Census and Statistics Department (2021)

Table 3 highlights the distribution of part-time and precarious workers across various industries in Hong Kong. The retail and hospitality sectors have the highest concentration of precarious workers (25%), followed by logistics and transport (18%). These sectors rely heavily on part-time, temporary, or gig-based labor, which often leads to income instability, lack of job security, and limited access to employee benefits. The table also shows that industries like education and health have lower percentages of precarious employment, suggesting greater stability in these fields. The data underscores the vulnerability of workers in industries with a high prevalence of part-time and precarious work arrangements, further emphasizing the need for welfare measures and protections for this segment of the labor market.

The retail and hospitality sectors, which employ a large proportion of low-skilled workers, are particularly vulnerable to underemployment due to the seasonal and cyclical nature of demand in these industries.

Consequences of Underemployment:

Workers in part-time and precarious positions face several disadvantages, including:

Income Instability: Part-time workers often earn less than their full-time counterparts, leaving them vulnerable to poverty, particularly in high-cost cities like Hong Kong.

Lack of Benefits: Precarious jobs frequently exclude workers from employer-provided benefits such as healthcare, retirement contributions, and paid leave, further eroding economic security.

Skills Mismatch: Many underemployed workers are employed in roles that do not utilize their education or experience, limiting their long-term career prospects and contributing to job dissatisfaction.

The COVID-19 pandemic exacerbated these challenges, as industries reliant on precarious labor, such as tourism and retail, faced prolonged shutdowns. A 2021 report by Ng and Yu found that 30% of gig workers experienced income losses of more than 50% during the pandemic, highlighting the vulnerability of this segment of the workforce.

2.2. Welfare Measures to Address Labor Market Instability

Given the growing prevalence of underemployment and its associated challenges, welfare measures must be expanded to support workers in precarious positions. While existing programs provide some relief, targeted interventions are needed to address income instability, enhance job security, and promote career development.

Income Support Programs:

Hong Kong’s existing welfare system provides limited income support for underemployed workers. The Comprehensive Social Security Assistance (CSSA) program offers financial assistance to households with insufficient income, but its strict eligibility criteria exclude many underemployed individuals who earn slightly above the income threshold. Expanding CSSA eligibility to include underemployed workers and introducing temporary income supplements during economic downturns could provide greater financial stability.

Employment Insurance:

Introducing an unemployment or underemployment insurance scheme would provide critical income support for workers experiencing reduced hours or job losses. Countries such as Germany and Canada have implemented employment insurance programs that include partial wage replacement for underemployed workers, enabling them to maintain their standard of living while seeking better opportunities (OECD, 2021). Adopting a similar approach in Hong Kong could mitigate the financial impact of labor market disruptions.

Access to Benefits for Precarious Workers:

To address the lack of benefits in precarious jobs, the government could implement policies to extend social protections to gig and part-time workers. For example, Singapore’s Contribute-As-You-Earn (CAYE) scheme for self-employed individuals allows gig workers to make small, regular contributions to retirement and healthcare savings accounts, ensuring long-term financial security (Asian Development Bank, 2020). A similar system in Hong Kong could incentivize gig workers and their employers to contribute to social insurance programs.

Upskilling and Career Development:

Investing in retraining and upskilling programs is essential to helping underemployed workers transition into more stable and higher-paying jobs. Initiatives such as the Employees Retraining Board (ERB), which provides training in high-demand sectors like healthcare and technology, can reduce skills mismatches and improve job prospects for underemployed workers (Employees Retraining Board, 2021). However, participation in these programs remains low due to limited outreach and financial barriers. Expanding subsidies for training programs and creating partnerships with employers to offer on-the-job training could enhance program accessibility and effectiveness.

Minimum Hours Legislation:

To reduce the prevalence of involuntary part-time work, Hong Kong could consider introducing minimum hours legislation, similar to policies in countries like the Netherlands. These regulations require employers to guarantee a minimum number of working hours for part-time employees, providing greater income stability and job security (OECD, 2021). While such measures may face resistance from employers, they represent an important step toward protecting vulnerable workers.

Conclusion

Underemployment poses a significant challenge to Hong Kong’s labor market, reflecting the rise of part-time and precarious work arrangements that leave many workers without sufficient income or benefits. While existing welfare programs provide some relief, they are insufficient to address the scale of the problem. Expanding income support, enhancing access to social protections, and investing in retraining programs are critical to reducing labor market instability and promoting economic security for underemployed workers. By implementing targeted reforms and learning from international best practices, Hong Kong can build a more inclusive and resilient labor market that supports all segments of its workforce. Subsequent sections will explore additional employment challenges and propose evidence-based strategies to enhance job security and social equity.

Summary

Aging Population and Welfare Sustainability

The aging population poses significant challenges for Hong Kong's healthcare, long-term care, and pension systems. Elderly residents consume a disproportionate share of healthcare resources, resulting in overcrowding and long waiting times in public hospitals. Rising healthcare costs, currently at 5.9% of GDP, remain insufficient compared to aging economies like Japan and Sweden. Reforms such as preventive care, community-based eldercare models, and geriatric clinics are essential to alleviate system strain (Hospital Authority, 2021; Esping-Andersen, 1999).

Pension inadequacy further compounds the issue. The Mandatory Provident Fund (MPF) has been criticized for its limited payouts, with the median MPF balance for retirees insufficient to cover two years of living expenses (MPF Authority, 2021). As seen in Sweden, adopting universal or non-contributory pensions can address inequality and enhance retirement security.

Housing Affordability and Public Housing Shortages

Hong Kong's housing affordability crisis is characterized by extreme overcrowding and a lack of public housing. With a home price-to-income ratio 20:1, the city consistently ranks as one of the least affordable housing markets globally (Demographia, 2022). Over 220,000 residents live in subdivided flats, highlighting the dire need for affordable housing (Census and Statistics Department, 2021). Chronic underinvestment in public housing programs has led to long waiting times of over six years for subsidized units (Housing Authority, 2021).

Policy recommendations include reallocating underutilized land for public housing, streamlining construction processes, and enhancing rental assistance programs. Expanding tenant protections and implementing rent controls would safeguard low-income families against housing insecurity.

Labor Market Disruptions and Employment Challenges

Automation and underemployment are reshaping Hong Kong's labor market. Low-skilled workers in manufacturing, logistics, and retail industries are particularly vulnerable, with 28% of jobs at risk of automation (ILO, 2020). Underemployment, characterized by part-time and precarious work, disproportionately affects younger and low-income workers, limiting career mobility and income stability (Census and Statistics Department, 2021).

Retraining and upskilling initiatives are essential to help workers transition into higher-value roles. Existing programs like the Employees Retraining Board (ERB) must scale up to meet demand. Policies like Singapore's SkillsFuture and Germany's Dual Vocational Training System provide valuable models for lifelong learning and workforce development. Introducing employment insurance and extending benefits to gig workers would further enhance job security and economic stability.

Integrated Reforms for a Resilient Future

Hong Kong must adopt integrated reforms to address these interconnected challenges and ensure sustainable welfare development. Investments in preventive healthcare, public housing infrastructure, and employment resilience will build a more equitable and inclusive society. Drawing from global best practices, these reforms can help Hong Kong balance economic competitiveness with social stability.

References