The Prospects for Old-Age Income Security in Hong Kong and Singapore
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1 London School of Economics and Political Science The prospects for old-age income security in Hong Kong and Singapore Ng Kok Hoe A thesis submitted to the Department of Social Policy at the London School of Economics for the degree of Doctor of Philosophy, London, September 2013 2 Declaration of Authorship I certify that the thesis I have presented for examination for the MPhil/PhD degree of the London School of Economics and Political Science is solely my own work other than where I have clearly indicated that it is the work of others (in which case the extent of any work carried out jointly by me and any other person is clearly identified in it). The copyright of this thesis rests with the author. Quotation from it is permitted, provided that full acknowledgement is made. This thesis may not be reproduced without my prior written consent. I warrant that this authorisation does not, to the best of my belief, infringe the rights of any third party. I declare that my thesis consists of 99,613 words. 3 Abstract Family support is the central pillar of old-age income security in Hong Kong and Singapore. But demographic ageing, among the fastest internationally, implies fewer adult children to provide support, while the public pension systems remain lean even by East Asian standards. Future elderly cohorts therefore face growing risks of financial hardship. This study examines the current extent of this problem, its prospects in the coming decades, and the possibilities of pension reform. It is unique in combining historical and prospective approaches towards policy causes and effects within a comparative framework. First, it analyses work, incomes, and living arrangements among elderly persons in 1995/1996 and 2005/2006 using microdata from national surveys. Next, it models possible living arrangements, income sources, and pension outcomes for future elderly cohorts using a macrosimulation model and illustrative cases. Finally, it examines the historical factors affecting pension policy development and assesses the potential for reform. Elderly poverty is more serious than often acknowledged—three quarters of elderly persons have incomes below 40% of the median wage, including a quarter of those in work in Singapore. Children‘s transfers are prevalent and large, while co- residence boosts elderly incomes on a household basis. But co-residence is already falling. By 2030, half of elderly persons may not live with their children. Almost a third may have access to neither market income nor children‘s contributions. Pensions are estimated to replace less than a third of men‘s final wage and are equivalent to a quarter or less of the median wage for women. Although developmental policy paradigms disfavour generous public pension systems in both places, explicit policy demands by the public keep up the pressure on policymakers in Hong Kong. In Singapore, reform prospects may depend on the growth of ideational competition and the availability of policy proposals to focus public concerns and rejuvenate policy thinking. 4 Acknowledgements I am grateful for financial support towards my doctoral studies from the Ee Peng Liang Memorial Fund. I thank the former Ministry of Community Development, Youth and Sports in Singapore for permitting the use of datasets from the National Survey of Senior Citizens, and the Ministry of Manpower and Housing and Development Board for sharing data tables. In Hong Kong, the Census and Statistics Department was very generous to allow access to datasets from the Population By-census and other thematic and household surveys, and hosted me on two visits for on-site data analysis. Their collaboration enabled the empirical analysis in the study. Early stages of this research benefited from colleagues‘ comments during seminars at the Centre for Analysis of Social Exclusion, LSE. Howard Glennerster‘s detailed response to an earlier paper was especially helpful. I also received useful feedback from participants at several conferences, including the East Asian Social Policy Research Network (EASP) International Conference in Hong Kong; the joint EASP-UK Social Policy Association Conference in York, UK; the Asian Political and International Studies Association Congress in Hong Kong; the Conference on Lifelong Asset Building for Security and Development in Beijing, China; and annual seminars at the National University of Singapore (NUS). Ho Kong Chong from NUS offered suggestions regarding the Singapore section of projections. Raymond Chan (City University of Hong Kong), Chou Kee-Lee (Hong Kong Institute of Education), and Terry Lum (University of Hong Kong) were very kind to meet with me to discuss ageing research during visits to Hong Kong. I owe the deepest gratitude to my supervisor, John Hills, for his genuine interest in this project, attention to detail, and concern not just for the completion of this thesis but my development as a policy researcher. He will always be the role model to aspire towards. While working on this study in London, I drew constantly from the support of friends and family back home. I am grateful to Ang Bee Lian and Nancy Ng for their patient counsel, encouragement, and confidence. They helped to shape my interest in social policy. My parents supported my decisions, and their enthusiasm and understanding freed my mind to focus on my studies. My sister provided much-needed companionship and academic advice at critical junctures of this process. Most of all, I thank Kah Gay for his friendship, wisdom, and generosity, without which none of this would have been possible. 5 Table of Contents List of Figures ...................................................................................................................... 7 List of Tables ....................................................................................................................... 9 1. Introduction .......................................................................................................... 12 1.1 Research problem ............................................................................................... 12 1.2 Research landscape and scope for contributions ................................................ 13 1.3 Outline of study .................................................................................................. 21 Part 1: Problem 2. The background and current situation of ageing, work, and income security .......... 28 2.1 Demographic trends ............................................................................................ 28 2.2 Research on ageing and poverty in Hong Kong and Singapore ......................... 35 2.3 Survey datasets ................................................................................................... 39 2.4 Work and retirement ........................................................................................... 41 2.5 Individual income levels ..................................................................................... 48 2.6 Income sources ................................................................................................... 52 2.7 Summary ............................................................................................................. 60 Appendix 2.1 Statistical tables.................................................................................. 63 3. A comparison of public pension systems in Hong Kong and Singapore ................. 66 3.1 Public pensions in Hong Kong .......................................................................... 66 3.2 Public pensions in Singapore ............................................................................. 72 3.3 Housing and asset ownership ............................................................................. 80 3.4 Pension outcomes: Criticisms and evidence ...................................................... 88 3.5 Pension outcomes: Theoretical projections ....................................................... 95 3.6 Intergenerational conflict and sustainability .................................................... 101 3.7 Summary .......................................................................................................... 104 4. The role of family support: Availability of children, intergenerational co-residence, and financial transfers ......................................................................................... 108 4.1 Why children support their elderly parents ....................................................... 108 4.2 Availability of children ..................................................................................... 121 4.3 Intergenerational co-residence .......................................................................... 130 4.4 Financial transfers ............................................................................................. 141 4.5 Elderly income security at the household level ................................................ 151 4.6 Summary ........................................................................................................... 159 Part 2: Prospects 5. Modelling old-age income prospects ................................................................... 164 5.1 Modelling kin availability with fertility and mortality data ............................. 165 5.2 Household projections using macrosimulation ................................................. 165 5.3 Projecting future care and support using macrosimulation .............................