Why has it been taken for granted that elderly people in Hong Kong are poor? In fact, most elderly people are faced more with the problem of uncertainty than the problem of poverty. When a person is working before retirement, the wage and earnings received are certain and the individual knows exactly his/her economic position. After retirement, since no individual can tell when his/her life will end, there is uncertainty, that even though some retirement funds may have been secured, many retired people cannot tell if the available fund is sufficient to last.

A late retirement, though the individual may have to work longer, would mean a delay in the "time uncertainty". The pressing issue therefore is retirement. Prolonging the working age is one possibility. Post-retirement employment can take place, especially if a proportionately lower wage is paid after the retirement age. The reason is that the individual usually will not be the "bread winner" in the family, as his/her children would have grown up. A lower wage could also allow more employment for other younger workers. A wage formula can be worked out and be acceptable to both parties. Voluntary post-retirement employment can be introduced first in the public sector.

There are other ways to reduce uncertainty of time of retirees. In foreign countries, some property assets are bought by retired people, with the guarantee that they will receive life-time nursing home service. But when the owner/s of the property dies, the property will belong to the institution. This ensures certainty as the elderly will receive a life-time nursing service. An "elder-village" can be established in Hong Kong to offer a cluster of services to the elderly: nursing, medical and burial services. Such an "elder-village" can be established either by private organizations, probably with land support by the government, or sub-vented by the government to a private organization.

There are thus better ways to look after the elderly than simply providing blindly free subsidies and welfare to all elderly. Welfare advocates wrongly assume all elderly are poor, but welfare cannot solve the "time uncertainty" problem. A blanket-style of welfare subsidy would further constrain the fiscal ability and lead to more economic distortions. The government's economic resources should be better spent in promoting the able so that more employment can be generated. All kinds of welfare should only be given to those in need, and not in duplication with other assistance.

One ever-lasting method to aid the elderly would be for the government to initiate a "elderly fund" within the fiscal framework, so that the government can periodically allocate funding to aid the elderly from the annual performance of the budget. The "elderly fund" can also serve as a coordinating agent between the government and the elderly. For example, donation of body organs in Hong Kong has been encouraged so that a person's healthy organs could be transplanted to another person to save the life of a person in need.

Consider the possibility of the elderly who donate their wealth (beyond a minimum threshold) to the "elderly fund" so that the fund can be used to help other elderly people. In other words, many elderly would have some financial surplus when their life ends, and they have the right and choice to donate to the "elderly fund", especially if the person/couple has no next-of-kin.

The author is an associate professor of the Department of Economics and Finance at City University of Hong Kong.

(HK Edition 12/19/2012 page3)