Hong Kong has for many years been wrestling with the problems of an increasingly aging population and labor shortages. Many people have suggested solutions. Unfortunately none of them considered this to be a long-term issue or one of sufficient political sensitivity to need a truly comprehensive approach. For this reason these suggestions all suffered from dealing with one problem while creating another. It is little wonder that most local residents found them unacceptable.

For example, Europe found itself in this difficult situation decades ago. It chose to import cheap labor from North Africa. Countries like France, Britain, Italy and Germany did this. Britain and France received most of the immigrants. Because the imported laborers were young they also helped ease the problem of a growing aging population in these European countries. Importing foreign labor appeared to kill "two birds with one stone", but it also sowed the seeds for greater problems.

This is because the customs, lifestyle and religious beliefs of foreign immigrants' cultures were very different from those of their European hosts. Although these European countries had enacted stringent anti-racial discrimination laws they lacked the means to ensure a harmonious coexistence. Secondly, the children of new immigrants eventually found themselves competing for jobs with their native peers. As more European young people became jobless their families' living standards have suffered. This has frequently fueled resentment toward immigrants.

These problems are yet to be resolved, particularly after European economic conditions suffered following the start of the global financial meltdown in 2008.

Antipathy between immigrants and host populations has sometimes resulted in serious racial conflict. This invariably starts as demonstrations to air grievances but frequently turns into ethnic conflict. Europe has also become a hotbed for terrorism. That some active members of the terrorist group of Islamic State are European-born children of immigrants bears testament to the serious consequences of these policies.

Earlier this week Financial Secretary John Tsang noted in his annual Budget report that Hong Kong also faced the same problems of labor shortages and a growing aging population. He added that these problems would put the SAR economy under considerable future pressure.

Not long ago, the SAR government said it was time for employers to hire capable retirees. Personally I believe this is a good idea. Here is why:

1. Today the average working life has increased due to improvements in health. This allows people to continue working after they pass the age of 60. That means it is appropriate to raise the retirement age.

2. Hiring retired workers can save employers a lot of money. They don't need to spend so much money training young people with little or no experience. Older workers are also more efficient.

3. Doing this helps address labor shortages. It also reduces the number of social welfare recipients. It indirectly eases the burden of an increasingly aging population.

4. Retirees rejoining the workforce help improve the labor supply without serious political repercussions.

5. Employers can allow them return to retirement life when the labor market experiences oversupply. This can be useful in dealing with short-term labor supply problems.

However, it won't be easy to attract as many capable people out of retirement as employers want. The reason is quite simple: many retirees are better off having a relaxed life after working hard for so many years. They generally have no desire to resume work. Therefore, the government must introduce good policies to make it worthwhile for skilled retired people to re-enter the workforce. The most effective measure would be reduced salary taxes for retired workers re-entering the workforce. These retirees deserve preferential treatment if they rejoin the workforce.

It would also be beneficial to society if young workers are given similar tax cuts. The years immediately after graduation from college can be tough. Many new workers have to pay back student loans. Even if they don't need to pay student loans the extra cash from tax reductions could be used to boost consumer spending.

Let's not ignore the worrying phenomenon of young college graduates depending on their families instead of supporting themselves with regular work.

These young adults may be more attracted to the job market if they knew they would be offered tax breaks.

Implementing these measures should pave the way for the introduction of universal retirement protection in Hong Kong. This is because the number of senior citizens eligible for full pensions will be less than it was earlier thought. This could also help pave the way for a sales tax on consumer spending. Hong Kong has been the exception among developed economies with its lack of a sales tax and a universal pension system. Both are long overdue, but a universal pension must be available first or there will be widespread public opposition to a sales tax.

The author is a veteran journalist based in Hong Kong.

(HK Edition 03/06/2015 page10)