Jake's View

Welfare for working poor depresses wages, benefits greedy employers

An allowance for those eschewing support would only benefit greedy employers

PUBLISHED : Sunday, 18 November, 2012, 12:00am
UPDATED : Sunday, 18 November, 2012, 3:48am

[Oxfam director general Stephen] Fisher, who is on the government-appointed Commission on Poverty, said he would urge the authorities to introduce a low-income family allowance for the working poor who earned less than CSSA payments but were loath to apply for assistance.

SCMP, November 14

Let's assume the government listens and does as Mr Fisher suggests. The sorts of employers who underpay their workers will then rub their hands and say, "Wonderful. Now I won't have to bother myself about paying these people more. The government will do it for me."

It would not happen this way if just a handful of people received a special handout but we are talking here of a blanket allowance for every household that earns less from work than it would from social welfare if its members were unemployed.

Their employers will of course know how much this subsidy comes to and of course they will take advantage of it. They wouldn't otherwise be the sorts of employers who underpay their workers. We're not talking of nice people here.

In fact we already offer subsidies of this kind at the moment with exactly these effects. Public housing with average rents of HK$1,200 a month amounts in practice to a wage subsidy, as does the more recent scheme to pay a HK$600 monthly travel allowance to every worker who makes less HK$10,000 a month.

The bosses just rub their hands and keep the wages down. It's one big reason that we still have 550,000 households that make less than HK$10,000 a month. This is almost a quarter of the households in Hong Kong, and in an economy where gross domestic product per household runs at HK$70,000 a month. It has also been getting worse. Only 340,000 households made less than HK$10,000 a month fifteen years ago.

I have other doubts about the efficacy of Mr Fisher's proposal. For one thing, social activists often say that the reason many people continue working when they could do better on social welfare is that they feel tarred by taking social welfare.

I would put it differently. I take pride in the fact that I have been able to provide for my family. It is a natural human value and one of the building blocks of a healthy society. I have a great deal of time for people who work when they could take social welfare instead and I would never denigrate their self-esteem. We should respect that they feel themselves demeaned by taking money from others.

There is more. I think Mr Fisher should ask himself where government will find the money for his special allowance. It won't do to ignore this question or answer it simply by saying that the rich should pay. They never have paid for it and any level of taxation that would make their total contribution significant will either extinguish them or make them run.

The bottom stones of the pyramid always carry the greatest weight. To ignore the cost of social welfare is just to put it back on the shoulders of the working poor. Through any number of roundabouts that the weight may take, this is always where it lands in the end. Ignoring this fact is a cop-out.

I have a great deal of time for Oxfam but I just wish it would keep to its roots of helping the poor through direct project aid that really has a measurable effect distinguishable from the way that so many NGOs just scatter money about.

The more recent political activism, although well-intentioned, is largely misdirected in my view. It consists too much of talk alone and of ideas that will rebound on themselves to the worsening of the plight they are meant to alleviate.

But if Oxfam feels compelled to political activism I have a suggestion. Why not take up the cudgels in the Mandatory Provident Fund scandal?

Here we have a handful of financial institutions that forcibly charge all the working people of Hong Kong thieving high fees to manage their retirement savings, this done with the connivance of public officials.

Do you want to do something about income polarity, Mr Fisher? Start there.