The Labour Day protests in Macau showed that even booming economies need to cope with the rich-poor gap. Hong Kong, where the number of households earning less than HK$6,000 a month increased 64 per cent between 1996 and last year, also has to face up to the issue.
Confronted with spiralling property prices, Macau's chief executive, Edmund Ho Hau-wah, announced on April 3 a package of measures to help lower-income people, especially with home ownership. He noted that the experiences of Singapore and Hong Kong had been considered.
There is no better way to help residents of a crowded city than to assist them in owning their home. In this, Singapore has succeeded remarkably well. Practically its entire low- and middle-income classes, 87 per cent of the population, live in flats built and run by the government. Of these, 80 per cent own their flats. Singaporeans are assured of affordable housing for life, and can sell their flats or release the equity in them through a reverse mortgage after they retire. Social security for an ageing population need not worry Singapore.
The home ownership programme, begun in 1964, has been the main nation-building tool of the government. With hardly a protest even in difficult times, social coherence is strong, notwithstanding a fairly wide wealth gap.
All this has not come cheaply. To keep flats affordable, the government sells them at subsidised prices, and offers subsidised loans. It maintains the estates in an attractive state. Mandatory contributions to the Central Provident Fund, a principal financing tool for housing, were once 50 per cent of wages (it is now 33 per cent). Moreover, for the grass roots and middle classes, there is simply no affordable alternative.
Also, the aid is not structured for efficiency, reflecting perhaps its paternalistic, nation-building heritage. All households with income below the stipulated ceiling receive full benefit. This implies a roughly 50 per cent oversubsidy than if aid ranged from, say, just S$1 (HK$5.13) for a household earning S$1 less than the ceiling level, to full benefit for those with no income. Also, applicants must meet the income criterion only once - at the time of application, even though incomes usually rise over time.
Public housing in Hong Kong is also structured on an income ceiling. The Home Ownership Scheme, launched in 1978, offered discounts of 30 to 60 per cent from market prices on government-built flats for sale.