Sizing up poverty in Hong Kong

Carrie Lam says setting Hong Kong's first official poverty line is only the start of the massive work of providing targeted, effective help to ensure the fruits of economic growth are shared by all

PUBLISHED : Monday, 30 September, 2013, 12:00am
UPDATED : Monday, 30 September, 2013, 3:32am

Publication of Hong Kong's first official poverty line at the Commission on Poverty summit on Saturday marked a significant step forward in poverty-alleviation work. As chairwoman of the commission, I am indebted to members for their hard work in the past 10 months.

As the chief executive has said, the government has a duty to assist the poor. To ensure we do a proper job, he gave the commission the task of drawing a poverty line which is credible and generally accepted, locally and internationally. The consensus reached reflects a wish to better understand the poverty situation and an earnest desire to provide clear policy direction for poverty-alleviation measures.

The official poverty line has three functions: it measures and analyses poverty here; facilitates evidence-based policymaking; and, assesses the effectiveness of policy intervention.

The poverty line is defined as half of the median monthly household income of all domestic households in Hong Kong, prior to government intervention like tax and social benefits transfers. This approach is based on the concept of relative poverty, as opposed to absolute poverty expressed in terms of basic subsistence.

The commission considers that, in an affluent city like Hong Kong, poverty can no longer be understood merely by the lack of ability to afford minimum subsistence. Relative poverty acknowledges that the definition of poverty should move with the times. This is in line with the government's thinking that we should put in place a reasonable and sustainable social support system for all to share the fruits of economic development.

For 2012, the poverty line was HK$3,600 for a single person, HK$7,700 for a two-person household, HK$11,500 for a three-person household, HK$14,300, HK$14,800 and HK$15,800 for a family of four, five, and six and above respectively. As a result, Hong Kong's poor population last year was around 1.02 million (403,000 households), representing a poverty rate of 15.2 per cent. These poverty thresholds will be reviewed annually in line with the median monthly household income movement.

While easy to understand, the income-based poverty line has limitations. Specifically, the median monthly household income measures only income without considering assets. Some "asset-rich, income-poor" people (such as better-off elderly people) may be classified as poor, thus overstating the poverty problem.

Given the relativity concept, poverty cannot be eliminated. Indeed, an economic upturn with a broad improvement in household income does not guarantee a decrease in the size of the poor population, especially when the income growth of households below the poverty line is less promising than the overall.

Further, the poverty line represents the household income prior to policy intervention. In reality, many households receive cash-based benefits from the government under policies like social security and student financial assistance. These recurrent cash transfers will lift some households out of poverty. It has to be noted that the government's role goes beyond providing recurrent cash transfers to those in need; universal benefits like free primary and secondary education and heavily subsidised health care, and means-tested benefits in kind, like public rental housing, form an integral part of our social support system.

Our assessment indicates that public rental housing has a major poverty alleviation effect. In addition, one-off cash-based relief measures were introduced in past budgets to reduce the economic burden on many households. However, the commission is of the view that since these measures either do not increase a family's disposable income or are ad hoc in nature, they should not be factored into our measurement of the poor population.

We are publishing together with the poverty line a detailed report on Hong Kong's poverty situation in 2012. We will update this report annually to facilitate public understanding of the situation and monitoring of the government's poverty-alleviation measures.

Among the 1.02 million people below the poverty line, 209,000 were children under 18, while 297,000 were aged 65 or above. In other words, one in five of our children and one in three of our elderly are living below the poverty line.

However, as mentioned, the elderly poverty rate could have been inflated by including the "asset-rich, income-poor" households. Indeed, government surveys have indicated that 61 per cent of the elderly (some 140,000) in the non-CSSA households below the poverty line had no need for financial assistance when asked. The elderly poverty rate will also come down in future with the implementation of the Old Age Living Allowance in April. A separate study engaged by the commission is looking into how retirement protection may be improved.

While the Comprehensive Social Security Assistance scheme has lifted some 90,000 families out of poverty, around 100,000 CSSA families are still below the poverty line. Many are one- and two-person households and about a third are children or students.

Of the 300,300 non-CSSA households below the poverty line, some 48 per cent (143,500 households comprising 493,200 people ) were in employment. Notwithstanding the statutory minimum wage and that the majority of breadwinners were in full-time jobs, they belonged to a category of working poor with a larger household size, had more dependants to support and were engaged in low-skilled jobs. They deserve priority attention.

The setting of the poverty line has helped us size up the problem. The task is to find the right ways to help the poor. Several observations are worth deliberation.

First, employment is the best route out of poverty. We should continue to grow our economy and create employment opportunities, particularly quality jobs to help the upward mobility of young people.

Second, any new measure helping needy working-poor families should be pro-employment and pro-children. The support should be structured to sustain family members' self-reliance while enhancing opportunities for upward social mobility.

Third, it would be more effective to consider targeted improvements to the CSSA system to encourage able-bodied recipients to move from welfare to self-reliance and strengthen support for school-age recipients to tackle the risk of intergenerational poverty.

Fourth, we should consider helping other special needs groups like people with disabilities, ethnic minorities, single parents and new arrivals through a combination of cash assistance, support services and regularisation of programmes funded by the Community Care Fund.

By setting a poverty line, the commission has fulfilled an unprecedented mission. But the real test lies in devising effective poverty-alleviation measures.

Carrie Lam Cheng Yuet-ngor is Hong Kong's chief secretary