Redirect Hong Kong’s welfare spending to reach its most needy

Paul Yip says an analysis of the city’s poverty statistics shows it’s time for subsidies that are now widely shared to be redistributed to vulnerable groups

PUBLISHED : Friday, 21 October, 2016, 12:42pm
UPDATED : Friday, 21 October, 2016, 7:10pm

The Commission on Poverty provides detailed figures on the situation in Hong Kong and has just released the fourth update to the poverty line since it was set in 2013. The poverty line is set at half the median household income, according to household size. Those living below it are considered poor. As it is in relative term, there will always be a certain proportion of the population below the threshold.

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Based on this criterion, Hong Kong’s poverty rate has hovered between 14 per cent and 18 per cent over the past two decades and has been pretty stable throughout the years, irrespective of the economic conditions. Slight changes in the rate should not be a big concern. Analysis of the poverty line plays a major part in identifying which groups need priority support. This helps the community gain a better understanding of the situation and enables citizens to assist the government in evidence-based policy formulation and the effective evaluation of policies.

In 2015, the poverty rate stood at 14.3 per cent after accounting for recurrent cash injections from the government totalling more than HK$66 billion. Welfare expenditure already accounts for about 19 per cent of total government spending and that figure is expected to rise further, given our rapidly ageing population profile. Sustaining these levels of assistance could be a real concern.

To really help the poor, Hong Kong needs to target the advantages enjoyed by the rich

Thus, it is important for Hong Kong to maintain economic growth to mitigate the poverty situation, especially as the poverty rate among people in work is only 8 per cent, compared with 58.2 per cent of those who are unemployed. Certainly, income levels of the working poor should be continuously improved. The proposed new minimum wage of HK$34.50 an hour would have only a limited impact in the improvement of low-income earners’ quality of life.

The actual poverty situation among older adults may well be better than the data suggests

Meanwhile, the government’s outsourcing of low-skilled work is also a concern. As the bargaining power of this group is not strong, outsourcing companies have little incentive to increase wages.

Another major concern is the supposed increase in the number of poor older people, which might have been grossly overestimated due to the fact that only income, not assets, is taken into consideration in compiling the statistics. There are a significant number of “income poor, asset rich” older people, for example, retirees who have made sufficient financial arrangements for their old age.

It is interesting to note that 54.7 per cent of these “poor older adults” are owner-occupiers and 35.6 per cent are living in public rental housing. As accommodation costs are the major expenditure item in Hong Kong, it is not unreasonable to assume that this group is not so poor and they are, in fact, much better off than many others. Hence, the actual poverty situation among older adults may well be better than the data suggests.

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The increase in the number of impoverished smaller households is another concern. The poverty rate of one-person and two-person households is 36.6 per cent and 28 per cent respectively, higher than the population average (19.7 per cent) before the government’s recurrent cash injections.

The time for talking is well and truly past. We need to move on from blaming the government

The increasing poverty gap among young people after the government funding is factored in is also a worry; it seems that some groups are trapped in the poverty pit and there is very little chance of them getting out. The disappointment and sense of hopelessness felt by these young people is not uncommon. Additional efforts should be made to empower our young, so they can become more competitive.

The increase in the number of impoverished smaller households is mainly attributable to the rise in divorce in Hong Kong. We should also factor in our ageing population. Taken together, these two factors accounted for the slight rise in the poverty rate before the recurrent cash injections, in effectoffsetting the impact of the government’s efforts.

It is important to acknowledge the limitations of the poverty line and its interpretations and analysis. Unfortunately, some inappropriate, if not misleading, messages have been reported.

The time for talking is well and truly past in Hong Kong. We need to move on from blaming the government, which is an easy target; those hurling the accusations know full well that there is no price to pay for such behaviour. Above all, we must be fair.

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The fact is that the poverty line is a relative measure and there will always be households who fall below the preset threshold and are deemed poor. If the population increases, even with no change to the poverty rate, the number of poor will rise. Yet, these numbers can also be helpful. If used correctly, we can identify who is genuinely impoverished and then deploy the appropriate resources to provide support to the people who really need it.

A rapidly ageing population and rising number of smaller households have a negative effect on the poverty rate. Furthermore, population growth would also increase the number of poor in society. Hong Kong will lose many of its competitive advantages if it does not respond to such challenges in a timely manner. At present, we are simply engaging in lots of meaningless argument with no gain whatsoever.

It is interesting to note that Australian Prime Minister Malcolm Turnbull has been slammed as “the Christmas Grinch” for applying new rules this December which will reduce pension payments if the assets of senior citizens exceed a certain limit. Even a very livable country, with a higher tax level, still faces such challenges. What it really means is that for those who are poor, the government should increase its efforts while those who can look after themselves should be left to do so, so that resources can be redeployed. There is no free lunch. While there may be some winners and some losers, hopefully no one will be left behind.

Paul Yip is a professor in the Department of Social Work and Social Administration at the University of Hong Kong