HK’s Disadvantaged - 23 Oct, 2004

Dear Subscribers & Friends

This month’s reduction of welfare payments by 5.4% sparked a discussion about social conditions in Hong Kong. Rumours also have it that the chief executive’s annual policy address scheduled for 1/2005 will likely have a focus on poverty alleviation.

So, just how poor are the poor in Hong Kong? How can Hong Kong reduce poverty and wealth disparity?
This eNewsletter notes politically incorrect options.


A. How HK takes care of the disadvantaged

1. Social security - HK’s Comprehensive Social Security Assistance Scheme (CSSA) is means-tested and designed to bring the income of the poor up to a level to meet basic needs. The Social Security Allowance Scheme (SSA) provides monthly allowance to the elderly (65+) and the severely disabled to meet special needs. The SSA’s old age allowance is means tested but other allowances are not. Other social benefits include public housing (means-tested), as well as universal education and public healthcare.

2. Recipients’ profile - who needs help? Around 1 million?

(i) There are currently 295,700 CSSA cases or 534,220 recipients:

(a) 50% poor elderly [thus, CSSA serves as a pension];
(b) 14% of people with disabilities;
(c) 15% of single parent families;
(d) 5% of very low income earners;
(e) 16% of people who are unemployed [thus CSSA serves as unemployment benefits].

(ii) There are currently also 455,500 people receiving various SSA allowances with 93,200 means-tested cases i.e. these are the most needy. There are also 122,320 cases of welfare recipients under 15 years old who are from the most needy families.

(iii) Not everyone entitled to social security actually applies for it. Thus, the real number of poor people is greater than the number receiving welfare.

(iv) The Hong Kong Council of Social Service believes there are 1.12 million people out of a total population of 6.9 million who live below the poverty line, which is defined as half the median household income (HK$9,000 for family of 4). HKCSS notes the lowest 10% of income earners take home an average of HK$2,977/m. There is no minimum wage in HK, except for foreign domestic helpers at HK$3,750.

B. Future trends and challenges … some questions

1. Rising median age - society is getting older.

2. Education attainment affects earning power - approx 8% of population had no formal education (mainly the elderly); 20% finished primary school; 19% finished lower primary and 27% finished upper secondary school.

3. Deflationary factor - is China a long-term deflationary factor for many types of less-skilled jobs in HK?

4. MPF - MPF won’t help workers in later years of their working lives.

5. Disparity of wealth - Lower income earners are earning less and high income earners are earning more. Low income workers are also working longer hours, 60-70 hours a week or 12-14 hours a day are not unusual.

C. Politically incorrect observations

Apart from improving education and providing re-training schemes [government focus], and considering whether the tax net needs to be widened to increase public revenues to pay for these and the existing welfare schemes [discussion on a possible GST], there are two other areas to consider but these are often regarded as politically incorrect solutions in Hong Kong.

The first is to reconsider infrastructure projects needs [Hong Kong loves to build hardware] and axe those that cannot be justified; and the second is to tax the rich more to reduce the disparity of wealth. However, there will be tremendous resistance against both of these options.

Whether and how Hong Kong discusses various options to meet the challenge will be important for maintaining social stability in the coming few years.

CHRISTINE LOH
Civic Exchange - HK’s independent think tank
For other publications, see www.civic-exchange.org