Tuesday, 1 October 2013

HK draws poverty line to sharpen policy focus

A fifth of population deemed poor; guide helps govt target those most in need
By Li Xueying, The Sunday Times, 29 Sep 2013

Hong Kong has established its first official poverty line in a bid to formulate more effective policies to help the poor.

Under this line, which is set at half of the median household income, about one-fifth of those living in one of Asia's wealthiest - but also most unequal - cities are considered poor.

About 1.31 million in the population of 7.2 million fall into this category.

The specific income threshold differs, depending on the number of members in the household: Families with, say, four people, and earning less than HK$11,500 (S$1,860) will now be considered poor.

Speaking at a press conference yesterday, Chief Secretary Carrie Lam said that the poverty line will be a helpful analysis tool for the government in developing policies that are "more focused".

"It will (also) let us monitor the effectiveness of the programmes," she said.

But Mrs Lam also made it clear that the poverty line "is not a poverty prevention line" - not all who fall under it will be helped.

This is because the line does not take into account assets such as homes. And because the methodology measures "relative poverty", which is dependent on the median income, rather than "absolute poverty" - when one cannot afford essential goods regardless of how the rest of society fares - there will always be a pool of those deemed poor, even if their conditions improve.

Rather, the line will help the government zero in on those that need help the most.

This is essential to restart social mobility and prevent kids from poor families being caught in a poverty cycle.

These families work long hours, she noted. "But due to the large number of dependants, the statutory minimum wage is no guarantee of meeting their household needs."

To help them, the government will focus on "employment support that will not lower their incentive to work". This is likely to take the form of low-income subsidies, which could be similar to Singapore's Workfare programme.

Mrs Lam also noted that while there is ad hoc help for poor students with textbooks, lunch and curricular activities, the challenge is to turn these into "regular policies".

Another group singled out for notice are those with special needs - the ethnic minorities, new immigrants and single mothers.

The poverty line could also be useful ammunition for Chief Executive Leung Chun Ying, who has made poverty alleviation one of his top priorities since taking office in July last year.

Businesses, for instance, baulk at having the minimum wage raised further, even though labour groups argue that the current rate is not enough for subsistence living given brisk inflation, stratospheric housing prices and an ever-widening income gap. Hong Kong set a minimum wage in 2011 at HK$28 an hour, which was later revised to HK$30.

The Gini coefficient, which measures inequality on a scale of 0 to 1, here rose to a record high of 0.537 in 2011, up from 0.525 in 2001. In recent years, tensions have flared on the streets in the form of protests and strikes, including the 40-day dispute when port workers laid down their tools.

Mr Leung yesterday said that what is also essential is for the government to grow the economy in order to create better-paying jobs.

HK poverty line a promising start
Further tools needed, as well as policies to alleviate the problem
By Li Xueying, The Straits Times, 29 Sep 2013

THE question of how many poor people there are in Hong Kong - and who they are - can now be readily answered, thanks to a poverty line announced by the government.

There are 1.31 million poor people in one of Asia's wealthiest societies, from households earning less than HK$7,700 a month (if there are two members), HK$14,300 (four members), or HK$15,800 (six members or more).

That is S$1,247 to S$2,560.

On Saturday, chief executive Leung Chun Ying announced that Hong Kong would follow the definition used by the Organisation for Economic Cooperation and Development.

Families with less than half of the city's median household income will be deemed poor.

For many years, the city - whether under the British colonial government or after the handover - had resisted adopting an official poverty line. It was not alone in Asia: while much of the developed Western world did so long ago, few countries in the region, including Singapore, went down the same path. Only in recent years have Japan, Taiwan and India adopted official poverty lines.

One reason for such caution is that a baldly measurable indicator could paint an unflattering picture of the economy with a certain number of people officially singled out as "poor", say experts. Governments would also be held politically accountable to help them.

"From the colonial to the special administrative region period, the Hong Kong government thought that having a poverty line meant it must have specific poverty alleviation programmes," said Professor Joe Leung, of Hong Kong University. "Effectiveness of government policies would be evaluated accordingly."

Thus, many are hopeful that the poverty line will help Hong Kong better identify those in need, and direct resources to them. Existing policies will also be fine-tuned. This could range from how welfare benefits are calculated, to the level at which the minimum wage - now HK$30 an hour - should be set.

Meanwhile, the Federation of Trade Unions already has plans to lobby for a subsidy scheme for the working poor, based on the poverty line. Those beneath it would be entitled to amounts from HK$400 to HK$1,600, depending on their working hours, said legislator Alice Mak. "We expect 320,000 people will benefit."

But a poverty line, while a promising first step, is not a panacea for all poverty problems. For one thing, the setting of such lines remains mired in controversy around the world.

In the United States, for instance, it is facing brickbats on its 50th anniversary for its inadequacy. The poverty line there is defined by calculating the cost of the cheapest sustainable diet and multiplying that by a number for each household type. The assumption is that food comprises a fixed share of all costs for basic survival. While updated for inflation, it does not consider changing needs like medical care.

The methodology adopted by Hong Kong suffers from a different problem. As it is based on median income, what it measures is relative poverty - inequality - rather than absolute poverty. Any changes that affect the median family income in Hong Kong will shift the poverty line up or down - even if those at the bottom see no change in their condition.

"It is a convenient yet clumsy way to measure poverty," says Dr Wong Hung, of the Chinese University of Hong Kong.

What this means is that policymakers have to be mindful about supplementing the poverty line with a second benchmark that measures absolute poverty. This could be done by deciding on a dollar value based on a basket of essential needs - food, clothing, transport, liveable accommodation.

Ultimately though, effective monitoring of the situation will be useless if it is not followed up by effective policies to alleviate poverty.

The problem in prosperous Hong Kong is multi-faceted: kids from poor families who seem destined to stay poor, due to an increasingly segregated education system; the working poor who have jobs - the unemployment rate is just 3.3 per cent - that barely cover the basic costs of living, due to businesses' bargaining power; the elderly with homes, but little cash for daily living, due to the lack of a proper retirement net.

Incomes, for instance, have stagnated even as productivity and inflation have risen. In 2010, the average household income was HK$18,000 a month, as in 2000. The number of families with under HK$6,000 a month increased from 13 per cent of the total to 17 per cent.

This was despite rising labour productivity here - which went up by 3.4 per cent a year, faster than Singapore (2.4 per cent) and the US (1.4 per cent).

Former senior civil servant Leo Goodstadt, who headed the government's Central Policy Unit think-tank between 1989 and 1997, says much needs to be done to reverse its neglect over the past two decades.

"The supply of public housing has been reduced; waiting times for key services have become dreadful; and the prices and fees charged for social services have been raised," says Mr Goodstadt who has published a book, Poverty In The Midst Of Affluence.

So, while Saturday marked a milestone for Hong Kong, it was just the first step of many that must be taken.

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