HK to launch subsidy for low-wage households

Workfare-style scheme will help families with at least one employed member

By Li Xueying and Pearl Liu, The Straits Times, 16 Jan 2014

MARKING a "philosophical" shift in official attitudes on how poverty can be eradicated, the Hong Kong government will be supplementing the wages of its working poor, Workfare style.

This, together with an existing minimum wage policy, will form a sturdy safety net for the city's poor, say observers.

The new scheme - which will cost HK$3 billion (S$491 million) a year - was a centrepiece in Hong Kong Chief Executive Leung Chun Ying's annual policy address yesterday to set out his government's direction for the coming year.

Called the Low-income Working Family Allowance, the policy will benefit families that fall at or beneath the new poverty line drawn up just four months ago. This is half the city's median household income, which stands at HK$31,000 for a family of four.

To incentivise self-reliance, at least one family member must work. And the longer he or she works, the more the family gets from the government. Those who put in more than 144 hours a month get HK$600; those toiling over 208 hours receive HK$1,000.

If there are children in the family, including students below age 21, an additional allowance of HK$800 per offspring is given.

There is no age floor, unlike in Singapore, where workers must be age 35 and above to qualify for the Workfare Income Supplement. Payouts are in cash.

In all, some 200,000 low-income families with 710,000 members will benefit, said Mr Leung.

Speaking to the foreign media, Chief Secretary Carrie Lam, who also heads the Poverty Commission, said the scheme is meant to help kick-start social mobility, given anecdotal evidence that there is greater inter-generational poverty today.

Previously popular notions in Hong Kong of "trickle-down economics" have fallen out of vogue, she said. "There's a philosophical change, a recognition that economic growth does not provide all the answers. Statistics show quite clearly that work alone does not provide all the solutions."

This is especially so in recent years, with soaring housing rentals taking up major chunks of a family's income. The wealth gap has yawned, with the Gini coefficient, where zero represents maximum equality, at a high of 0.537 in 2011.

On whether the policy amounts to a wage subsidy for employers, she said that the minimum wage - now set at HK$30 an hour - ensures that bosses do their part in providing a living wage as well.

Social work activists yesterday applauded the new policy.

Mr Ho Hei Wah, director of lobby group Society for Community Organisation, called it "long-sighted". "It's an investment in the society as it helps prevent growing poverty in future."

Social work academic Wong Hung of the Chinese University of Hong Kong said it is right that there are no age requirements for the allowance; younger Hong Kong residents, he added, can use it for skills-training and "lift themselves out of poverty eventually".

Social welfare, which was clearly emphasised in yesterday's policy address - Mr Leung's second - is likely to give the unpopular leader's approval ratings a much-needed boost. His address last year focused on raising housing supply - an intractable challenge that requires more time to bear fruit. At a press conference, he denied it was a policy aimed at "buying popularity", adding that this will just earn him brickbats.

On whether the city can afford the recurrent expenditure from the new scheme and others announced, Mr Leung said: "It is indeed a substantial expense but we are confident we can afford it."

There are no plans to raise taxes to boost the government coffers, he added.

Key policies of HK govt for 2014

- More land and more homes: Maximum allowable plot ratio of most districts to increase by 20 per cent.

Government aims to provide 20,000 public rental units and 8,000 subsidised ownership units a year over the next decade, a 36 per cent increase over its previous goal.

To explore ways to develop Lantau Island with a view to creating an East Lantau Metropolis to accommodate new population.

- More training: To start an apprenticeship programme with industries to train young Hong Kongers for jobs in fields such as mechanics and nursing.

- More help for minorities: There will be a long-awaited curriculum for Chinese to be taught as a second language to Hong Kongers of South Asian ethnicity - the lack of which has hampered their ability to learn the language and find jobs.

- More economic links: Hong Kong to begin formal negotiations with Asean on a free trade agreement this year.