Poverty in Hong Kong: our challenges and responses
A speech delivered at a speaker luncheon of Hong Kong Democratic Foundation on 22 September 2010
Alan (Chairman of Hong Kong Democratic Foundation, Mr Alan Lung), George (Vice-chairman of Hong Kong Democratic Foundation, Dr George W H Cautherley), distinguished guests, ladies and gentlemen,
Thank you for inviting me to this high-powered luncheon and for the opportunity to speak on an issue of growing community concern – poverty in Hong Kong.
There is a good deal of analysis in the public arena on poverty in Hong Kong. Admittedly, poverty is a hard nut to crack and a problem facing many advanced economies. According to news reports last week, one out of seven Americans in the United States (or 14.3% of its population) lives below the poverty line. There is simply no quick fix to the problem. But it is important that we all see it in its proper perspective and tackle it head-on and in a-matter-of-fact manner.
THE SIZE OF THE PROBLEM
Let us first gauge the gravity of the problem and ask a fundamental question: How many poor people are there in Hong Kong?
Some commentators seek to understand poverty in Hong Kong by quoting the Gini-coefficient, which indicates the general distribution of income in an economy, and refer to our high Gini-coefficient of 0.533 in 2006. Others adopt half of the median household income as the line below which families would be defined as poor and come up with the figure of 1.23 million poor people.
The former Commission on Poverty, which had fully deliberated the issue, took the view that in an affluent city like Hong Kong, poverty could not be understood simply by the concept of absolute poverty or the lack of ability to afford minimum subsistence. Nor should we rely on a single poverty line or income indicator to measure poverty because income disparity and poverty are two distinct concepts.
If we take into account the impact of taxation and social benefits including housing, medical services and education, and removing the effect of a declining household size, the per capita post-tax post-social transfer Gini-coefficient in 2006 would have been 0.427, which is equal to the 1996 level or slightly (0.006) higher than that in 2001.
The former Commission on Poverty has devised a set of 24 multi-dimensional indicators to gauge the overall poverty situation in Hong Kong, taking into account the actual situation and needs of the poor and their families, including their access to essential services and opportunities such as housing, health care, education and employment. On this basis, it is estimated that around 838,000 people lived in poor households in 2009.
Poverty is not about number. It starts with people. Whether it be 838,000 or 1.23 million, the Hong Kong SAR Government has never dodged the issue or shied away from finding the best possible solutions to help the poor.
THE CAUSE OF POVERTY AND INCOME GAP
Before we try to identify a long-term panacea, we should go beyond the symptoms and look into the cause of the problem.
Hong Kong’s population is fast-ageing. We see more smaller-sized and elderly households in recent years. As many elders have no income but are supported by their own savings and children instead, there has been an increasing number of low-income households.
In parallel, Hong Kong has seen drastic changes in its economic structure over the years. Our transformation towards a knowledge-based economy has led to an increasingly keen demand for professionals and managers with higher education and skills, resulting in the creation of a large number of higher-paid jobs. This contributes to a wider income gap between higher-skilled and lower-skilled workers. Such a phenomenon is common in other knowledge-based and fast developing economies.
Our latest unemployment figures are rather telling on this score. With the local economy gradually coming out of the woods, our latest unemployment rate has dropped to 4.2% – 1.3 percentage points down from the peak of 5.5% in mid-2009. However, the unemployment rate for the highly educated and more skilful stands at 2.3% while that for the lower-skilled reaches 4.8%. This disparity inevitably leads to a polarisation of wages and a widening income gap.
What’s more: whilst the stream of new arrivals from the Mainland who come to settle here for family reunion contribute to our population growth, they also enlarge the pool of our workforce at the low end. It is noteworthy that the number of elementary jobs has been shrinking. Over the past decade, demand for lower-skilled workers saw a 1% drop, while that for higher-skilled ones rose by a hefty 33%. This mismatch in supply and demand in the labour market partly explains the surge in the number of low-income families.
POLICY ANCHORS AND STRATEGY
In tackling poverty, the Government’s policy anchors and objective are premised on three pillars:
- first, promoting Hong Kong’s overall economic growth, thereby sustaining employment and creating more job opportunities;
- second, equipping our people with the means to move up the social ladder through education and training/retraining; and
- third, providing a sturdy and sustainable safety net for the needy, the disadvantaged and the under-privileged.
Our cardinal belief is that it is far better to teach people to fish and be self-reliant rather than to feed them with fish. However, for those who are genuinely needy and deprived, we see it as our role and responsibility to help them.
STRATEGIES IN PRACTICE
Let me now go through the Government’s toolbox for easing, if not fixing, the problem of poverty. To begin with, as we strive for economic success, we must ensure that everyone has a fair opportunity to contribute to, and benefit from, our society’s economic and social development. Here education has a key role to play.
Education can effectively enhance social mobility and reduce inter-generational poverty. This explains why the Hong Kong SAR Government attaches great importance to education. Expenditure on education alone now takes up 23.4% of the Government’s total recurrent expenditure – the largest share among all policy areas.
I firmly believe that employment is the key to people’s livelihood and the bedrock of social harmony. For behind each worker depends a family with mouths to feed. Work, by nature, helps create the opportunity for people of working age to take responsibility and live in dignity.
This calls for better and more effective training and retraining so that people without any skills or with inadequate or obsolete skills can lift themselves up. This is why training and retraining for our labour force, particularly for the less-skilled workers, are high on our agenda. We need to enhance their competitiveness and employability, better equip them to rise to the challenges in the labour market, thereby improving the overall productivity of Hong Kong.
Our full spectrum of training programmes is mainly provided through the Employees Retraining Board, the Vocational Training Council and the Construction Industry Council Training Academy. Together, they provide a multitude of courses in meeting the needs of young people and the middle-aged with lower education level, as well as apprentices and in-service elementary workers of various industries.
For those who cannot support themselves financially owing to old age, disability, illness, unemployment, low earnings, etc., we have in place the Comprehensive Social Security Assistance Scheme (CSSA) to help them meet their basic needs. We also have the Social Security Allowance Scheme (SSA), which provides largely non-means tested grants to elders and persons with severe disabilities. Excluding one-off additional payments, the estimated total expenditure of these two schemes in 2010-11 is $27.5 billion, or $75 million per day, representing around 12% of the Government’s total recurrent expenditure, or about 69% of the total recurrent expenditure on social welfare.
About 1.1 million or over one in every seven residents are recipients of social security payment. Over half of the beneficiaries of both the CSSA and SSA schemes are elderly people and persons with disabilities. This underlines the priority that we accord to the most vulnerable group.
In addition, our 12-year free education, heavily subsidised healthcare system and major public housing programme (which accommodates 30% of our population in low-rent public housing and another 18% in subsidised home ownership flats) combine to provide essential social and economic cushions for our people. All these public services add up to 57% of the recurrent government expenditure.
STATUTORY MINIMUM WAGE
Let me digress here and update you on the latest state of play on putting in place a statutory minimum wage in Hong Kong.
The Government’s conscious and bold decision to go for a minimum wage, despite all odds, represents a significant breakthrough in the protection of our workers at the grassroots. Minimum wage will not eradicate poverty, but will go a long way towards easing the difficulties of the working poor. Gone will be the days of blatant exploitation through paying excessively low wages.
The Minimum Wage Bill was passed two months ago (July 17). Our aim is to arrive at an optimal minimum hourly wage floor to forestall excessively low wages without, at the same time, unduly affecting our labour market flexibility, economic growth and competitiveness as well as causing significant loss in low-paid jobs. With the understanding and cooperation of all stakeholders, I am confident that we can get this fine balance right. The Provisional Minimum Wage Commission will shortly submit its recommendation on the initial wage rate to the Government for consideration. If everything goes well, the statutory minimum wage regime will be in place in the first half of next year.
FOLLOW UP ON CoP RECOMMENDATIONS
There have recently been suggestions that the Government should re-establish the high-level Commission on Poverty (CoP). The Commission concluded its work in 2007 after making 53 recommendations. The Task Force on Poverty, headed by me, was set up immediately thereafter to coordinate efforts among various government bureaux and departments to translate the Commission’s ideas into practice. We have diligently followed up all the recommendations, many of which have already been implemented.
Transport Support Scheme
Let me cite some of the key recommendations and give you an update on progress. First is the Transport Support Scheme (交通費支援計劃), which aims at providing transport subsidy over a period of time for low-income employees and needy job-seekers living in four remote districts – i.e. North, Tuen Mun, Yuen Long and Island Districts. We are now seriously considering how best to ease the burden of transport costs faced by low-income earners in the wider community in commuting to and from work. Our aim is to come up with concrete proposals by the end of this year.
Child Development Fund
Second is the Child Development Fund (CDF) (兒童發展基金), which will benefit 13 600 children from low-income families. Inter-generational poverty is one of our major concerns. We are concerned not just about the tangible wealth gap, but also the resulting social, psychological and emotional gaps between children from a disadvantaged background and those from better-off families. If not plugged, these gaps could turn into life-long social exclusion.
It is against this background that we set up the $300 million-CDF in 2008 to promote the longer-term development of deprived children. Projects under CDF have three core asset-building components, namely: a personal development plan, a mentorship programme and targeted savings for the participant, by which the child can build up financial and social assets, with a view to reducing inter-generational poverty.
The beauty of having a mentorship programme is that we can mobilise volunteers to serve as mentors to guide, nurture and support the disadvantaged. The mentors act as beacons to these youngsters and help shape their future growth and character formation.
For the 15 new projects to be rolled out next month, we have already selected experienced non-governmental organisations to be operators. We have also secured the support of some generous donors to provide matching funds for targeted savings. But we are running short of devoted mentors. I appeal to all of you here to join the ranks of mentors, be an “agent of hope”, and help narrow the social divide.
This brings me to the role of the business sector and the wider community in joining hands with the Government in combating poverty. We need to leverage the strengths of the business sector and the civil society. But I must hasten to stress that the Government will never abdicate its responsibility. The $110-billion fiscal, employment and relief measures that we introduced to help the community tide over the difficult period when the financial tsunami battered us earlier speaks volumes for our commitment in this regard.
Partnership Fund for the Disadvantaged
Tripartite approach is indeed the key and the way forward in building a more caring, compassionate and harmonious society. A case in point is the Partnership Fund for the Disadvantaged (攜手扶弱基金). Since its inception in 2005, the Fund, through funding support on a matching basis, promotes collaboration among the social welfare sector, the business community and the Government in helping the disadvantaged, thereby enhancing social cohesion. So far, around $130 million has been approved, attracting a total donation of a similar amount from over 560 business corporations, supporting over 300 welfare projects. The total number of beneficiaries has already exceeded 650,000.To keep up the momentum, the Government has recently injected an additional $200 million into the Fund.
Community Investment and Inclusion Fund
In face of a fast changing socio-economic landscape, social welfare nowadays means far more than basic relief work. It should be viewed as social capital, social investment and social development. In 2002, we established the $300-million Community Investment and Inclusion Fund (CIIF) (社區投資共享基金) to provide seed money to create social capital by fostering mutual support and assistance among people, developing cross-strata neighbourhood networks, and promoting community participation and cross-sector collaboration. So far, over 200 projects have been approved under the CIIF and some 530,000 people from different age groups, social strata and cultural or ethnic backgrounds have participated in the projects.
Take Tin Shui Wai as an example. The CIIF has invested heavily in terms of funding, energy, efforts in this remote district with a view to building community network, fostering a strong sense of good neighbourliness and bringing hope, social cohesion and opportunities to the new town.
The Government welcomes more concerted efforts to build a more caring, compassionate and harmonious society. It is therefore most encouraging to note the growing interest of the business sector and the more affluent members of our community in poverty alleviation. We stand ready to work hand in hand with all sectors to improve the well-being of the disadvantaged and light up their lives with hope and dignity.
Thank you very much.
Matthew Cheung Kin Chung (張建宗)
Secretary for Labour and Welfare (勞工及福利局局長)
22 September 2010
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