HK poverty line a promising start

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.

Additional reporting by Pearl Liu

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