A Wider Net


Most people now see poverty in Hong Kong as a pressing social problem; many are also starting to realize that we probably cannot rely on economic growth alone to solve it.

In the first half of 2010, Hong Kong had 470,800 low-income households with income less than half the monthly median. Of those households, some 210,500 – 45% of the total – were working poor, with at least one member in employment.

The hotly debated minimum wage could help these workers meet some of their basic living needs, but it will not end the problem of the working poor.

At the moment, the major source of assistance to low-income households is the Comprehensive Social Security Assistance scheme (CSSA). In July 2010, there were 14,887 households claiming CSSA on the basis of low earnings. Clearly, the majority of working poor households do not turn to the safety net; they get by on their own.

The government offers other measures to help the low-income population. For example, the School Textbook Assistance and Student Travel Subsidy schemes help students from needy families. The government has devised various transport subsidies for low-income workers in recent years; the current one is the Transport Support Scheme, which applies in four districts.

Working poor households do not, in most cases, want to rely on public support. But the fact is that they need it to help maintain a reasonable living standard as they strive for greater self-reliance. For this reason, the community should take seriously calls in recent years to strengthen the “second helping hand” – such as travel subsidies – to help the poor who are not in the CSSA safety net and even to help some others move out of CSSA.

There is still much room for improvement to make this more effective. At least three more measures could be considered: extending the current Transport Support Scheme to all 18 districts and extending the subsidy beyond the one-year limit; rental subsidies; and better childcare services in the community. There is a case for targeting subsidies at specific groups; for example, a caregivers' allowance for families taking care of elderly or disabled members. After all, people who are earning enough to pay salaries tax get such a subsidy in the form of elderly and disabled dependent allowances.

But let's look further ahead. We need a serious debate about building a broader support system for low-income families through some sort of general low-income subsidy. One such system is a “negative income tax” (NIT). An NIT pays families the difference between their earnings and a designated income level (say, a proportion of the median income).

The Working Tax Credit in the UK and the Earned Income Tax Credit in the US are variants of NIT. The community decides on a level of allowance for individuals and families and a fixed NIT rate. For instance, if the allowance is $8000 a month and the NIT rate is 50%, a family earning $5000 gets NIT credits of half the difference: $1500. The scheme does not subsidize families with no income and hence encourages people to work.

One important feature of a tax credit scheme is that it is administered as part of the tax system. All employees send in their salary returns, and the tax bureaucracy takes money from or gives it to them depending on whether they earn enough to pay a “positive” tax or poor enough to receive a “negative” one. It is administratively simple compared with piecemeal measures, can be supplemented by existing dependent or other allowances, and it reduces the stigma of a separate programme of handouts.

However, it would bring all those poor families currently not applying for Low Earnings CSSA into the safety net, and this would inevitably cost the government more money. This is what the community has to consider if it wants to solve the problem of the working poor.

In case some people think an NIT sounds too “socialist” for Hong Kong, they may be interested to know that one of its foremost advocates in the United States was free-market economist Milton Friedman – an admirer of our small government system.

In view of the severity of Hong Kong's poverty problem, there is an urgent need to explore more comprehensive and effective ways to help the poor. Measures taken by the government in past years, like the transport subsidies, have to some extent been gestures and of limited impact. The negative income tax principle has been adopted in many countries for years. It has pros and cons. But the least the government could do is raise it as a possibility and let the community have a serious discussion on the issue.

* This article was published on the Opinion Page of the South China Morning Post

「寫情寫理」捕捉社會點滴，讓關心香港的人 -- 無論從事社會服務或其他界別的 -- 有更多反思和討論。歡迎讀者將閱後感透過電郵與我們分享。

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