Hong Kong’s First Poverty Line Puts One-Fifth of People in Need

A fifth of Hong Kong’s population is living in poverty, underscoring the challenge Chief Executive Leung Chun-ying faces in seeking to narrow a record wealth gap.

About 1.3 million, or 19.6 percent of the city’s 7 million people, were below the poverty line last year if excluding impact from government aid, Chief Secretary Carrie Lam said today at the Commission on Poverty Summit, broadcast by Cable TV. Including benefits, the poverty rate falls to 15.2 percent, or 1 million people. The benchmark, determined for the first time, was set at half of the city’s median household income, she said.

The report, commissioned by Leung, may give him the backing needed to ask for more spending and overcome objections to further increases to the city’s minimum wage. Tens of thousands of people protested on July 1, the anniversary of Hong Kong’s return to China, demanding the government address the inequality between the rich and the poor, which has been exacerbated by the doubling of home prices since early 2009.

“Having an official indicator will help the government define its social welfare policies and will also raise public expectations for something to be done,” Chung Kim-wah, an assistant professor at The Hong Kong Polytechnic University, said by phone yesterday. “It’ll put a certain pressure on the administration.”

Hong Kong’s Gini coefficient, a measure of income inequality, rose to 0.537 in 2011 from 0.525 in 2001, the government said last June. The score, a high for the city since records began in 1971, is above the 0.4 level used by analysts as a gauge of the potential for social unrest.

“To alleviate poverty, the government must promote balanced economic development,” Chief Executive Leung Chun-ying also said at the summit today. “Poverty is not only an issue of the low-income population’s hardship, but it also affects Hong Kong’s harmony and stability, thus affecting its long-term competitiveness,” he said.

Labor Unrest

Labor unrest and protests have increased in Hong Kong in the past two years as inflation and home prices soared.

The average gross household income of the poorest 10 percent of the population fell 16 percent to HK$2,170 a month in 2011, from 10 years earlier, according to a government report. The comparable income for the richest 10 percent jumped to HK$137,480 a month, a 12 percent increase.

Leung increased welfare spending by about a third in his first budget delivered in February, boosting recurrent spending by 31 percent to HK$56 billion ($7.2 billion) in the fiscal year starting April 1. He handed out allowances to more than 400,000 elderly residents and pumped $2 billion into a poverty alleviation fund.

Hong Kong’s wealth inequality may increase as the population ages. The proportion of people aged 65 and older reached 14 percent last year and is expected to account for 30 percent by 2041, Financial Secretary John Tsang said in February.

Expensive Homes

Home prices in the city are the highest among major global cities, according to London-based property broker Savills Plc. (SVS) The government has imposed measures, including extra taxes on foreign property buyers and higher mortgage down payment requirements, as it seeks to reduce the risk of an asset bubble.

Leung this year restarted the sale of subsidized public housing, a program that was halted in 2004 by his predecessor. A government committee studying the city’s long-term housing plan has recommended building 470,000 new homes over the next decade, of which 60 percent should be public housing, Anthony Cheung, secretary for transport and housing, told reporters this month.

Hong Kong increased the minimum wage 7.1 percent to HK$30 an hour on May 1. The raise will bolster the salaries of about 327,200 employees, or 10 percent of the city’s workers, according to a report by a government commission before the new ruling.

Poverty Line

The city has a wealth gap wider than Singapore, Australia, and the U.K., though its unemployment rate for the three months ended August was just 3.3 percent.

Singapore doesn’t have a poverty line and an estimated 6 percent to 8 percent of working households can be called “working poor,” the Straits Times reported Sept. 25, citing a report. Europe uses an at-risk-of-poverty indicator set at 60 percent of national median disposable income after accounting for social benefits.

Labor unrest in Hong Kong has been increasing.

Workers at docks operated by billionaire Li Ka-shing’s Hongkong International Terminals Ltd. went on strike for more than a month earlier this year, demanding higher wages and better working conditions. The 40-day dispute ended in May after the workers accepted a 9.8 percent wage increase, compared with their original demand of 23 percent raise.

To contact the reporter on this story: Michelle Yun in Hong Kong at myun11@bloomberg.net

To contact the editor responsible for this story: Stanley James at sjames8@bloomberg.net

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