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Following is the speech by the Secretary for Health and Welfare, Dr E K Yeoh, in the motion debate on "Alleviating the disparity between the Rich and the Poor" in the Legislative Council yesterday (November 21) (English only):

Madam President,

I am grateful to Hon. Frederick Fung for moving this motion, and to Honourable Members for participating in this timely debate on this very important issue. I wish to emphasise to Members that the Government is aware that this is not a social welfare issue. The fact that I am standing in front of you is testimony to the understanding of the Government of this problem because we've discussed within the Government the social, economic and political dimensions of this particular problem. And anyone of my colleagues from Economic Services, from Financial Services, from Education and Manpower could equally be standing up today to respond to this motion because each one of us has been involved in the discussion and in development of strategies we will present to you. With the major economies around the world either experiencing or expecting either a slow down or a recession, HK as an externally-oriented economy, is inevitably affected. We have already seen a decline in our exports and an increasing unemployment rate. And inevitably, it will take some time for the economy to recover. In these circumstances, we are aware of and empathise with public concerns surrounding the capacity of and protection for, the low-income and the vulnerable to cope with such adversity. The recent release of the Gini Coefficient data, compiled as part of the 2001 Population Census, has also aroused discussion about the distribution of income in our society and the issue of poverty.

Definition and Measurement of Poverty

Let me start by exploring what we mean by the term "poverty". Our research reveals that there is no generally agreed definition since poverty may encompass hardship relating to material conditions in terms of the provision of goods and services. Or economic position through low income, limited resources or inequality. Or thirdly, social position through a lack of entitlement, dependency or general social exclusion. Any one of these factors can lead to an individual being regarded as living in poverty.

When discussing poverty, two models dominate. Firstly absolute poverty which is based on subsistence - the minimum amount needed to live. It has been described as "a condition characterized by severe deprivation of basic human needs including food, safe drinking water, sanitation facilities, health, shelter, education and information. It depends not only on income but also on access to social services". For example, the World Bank sets the abject poverty line at US$1-2 a day per person. The second model is relative poverty, based on a comparison of poor people with others in the same society. Some define this in terms of half the median wage or household income or some other benchmark.

I have heard Hon. Members propose the drawing up of a poverty line. This suggestion has been thoroughly examined by the Government in the past, taking account of overseas experience and views in the community. If we felt this is helpful, I can assure Members that the Government will define it. Since there is no agreed definition, there can be no agreed measurement of poverty. As such and as I have already pointed out, the measures can only at best serve as indicators. There is no scientific method of devising a poverty line. The absolute approach is clearly irrelevant in the Hong Kong context whilst the relative poverty scenario means that even in the most affluent of societies, there will always be a group of people regarded as poor.

Hence any attempt to define poverty will inevitably involve subjective value judgements. The definition of poverty that each society adopts is based on the norms and values of that society, and is often subject to a number of variables including time, place and prevailing social conditions. This contention was supported by Adam Smith, an 18th Century market economist who argued that to be poor was to go without what was needed to be a creditable member of society. Notwithstanding, this somewhat theoretical debate, our common goal is to provide assistance for the disadvantaged. In the context of Hong Kong, rather than adopting a single income line to define poverty, we have defined the disadvantaged members of the society to whom we should give greater support and assistance. We have adopted the budget standards approach in our Comprehensive Social Security Assistance Scheme to ensure that needy individuals and families have adequate financial resources to meet their basic and essential needs.

In our view, the use of a poverty line based solely on income levels is too simplistic, has severe limitations and many distinct disadvantages. For example, using the broader definition of poverty which I referred to earlier, it is apparent that some individuals whose income exceeds the subjectively drawn poverty line, might also be in need of assistance and could be regarded as poor as some Members have observed. In the local context, other assistance in the form of low cost or free education, housing, health and welfare services are provided to the needy. Each programme adopts specific criterion for defining who qualifies for different types of services, having regard to relevant policy considerations and specific circumstances. A single poverty line is not required for them to be eligible for such assistance and indeed may exclude them from receiving the assistance needed. In so doing, the assistance and services provided are more effectively administered and are geared more closely to people's very different needs.

A poverty line based on income level distracts attention from factors that contribute to poverty. In any debate on poverty, we need to understand and appreciate the factors which may either in whole or in part, contribute to an individual or family becoming disadvantaged and thereby socially excluded. These factors may be related to the individual or may be structural in nature applying to a particular community. They may include those with low or no income; or exclusion from the labour market especially in the form of long-term unemployment; or illness either physical or mental, which may worsen with the advance of age; or a basic lack of opportunities, for example in education, housing or other social services. The causes of poverty are often multi-faceted and complex but must be understood in relation to each and every individual, if their situation is to be improved. Our social policy and strategies are based on our analysis and understanding of these factors.

Disparity between the Rich and the Poor - the Phenomenon

Hon. Members have spoken at considerable length about the disparity between the rich and the poor. The Gini Coefficient, is a statistical method intended as a measure of concentration or disparity. When applied to income data, it serves as a yardstick to assess income disparity in economies. Corresponding figures for Hong Kong in recent years, as compiled in Population Censuses and By-censuses, have been on the rise. Although the figure only reflects the income side of the equation, the rising trend has been perceived as an indication of a widening gap between the rich and the poor in Hong Kong.

While the Gini Coefficient is a comparative figure reflecting the income of the financially less well off and better off sectors of society, we see a corresponding trend in the absolute income growth of people at the two ends of the spectrum. Disregarding inflationary or deflationary trends, we observe that the income of households in the lowest two decile groups has fallen over the past five years. Meanwhile, that of the upper decile groups has increased. Obviously, the Government is concerned about this.

For an indepth projection of the implication of the figures, we need to interpret them in a holistic context. A widening income gap is a common consequence seen in many places undergoing transition towards a knowledge-based economy. Hong Kong is not alone in this situation. In addition, Hong Kong is a city economy, with a strong agglomeration of service sector activities which are highly developed and well diversified. Income disparity in city economies tends to be greater than in national economies, which have a greater preponderance of manufacturing and agricultural activities with narrower income differentials.

We should also be aware that the Gini Coefficient is only a partial reflection of the distribution of economic resources in a society. Care should be taken in projecting the implication of the figures, since they overlook a number of other very important aspects.

First the figures do not take "assets" into account. In addition, the effects of taxation and intangible income derived from, for example, publicly-funded programmes on housing, education, health and welfare, which narrow the effective disparity are also not featured. They also do not reflect social mobility within society. A study conducted by the University of Hong Kong in 2000 indicates that, the earning mobility of Hong Kong workers has been significant over the past decade. 58% of those in the bottom quintile group in 1991 had succeeded in moving up the earnings ladder by 2000. This implies that the people in different income brackets have changed over time and enjoyed upward mobility. Moreover, in studies of income disparity, consideration should also be given to the effect of changes in household size, household composition and family life cycle over time in their computation.

Reasons Accounting for the Widening Disparity

The Government regularly monitors the social and economic development of Hong Kong. Statistical data is collected regularly by the Census and Statistics Department, through conducting surveys on the economy, labour, earnings etc., and these are analysed in the context of the local, regional and global economic climate to reflect the social and economic dynamics of Hong Kong. The economy of Hong Kong has been undergoing constant restructuring over the past few decades. Structural changes in the economy, arising from the shift from manufacturing-based to service-oriented activities, and further to a knowledge-based economy, have changed the labour structure and demand of the economy. The surging demand for well-educated and skilled labour, in particular those professional, managerial, supervisory and technical personnel, has provided room for a faster increase in wages and salaries for these jobs than for jobs requiring a lower level of knowledge and skill. This widening in wage disparity during the transition to knowledge-based activities has also been observed in many other developed and developing economies.

Also, the economic downturn in the late 1990s following the Asian financial crisis, coupled with the incipient global economic slowdown, has posed great challenges to economies in the region and indeed, worldwide. Whilst the negative impact is generally felt by the entire workforce, it does tend to impinge more on the lower end rather than the upper end of the occupational hierarchy.

We have been, and will continue to closely monitor social and economic conditions, to ensure that appropriate adjustments are made to our policies to address the latest developments. Apart from the standing monitoring mechanism through the conduct of regular surveys, we also initiate thematic research to study specific issues in an indepth manner. For instance, the recent study on earning mobility completed by the University of Hong Kong. Another longitudinal examination of income statistics has been undertaken. Over the past 16 years, the study indicates that the income of households in all sections of the social hierarchy has increased, both in money and real terms.

Measures to Address the Issue of Poverty and Income Disparity

Basic Approach

Turning now to the Government's response to the issue of poverty and income disparity. Honourable Members have given us some valuable insights. Some Members have also given us some very valuable and valid criticisms. A few Members have given some suggestions which we will give further thoughts to. But there were one to two Members who have given us nothing but unjustified criticisms, based on misinformation, lack of information, which are also inflammatory. I cannot agree with the comments of some Members that the Government has given undue emphasis to economic development at the expense of social issues. I urge Members to go back and read these two Policy Addresses. The Chief Executive in his Policy Address last year (in 2000) spoke that "in pursuing economic development, we attach great importance to enhancing the well-being of every member of the community so we can build [a society in which we can all live together in] a harmony". He also outlined four strategic social policies to address the issue and which will also enhance social development in our community. Firstly, to create an environment in which participation in economic and social life, is open to all. To help achieve this, special attention will be paid to the provision of education and enhancement of the knowledge and skills of the workforce. In essence, each individual should be provided with opportunities to develop his or her potential to the full. Secondly, for individuals who are economically inactive due to age, illness, disability or unemployment, to provide a well-resourced basic safety net of income support. Thirdly, to fulfill our special responsibilities to the disadvantaged members of our community by providing specific programmes, additional support and targeted assistance to enhance their will to be self-reliant. And fourthly, to strengthen the social fabric of our society by encouraging mutual care and support thereby building new social networks in which individuals and families can flourish. So I just wonder from where Members got the information and the impression that the Government does not have a strategic vision and effective strategy to address the problem. Because all I have heard from Members have all been covered by our social policies. The Chief Executive also in his 2001 Policy Address, in sections 106 to 129, talked about social policies in a changing economic climate. So I would urge Members to go back and read these sections of the Policy Address. In this Policy Address, the Government again reiterated the objective to create an environment that everyone has the opportunity to fully develop their potential and necessary support should be provided to those hardest hit by the rapid changes in circumstances as well as disadvantaged groups. Our aim is to help our people to enhance their ability to help themselves and to boost their will-power to do so. The Government also in this document reported about $103.3 billion that we'll be spending this financial year on public housing, health care and social welfare. We also reported in the area of social welfare, there are 377 000 recipients on the Comprehensive Social Security Assistance Scheme and 529 000 recipients of Social Security Allowance benefits. Spending on public health services is expected to be $33.9 billion. We also spend $2.6 billion annually on comprehensive support and rehabilitation services for people with disabilities. So Hon. Members please go back and read this document.

In the face of the impact brought about by economic restructuring, our focus is on fostering an environment which encourages and provides opportunities for upward social mobility. At the same time, to take care of the socially vulnerable in particular, those with limited capability to achieve this upward social mobility, specific help is required. And this is no difference from what Members suggested. As such, we have in place policies and services to secure their standard of living, improve their position and provide them with opportunities for economic and social participation in keeping with the Chief Executive's direction. In this way, we help the socially vulnerable, by enhancing, not impeding, their will to be self-reliant.

We consider that the multi-pronged approach of fostering economic growth, facilitating human investment and increasing social investment, together provide the best environment for people to leave the poverty net. Healthy economic recovery and a broader economic base is the key to lifting the standard of living for all, including those with no or little income. As the South China Morning Post said in an editorial last week, "It is time we focus attention once again on the goal of enlarging the economic pie so everyone can claim a bigger share".

Human and social investment through education, training and retraining, will raise the capability, productivity and competitiveness of our workforce, and help those unable to benefit from the changing economy in the short term. With opportunities of upward social mobility, everyone through the exercise of talent and hardwork can raise their income, improve their standard of living and climb up the social ladder over time.

Specific Measures in Place to Alleviate Poverty

We have a great variety of policies and measures in place to actualize our approach to alleviating poverty, many of which are specially tailored-made to assist the socially vulnerable, who may have limited capacity for upward social mobility. Members will be familiar with our social security system, under which direct financial assistance is available and which serves as an effective and immediate relief for the needy. Public rental housing is provided to families in genuine need who cannot afford other types of accommodation. Tenants in financial hardship are given rental assistance under the Rent Assistance Scheme or under the CSSA Scheme. In addition, heavily subsidized medical care and welfare services are provided. If you have heard Members' remarks earlier, you will have thought that the Government is heartless and doesn't have any of these in place.

We believe that education and training are the ultimate routes to enhance the capability of our population, thereby building up the human and social capital of our society. The provision of nine-year free universal basic education, together with the heavily subsidized senior secondary and tertiary education, guarantees educational opportunities for all who have the potential and ability to pursue studies. No student is denied access to education because of a lack of means. Financial assistance is available under various schemes to needy students at all levels.

Training and retraining, as a means to upgrade the skill level of the workforce, are especially important to those who need to acquire the new skills in the new economy. Training institutes, including the Vocational Training Council and the Employees Retraining Board, provide a wide range of relevant programmes.

To supplement this fundamental strategy, the Government has in recent years launched an extensive range of short-term and long-term measures, which aim to help the community to deal with the current economic environment.

Some Hon. Members have criticized the Government for not introducing new measures to deal with the situation. I shall, over the next few minutes, outline some of the new initiatives announced in the past 13 months.

Measures announced in 2000 Policy Address

The Chief Executive announced in the 2000 Policy Address, an extensive package of initiatives to promote the wider economic participation of socially disadvantaged groups, at a cost of $2.7 billion over a two-year period. Apart from infrastructural-related jobs, an additional 15 000 jobs have been created, including 7 000 social investment jobs and 8 000 related to the normal expansion of Government services. $400 million has been earmarked to finance the Skills Upgrading Scheme, which provides focused skills training in this year and the next for elementary workers with low education levels. For the long-term unemployed middle-aged persons, the Re-employment Pilot Programme for the Middle-Aged provides this Group with one-stop counselling and follow-up services. The Business Startup Assistance Scheme helps retrainees who want to start up a business or become self-employed. I can go on and on the list but I shall not go into the details.

Measures announced in the 2001-02 Budget

A series of measures were announced in the 2001-02 Budget, designed to upgrade our human capital and I shall not again go into the details but if Members would like to go back to measures announced in the 2001-02 Budget, you will find the details of the measures that we proposed.

Measures announced in 2001 Policy Address

All of these efforts were further enhanced in last month's Policy Address. The Chief Executive announced the creation of an additional 30,000 jobs together with another package of relief measures. These include a reduction in rates payment in the coming year, and a proposed increase in the tax-deduction ceiling for housing loan interest. A $5 billion Continuing Education Fund will be established to subsidize those with learning aspirations to pursue continuing education and training programmes. And a $300 million Community Investment and Inclusion Fund will be set up to build up the social capital in our community particularly, amongst the vulnerable.

Income Redistribution Measures

Some Hon. Members have earlier alluded to the need to introduce income redistribution programmes. Other countries have attempted to tackle income disparity by adopting high-tax policies. However, as I have already explained to Hon. Members at last week's Council Meeting, such income redistribution measures, involving fundamental changes to the structure of taxation and/or government expenditure, are likely to do more harm than good to the economy, in the longer term. These measures are likely to dampen the work incentive, especially amongst the higher paid and better-skilled workers. If taxation levels were to rise, this might undermine Hong Kong's competitiveness as a place to do business, which in turn would discourage investment and lead to a reduction in job opportunities for workers at all income levels.

Committee to Alleviate Poverty

I am also aware that a few Honourable Members have called for the setting up of an inter-departmental committee to study the issue and causes of disparity between the rich and the poor, and to formulate social and economic strategies to alleviate poverty. I and my colleagues have already explained the Administration's position on this on numerous occasions in the past six months. We believe that the existing arrangements for co-ordinating poverty alleviation efforts across the Government, already provide the necessary degree of co-ordination and community input.

Inevitably, many of the issues which the Government has to deal with, are cross-sectoral in nature. Alleviation of poverty is just one example. It is handled, like other overarching issues, through discussion in various internal fora and coordinated at different levels within the Government. It is clear from my earlier remarks that the Chief Executive himself is concerned about the plight of the families with low incomes and the socially disadvantaged and is personally involved in development of our strategies, policies and programmes. Considerable discussion has already taken place between various Bureaux in their formulation, in advance of the annual Policy Address and at other times.

Conclusion

In closing, I wish to thank Honourable Members again for some of their very useful comments and suggestions put forward in today's debate. The Government understands and empathises with the hardships the community is currently going through and has developed mechanism to gauge social, economic changes and issues and strategies and social policies which will assist the low-income and socially disadvantaged. The Government is committed and will continue with its efforts to improve the livelihood of people to ensure that the needs of the vulnerable are addressed and in a manner which promotes self-reliance and upward mobility amongst socially disadvantaged groups.

And, it is clear from my earlier remarks that the Administration cannot support the Hon. Wong Sing-chi's amendments to the motion.

Thank you.

End/Thursday, November 22, 2001

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