Critically Present Social Security System Essay Example

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This analysis will focus on the UN definition of poverty in Hong Kong and examine its trend and magnitude. In 2011, there was a notable positive shift as the poverty rate reached its lowest point compared to 2001. Prior to this turning point, both the number of households living in poverty and the overall poverty rate were increasing. Specifically, in 2010, the poverty rate was at 17.9%, but it dropped to 17.1% in 2011, resulting in a decrease of 55,000 individuals experiencing poverty.

Between 2001 and 2007, the number of impoverished households in Hong Kong increased but then started to decrease. By 2011, there were 444,000 poor households, which was lower than both the figures in 2007 (11,000 less) and 2010 (7,000 less). However, despite this decline in poverty rates, income inequality in Hong Kong has worsened. In 2001, the high-income group had a median monthly income of $31,000 compared to $10,000 for the low-income group - making it 3.1 times higher.

Despite the introduction of a minimum wage law, income inequality has worsened. In 2011, the median monthly income for the high-income group rose to $35,000 while the low-income group witnessed a significant decrease to $9000. Consequently, the high-income group now earns 3.5 times more than the low-income group. Despite attempts to alleviate poverty and some favorable results from economic growth, it is evident that governmental measures have achieved limited success in tackling income disparity.

According to the data, the current social policies are insufficient in eradicating the immediate threat of poverty. Hong Kong's social security system consists of three tiers: Comprehensive Social Security Assistance and Old Age Allowance for social

assistance and social allowance, Mandatory Provident Fund for mandatory occupational pension, and private savings. The upcoming section of this essay will assess the efficacy of these individual social security policies in reducing poverty.

The Public Assistance Scheme, currently called the Comprehensive Social Security Assistance (CSSA), was renamed in 1993. Its primary goal is to offer financial aid to those who cannot financially support themselves. The program aims to increase their income to a predetermined level so that they can fulfill their basic needs. CSSA operates as a non-contributory and means-tested scheme that receives complete funding from the government. CSSA payments are categorized into standard rate, supplements, and special grants.

The text below describes the different types of standard rates from 2012, which include elderly persons aged 60 or above, ill health adults under 60, disabled children, able-bodied adults under 60, and able-bodied children. Each type has a different amount of standard rates payable, but they all follow the same guiding principles. These principles include higher rates for children and seniors compared to adults, greater rates for single individuals living alone compared to family members, and increasing rates based on the severity of disability (Tsoi, 2002). Additionally, there are five types of supplements. The long-term supplement provides an annual payment to recipients who have been receiving assistance for at least 12 months to replace household and durable goods. The single parent supplement is a monthly payment for single parent families facing challenges in raising their families. The community living supplement is a monthly payment for old, disabled, and certified ill-health CSSA recipients living in the community instead of institutions.

The Transport supplement aims to assist

social integration and geographical mobility by giving monthly aid to individuals who are certified 100% disabled or aged between 12 and 64. Moreover, the residential care supplement intends to alleviate housing burdens for elderly, disabled, and certified ill-health CSSA applicants who do not live in subsidized housing estates. Different special grants are also provided to fulfill specific needs of applicants, including school fees, school-related expenses, and essential traveling expenses.

According to Midgley, a famous English philosopher, the most effective way to address poverty is by redistributing wealth through social assistance. She outlined three conditions that must be met for this approach to succeed - progressive taxation as a funding source, providing sufficient benefits to lift recipients out of poverty, and ensuring easy access without any deterrents. However, when applying these principles in Hong Kong, only the first condition is fulfilled. In the following paragraphs, we will discuss how the Comprehensive Social Security Assistance (CSSA) in Hong Kong falls short in terms of benefit levels, application process efficiency, and incentives for recipients to reenter the job market. Currently, CSSA benefits are arbitrarily determined and do not accurately align with recipients' actual needs. The rates are reviewed annually by the Legislative Council based on changes in the Price Level determined by the Census and Statistics Department. It's important to note that using Consumption Price Index only represents household expenditure of the bottom 25% income bracket of the population.

There is significant doubt regarding whether the expenses of impoverished households accurately reflect their daily living needs. Additionally, certain CSSA recipients have expressed that they feel humiliated and intimidated during the application process.

A project conducted by

the Department of Applied Social Sciences in Polytechnic University and Oxfam Hong Kong in 2007 revealed that certain recipients of CSSA had concerns about delays and mismanagement in their applications. Additionally, some applicants accused social security officers of lacking empathy and displaying rude behavior. These findings were obtained through in-depth interviews and group discussions. Although the representativeness of the sample size is questionable, the criticism towards the "humiliating" application procedures likely holds some truth based on the experiences of CSSA recipients.

Moreover, several social workers in the study expressed dissatisfaction with the behavior of certain officers who tend to insult and threaten applicants with unreasonable requests. In relation to Midgley's third condition for eliminating poverty, which addresses access to social security, it is crucial that this does not discourage those in need from applying. The Social Services Department should strive for improvement in this area. Additionally, there is an underlying apprehension that receiving CSSA could promote a "dependency culture," particularly when the mechanisms within CSSA do not encourage recipients who are physically capable of achieving economic independence.

Despite the misconception that only lazy able-bodied individuals and new immigrants apply for CSSA, a majority of CSSA applicants (60% according to Oxfam, 2007) see social security as their last option to improve their dire financial situations. However, due to a lack of support services, only a small percentage (8%-10%) of able-bodied CSSA recipients can successfully re-enter the job market (Ming Pao Daily News, 2000) through the Special Job Attachment Programme. Additionally, the expenses associated with trying to reintegrate into the workforce can have negative effects on families receiving CSSA. This is especially true for single-parent

families without adequate child-care facilities who may choose to continue relying on welfare instead of seeking employment. In conclusion, CSSA does not provide enough incentives for recipients to return to work, which is crucial for escaping poverty. Another aspect of Hong Kong's social security system is the mandatory occupational pension called the Mandatory Provident Fund. Under this scheme, both employers and employees must make defined monthly contributions.

The Mandatory Provident Fund Schemes Ordinance, enacted in 2000, aims to improve safety nets and retirement protection. According to MPF regulations, employees must contribute 10% of their income while employers must contribute 5%. The contribution amount may be adjusted based on income levels and revised after implementing a minimum wage policy. Individuals earning below $6500 per month are only obligated for the minimum required contribution of 5% from their relevant income, which falls solely on the employer.

For employees earning more than $25000, both employers and employees must contribute $1250, which is the maximum contribution. All MPF contributions will be deposited into the chosen registered MPF trustee in the market by the employers. However, employees now have the option to select a new MPF scheme every year based on their performance. Subsequently, the subsequent paragraphs will address the limitations of the MPF scheme, such as its limited coverage and insufficient retirement protection, which undoubtedly hinder its effectiveness.

The MPF functions as a mechanism for providing employment-related protection, particularly in terms of retirement. However, it is important to note that the MPF's coverage is restricted and does not extend universally. Certain groups such as the sick, disabled, housewives, hawkers, and domestic employees are not included in this protection.

This exclusion encompasses a significant portion of the population. Moreover, employers may try to avoid fulfilling their contribution obligations by modifying employment contracts.

Under the law, employers must contribute to MPF for employees who work more than 60 days. However, some employers may manipulate contracts to be shorter or terminate and rehire workers, which leaves a large number of people without MPF coverage. Furthermore, certain cunning employers may attempt to modify contracts in order to evade their responsibility of contributing to their employees' retirement protection scheme.

The MPF Scheme aims to provide retirement protection and strengthen the safety net. However, the scheme falls short of providing sufficient protection. Unlike a defined-benefits scheme, the MPF is a define-contribution scheme. This means that the amount of employees' contributions is dependent on various factors such as the duration of contribution, returns from investments, deducting administrative and transaction costs, as well as the contribution amount.

The introduction of the MPF scheme in 2000 led to unpredictable benefits that were not guaranteed by trustees or protected by the government. This lack of guarantee meant that individuals nearing retirement age at the time would receive minimal or no protection due to the short contribution period. Elderly poverty was, and still is, a severe issue in Hong Kong. Instead of providing retirement protection as intended, the MPF added to the uncertainties and unpredictability of life after retirement.

The minimum wage law in Hong Kong was implemented in 2010 and took effect on Labour Day in 2011. Its purpose is to strike a balance between preventing excessively low wages, reducing the number of low-paid jobs, and maintaining Hong Kong's economic growth

and competitiveness (Labour Department, 2011). The government-appointed commission reviews the minimum wage rate every two years and has increased it from $28 to $30 per hour. However, there are concerns that the introduction of a minimum wage could lead to job layoffs for workers with low skills and disrupt the labor market equilibrium.

The impact of the minimum wage law in Hong Kong on poverty eradication will be evaluated. The government predicts that around 273,800 low-income workers would benefit from this law and avoid being underpaid. Nonetheless, there are reports suggesting that employers have been reducing employee fringe benefits since its implementation, which makes it uncertain how much effect it has had on the labor market.

The effectiveness of the minimum wage was evaluated by comparing changes in monthly income for different income groups in the first half of 2011. The population was divided into ten decile groups, ranging from the poorest 10% to the wealthiest 10%. The results revealed that the first three decile groups experienced an increase in monthly income ranging from 6.9% to 9.3%. However, there was either no change or a decrease in monthly income for the last three decile groups (HKCSS, 2011).

To accurately assess the effects of minimum wage laws, it is essential to take into account factors apart from income. This is because these laws were put in place during a period of economic growth. In order to obtain a more reliable evaluation, it is crucial to compare the living conditions of low-income households before and after the implementation of minimum wage laws. Oxfam Hong Kong conducted a study using two-stage stratified surveys, which interviewed

impoverished households with at least one family member earning minimum wage and compared their quality of life between March 2011 and January 2012.

The following paragraphs will explore the results of this study. Clearly, the minimum wage law has increased household income. Out of the 131125 families surveyed, around 70% reported a rise in their household income after the implementation of the minimum wage. Additionally, 72.6% of these individuals also witnessed an increase in their individual workers' income. Interestingly, despite earning more per month and per hour, employees saw a decrease in their working hours.

The average hourly wage of participants who remained in the same job before and after the implementation of the minimum wage has risen, with 56.8% earning over $28 per hour. However, this group also experienced a decrease in their average working hours by approximately 13.9 hours, resulting in the loss of benefits like paid lunch breaks and overtime pay. Moreover, 46.8% of respondents expressed dissatisfaction with no longer receiving previously compensated rest days. Despite an apparent increase in monthly income, more than half (55.8%) actually encountered a decline in individual income due to the loss of benefits and reduced working hours. It's worth mentioning that CSSA recipients perceive social assistance as a final resort for improving their financial situation.

Numerous CSSA recipients perceive discrimination and believe that the minimum wage affects their chances of obtaining low-income jobs. A study by Oxfam found that approximately 50% of surveyed CSSA recipients think that a minimum wage can incentivize them to rely less on social assistance. By attaining self-sufficiency, these individuals can overcome negative perceptions and stereotypes associated with reentering

the workforce.

The Oxfam study reveals that poverty does not necessarily decrease despite an increase in income. It indicates that 40.5% of households continue to experience deprivation, even with minimum wage laws implemented. Deprivation refers to the inability to afford essential items such as dental check-ups, leisure activities, private clinic visits during illness, and outings to tea houses. These items are considered crucial by numerous Hong Kong residents.

According to Townsend (1979), a person is considered in poverty if they lack the resources to participate in normal activities of the community and cannot fully integrate into society. Therefore, when 40.5% of respondents, representing 531354 households, still cannot afford necessary items, it highlights the ineffectiveness of minimum wage legislation in eradicating poverty.

Addressing poverty is a complex issue that cannot be fully resolved solely through social policies due to their flaws and limitations. However, recognizing these imperfections in social welfare policies is crucial for making improvements and ultimately achieving the objective of eradicating poverty. Reference list:
- Hong Kong Council of Social Service, The Statistic review of the Low Income Household in Hong Kong, 2011.
- Labour Department (2011). Statutory Minimum Wage: Reference Guidelines for Employers and Employees.
- Legislative Council (2012). Before and After the Statutory Minimum Wage Ordinance in Hong Kong: Survey of Low-income workers and their Families.
- Oxfam Hong Kong and Centre for Social Policy Studies, Department of Applied Social Sciences, Hong Kong Polytechnic University (2007). Perception and Utilization of CSSA: a Study on the Views of the Public and the Lower Income people.The text provides information on the Comprehensive Social Assistance Scheme from the Social Welfare Department (2012), available at http://www.swd.gov.hk/en/index/site_pubsvc/page_socsecu/sub_comprehens/. It also

mentions a chapter titled "Poverty Eradication and Social Security in Hong Kong" by Tsoi Kcon-wah in the book Advances in Social welfare in Hong Kong edited by D. T. L. Shek in 2002. The Gini Index information is sourced from the World Bank (2011) and can be retrieved from http://data.worldbank.org/indicator/SI.POV.GINI.