Hong Kong has a poverty line, is it time New Zealand implemented one too?
Dr Bryce Wilkinson and I are in Hong Kong to study their welfare system and policies for poverty alleviation. Over the last couple of days, we have spent some time meeting with senior representatives from government departments. Specifically, the Central Policy Unit and Department of Labour and Welfare.
While I was aware the Hong Kong government had implemented a poverty line (a means of measuring poverty , and changes in poverty over time), I was not aware of the wisdom behind its implementation, or how it was being used practically to influence policy. Many of the readings I could get my hands on were riddled with bureau-speak (or weren’t in English!). The meetings, however, clarified many of my questions.
Meanwhile back at home, Jason Walls at the NBR wrote on the lack of official poverty definitions and measures in New Zealand.
Poverty can mean whatever a politician wants it to mean, they even have a suite of measures to choose from: material deprivation indices, income measures, before/after housing costs, before/after government tax and transfers…to name a few.
The Ministry of Social Development’s Household Incomes in New Zealand: trends in indicators of inequality and hardship does collect data on a range of these measures, but explicitly advises against choosing just one as illustrative of poverty in New Zealand.
So what can New Zealand learn from Hong Kong?
Here are some of my take away points:
- The poverty line is set at 50% percent of the median income, before housing costs, and before tax and transfers.
- It has three primary functions: to analyse the poverty situation, to assist policy formulation, and to assess policy effectiveness.
- The reason for using a relative measure of poverty, rather than an absolute measure of deprivation is because cities as developed as Hong Kong (purportedly) make absolute measures irrelevant.
- A tangible example of how the poverty line has been used to influence policy is through the introduction of the Low Income Family Allowance. Prior to the poverty measurement, the government had take an Angus Deaton-style approach to welfare, where “Economic growth is the engine of the escape from poverty and material deprivation” (the quote even featured in the presentation we were given). However, the poverty line data revealed there were a number of working families who were still poverty. A policy targeted specifically at working families was then introduced.
- The poverty line also reveals the people close to falling below the line, so that policies can be targeted at prevention.
- One problem with the current measurement is that it suggests a high rate of elder poverty. However, it is likely the figure is exaggerated as it only measures income, not assets. It therefore does not capture asset-rich older people, or the family support they receive.
- The poverty line does not solely inform means-tested subsidies and transfers. While the poverty line can give some information about who is in poverty, policies would still need to balance this with ensuring the incentives of a policy are right, and that a new policy does not encourage moral hazards. Currently, those slightly above the poverty line may still be eligible for means-tested subsidies, while those below the line are not necessarily guaranteed eligibility.
- We met with academic Professor Hung Wong from the Chinese University of Hong Kong, who is at the forefront (teamed with international colleagues) of formulating and analysing a deprivation index for Hong Kong. A study in 2013 found that in comparing the deprivation rate (so, the lack of essential material goods and services), and the income poverty rate, there is only an overlap of 41.7% for people who are in poverty (defined by the poverty line) and also poor. That means there are some classified in poverty who have sufficient material security, while there may be some suffering deprivation who aren’t classified as poor.
- Naturally, we asked what could explain the lack of overlap between deprivation and income poverty. Analysis in this area is still being done, so we must wait with eager anticipation for the results of that research.
- A poverty line won’t reveal how policies have improved material living standards, it only measures whether incomes have increased.
- Interestingly, in a survey asking those eligible for the Comprehensive Social Security Assistance (a benefit payment) why they hadn’t applied for it, many revealed it was because they did not have financial need for it. This again suggests that those who are income-poor may not necessarily be suffering deprivation.
The call for official poverty measure won’t go away, as long as poverty remains a serious issue for voters and politicians. Certainly more could be done to strengthen informed public debate, though as the Hong Kong example shows, official measures are riddled with complexity.
Finally, I would like to sincerely apologise to anyone who has been distracted by typos in my blogs (thanks for pointing them out, Mum!) I’ve taken a very libertarian approach to proper spelling and grammar.
Now, as a reward for reading this post, some photos. Popular blogs tend to have photos of food and cute stuff, so here goes: