Commission on Poverty
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Pro-employment and Pro-child Low-income Working Family Allowance

 

In his Policy Address released this Wednesday, the Chief Executive outlined the poverty alleviation blueprint of the current-term Government.  The Low-income Working Family Allowance (LIFA) is a key element of this blueprint.  Let me share with you how we have worked out the LIFA proposal.

 

(1) Identifying the poverty problem to help the most needy

 

In the Commission on Poverty (CoP) Summit last September, we published the first official poverty line and released the “Hong Kong Poverty Situation Report 2012”.  The analysis shows that employment can lower poverty risk effectively.  The Comprehensive Social Security Assistance (CSSA) Scheme can also effectively alleviate poverty and lift poor families out of poverty.  However, there remain some 140 000 working households involving 490 000 persons living below the poverty line.  These families do not rely on CSSA.  Many of their working members have worked hard on a full-time basis.  But having to raise the families alone has created a heavy burden for these sole breadwinners.  Of particular attention is that 60% of the working poor households have children to look after and about half of these households have two children or more.  Giving these poor children or young members at school more means for learning opportunities will help them overcome inter-generational poverty.

 

The LIFA aims to provide cash subsidy to the working poor households.  Apart from the family-based basic grant, each child will be given a monthly allowance of $800 or $400 (depending on the household income), which could help meet their after-school learning and other needs.

 

(2) Maximising common grounds through engagement

 

In developing the parameters of the LIFA scheme, we have engaged the CoP and its Social Security and Retirement Protection Task Force twice in thorough discussions.  At the invitation of the Legislative Council (LegCo) Subcommittee on Poverty, the Secretary for Labour and Welfare and his colleagues met with Members and deputations to listen to their views in two meetings.  I also met with the Alliance for Protection of Low-income Families (爭取低收入家庭保障聯席) personally.  Furthermore, we have studied carefully some 15 submissions from political parties, trade unions, non-governmental organisations and concern groups.  We have incorporated their views as far as possible on a range of areas, including a more relaxed working hour requirement for single parent families and expanding target beneficiaries to include working households marginally above the poverty line.

 

(3) Adopting a two-tier design to broaden scheme coverage

 

Our poverty line is defined as half of the median monthly household income prior to government intervention like tax and social benefits transfers.  After the promulgation of the poverty line, many parties have raised with us that the new poverty alleviation measure should not only help those households below the poverty line.  Supporting households marginally above the poverty line is conducive to attaining the policy objective of poverty prevention.  We have therefore proposed a two-tier household income structure for the LIFA.  If the household income is at or lower than 50% of the median monthly domestic household income (MMDHI), the household will be eligible for a full basic allowance.  If the household income falls between 50% and 60% of the MMDHI, a half allowance will be given. 

 

We will also adopt a two-tier arrangement for working hours to reward those who work more.  We will use 208 and 144 hours as the two working hour thresholds.  If the applicant works 208 hours or more a month, the family will get a monthly basic allowance of $1,000.  If he can attain the minimum working hour of 144 hours but falls short of 208 hours, his family will be given the basic allowance of $600.  In view of the childcaring needs of single working parents, we propose to reduce substantially their working hour requirement to 72 and 36 hours respectively. 

 

That said, the level of child allowance, proposed at $800 a month per eligible child for full rate and $400 for half rate, will be determined according to the household income.  It will not be affected by the number of hours worked.

 

(4) Introducing asset test to ensure efficient use of public resources

 

Among the proposals from the political parties and concern groups, one of the biggest differences is whether an asset limit should be imposed on the LIFA.  Those agreeing with such a proposal consider that the limit should be more generous than other social security schemes.  We have a duty to ensure that this government-funded and broad-based poverty alleviation measure is going to help those in need on a reasonable and sustainable basis.  We therefore consider that the household applicants should be subject to asset tests.  We propose to broadly adopt the asset limits for public rental housing.  For instance, based on 2013 figures, the assets of an eligible 4-person household should not exceed $436,000.  This is six times of the asset limit of CSSA and more than double that of the Work Incentive Transport Subsidy Scheme.  This rather generous arrangement will encourage low-income households to save for hard times.

 

(5) Monitoring the effectiveness of LIFA through the poverty line framework

 

According to 2012 figures, introducing the LIFA is estimated to involve recurrent expenditure of about $3 billion each year, benefitting more than 200 000 low-income households with 710 000 persons.  Of these, more than 180 000 are eligible children or young people.  Of the 200 000 beneficiary households, some 90 000 are working households living below the poverty line, representing 64% of the total of some 140 000 non-CSSA working poor households.  Among these 90 000 beneficiary working poor households, we estimate that around 38 000 households will be lifted out of poverty, reducing the overall poverty rate by 2.1 percentage points and the child poverty rate by 4.4 percentage points.  After the roll-out, we can make use of the annual poverty analysis to assess the effectiveness of the LIFA and make adjustments as necessary.

 

Conclusion

 

The LIFA is another important poverty alleviation policy after the “Old Age Living Allowance” introduced by the current-term Government.  The Government has analysed the views gathered and studied them in detail.  Yet, in the few months ahead, we will continue to listen to public views on the scheme.  We shall then seek funding approval from the LegCo.  I look forward to support from LegCo Members so that the scheme can be implemented as early as possible to bring hope to low-income working families.

 

Mrs Carrie LAM
Chairperson of the Commission on Poverty


17 January 2014