Targeting, Universalism and Child Poverty in Hong Kong

Abstract

Concerns about the long-term effects of child poverty on individuals and society have been increasing. Urgent action needs to be taken to combat child poverty, but what is the best strategy likely to be? The relative effectiveness of means-tested versus universal schemes for poverty alleviation strategies has long been debated. Key differences include screening costs, targeting errors, incentive gaps and issues of financial sustainability. This article explores and compares the extent to which the Hong Kong SAR Government’s current means-tested Comprehensive Social Security Assistance (CSSA) scheme and alternative simulated means-tested and universal schemes could alleviate child poverty and income inequality. Core data for the study was taken from cross-sectional household survey data in Hong Kong. The study found that means-tested schemes with flat rates had higher adequacy in terms of the amount of benefits reaching poor households, than those with sliding scales. Targeting schemes had relatively higher exclusion errors compared to schemes with universal benefits. Evidence was found that that universal benefit schemes with flat rates had substantially greater impacts on all child poverty and income inequality indicators compared to the current CSSA and simulated means-tested schemes with flat rate benefits. The study is timely and presents a new and important opportunity to assess the extent to which a simulated policy change from means-tested to universal benefit could more effectively combat child poverty and reduce income inequality as well as achieve financial sustainability. The article concludes that more effective policy initiatives and approaches to child poverty and income inequality could be gained by varying dimensions, including: type of programmes (means-tested versus universal basis); benefit levels; and delivery methods (flat rate versus sliding scales). The projected expenditures of 42 cash transfer benefit schemes and four selected means-tested and universal programmes with the lowest and highest average costs can form the basis for future discussion on policy options to promote social and economic improvement for all groups.