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Respect for the elderly to be put to the test


By: Justine Lau and Joe Leahy
 Financial Times, July 1, 2002



In the best Confucian tradition, Tung Chee-hwa, Hong Kong's chief executive, has long emphasised respect for the elderly as a big priority.

One of his first acts on coming to power in 1997 was to increase the government's social welfare payment for the elderly by nearly one quarter.

Five years on, however, improving the lot of the territory's growing elderly population continues to be a huge challenge.

Already battered by the Asian financial crisis, Hong Kong is struggling through its second downturn in five years.

The government's revenue is shrinking and unemployment rising. Antony Leung, financial secretary, has warned that government expenditure is expected to grow only 1.5 per cent a year over the next five years.

This has left the administration with little room to increase spending at a time when pressure on the welfare system is rising.

The elderly are by far the dominant group drawing welfare benefits, accounting for 55.9 per cent of all cases in April this year.

While the number of unemployed is rising, it is the elderly who are expected to place the greatest burden on the system in the future. In 2001, 11 per cent of Hong Kong's population was above 65 years old; by 2031 one in four will be above this age.

The cost of elderly welfare and medical care could escalate from HK$20bn a year now to HK$50bn in 30 years time, at which point it could account for one fifth of total government spending, says Nelson Chow of the University of Hong Kong.

To meet the longer-term challenge of this burden, the government in 2000 introduced the country's first compulsory pension scheme. The problem is what to do in the intervening 20 to 30 years. It is not that Hong Kong's welfare system is ineffective - the government's social safety net does ensure most old people do not end up on the streets.

The difficulty is that the system is inefficient; resources are spread too widely over all income groups, leaving many who do not meet the stringent requirements for full welfare overly dependent on their children or on meagre savings to survive.

Under the present system, there are two main allowances available to the territory's elderly. The poorest - those who do not live with their children and have assets of less than HK$37,000 - receive the comprehensive social security allowance of HK$2,500 a month plus rent concessions and other allowances.

Those with assets above this amount, or who live with their children, can apply for the old age allowance, nicknamed "fruit money" by Hong Kong people, which is valued at up to HK$705 a month.

This is means tested for those aged 65 to 69 but is available to all aged 70 and over.

The government also provides housing and medical subsidies.

For those who qualify for the comprehensive social security allowance, the system provides an adequate living standard, Prof Chow says.

However, for those forced to make do with fruit money, things can be more difficult.

Prof Chow estimates that about 40 per cent of fruit money recipients have lower incomes than people on full welfare.

Take Lo Lai Shung, for instance, an energetic 74-year-old widow living in a two-room apartment in Kowloon.

A former factory worker, she is extremely careful with her money and possessions - many of the appliances in her flat are still wrapped in their original plastic to help them last longer.

She saved HK$100,000 for her retirement. This is a large sum for her but small for Hong Kong, where average monthly expenditure is estimated at HK$21,797 for a three to four person household.

However, it is still enough to disqualify her from all welfare payments except the fruit money.

With few jobs available, Ms Lo is forced to use her savings to pay her monthly bills.

"No matter how thrifty I am, I still have to spend at least HK$2,000 a month - and I have to make sure I don't fall sick," she says.

The government has released few details of what it plans to do to overhaul the system.

But as part of a review, it is believed to be studying abolishing the fruit money allowance altogether.

The money saved would be used to increase welfare payments for those who need them most - subject to means-testing - perhaps by introducing a multi-tiered system.

Any attempt to stop the fruit money payments will meet stiff opposition.

It would leave many old people, particularly those who live with their children and are therefore not eligible for full social security benefits, without an important source of income.

"It will only make the old people feel that society doesn't care about them anymore," says Ng Wai Tung a social worker. However, CK Wong of the department of social work at the Chinese University of Hong Kong, says that given the budgetary pressures on the government, some form of change in this direction is inevitable and even desirable.The key will be the timing. "It's a very politically sensitive issue, especially when the economy is not good," says Prof Wong.

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