And in 1992, the government issued a consultation paper on the set up of a community-wide retirement protection system in Hong Kong. The paper proposed that 5% contribution of the employees’ salary and 5% contribution from the employers, with portable accrued benefits when changing jobs. And the payment would be obtainable at the retirement age (65 of age), or payable only under other special situation, such as emigration, total disability, health ground or death. This is actually the well known M.P.F. However the public rejected it in a 3 month consultation period about the scheme.
At the same time, the establishment of a publicly financed retirement benefits scheme has aroused a great controversy. Indeed, it has been considered for over 30 years. Central Provident Fund (CPF) and a compulsory Old- age Pension Scheme were ones of the suggestions but both of them were rejected. On 27th July 1995, Mandatory Provident Fund (MPF) scheme has finally become Hong Kong’s first government sanctioned pension fund scheme. From then on, Comprehensive Social Security Assistance (CSSA) and Mandatory Provident Fund (MPF) have been the two major social security measures in Hong Kong.
3 models of Social Security System
Social security can be divided into three parts which are the social assistance, social subsidy and social insurance.
A. Social Assistance
The provision of social assistance primarily aims to help the poorest in the community, who cannot afford their basic needs. It is a mean-tested scheme.
- Comprehensive Social Security Assistance
CSSA provides assistance at subsistence level to those with recognized hardships. It is non-contributory in which the funding is provided by taxation. It is a means tested scheme which will only assist those living in poverty. The monthly income, the properties owned, together with the deposit in banks will be the criteria for receiving the assistance. The total asset of the applicant and his family cannot exceed a prescribed limit.
People living in Hong Kong continuously for more than a year will be allowed to apply for the scheme. However, for those aged between 15 and 59, if they are not in school, they have to register in the Labour Department to show that they have the intention to find jobs. For a singled elderly, the monthly assistance is $2555 which covers food, clothing and transportation fee. There are also some allowances in this scheme such as an annual long term supplement for the elderly, disabled and the person who are medically certified to be in ill-health and have been receiving assistance continuously for 12 months to meet the extra costs incurred for the replacement of household goods.
Besides, some special grant like the rental allowance is given which is $1545 per person. There will be an extra amount of money for those who have received CSSA for more than a year. This amount is for them to maintain and renew their furniture. There is an allowance for single parent families, too. An extra amount of $255 per month is given. Another system named Portable CSSA is specially designed for the elderly living in the Guang Dong Province. The number of cases receiving CSSA grew from 105000 in 1994 to 231000 in 1999. The growth rate was very high and the expenditure in CSSA was more than a half of the total expenditure in social welfare.
B. Social allowance
Social allowance is not targeted at the poor, but those with special needs, such as the disabled, the elderly and orphans. Unlike social assistance, it is not means-tested and it is universal in nature.
Social Security Allowance Scheme
Social Security Allowance Scheme includes the Normal Old Age Allowance for those aged 65 to 68, with monthly income less than $4140, Higher Old Age Allowance for those aged 70 and above, Normal Disability Allowance for a disabled person and the Higher Disability Allowance for a severely disabled person. This measure is not mean-tested and contributory.
Another type of social security allowance is Disability Allowance. It is non-contributory and non-means tested. A certificate from a medical doctor is required for applying this allowance. The disability is further classified into two types, the normal disability and the higher disability. Normal disabled person means that he is severely disabled. Higher disabled person means that he needs to have constant medical treatment in public hospital or needs to been taken care but doesn’t have this service
C. Social Insurance
The target group of social insurance is those who can no longer rely on full-time employment to generate the financial resources they need to live, such as the retired people. Its funding mainly comes from the contributions by employers and employees, may be the government
Mandatory Provident Fund (MPF)
The government adopted the M.P.F. in 1995 and it was established on 1-12-2000.
Members of the workforce aged between 18 and 65 and self-employed persons aged 65 or below are required to participate in and make regular contributions to registered MPF schemes. However, some employers, such as those who, at the date the relevant provision in the MPF Schemes Ordinance is implemented, have attained 64 years of age and people covered by statutory pension and provident fund schemes, for example, civil servants and teachers are exempted. Mandatory contributions are basically calculated on the basis of 10% of an employee's relevant income, with the employer and employee each paying 5%. The MPF legislation has prescribed 65 as the retirement age. Scheme members who have attained age 65 may withdraw the benefits accrued from mandatory contributions in their MPF schemes in a lump sum. The funds are managed by approved trustees in private sectors, like banks and insurance companies. The Mandatory Provident Scheme Authority (MPFA) of the government is only responsible for surveillance for compliance and effective operation.
Other social security measurements
There are other social securities measurements in HK:
Criminal and Law Enforcement Injuries Compensation Scheme
This scheme provides cash assistance to people who killed or injured due to crime of violence or law enforcement.
Traffic Accident Victims Assistance Scheme
This is speedy cash assistance to traffic accident victims (or dependents ) on a non-means tested basis and without regard to who was at the fault in causing the accident.
.
Emergency Relief
It is a welfare provided for helping victims of natural and other disasters by means of material aid and by means of grants from the emergency relief fund.
The above three schemes are too specific and only few of people will apply these schemes. As a result, they cannot help to increase the social security in Hong Kong.
Strength and Weakness
We are now going to see the strength and the weakness of CSSA, SSA and MPF.
i. CSSA
Strength
CSSA provides financial support to the needy ones, it ensures the people can enjoy basic living standard, so fewer people will commit crime. As the crime rate is lowered, Hong Kong can become a more peaceful place to live. Furthermore, it helps to reduce the conflicts between the under-privileged and the poor under the capitalistic society. As CSSA can produce a redistribution effect, it helps narrow the income gap between the lower class and upper class.
Weakness
The CSSA is mean-tested, it cannot provide immediate help to need, applicants need to wait for a long time before they can live a better life. The amount of money provided is quite limited. It may not be enough for the applicants to meet their basic lives.
It of course increases government financial burden. Moreover, applicants may lose incentive to work since they may just rely on the CSSA and don’t go to work.
- SSA
Strength
For the Social Security Assistant Scheme (SSA), it suits the need of different people. There are the normal and the higher kinds of allowance which provide certain assistant for the health care and medical expenses. It improves the quality of living to a certain extent. Besides, it provides opportunities for the special needs people to get the welfare due to its universality.
Weakness
It cause a heavy financial burden to the government as 300,000 people receiving payments in 1996 and the number of people applying for it is increasing. As it is non-means, it cause much more expenditure than CSSA.
- MPF
Strength
The scheme help people to live a better lives when they are old, it prepares money for them to spend in the future. And unlike CSSA, since it is work-related, it won’t put a negative impact on the working incentive. Also, it reduces government’s involvement and financial burden.
Weakness
As the M.P.F. is work related, it has no help to those who have already retired or unemployed. It doesn’t provide much financial support to those of low income since the contribution is small (especially those with salary less than $4000 per month, because they don’t need to make contribution). Also, it may lead to cut down of welfare, benefit and salary of the employees by some bad employers to exempt from contributing the MPF of the employees. Moreover, it faces certain risk in private operation through private sector. Furthermore, the amount of benefits each individual will receive is uncertain because it depends on the investment return on the contributions. The scheme offers no protection against the investment risks facing private provident funds.
Overall comment
The social security in HK has it good and bad points Let us look at the strength of the system first.
The system can meet the basic needs of disadvantage citizens through the provisions of basic needs. CSSA and SSA do quite well in this aspect as they can provide help to deal with their daily expenses.
The system is also pretty all rounded. It can help different kind of people including the poor, elderly, disabled etc. Furthermore, it can reduce the inequality resulting extreme disparity between the rich and the poor. It is because the money given to the poor is from the tax revenue which mainly collected from the rich. Moreover, it benefit from social integration, arising from the sense of belonging the recipient may think that the government has cared about them.
However, there are also some weaknesses of the system.
The most serious problem is that it makes a high cost and heavy burden to the government spending because most of the social securities system is are non- contributory. The government cannot afford the spending when the economic is in recession.
It can at the same time create social alienation. In recently year, people who receive CSSA are labeled as inferior and lazy guy. Normal people do not like them as they think that they are just earning the money from the government without doing anything. This will cause social alienation and social instability.
The social security in HK is not enough. Since the tax is very low in Hong Kong and the assistance fund is based on the income from tax, the assistance level is quite low and only meets the basic needs.
The CSSA and MPF have loopholes. There are many problem aroused by the two schemes such as people cheat for CSSA and the employers find some method to minimize the MPF expenses on the employees.
Suggestions
The government should provide more counseling services for CSSA applicants to help to have a better feeling about receiving CSSA, so the applicants for the assistance would not feel a sense of inferiority since some of the applicants, especially the father of a family would feel shameful for depending the assistance to live and cannot act as the financial support for the family.
The government should quicken the approval of the assistance and subsidy so that the needy can get the money faster and do not need to suffer from the hard time. It can be done by increasing the manpower of the Social Welfare Department.
Also, our government should review the system frequently to deal with the changes of the society. We know that in HK there are more and more immigrants from the china. They usually need financial help from the government. Therefore, it is necessary to review the current system in order to suit the changes.
The social insurance can be carried out to secure the future income of the elderly such as, the Old Age Pension may be reconsidered to compensate the weakness of the M.P.F of not providing support to those unemployed, housewives, low income group, can be released. This is a contributory scheme which shows respect to the elderly. The younger generation will contribute to the pension funding. This can ensure that the elderly can get a stable support and all people can be benefit when they get old and retire.
Conclusion
In conclusion, the strength of the social security system in Hong Kong is comprehensive, universal and flexible to meet emergency needs. Different types of scheme are launched to meet different type of needs and against different type of risks. Although the level of assistance is low compared to other foreign cities, but HK is doing quite good because of her low taxation.
The Social society system in Hong Kong has strength and weakness. There are still many to improve. The government should review the schemes over times and provide the social assistance for the general public effectively and efficiently. A policy, even the most perfect one, cannot meet the needs of people of individual districts or special groups. Therefore, their needs should be observed and reviewed frequently.