Minister for Social and Family Development Chan Chun Sing ruled out having an official poverty line. He was speaking in reply to Non-constituency Member of Parliament Yee Jenn Jong (Workers’ Party). Chan said it would not fully reflect the severity and complexity of issues faced by the poor, and may also lead to needy persons who happen to be above the line missing out on assistance. The full text of the question and written parliamentary reply is as follows:
Parliamentary sitting, 21 October 2013
Question by Yee JennJong:
To ask the Minister for Social and Family Development whether the Government plans to introduce an official poverty line adapted from international practice to identify at-risk households and to measure the performance of governmental and non-governmental efforts in helping them leave the poverty cycle.
Written Answer by Chan Chun Sing, Minister for Social and Family Development:
Different countries tailor their methods to identify and assist their needy according to their circumstance. Even amongst developed countries, New Zealand and Canada do not subscribe to official poverty lines. In Singapore, we use broad definitions for the groups we seek to help, have clear criteria to identify and assess those in need, and tailored schemes to assist them. A poverty line does not fully reflect the severity and complexity of the issues faced by poor families, which could include ill health, lack of housing or weak family relationships. If we use a single poverty line to assess the family, we also risk a ‘cliff effect’, where those below the poverty line receive all forms of assistance, while other genuinely needy citizens outside the poverty line are excluded. Our assessment process is rigorous but also flexible to cater to the genuinely needy. Singaporeans who do not meet scheme criteria but who still deserve help, can receive assistance.
Social media tore at the “cliff effect” that he mentioned. And rightly so. Look carefully at Yee’s question. He was suggesting that having an official poverty line would do two things: identify at-risk households and provide a convenient longitudinal gauge of the effectiveness of policy intervention. He did not say that a poverty line is all that is needed to “fully reflect the severity and complexity of the issues”, nor did he suggest that “those below the poverty line receive all forms of assistance, while other genuinely needy citizens outside the poverty line are excluded.”
Chan Chun Sing twisted the question into this form in order to knock down the idea. This is not engagement. It is contortion and misrepresentation in order to avoid engagement.
A good government will always have a multiplicity of help schemes for the poor and underprivileged. Each help scheme will have its own set of eligibility and means-testing criteria, simply because each help scheme seeks to address a specific need. But precisely because there’s a multiplicity of programmes, each with varying criteria, it becomes too complex for the public to have an easy grasp of whether we’re moving forwards or backwards.
A simple measure like a poverty line is a rough indicator but a useful one to know how we’re doing. Nobody is suggesting that it becomes the only criterion for receiving state support; nobody is arguing for a “cliff effect”.
Secondly, a poverty line helps direct resources a little better. Without it, there’s a tendency to sit back and say, we have all these schemes and it’s up to the indigent folks to approach us for help. The reality is that the indigent also tend to be cut off from information because of economic deprivation. Having an at-risk indicator like a poverty line helps social help providers to know who they should pro-actively approach with the possibility of offering help. Which doors should we knock on?
Chan’s answer reinforces a general view about this government. They really do not want to provide social assistance. At heart they really do believe in trickle-down and little else. They only get into social assistance when they can’t avoid it and a problem is staring them in the face. More effort is spent trying to excuse themselves from doing anything, rather than propel themselves to deliver assistance. Twisting Yee’s words in order to avoid accepting the value of having an official poverty line is entirely consistent with this government’s character.
Undoubtedly, they are afraid that once an official poverty line is drawn, the ineffectiveness of existing social support becomes clearer, with at-risk numbers refusing to budge year after year. Public pressure to do more becomes hard to resist. Doing more, however, is not what the government wants.
How about using the same formula as Hong Kong for a poverty line?
Nothing should stop civil society from arriving by consensus at a poverty line. If the government won’t set one, we’ll derive our own. Used repeatedly over time, it will gain acceptance as a measure of our society’s social wellbeing. The easiest, especially if we want comparability, is to follow Hong Kong’s definition.
So first, we need to understand how Hong Kong’s official poverty line is set. Let me quote Chief Secretary Carrie Lam’s statement:
The poverty line is defined as half of the median monthly household income of all domestic households in Hong Kong, prior to government intervention like tax and social benefits transfers. This approach is based on the concept of relative poverty as opposed to absolute poverty expressed in terms of basic subsistence.
The commission considers that in an affluent city like Hong Kong, poverty can no longer be understood merely by the lack of ability to afford minimum subsistence. Relative poverty acknowledges that the definition of poverty should move with the times and change with general living standards.
This is in line with the current Government’s thinking that we should put in place a reasonable and sustainable social-support system where different strata of society can share the fruits of economic development.
For 2012, the poverty line was $3,600 for a single person, $7,700 for a two-person household, $11,500 for a three-person household, $14,300, $14,800 and $15,800 for a family of four, five and six & above respectively. These poverty thresholds will be reviewed annually in line with the median monthly household income movement.
– Statement from Hong Kong Information Services Department, 30 September 2013, link: http://www.news.gov.hk/en/record/html/2013/09/20130930_110325.lin.shtml
The statement continues, cautioning readers to be conscious of the limitations of such a simple, broadbrush measure:
While easy to understand and comparable to international and local practices, the income-based poverty line has its limitations.
Specifically, the median monthly household income measures only income without considering assets. Some “asset-rich, income-poor” people, such as better-off elderly people or retirees, may be classified as poor, thus overstating the poverty problem.
Given the relativity concept, poverty cannot be eliminated. Indeed, an economic upturn with a broad-based improvement in household income does not guarantee a decrease in the size of the poor population, especially when the income growth of households below the poverty line is less promising than the overall. There will always be people below the poverty line.
When we try to use the same definition as Hong Kong to derive a poverty line for Singapore, we immediately run into problems. Firstly I am unable to establish how “income” is defined in Hong Kong for their household income survey and for the purposes of poverty line calculation. Some tables from Hong Kong Statistics (e.g. in this report: Household income distribution in Hong Kong) appear to use the term “income from main employment”; other tables just say “income”. Data from Singapore’s Department of Statistics website (e.g. a report called Key Household Income Trends 2012, published in February 2013) tend to be based on “income from work” or “income from employment”. I can only hope that Singapore’s and Hong Kong’s mean more or less the same thing.
Moreover, one has to be cautious, for self-employed persons (e.g. hawkers) often do not declare their income from work accurately. And some households have significant income streams, but not from work. Singapore’s Department of Statistics points out in the same cited report (footnote, page 6) that “19% of resident employed households in the lowest 10% [decile] owned a car or employed a maid.”
Secondly, what does Hong Kong mean by “all domestic households”? Singapore uses “resident households”. How different are these concepts? I can’t quite work it out, so once again, I can only hope that the difference is not material.
Deriving Singapore’s poverty line
To figure out Singapore’s poverty line, we first begin by establishing the median income. Median income of what? There are various categories of households. From the above-mentioned report (Key Household Income Trends 2012), pages 30 and 31:
The figures refer to households headed by Singapore citizens or permanent residents (thus “resident”). “Resident employed households” means households that have at least one working person, while “resident households” includes those where no person works. The relevant numbers of households, taken from page 3 of the report, are:
You will also notice that in Table 1, I have chosen to extract not just the median household income but the median household income per household member. This is to eliminate the variability that springs from household size. Doing this is essential if we want to compare across several years, since households can gradually become larger or smaller over time, for all sorts of social factors.
Using the same formula as Hong Kong, the poverty line is half the median income (all resident households). Since the median as indicated in Table 1 is S$1,913, so the poverty line is S$956.
At first glance, it may seem a bit high. When I informally asked a few friends what they might consider a poverty line per head, most answered somewhere around $500 or $600, i.e. $2,000 – $2,400 for a family of four.
However, the figures in Table 1 are inclusive of employer’s Central Provident Fund (CPF) contributions. So if the per head income straddling the poverty line is $956, it generally means that the take-home income is one-third less, or around $650 per head. Another way to look at it is to consider the fact that in most other countries, people pay rent. In Singapore, they are more likely to pay a mortgage, but it still comes out of the monthly income, albeit that it mostly comes out of the CPF portion. In other words, a poverty line at $956 per household member is not far off what people here consider as the amount of money needed to survive ($500 to $600 per person per month).
In any case, if we want comparability with other countries, we should adopt a similar formula. OECD countries generally use a line drawn at 60 percent of median household income.
What percentage of households are under the poverty line?
Now that we have established the poverty line for Singapore, the next question is: What percentage of households are under the poverty line?
Here we face two problems. Firstly, Singapore’s breakdown of household income is only based on Resident Employed Households. I cannot find a breakdown based on Resident Households (which includes households with no working person). Yet the latter is what I need, because the median income I am using is the median income of Resident Households. Secondly, even the breakdown based on Resident Employed Households is by decile; it is not fine-grained enough for our needs. It would have been better if we could see a percentile breakdown.
Consequently, I have to make an estimate. Here are the average incomes per decile of Resident Employed Households
All those in the first decile and about 80% of those in the second decile would be under our poverty line of $956. They comprise about 188,000 households (since each decile = 104,600 households). Adding in the 106,000 households that have no working member (and thus no income from work) we have a total of about 294,000 resident households under our poverty line.
That makes about 25.5 percent of all resident households in Singapore.
Compare this with Hong Kong.
In the territory, for the same year (2012) the percentage of the population below the poverty line is 19.6 percent, according to the South China Morning Post (1.3 million Hongkongers live in poverty, government says, but offers no solution, 28 Sept 2013), and Bloomberg News:
About 1.3 million people, or 19.6 percent of the population, were below the poverty line last year, according to a report commissioned by Chief Executive Leung Chun-ying and released on Sept. 28. The benchmark, determined for the first time, was set at half of the city’s median household income, excluding impact of tax and welfare transfer, the report said.
– Bloomberg, 29 Sept 2013, Hong Kong Poverty Line Shows Wealth Gap With One in Five Poor, by Fox Hu and Michelle Yun. Link
At first sight, it may appear that Chief Secretary Carrie Lau’s statement in September 2013 gave different figures. She said that “Hong Kong’s poor population in 2012 was around 1.02 million, or 403,000 households, representing a poverty rate of 15.2%.” But if you read carefully, she was referring to the figures after policy intervention, i.e. after receiving cash-based benefits from the government under policies like social security and student financial assistance. This is not comparable to what we have calculated for Singapore.
Has below-poverty-line percentage grown over time?
An obvious follow-up question is whether the percentage of households under the poverty line (going by the same formula) in Singapore increased over the last decade. Regrettably I’m not able to offer the figures here, because the effort involved in trying to dig up the base data from the Department of Statistics website is too daunting. I think the figures are somewhere there, but it will probably need a few days’ searching, and this post will be badly delayed as a result.
My guess is that the percentage has increased slightly from ten years ago (2002). I refer you to the graph showing the Gini coefficient of per-member household income, right at the top of this article. You can see that the Gini has increased.
The next table is also instructive.
(You may need to click on it to enlarge)
It shows that in 2002, the average income per household member in the richest decile was 21 times that of a household member in the poorest working decile. But by 2012, this gap had grown to 26 times.
In 2002, the average income per household member in the 6th decile (i.e. 51st – 60th percentile) was 4.85 times that of a household member in the poorest working decile. By 2012, this ratio had grown to 5.35 times.
Consistent with the Gini coefficient graph, this suggests that the income gap has been widening and that the less well-off are falling further behind the rich, and the median income. Logically therefore, the percentage who are below half-median income (which our formula uses as the poverty line) has been increasing.
The government surely knows this. Nor is it totally hidden, though for me to show you this, I had to tunnel through data and speak about esoteric statistical things. It would be easier for the layman to have a few simple measures laid out, among which would be the percentage of people or households under a poverty line.
But easier for laymen means adverse trends become more visible, which in turn means it becomes more likely that the ruling party might be pushed over a cliff.