The welfare claims ratio
17th October 2012 (updated 21-Oct-2012)

Do HK people claim their entitlements? Writing about the proposed Old Age Living Allowance in SCMP last Friday, 12-Oct-2012, Albert Cheng King-hon (aka Jing-han), who opposes means-testing, said:

"The additional financial burden, if means testing is waived, is over-exaggerated by the government, because it's an open secret that most of the elderly who qualify for the "fruit money" do not claim it."

That statement, which formed the core of his argument, is false. The actual claims ratio for elderly welfare is over 90%, as we will show below. The only "open secret" here is that Mr Cheng does not check his facts before mouthing off. HK's elderly are not as irrational as he thinks. He's probably not the first person to make this claim though, so let's set this urban myth to rest.

Now, keep in mind that there are three mutually-exclusive benefits that a person aged 70+ could receive, in ascending order of value: either Old Age Allowance, also known as "fruit money" (OAA), or Disability Allowance (DA), or the means-tested Comprehensive Social Security Assistance (CSSA). You cannot have more than one of these. You need to satisfy disability tests for DA (there are two levels), and a financial means-test for CSSA, but the fruit money is not means-tested over 70.

The eligible over-70 population

Thanks to the 5-yearly Census which took place in 2011, we have some accurate data to work with (they have a neat roll-your-own tables feature, by the way - geek heaven). The most recent date for which consistent OAA and DA figures are available is 31-Mar-2011, so we'll work with that, because the propensity to claim won't have changed much since then. The Census was conducted as at 3 a.m. on 30-Jun-2011 (Census Moment), but we can roll back 3 months based on known growth rates.

For statistical purposes, the resident population of HK is divided into Usual Residents and Mobile Residents. Usual Residents comprise:

• Permanent Residents (PRs, with right of abode) who had stayed in HK for at least half of the 6 months before or after the Census Moment; and
• Non-permanent residents (ID card holders, including Foreign Domestic Helpers) who were in HK at the Census Moment.

"Mobile Residents" are defined as:

• PRs who were not Usual Residents but were in HK for at least 1 month but less than 3 months during the 6 months before or after the Census Moment, regardless of whether they were here at the Census Moment (in fact, the Census questionnaire asked people about their expectation for the second half of the year). This means that they spent at least 6 months of the census year outside HK. At the 2011 Census Moment, there were 212,235 Mobile Residents, of whom only 40,359 (19.0%) were in HK.

The Census also provides data on population excluding Foreign Domestic helpers (FDHs). You wouldn't expect many FDHs over 70, but there were actually 38 in the Census, of whom 7 were aged 75 and 1 was aged 82! At the Census Moment, there were 706,974 over-70 non-FDH residents, of whom 20,689 were Mobile Residents. For example, these Mobile Residents include PRs (including non-Chinese) who have retired overseas but stay with children in HK for a total of at least 1 month in either half of the year.

The OAA, DA and CSSA rules impose two requirements which mean that only part of the 70+ population is eligible, even for OAA. They must be:

• resident in HK for at least seven years (unless qualified before 1-Jan-2004, when this requirement was introduced); and
• in the case of OAA and DA, resident in HK continuously for the 1 year immediately prior to application, with total absences of not more than 56 days

So Mobile Residents don't qualify unless they stayed in HK for at least 1 year (less 56 days) some time after reaching 69, or met the criterion after reaching 65 and passed the means test between 65-69. We will therefore assume that 80% of Mobile Residents over 70 have not qualified for benefits under current rules.

The Census also gives the number of years of residence in HK, in ranges. Of the resident population of 706,974 over-70s at the Census Moment, 3,914 had lived in HK less than 7 years in their life. A few of them may have been PRs by birth but are now included in Mobile Residents, and a few of them may have qualified by being resident and over 70 before 2004 (and hence over 77.5 at the Census Moment) but we estimate that 90% of them are not qualified for OAA.

Finally, the growth rate in the over-70s is currently about 1% p.a., or 0.25% in 3 months. So our best estimate of the population of eligible over-70s at our measurement date of 31-Mar-2011 is as follows:

Rounding, we can say about 685,200 people were eligible to claim. This number will also include a number of Usual Residents who still don't meet the 1-year (less 56 days) residency requirement, and some people whose applications for OAA are pending.

Number of OAA recipients over 70

According to figures from the Social Welfare Department, at 31-Mar-2011 there were 437,002 people on "Higher" OAA (i.e. over 70). In fact the payments of "Normal" OAA (for aged 65-69) and "Higher" OAA (for 70+), which historically were different, are now the same $1090 per month, but the Higher OAA is not means tested.

Number of DA recipients over 70

According to a Legco answer, at 31-Mar-2011 there were 49,775 people aged 70+ on DA.

Number of CSSA recipients over 70

In the 2011 Census, of people over 60, 52.4% were over 70. According to a Government statistical report in Sep-2012, the number of CSSA recipients over 60 has been relatively stable since 2004, and declining as a share of the elderly population from 17.4% at the end of 2004 to 13.5% at the end of 2011. It was 188,283 at 31-Dec-2010 and 187,099 at 31-Dec-2011. Interpolating, we get 187,991 on 31-Mar-2011.

We cannot find separate data for those CSSA recipients who were over 70. So apportioning the over-60 figures according to the age of the population and rounding to 100, about 98,500 people over 70 were on CSSA at 31-Mar-2011. The figure is probably higher, because older retirees are more likely to run out of money and apply for CSSA than people aged 60-69 who are either still working or recently retired, and because people over 70 had lower lifetime earnings on average than those aged 60-69, due to the rising post-war economy. We call on the Social Welfare Department to publish better data for CSSA recipients by age, grouped in 5-year age bands.

UPDATED 21-Oct-2012
A reader has pointed us to a paper from the Government to Legco, which unfortunately the Government chose to produce in Chinese only, which is why we didn't find it before. The paper is "Administration's consolidated response to deputations' requests for the provision of statistical information relating to retirement protection (Chinese version only)" and in answer 14 on pages 5-6 you will find a table breaking down the number of over-60 CSSA recipients by age groups at 31-Mar-2011. This tells us that there were 187,487 CSSA recipients aged 60+, of whom 159,076 were over 65, of whom 131,835 were over 70. In answer 18 on pages 6-7, you can see that the number of CSSA recipients aged 65+ has been stable since 2004.

Final calculation

UPDATED 21-Oct-2012:

Altogether then, OAA+DA+CSSA = 618,612 recipients at 31-Mar-2011. That is about 90.3% of eligible persons. Of the remaining population, some of them still would still not qualify for OAA because:

• although they are Usual Residents (having spent over 3 months in HK in either half of 2011), they have not spent a whole year in HK with less than 56 days away since turning 70 - for example, people who spend a lot of time at an overseas holiday home or visit their overseas children; or
• they are in jail or detention

There would also be some residents who recently turned 70 and were in the process of applying (approval is not instant), or will do so at some point in future.

So the total claims ratio is at least 90.3% and probably higher. A 2006 Government paper for the Commission on Poverty put the figure at 91% at the end of 2005. That was before the 42% increase in OAA from $705to $1000 per month on 1-Feb-2009, which surely made it more attractive.

Fewer than 9.7% of eligible persons over 70 do not claim a benefit. Now, that is just with a benefit of $1,090 per month on the table. If it is doubled to the proposed OALA of $2,200 ($26,400 per year), or more, then the claims rate will surely be higher - but whether it is 90%, 95% or 98% really doesn't make a difference to the fundamental point in our article "Help the needy, not the needless" last week. Non-means-tested handouts are financially unsustainable.

© Webb-site.com, 2012