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17 JUN 2014

Oxfam releases poverty line based on the basic cost of living to help the government measure the poor population more accurately

Oxfam recently conducted a study on the basic cost of living and the poverty line, and created a threshold derived from the basic cost of living to provide another method of measuring the poor population. The study shows that the 2013 poverty line  largely corresponds with the threshold calculated using the basic cost of living. The main discrepancy lies in one-person households, followed by households with two people. The two poverty thresholds were found to be largely similar for larger households.

Calculating the basic cost of living from the cost of a nutritional diet

The government announced that it would set Hong Kong’s first-ever poverty line (the 2012 official poverty line) at half the median household income using the concept of relative poverty at the Poverty Summit in September 2013. As a first step in setting a poverty line, this method was easy to understand and therefore considered acceptable. However, this method did not take into account people’s real-life day-to-day needs. For this reason, Oxfam considered the method that the United States used when setting its own poverty line, and from October 2013 to February 2014, conducted this study on the basic cost of living and the poverty line. By finding out how much money different demographic groups would need to purchase ingredients for nutritionally balanced meals, this study estimated the basic cost of living for households of different sizes. With this information, a comparison with the 2013 poverty line was conducted.

Three steps were involved in the study:
(a) Nutritionally balanced menus for people of different ages were designed through consultations with registered nutritionists, questionnaire surveys and small-group interviews.
(b) The lowest average prices available for the foods in these menus were determined.
(c) Based on information from the Census and Statistics Department, the overall basic cost of living for households of different sizes was determined, and based on these figures, a poverty line – which is the subject of this study – was created.

The study indicates that it costs HK$1,102 to provide children aged two to 12 with nutritionally balanced meals. For people aged 12 to 60, it would cost HK$1,632, and for those aged 60 and above, HK$1,025. Using these figures, the study determined how much households of different sizes would need per month to maintain a nutritional diet, with the results as follows:

- In one-person households comprising adults below 60, it would cost HK$1,632 to maintain a nutritionally balanced diet. For one-person households comprising elderly people, it would cost HK$1,025.
- Two- and three-person households would need HK$2,483 and HK$3,490, respectively.
- Four- and five-person households would need HK$4,334 and HK$4,672, respectively.

Based on the results above and information from the Census and Statistics Department, we estimated the basic cost of living per month for households of different sizes. This represents the poverty threshold which is the subject of our study. We conducted a comparison between this and the 2013 poverty line and found that the two largely corresponded. One exception is one-person households, whose poor population is seriously underestimated by the 2013 poverty line. For one-person households comprising adults below 60, the poverty threshold in this study is 93.3 per cent higher than the 2013 poverty line, while for elderly one-person households, it is 21.4 per cent higher. It is 6.9 per cent higher for two-person households, about the same for three-person households, and slightly higher – by 1.5 and 3.1 per cent – for four- to five-person households. (Please see the table below.)

Comparison between the basic-cost-of-living poverty line and the 2013 poverty line

Household size

 

Poverty line derived from the basic cost of living ($)(A)

2013 poverty line ($)(B)

Difference (%)

(A)-(B)/(B)

1

(Adult) 7,344

3,800

93.3

 

(Elderly) 4,613

3,800

21.4

2

9,083

8,500

6.9

3

12,704

12,700

0.0

4

15,776

15,550

1.5

5

17,006

16,500

3.1

There are likely two reasons for the bigger difference between the threshold from this study and the 2013 poverty line for one-person households. First, the poverty line is based on income. Many one- and two-person households comprise elderly people who do not have incomes. As a result, it is likely that the median income for these two household sizes has been underestimated. Second, those living in one-person households cannot share their major living expenses, including food and rent, with anyone else, so these costs will be higher per capita than in larger households.

The cost of living threshold can help where the official poverty line is lacking
This study by Oxfam shows that the 2013 poverty line largely corresponds with the threshold derived using the basic cost of living, and that it is able to reveal a general picture of poverty in Hong Kong. The one exception lies in one-person households, whose poor population has been seriously underestimated by the 2013 poverty line. There is also a slight discrepancy for two-person households. Oxfam’s poverty line, which is based on the basic cost of living, would be better at reflecting the spending patterns and day-to-day living expenses of one- and two-person households. Oxfam believes that proposals for the minimum wage should be enough to support the basic cost of living for an additional family member who is not employed (that it, one person should be able to support one person more). According to the study, the basic cost of living for two-person households is HK$9,083. The minimum wage should not be lower than this level.

Oxfam hopes that the poverty threshold calculated using the basic cost of living can be used as an additional tool of measure, to act as a point of comparison for the official poverty line and compensate for where it is lacking. Oxfam hopes this will help the government measure and determine the characteristics of the poor population more accurately, so that it can put forward appropriate alleviation measures and tackle poverty more effectively in the long term.

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About Oxfam
Oxfam is a worldwide development organisation that mobilises the power of people against poverty.

For media enquiries, please contact:
Sarah Chu (Senior Communications Officer)
Tel: +852 3120 5280
Email: sarah.chu@oxfam.org.hk

Alfred Choy (Acting Hong Kong Programme Manager)
Tel: +852 3120 5253
Email: alfredc@oxfam.org.hk

Learn more about poverty in hong kong