ABSTRACT
Hong Kong's welfare state system is a very peculiar one, with a unique historical and political background that has enabled it to grow steadily over the past years. Social insurance is absent, and only one major provident fund system exists to provide old-age income maintenance and asset building. Most welfare state spending is government-financed, with particularly high social investment in education, health and—what is unique in Asia—a full-fledged system of social assistance and social services, which are mainly financed by the state, but provided by NGOs. There is also significant provision of public housing, although, in general, both the type and quality of publicly constructed housing are inadequate, and government investment in housing has been restricted in the recent decade. All in all, the welfare state system in Hong Kong fails to eliminate poverty, owing to the presence of asset- and means-tested social benefits and services. As a result, a large underclass exists in Hong Kong, while the middle class benefits more from social investment in education, but faces increasing uncertainty. The future of welfare state spending in Hong Kong is path-dependent for political reasons, and the system chosen is unsuitable, as it does not touch on the social structure which manufactures income inequality. Hence, the government, knowingly or not, is managing the continuation, and cementation, of poverty, while having limited effect on tackling overall income distribution before and after taxation and social transfers.
