Macau in need of adjustments to social policies as pandemic exacerbated income gap: Study

The Covid-19 pandemic has significantly affected the lives of less privileged residents, leading to a higher vulnerability for income security, according to a research conducted by Macau scholars.

The effects of the Covid-19 pandemic have led to “vulnerability in the social welfare system dominated by government financial investment,” which directly affects the stability and sustainability of the city’s social policy system.

The study, entitled Integration and “Enabling: Macau’s Social Policy Shift during Post-Pandemic Era,” was conducted by scholars Jierong Hu from the City University of Macau; Yanchong Peng and Ka U Lao from the Macao Polytechnic University. The paper highlights the existence of a substantial income disparity between different social classes in the SAR.

The three scholars believe Macau must further “integrate existing social policies, build a social safety net, strengthen investment in human capital and enhance residents’ ability to resist social risks in pursuit of welfare,” among other actions.

The study said Macau’s social welfare system, which focuses on government financial input, is vulnerable to some extent.

This comes as the epidemic has led to increased economic fluctuations and unstable government revenue, which directly affects the stability and sustainability of Macau’s social policy system, the scholars said.

The report examined how Macau could maintain a high level of social welfare.

It argued it is “necessary to shift towards active social policies to promote economic development, improve the ability of residents to resist social risks and balance the welfare responsibility of the government, market and individuals.”

Macau’s economy has been severely affected by Covid-19, where the city also adhered to a strict zero-Covid strategy that led to minimal activity and movement in the city.

Due to the pandemic, the GDP in 2020 was 204.4 billion patacas, a real contraction of 54% compared with 434.6 billion patacas in 2019, as cited in government data.

In 2021, it was 239.4 billion patacas. The first three quarters of 2022 were 177.2 billion patacas, and Macau’s economy contracted by 26% in real terms on an annual basis.

The Covid-19 epidemic has severely affected the social economy, straining the sustainability of social welfare primarily funded by the government.

“Residents are living more difficult lives under the epidemic, with higher expectations for social welfare, resulting in greater welfare tension.”

“In this context, the social security system that addresses various social risks to ensure income security highlights the importance of its safety net,” the study read.

Meanwhile, the scholars noted that although the multi-level social policies formed in Macau after the reunification have improved the level of social welfare coverage, “social policies lack integrity and tend to be fragmented.”

For the welfare needs of residents, the scholars believed that it is inevitable to form a situation where headaches and feet are treated, and the scattered society policies bring administrative costs and efficiency issues, which affect the overall effect of social welfare policies.

“In the face of major social risks such as the Covid-19 epidemic, when there is a lack of sufficient overall social support, residents are less able to resist social risks, and deeply feel the pressure of life,” the paper stated.

“Maintaining a high level of social welfare requires increasing financial support.

Faced with economic fluctuations caused by new social risks and unstable fiscal revenue, the government’s financial responsibility for social welfare faces fragility and unsustainability,” the scholars added.

Despite the high level of social welfare in Macau, the new social risk of Covid-19 shows residents are still vulnerable to social risks in the face of social development.

The study proposes three strategic directions of integration and empowerment.

The first is to give full play to the leveling function of social policies.

This suggestion comes as the scholars concluded lower-level residents in Macau have been significantly affected, leading to a heightened risk of income insecurity, highlighting the substantial income disparity among different social classes.

Social security initiatives play a crucial role in upholding residents’ fundamental income security, addressing their basic living requirements, and promoting fairness at the social bottom line.

“By integrating the existing and scattered income-based social security policies, we can make up for the shortcomings of social security policies, build up the bottom-line function of social security policies, narrow the gap between the rich and the poor, and ensure that all residents maintain a certain level of quality of life,” the academics noted.

The second is to carry out the nudging function of social policies, while the third is to leverage the development function of social policies.

“The transformation of modern social policies emerged in response to the challenges posed to the welfare state by globalization and aging, especially to find a way to solve the plight of the welfare state’s excessive financial burden and impaired economic competitiveness,” the study remarked.