Hong Kong on Saturday announced its first benchmark to measure poverty and found almost 20 percent of residents live in such conditions, a move hailed as a step towards tackling worsening inequality.

The poverty line, marked at half of the median household income, showed 1.31 million people in the city were living in poverty, a rate of 19.6 percent, based on official data from 2012.

The introduction of a poverty is a significant move for a densely populated metropolis known for its sky-high rents and home to one of largest wealth gaps in the world.

"To implement the poverty line is unprecedented...It is an important step in helping the government tackle the issue of poverty," Hong Kong chief executive Leung Chun-ying told a summit on poverty.

"Poverty is a multi-layered problem, it needs more time and continued hard work to handle it," Leung said.

Once existing social assistance programs were taken into account, 1.02 million people were considered to be living in poverty.

Households with children and elderly families made up the largest number of individuals living in poverty, both before and after government intervention.

Lawmakers were quick to push the government into action after the numbers were revealed.

"We feel that the government should raise the minimum wage and should also implement subsidies for those with low incomes so that people that come out to work can really support their families," Labour Party chairman Lee Cheuk-yan said.

Analysts believe the implementation of a poverty line would put pressure on the government to take action on the issue and to help it form policy to target groups hit hardest by poverty.

"Having a poverty line will put pressure on the government and for it to do something in facing poverty," Hong Kong University professor of social work Joe Leung told AFP.

"It's important for us to have a line just to see who are the people in need and to what extent government policy is effective in changing the situation," Leung said.

"By setting out a poverty line, it means the government recognises the problem," he said, adding that it would help the government target certain groups to help bring them out of poverty.

But Leung Chun-ying said eliminating poverty was not on the government's agenda.

"To completely eliminate the wealth gap and the problem of poverty is not possible and should not be one of our goals," he said.

The wealth gap in Hong Kong, already one of the world's widest, is worsening as the rich get richer and the poor struggle to make ends meet, official figures revealed in June last year showed.

Income distribution measured by the Gini Co-efficient, where inequality is indexed on a scale of zero to one, climbed from 0.525 to 0.537 over the decade to the end of 2011, according to figures from the statistics bureau.

A survey conducted by the NGO Hong Kong Council of Social Services said 1.16 million individuals lived in poverty in 2012, with a poverty rate of 17.1 percent, in a city better known for its glittering skyline and free economy.

More than 170,000 people in Hong Kong are living in cramped, cagelike, subdivided flats, a government-commissioned study found in May, underlining the scale of the city's housing crisis.

Tens of thousands of low-income families and immigrants are forced to live in the tiny subdivided units, unable to afford sky-high rents in the crowded city of seven million.

At the other the social spectrum, the city's wealthy occupy some of the world's most expensive real estate and are notorious for showcasing their enormous wealth.