Gini Coefficient
Gini coefficient is one of the indicators of income inequality. Although it may not reflect the whole picture of income inequality, the figure is above 0.5 implied the problem of income inequality may be existed.
In 2006, Hong Kong is in great hazard seeing that our Gini Coefficient has risen from 0.518 in 1996 to 0.533. Compared to about 0.424 to 0.513 in Canada, Singapore and England, Hong Kong has an extremely high coefficient.
However, the HKSAR government claimed that the calculation of Gini coefficient is not suitable in Hong Kong and Donald Tsang, who is the Chief Executive of HKSAR government, even said he was mistrusted to the Gini coefficient so that he did not think the wealth gap of Hong Kong was too wide. Therefore, the government does very little things or set up little policies to solve the wealth gap problem in Hong Kong. The taxes and the prices of goods keep increasing which heavier the onus of poor people.
Census and Statistics
The most recent census conducted by the government shows the gap between the rich and the poor worsened in the 10-year period up to 2006. The result showed the number of families spending less than 4,000 dollars a month increased from 6.7 per cent to 9.2 per cent in that period. The census also found that the real average income of families in Hong Kong fell 7.8 per cent since 2001. Deflation during period was only 3 per cent.
Table: Proportion (%) of Employed Persons by Monthly Employment Earnings
Source: Census and Statistics Department, various years.
In the figure of monthly household income, we can observe that between 1995 and 2005, gap of the income group less than $5999 and over $50,000 is widening. In 2005, the income group of less than $4,000 is increased from 5.18% in 1995 to 8.31; that of over $50,000 is increased from 7.43 in 1995 to 10.01.
From viewing the household monthly income of Hong Kong, we can realize the worsening trend of the problem. Income disparity between high-income and low-income is widening.
Causes
Threatened by wealth gap, a solution is needed. However, to solve the problem efficiently, causes of the problem must be identified.
According to the most popular saying, wealth gap started widening since 1940s, the time of the Chinese Civil War. After that, a series of incident has happened, which causes the widening of the wealth gap.
In 1940s, when the Chinese civil War broke out, many refugees from mainland China escaped to Hong Kong. On the other hand, a certain amount of Capitalists where afraid of new Communism, and hence went to Hong Kong with their capital and knowledge. As a result, the rich and the poor were separated much more firmly into two classes. And that’s the beginning of the problem.
In 1970s, Hong Kong turned herself into an international financial center from a manufacturing center. Therefore, labor-intensive industries didn’t exist anymore, but has changed into technology and knowledge-based economy. With the essential need of high-level technology, less unskilled labors were needed so lots of people lost their jobs, while the educated ones had great opportunities on work. The wealth gap widened.
In 1980s, the Open Door Policy was adopted in China, Kong Kong benefited from it on the development on economy. Nevertheless, a motto, ‘Let part of the people gets rich first’, was suggested by Deng Xiaoping. At the time, came to a rise of capitalists, while the others suffered from poverty. The wealth gap once again widened.
In 1997, a serious financial storm attacked Hong Kong, the stock market suddenly crashed, lots of people suffered from the sudden incident. The loss of money led to a crisis of negative equity and inflation. Poverty became more serious in Hong Kong while capitalists made use of the chance to gain profits
At present, the most important cause to the wealth gap is immigration. Large amount of immigrants from mainland China, especially those who are poor immigrates to Hong Kong. They have low productivity but benefit from the Comprehensive Social Security Allowance. The distance between the poverty and the rich are once again widens.
Effects
As the government said, a list of social unrest and difficulties would be brought out by the wealth gap problem. The followings are the effects brought by the widening distance of the rich and the poverty.
- The rich have a great power and effect on the society, and hence they may negatively affect the government’s policy and the infrastructure of a society.
- As the HKSAR government hasn’t relieved the problem of poverty efficiently, the psychological state of the poor may be unstable, and hence the ability of productivity decreases. In general, this will affect the demand and supply chain.
3. More and more people would have to face poverty, they may not have the ability to upgrade their technological and social knowledge. As Hong Kong adopts the knowledge and technology-based economy, without enough quality and knowledge, people may not be hired, and hence lead to structural unemployment.
4. Comparing the rich, the poor are difficult to create wealth, the limited self-financed problem has a great chance in lowering the ability of their movement and influence in the society.
As the negative effects shown above, solutions must be carried out before it is too late.
Solution
There are some recommendations being debated in society to narrow the wealth gap or make the poor’ lives better.
- Practice minimum wage policy
A minimum wage is the lowest hourly, daily or monthly wage that employers may legally pay to employees or workers. It can ensure the poor’ living so that they will get less poor.
- Provide more public housing estates
Public housing estates are relatively cheaper than private housing estates. The poor as a result can manage to buy them and save more money for themselves.
- Increase the amount of welfare to the poor
Providing more welfare can reduce their worries about miscellaneous expenditure. They can have better saving then.
- Develop labor-intensive industry
In many other cities, like Taiwan, has labour-intensive industry like computer hardware manufacturing to provide job opportunities. If Hong Kong plans this development, less people will be out of work.
Leadership Style Required
Since the income polarization problem affects Hong Kong international image and economy, which is also talking about Hong Kong’ s important prospect, our current government dares not do much and just acts modestly on solving it. Unfortunately, more efforts should be paid to make out a solution.
A democratic leader is needed to narrow the wealth gap. He should be diplomatic, democratic, determined and know by heart which party is most urgent that he should help first.
He should first carry out a research and poll specifically and find out the citizens’ actual thinking of it. Then, he shall publish the result on mass media, but not trying to hide it.
Sometimes it is just impossible to think out a win-win solution. There are many constraints to the government’s action nowadays, for instance, increasing the subsistence support to the poor will speed up the capital lost, which possibly results in raising tax rate.
The leader should endeavor to live up the public expectations all the time.
Most importantly, the leader should make a speech persuasive and convincing for both the rich and the poor. For example, practicing minimum wage can steady and increase the income of the poor, despite the fact that the capital in companies will run out faster, which results in earning less money for the businessmen. The job of the leader is to persuade the rich to do so willingly.
On the other hand, as the poor gets poorer, the worsening problem will eventually lead to social unrest or other unpredictable problems, the leader has to convince the poor and guarantee their living, to ensure the society stableness.
If he can reduce the complaints and blames from society and keep a balance between the rich and the poor, then he is exactly the kind of leader that this problem requires.
Reference
馬碧容. 貧富懸殊 — 人種學角度:香港的貧窮含意. Hong Kong: Ming Pao, 2004.
Hong Kong 2005. Hong Kong: Information Services Department of the Hong Kong SAR Government, 2005.
Karen Balkin. Poverty. U.S.A: Greenhaven Press. 2004.
Video
‘Hong Kong’s Wealth Not Shared All Citizens.’ Hong Kong: VOA story, 2007
Magazine Article
YULANDA CHUNG. ."IAWEEK: THE NATIONS: HONG KONG: A WEALTH OF PROBLEMS: Growing poverty has become a time bomb. "Asiaweek” Nov 10, 2000:Pg. 1
E-resource
Economic Analysis Division. Analysis of income disparity to LegCo. 16 MAR 07. Legislative Council. 22 JUL 07. <>
Hong Kong Annual Digest of Statistics. Census and Statistics Department. Hong Kong: Government Printer. Various years.
Website
Man Ki Kwok. “M-shaped Phenomenon.” Business Weekly. 16 OCT 06. Business Weekly a division of Cite Publishing Ltd. 20 JUL 07. <>