Wealth Inequality in Hong Kong

Wealth Inequality in Hong Kong By Madison Lau | Photography by Aidan Keough | Layout by Maegan Wang

Economic inequality is the unequal distribution of income between different social groups in society. It is a global concern as many people are often trapped in cyclical poverty with little chances to climb up the social ladder. The income inequality in Hong Kong creates a divide that separates the social ethnic groups— this is commonly known as the wealth gap, which signifies the difference in earnings between low-income, middle-income and high-income households. This article will explore the causes of the widening wealth gap locally in Hong Kong and discuss strategies to lessen the impact of the wealth gap on low-income households.

In 2018, Hong Kong was the second richest city in the world, with a net worth of $355.5 billion, ranking sixth in GDP globally in 2011. Although Hong Kong is considered a wealthy developing city, it o suffers from various long-term economic issues, namely economic and income inequality. This is a result ofHong Kong’s low tax policy, a policy that allows for its citizens to live there without paying the majority of the taxes. In 1947, two years after the Second World War, Hong Kong established the Revenue Ordinance in order to manage Hong Kong’s inland revenue and to fixate wartime measures. Therefore income tax was set at a staggeringly low 10% throughout the years, with many unsuccessful attempts to increase tax rates in Hong Kong. The low tax policy is not a feasible solution for income inequality because the tax system does not penalise wealth beneficial to Hong Kong’s upper class citizens, who earn over $40,000 HKD per month. This occurs because the upper class citizens attempt to avoid high tax rates, therefore minimising tax burden over the years. In contrast, low income households who earn under $9,500HKD per month remain in cyclical poverty. Since Hong Kong utilizes an income tax system, low income class households generally pay a larger proportion of their income in tax than high income households. This makes it so that they constantly lack the resources and opportunities to increase their income, therefore trapping them in a cycle of poverty. The continuously increasing wealth gap has caused Hong Kong to reach ever higher measurements of wealth inequality.

According to government statistics, Hong Kong’s GINI coefficient, a standard measurement for wealth inequality since the 1990s, was 0.539, the highest level since the 1970s. Based on an article by South China Morning Post, the wealthiest 10%, including Li Ka Shing, Lee Shau Kee and Henry Cheng in Hong Kong earned around 44 times more than the poorest 10% of households. In fact, Hong Kong is home to over 90 billionaires, 5 of which earned HK$23.6 in 2016 and 2017 alone. Despite this, Hong Kong also houses over 1 million people living in poverty. Although there is a stark difference between the “rich and poor” in Hong Kong, it has been disregarded by many government officials and corporate 校話 期刊 24 37 校話 期刊 24 37

stakeholders. The Hong Kong Poverty Situation Report 2019 states that there are 1.4 million people in Hong Kong living in poverty, a community that consists mainly of low-income workers, ethnic minorities, women, children and elderlies. Many factors contribute to the widening of the wealth gap. Firstly, the climbing price of cage housing has made it extremely difficult for poverty stricken people to afford comfortable living conditions. Due to Hong Kong’s dense population of 7.5 million people, living space is scarce and therefore cage houses are becoming increasingly more valuable. Cage houses are generally around 40 square feet and can cost up to HK$2,400 per month. Additionally, the lack of employment opportunities in Hong Kong makes it difficult for people of low-income households to find a job with sufficient income to sustain their own and their families’ lives. The lack of job opportunities is also a result of Hong Kong’s uneven education system for lower income households in Hong Kong, as a person’s level of education largely influences their future employment opportunities. An example of this is language barriers between ethnic minorities and the locals. Since ethnic minority students struggle with learning Chinese to properly communicate with the locals, they also experience difficulties with finding employment opportunities. Low-income households face many disadvantages in terms of employment, and their lack of employment opportunities has only caused the wealth gap in Hong Kong to continuously widen.

Moreover, the elderly are an especially vulnerable group among the poor, as they face a difficult time competing for employment opportunities with the youthful, economically active population. Although they may be qualified with their expertise and long-standing work experience, their physical capability hinders their ability to perform physically arduous and demanding tasks like construction work. Agiesm is one of the most common types of age discrimination and prejudice in Hong Kong workplaces and major cause for over 50% of unemployed people. Furthermore the Hong Kong government has decreed an unofficial retirement age of 60 years old. This policy is aimed to establish mandatory retirement to ensure that the most capable people are being employed in order to maximise the economic efficiency and benefits in a company, leading to a lack of employment opportunities for older dependents of the population. Fortunately to counter this social phenomenon, the government

has attempted to implement programmes to employ elderly and middle aged people (EPEM). The program allows people aged 40 and above to apply for long term job vacancies and encourages employers to hire EPEM. The main goal of this programme is to help job seekers with limited employment opportunities to browse job vacancies. In this brochure, (https://www.labour.gov.hk/ eng/public/eip/EPM_JS.pdf) two success stories have been included. These stories helped detail how the two participants found and adapted to their jobs

through applying to the program then receiving on the job training. Despite the prevalence of ageism in Hong Kong workplaces, programs and initiatives like the EPEM employment program are working to help the elderly and middle aged people find satisfactory jobs. Furthermore, due to the increasing unemployment rates induced by the pandemic, the economic inequality has worsened severely since late 2019. From September to November 2020, Hong Kong’s unemployment rate increased drastically from 0.3% to 6.3%. In this twomonth period, over 245,000 Hong Kongers lost their jobs. Since then, the unemployment rate has increased to 6.6%, the highest rate of unemployment in 16 years. Most importantly, strict social distancing measures restricted unemployment in many sectors of Hong Kong. Due to these social distancing government regulations, over 200 bars in Hong Kong were closed during the fourth wave of Covid-19, and 70 bars were subsequently shut down. This mass unemployment in the food and beverage sector forced service workers to accept a minimum wage of 37.5HKD per hour and unpaid annual leaves. This sudden mass unemployment forced the unemployed service workers to fall back on their life savings, which may not be enough to support themselves and their families. Unfortunately, Hong Kong’s unemployment rate is gradually increasing, and the government’s attempts to alleviate widespread poverty have not been particularly effective, therefore many low-income households have been forced into the vicious cycle of poverty.

Although the Hong Kong government has made efforts to improve poverty relief by increasing expenditure on public healthcare, these efforts are relatively insufficient in tackling inequality as a whole. For example, in the 1950s, the Hong Kong government launched a public housing program to increase housing and public investment in health and education. Although this improved social relations for around three decades, Hong Kong no longer has the economic ability to support these changes. Oxfam, a charitable organization that aims to end the injustice of poverty states suggests that the government should consider implementing a “participatory budgeting” process when deciding how much will be spent that year. A process that would help the people make better economic decisions regarding the future. An Oxfam’s Inequality Report, also recommended the government to review their current minimum wage policy annually, allocate more educational resources and provide Chinese education support to ethnic minorities, increase the quota for childcare services, extend service hours, allow the elderly to apply individually for CSSA and increase support for interim housing. These proposed plans may improve their standard of living for low-income households. The suggested alternative measure aims to decrease the wealth gap of low-income households through government provision of education, social service and elderly support.

In conclusion, wealth inequality has become an increasingly prominent social issue in Hong Kong. Moving forward, the government should consider implementing solutions with assisted support from multinational organisations, by reviewing wages, providing elderly care and childcare services and funding support towards ethnic minorities, in order to reduce the widening economic equality and far-reaching repercussions from the recent Covid-19 pandemic. If action is not taken soon, wealth inequality will become an unending problem between the different social groups of Hong Kong.