Downward Mobility by Anthony Cheung


Hong Kong is no stranger to the capitalist malaise that is increasing the wage gap
Anthony Cheung
Updated on Nov 02, 2010

Two weeks ago in this column, I made the point that the widening wealth gap in Hong Kong has more to do with our narrow economic structure, and that it requires new thinking in economic strategies and industrial policy, as well as government social policies.

This drew an immediate challenge from columnist Jake van der Kamp, who would want us to believe that Hong Kong has a broad economic base, that our costs of living are low, that our low-income workers should not moan because "the hard evidence says there has been enormous upward mobility". I am not anti-market or an advocate of a "loser" culture, but I don't believe in the infallibility of the free market.

Post-war capitalism suffers from a dual crisis of "accumulation" (continued capital accumulation and growth) and "legitimation" (of the capitalist order). That's why many Western governments, welfare state or not, have expanded social security and income maintenance to help reduce class confrontations; seeing the economic success of East Asian states, some have pursued state-led, economic reinvigoration policies. Hong Kong is no exception to such a crisis. Income disparity is becoming a major destabiliser, and we must look beyond gross statistics to gauge the real problem. The high cost of living and doing business is a frequently heard complaint in all the world's large financial centres. Hong Kong ranked second last year and fifth this year in the International Cost of Living Index.
Living costs are determined by multiple factors including exchange rates and housing prices. The Census and Statistics Department's Consumer Price Index (CPI) does not give us the full picture. Indeed, the CPI increase has remained very low over the past few years - at 1-2 per cent, and exceptionally 4.3 per cent in 2008 - but we need to look at the components. Housing makes up 30 per cent of total expenditure, and private housing rents have increased by 3.6-6.8 per cent. With some 30 per cent of domestic households in public rental housing, the government's low-rent policy, plus occasional rent exemption measures, have helped keep CPI low. According to the Consumer Council's analysis based on major supermarket price data, grain and oil food items went up by 15 per cent in 2007 and 34.9 per cent in 2008, though they dropped last year. Our daily necessities are mostly imported, and consumer prices will go up because of the weakening Hong Kong dollar due to the US dollar peg. A recent consumer confidence survey of the region found that Hong Kong lags behind the mainland and Macau, mainly due to declining confidence in consumer prices, living standards and housing purchases.
Hong Kong's Gini coefficient - which measures overall income disparity - deteriorated from 0.518 in 1996 to 0.533 in 2006. According to the Hong Kong Council of Social Service, using half of the median income as the poverty line, the overall poverty rate was 18.1 per cent for the first half of this year. Poverty was highest among the elderly - 65 years and older - at 33.9 per cent. Even among young people, aged 15-24 years, it was 20.1 per cent.

The median domestic household income was the same last year as in 1999 - HK$17,500 per month. Yet households with less than HK$10,000 had jumped in number from 498,600 to 649,900, and those with less than HK$25,000 from 1,319,500 to 1,511,600 homes - or three-quarters of the city's households. Although households at the top end, earning more than HK$100,000, increased from 46,700 to 65,600, the gap is clearly widening.

Educational attainment has not necessarily improved employment earnings. Statistics show that employees with post-secondary, non-degree qualifications earned a median monthly income of HK$13,000 last year, and those with degrees earned HK$22,000 - down from HK$16,000 and HK$23,000 in 1999.

Different occupations fare differently. Managers and professionals in financial institutions have mostly earned much more over the past decade, but some in other sectors like transport, storage and trading have not. For technical, clerical, service and non-production workers, wages have mostly remained stagnant or declined. The proportion of people with better education and the number of administrative and professional positions may have increased, but there is just no evidence of enormous upward mobility in terms of income.

Anthony Cheung Bing-leung is an executive councillor and founder
Posted by Chloe