Piecemeal measures won't close wealth gap

PUBLISHED : Monday, 18 April, 2011, 12:00am
UPDATED : Monday, 18 April, 2011, 12:00am


Politicians everywhere are worried about the gap between rich and poor in their societies, but few are as consumed with the problem as Hong Kong's leaders. To their minds, the divide is equated with social discontent, so the wider it gets, the more frantic they become in finding a solution. We have already got the biggest spread among the world's advanced economies and latest statistics show it is increasing. The government's slew of combative measures plainly are not working.

Economists do not have a tried and tested formula as to what to do. No two societies are the same, so solutions will vary from place to place. Finding a way to ensure that wealth is equitably distributed is more about trial and error than proven strategies. But weighing up approaches, considering what will work and putting in place a policy is key to lessening the divide.

That our government does not have a strategy may in part explain why figures released last week by the Census and Statistics Department showed the gap widening. The average household income of the top-earning 10 per cent of the population was about HK$104,900 a month, HK$7,300 more than in 2009. By contrast, monthly income over the same period for the lowest-earning 10 per cent of households remained unchanged at HK$2,500. That will lower Hong Kong's Gini coefficient, which mathematically measures overall income disparity, even more. It was already the lowest of developed economies and among the worst 20 in the world, in the company of the poorest countries in Africa and South America.

For a government sensitive to criticism of its claimed cosiness with big business and tycoons, such numbers are disconcerting in the extreme.

Authorities have long been struggling to come to terms with poverty, which the Hong Kong Council of Social Service, using half of the median income as the poverty line, puts at a rate of 18.1 per cent, or 1.26 million people. At the other end of the economic spectrum, the wealthy are getting richer, thanks to the property boom and market rebound. Citibank's annual survey of residents with liquid assets of more than HK$1 million showed we had 558,000 millionaires by the end of February, an increase of 42 per cent on the previous study and making up 8 per cent of our adult population.

Authorities have been trying all manner of measures to improve the lot of the poorest. Handouts and giveaways have become a feature of budgets. Emphasis has been put on social enterprises to get the unemployed working. A tycoon-financed venture, the HK$10 billion Community Care Fund, aims to help the underprivileged. It is what would be expected from a government that subscribes to self-reliance rather than social welfare.

To that end, its most ambitious step, a minimum wage of HK$28 an hour, takes effect on May 1. As radical as this may be for a government that since the 1960s has rigidly followed free-market principles, this in itself is not going to decrease the wealth gap. It is, after all, just another piecemeal effort, little related to other steps and lacking the necessary co-ordination to have full meaning.

Exactly what a meaningful policy would involve is a matter for deep study. But elements would include an education system that provides a high standard of schooling for all. Land, health care and pension reform are necessary. A well-thought out over-arching approach, not one determined by knee-jerk responses to events, is the only sensible way forward.