# The poor get poorer, the rich richer, with fewer left in between

PUBLISHED : Sunday, 15 May, 2011, 12:00am
UPDATED : Sunday, 15 May, 2011, 12:00am

## Share

Wealth gap widest in 20 years as rich get richer

I wish I was better at maths. I would then be able to calculate an up-to-date Gini coefficient for Hong Kong, or at least as close to it as is possible with the existing data. Bill Mak, who writes to me regularly from New Jersey, showed me how to do it once but I forgot. Sorry, Bill.

Basically, the idea is that you draw a square chart where the horizontal X-axis at the bottom is the number of people in your society, reading from zero at the left to however many million it is at the right.

Then on the right side of the chart your vertical Y-axis registers the cumulative income of your society from zero at the bottom to the total of all income at the top.

If you have a society of perfect income equality the chart will show a straight line at a 45 degree angle going from the bottom left to the top right.

Inevitably, however, the line sags towards the lower right, which tells you that some people make more money than other people.

The Gini coefficient is the ratio calculated on a scale of zero to one of how much that line sags relative to the perfect 45-degree line. Hong Kong usually scores pretty badly when international agencies calculate these Gini coefficients across the world and it has been getting worse.

Now, if I have confused you with this description, relax, I have another way of demonstrating that income polarity has become worse in Hong Kong since the handover of sovereignty in 1997. It hangs on the fact that, after years of going down and then rising again, consumer prices are pretty much where they were at their peak in May, 1998.

Yes, I hear you. Hah! Consumer prices no higher than they were 13 years ago? Hah! Someone's been smoking something illegal.

Okay, but this is still the official record of the consumer price index, as the first chart shows. Dispute it if you want but I'm going with it because it allows me to make a comparison with other official statistics that group households by income bracket from under HK\$4,000 a month to more than HK\$50,000 a month.

My reasoning here is that we have reasonable evidence that the poor are getting poorer if prices overall were the same back then as they are now but a higher proportion of households now make less than HK\$10,000 a month.

And if a higher proportion of households make more than HK\$50,000 a month then we also have reasonable evidence that the rich are getting richer and our sagging line on the Gini chart is sagging even more.

Technical note: I have made some adjustments here. I have used a 12-month moving average to smooth out anomalies and I have also taken the end date for this exercise as December 2010 because it is the latest date for which I have income breakdowns. This puts the beginning date (when prices were the same by the CPI) at September, 1997, just after the handover.

Right then, to that bar chart with the results of my calculations. It shows that, yes indeed, last year the proportion of Hong Kong households making less than HK\$10,000 a month was greater than it was 13 years ago, 26.7 per cent as against 19.6 per cent in the 12 months to September, 1997.

The next three income brackets, covering the range from HK\$10,000 to HK\$40,000 a month, all register a lower proportion of households than in 1997.

But from HK\$40,000 and up, and particularly HK\$50,000 and up, we once again see a higher proportion of households present. Thus, Q.E.D., more poor, more rich and fewer people in between. The figures indicate that income polarity is growing and that our Gini co-efficient is indeed getting worse.

Why? Well, that would probably take a book or 10 to discuss. Blame government policy above all else, I say, but how fortunate that I have come to the end of this column and won't have to elaborate.