Invest in education to tackle worrying wealth disparity

Hong Kong is one of the most unequal places on Earth and unless we address the key issue – social mobility – the problems will only get worse

PUBLISHED : Tuesday, 27 June, 2017, 1:15am
UPDATED : Tuesday, 27 June, 2017, 1:15am

It is not news that Hong Kong remains one of the developed world’s most unequal places. The mismatch between soaring housing costs and most incomes is a constant reminder. Nonetheless, statistics like the government’s household income distribution report and international indices serve a useful purpose in defining the wealth gap and assessing attempts to alleviate poverty. The Gini coefficient index – a measure of equality from zero (perfect equality) to one (total inequality) – puts the city’s household income gap last year at a record 0.539, the highest in the developed world after New York on 0.551. It means 10 per cent of households with a median monthly income of HK112,450 earned 44 times more than the poorest 10 per cent, who made an average of HK$2,500.

Statistics officials said the growing disparity was partly due to the negative impact on average income of an ageing population, which will continue for many years. The widening in the income gap of 0.002 was actually only half that in the previous five years (2006-2011), thanks to an increase of more than 40 per cent on welfare spending including public housing and medical benefits for the poor, and handouts such as the old-age living allowance. Officials said if the Gini coefficient also took into account the effects of taxation and social benefits, this would have actually reduced it by 0.002 in the five years to 2016. However, the figures still show that alleviation policies failed to make much difference, with wealth rising dramatically without benefiting low-income families and individuals.

What hope for the poorest? Hong Kong wealth gap hits record high

Experience shows that income inequality cannot be addressed by palliatives alone. And calls to raise taxes to fund a bigger social safety net do not take account of the impact this would have on confidence in the city’s low-tax, free-market economy. In any case, such solutions fall well short of the challenges facing Hong Kong. They call for a more comprehensive approach that not only embraces the needs of an ageing society and housing supply and affordability, but the education and social mobility of young people who, ultimately, are key to the city’s future. To quote former chief executive Tung Chee-hwa, given that technology touches all aspects of our lives, “our provision [in education] has not been adequate”.