Jake's View

Opinion: Who drinks lattes in Hong Kong? Not the minimum wage earner

The Latte Index, like that hoary Big Mac Index, is a poor reflection of Hong Kong’s poverty and income gap.

PUBLISHED : Monday, 22 May, 2017, 6:51pm
UPDATED : Tuesday, 23 May, 2017, 6:50am

The plight of the low-paid has been laid bare by the Latte Index – a new indicator developed by an academic that measures how many cups of coffee the lowest paid can afford to buy. -- SCMP City, May 22

Then follows a table in which we are told that an hour’s worth of the minimum wage in Hong Kong can only buy you 1.08 cups of latte from Starbucks, while you get 3.59 cups in Zurich with the Swiss minimum wage.

Except that Switzerland does not have a minimum wage. Oh, well.

But I accept that the Swiss drink too much coffee and that they are generally wealthy people, although a drive through Zurich will also reveal some surprisingly slummy districts. I even accept social work professor Paul Yip Siu-fai’s contention that our minimum wage is too low.

What I do not accept is that his Latte Index proves it.

For starters, the equivalent working-class drink in Hong Kong to a latte in Switzerland is laicha (milk tea). A Starbucks latte in Hong Kong is the drink of an office serf, which is a rank or two up from minimum wage.

So what might the cost of laicha be in Zurich and would this comparison reduce the disparity? Your answer, in case you wondered (as a journalist I like to state the obvious), is yes, of course it would.

The same applies to that hoary old Big Mac Index, that compares prices of McDonald’s hamburgers across the world. Could we do this on the basis of a lunchbox of pork, rice and choi sum, please?

I don’t see construction workers eating a Big Mac on site. Theirs is the lunchbox. What is the cost of one in New York?

Professor Yip’s point here, however, is that there is still a wide disparity in Hong Kong between how long an average person and a minimum wage earner must work to pay for one.

Again, I accept this. However, I also think we need to look at it from a different perspective. One way to improve living circumstances is to raise pay. Another is to subsidise living costs and we do this heavily for people of lower income.

To list just a few examples, public rental housing accounts for 35 per cent of the total housing stock in Hong Kong and the average rent across the entire portfolio is only about HK$1,500 per month per flat, making this some of cheapest urban accommodation on earth.

In medical care, we have a charge of only HK$100 per visit to a public hospital. Yes, the wait may be long and perhaps you are better off with a private hospital if you do not mind paying HK$100,000 for the same care except, of course, that public hospitals are better equipped.

A ride from one end to the other of the MTR system, Chaiwan to Tuen Mun, costs you only HK$27.90. This is now slightly more than the lowest cost of riding between any two adjacent stops on the London Underground.

Pre-Brexit, and before the sterling’s weakness, no ride on the tube costs less than HK$27.90.

We even give money directly to low income earners through the Work Incentive Transport Subsidy Scheme, HK$600 a month direct to your bank account if your wage is below a stipulated limit.

There are other examples of such hand-outs, all of which significantly reduce living costs at the bottom of the income scale and all of which are routinely ignored on international comparisons of income.

In fact, it is my contention that wages at the bottom of the scale are as low as they are precisely because employers are aware of these subsidies and adjust wages down accordingly.

Then there is the difficulty of collecting reliable statistics on income in an economy in which low income earners pay no tax.

Yet another income subsidy scheme launched last year (yes, another), attracted only 20,000 qualified applicants when 200,000 were expected, suggesting that poverty is much less serious than guesses made in the absence of hard data.

I do not say I know this to be true, let alone that I can prove it. I only say that the Latte Index is a poor substitute for rigorous academic work on poverty.