HK Magazine Archive

Are the Rich Getting Richer?

Our wage gap is getting wider and we can prove it.

PUBLISHED : Thursday, 19 November, 2015, 4:00pm
UPDATED : Wednesday, 19 October, 2016, 4:53pm

Lau Chung-ki is worried about the future of Tin Shui Wai. Property developer The Link REIT is ready to open the first phase of an upscale market at the Tin Shing Court public housing estate around Christmas. There will be a “SoHo” area for upmarket food and beverages, and a seafood street with chemical-free freshwater fish. Sounds great, but there’s just one problem. Tin Shui Wai has always been one of Hong Kong’s poorest areas and many of its inhabitants just can’t afford it.

Lau, who works for the Tin Shui Wai Community Alliance, says that the Link is monopolizing options for the public housing estates that accommodate the city’s working poor—the Link owns five of Tin Shui Wai’s six wet markets and this upscale market isn’t a new construction but instead a major expansion of an existing wet market. Unless the government steps in, this gentrification is likely to push up prices for everyone in the area. “The Link’s development is highly focused around a shopping mall,” says Lau. “We’re fighting for more options—like wet markets governed by the Housing Authority.” It might be the only way to keep prices low.

But the problem isn’t only in Tin Shui Wai anymore—Hong Kong is becoming increasingly and more drastically polarized between rich and poor. The wealth gap has long been a problem plaguing the city—and it’s growing larger than ever. As the minimum wage—$32.50 an hour—lags behind inflation, the number of working poor in the city continues to shoot upwards.

In 2014, Hong Kong’s top one percent of earners owned 52.6 percent of the city’s wealth—income, investment and more—up from 35.4 percent in 2000, says Credit Suisse. That’s staggeringly high compared to the developed world: In fact, Hong Kong ranks third-highest in wealth disparity after Turkey and Russia.

How rich are the rich? Just last week, Hong Kong tycoon Joseph Lau Luen-hung, handed a jail term in Macau, set world records when he bought his seven-year-old daughter a $375 million flawless blue diamond ring at a Sotheby’s auction in Geneva. A day before that he’d bought a pink diamond at Christie’s for $222 million. And a day later, he sold the Mass Mutual Tower in Wan Chai for a record-breaking $12.5 billion.

“Last year the wealthiest families earned 19 times more than the families in the lowest-earning decile,” says Wong Shek-hung, Oxfam Hong Kong’s program manager. “The richest sector in Hong Kong society has power and enough resources to do more and address this problem.” But will they?

A new IMF study shows that every one percent of wealth growth in the top 20 percent of earners results in a GDP decrease of 0.08 percent. Conversely a one percent increase in the bottom 20 percent of earners would bump up the GDP by 0.38 percent instead.

Hong Kong’s wage gap can be quantified by a number called the Gini Coefficient, which measures income inequality in society. Data shows that in 2011, Hong Kong’s Gini Coefficient rose up to 0.537—sandwiching the SAR between Colombia and Guatemala, and giving it the 11th-worst performance out of 141 countries.

Why are ordinary Hongkongers earning so little? For one, there’s a lack of labor protection. Poon Man-hon, a policy researcher for the Hong Kong Confederation of Trade Unions, says that an immediate cause of Hong Kong’s income gap is that there’s no fair negotiation system for employers and employees. “When a company earns a lot of money, there’s not necessarily fair pay for the workers,” says Poon. “If there’s an economic downturn, these workers will suffer from losses and layoffs.”

Unions in Hong Kong have asked the government for legislation to protect collective bargaining rights, so workers can negotiate fairly for pay raises—but the government has yet to act.

Trade unions are rallying for an increase in the minimum wage from $32.50 to $40 per hour and are urging the Hong Kong government to review the minimum wage every year. Currently the government reviews the minimum wage every two years—mostly thanks to bureaucratic red tape.

Another solution to the city’s widening wealth gap would be to provide help to the city’s working poor—the Comprehensive Social Security Assistance welfare scheme exists for that purpose. But despite the rise in Hong Kong’s working poor, the total CSSA caseload in September dropped by 1,144 cases, reports the Social Welfare Department.

“We approached many working poor in Hong Kong over the past few years and while most were eligible to apply for CSSA, they were not willing to do it because they thought there was a stigma attached,” says Oxfam’s Wong Shek-hung. “The idea of being reluctantly forced to apply for the scheme and increase society’s burden is not a very good picture for them.”

The government’s Mandatory Provident Fund pension scheme isn’t making retirement any easier. There are 647,500 working poor in Hong Kong—nine percent of the population. For workers who make under $7,100—the benchmark that qualifies working poor—existing legislation does not require that they contribute to their own fund. That makes it dependent on their employer’s contribution. It’s particularly bad when it comes to severance payments: Employers are permitted to take the severance out of the employee’s MPF, effectively destroying their pension funds.

For Legco’s Fernando Cheung, the sting of Hong Kong’s wealth gap is spreading past the city’s working poor. The government’s targets for building public housing are lagging behind, he says, and the real estate market is distorted beyond the reach of ordinary people. Inflation continues to rise.

Last week, a study by intelligence provider ECA International braced Hong Kong for more bad news on the wealth gap: While salary is expected to rise 4.5 percent next year, it will only amount to a 1.5 percent increase after inflation. That’s the third-lowest increase forecasted in Asia, with Hong Kong just topping Macau and then Burma. “With people making less and paying the city’s high rents or high mortgages, you end up with a lot of people who don’t have much to make a living,” says Cheung.

A version of this article appears in the November 20, 2015 issue of HK Magazine.