Liang Hongfu

HK's wealth gap must be narrowed

By Hong Liang (China Daily)
Updated: 2007-06-26 06:55

Latest Hong Kong government figures have confirmed what we have long suspected - the poor are growing in numbers and are getting poorer.

The number of households earning HK$4,000 ($512) a month or less has swelled by 80,000 in the past decade, while those earning more than HK$40,000 have increased by 100,000. To put this in perspective, HK$4,000 is barely enough to rent a room for a month in the city.

Dividing the population into 10 income groups, the figures show that the median income of the bottom two groups dropped 12.5 percent from HK$4,000 a decade ago to HK$3,500, while the median income of the top two increased 20 percent from HK$25,000 to HK$30,000.

What is worse, some economists have warned that the middle-class of Hong Kong is gradually dissolving as many of them are beginning to slip into the low-income segment, while a few only are making it to the top.

This is depressing news for Hong Kong people, especially those of my generation, with vivid memories of a rapidly developing economy that offered almost unlimited opportunities for young people to move up the social ladder.

That was the time when the super-structure of an international financial center, created by the large influx of foreign banks and other financial institutions, was beginning to take shape in Hong Kong, while the economy was anchored by a booming manufacturing sector which guaranteed a strong demand for workers.

There were no figures available to show what the income gap between the poor and the rich was like at that time. It could well be wider than what we are seeing now. But when jobs were plentiful and incomes were rising, few people had time to complain.

In recent years, the transformation to a service economy has been accompanied by the wholesale relocation of almost all manufacturing facilities to the Pearl River Delta region. The displaced factory workers were largely absorbed by the fast expanding service sector in the go-go years of the 1990s when the economy was kept on the boil by huge profits earned from the export of goods made in mainland factories either owned or contracted by Hong Kong manufacturers.

The Asian financial crisis in late 1997 abruptly plunged the Hong Kong economy into a prolonged recession that lasted until 2003. Many jobs were cut during those years, and surviving businesses outsourced part of their operations to service providers using temporary workers to meet ever changing workloads.

Without the protection of a minimum wage law, many thousands of displaced workers during the recession had to fight for available temporary employment at wages largely dictated by the service providers.

The ranks of displaced workers is expanding even though the economy has been recovering since more businesses are closing down operations that they can outsource at lower costs.

Some economists are saying that the widening wealth gap in Hong Kong is showing up the ugly side of outsourcing that has been widely praised for helping to keep businesses lean and fit. They question if it is too much a social price to pay in trading economic justice for cost efficiency.

The business sector has made its stand abundantly clear: let wage levels be determined by free market forces. But economists understand the brutality of market forces as the pendulum of demand and supply swings from one extreme to another.

It is necessary for the government to step up its efforts in working with the business sector to narrow the wealth gap in Hong Kong.

E-mail: jamesleung@chinadaily.com.cn

(China Daily 06/26/2007 page10)