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Inequality in Hong Kong
A study by the Census and Statistics Department released on 18 June 2007 revealed that Hong Kong's Gini coefficient rose from 0.483 in 1996 to 0.500 in 2006, indicating that Hong Kong has become one of the most unequal developed societies on earth. This short paper analyses this result, and asks whether it matters and if so what can be done about it.
The Gini coefficient measures income inequality. The Gini coefficient is a ratio1 between 0 and 1 where 0 means perfect equality (all persons have the same income) and 1 means perfect inequality (one person has all the income).
Countries have Gini coefficients that range from 0.23 (Denmark) to 0.71 (Namibia)2. Poor countries have Gini coefficients that range from the lowest to the highest level, depending on their social system. Rich countries tend to have low to middle coefficients (below 0.40). The lowest Gini coefficients are found in the Scandinavian and Eastern European countries and Japan. The US ratio, 0.47, is high for a developed country and is a current source of concern to many commentators in the US. Hong Kong's near neighbours in the rankings are Latin American countries like El Salvador, Columbia and Mexico. The only developed country higher on the list than Hong Kong is South Africa.
Like all single statistical measures of complex social phenomena the Gini coefficient is subject to limitations and should be viewed with caution. The calculation method may vary from one country to another, as may the quality of the data on which the calculation is based. Where government distributes non-cash benefits to the poor (such as public housing in Hong Kong), this will not be counted as income, while cash benefits (more common in developed countries) are counted. Post-tax and pre-tax income may also differ widely. For reference, the CSD also provided a calculation of the Gini coefficient adjusted for taxation, social benefits and changes on household size which remained at the same level - 0.43 - in 1996 and 2006.
Nonetheless, the CSD report admitted that on all its selected measures, except one, household income distribution in Hong Kong became more dispersed during the 1996-2006 period. And with whatever adjustment, Hong Kong's Gini coefficient remains significantly higher than those of most developed countries. A separate study by Oxfam and Chinese University found that the working poor living on less then HK$5,000 per month had grown in 2006 to 350,000 or 5% of the population.
Overall, Hong Kong has high income inequality and is becoming more unequal.
Why does Hong Kong have high inequality?
Hong Kong's high Gini coefficient relates to the relatively low level of government intervention to redistribute income.
In terms of taxation, the Hong Kong system does little to lower inequality. Property tax and stamp duty are mainly paid by the better-off, but betting levy is believed to fall more on the lower income groups. Salaries taxation is progressive, ranging in bands up to [19%], but it is subject to a cap of [16.5%] of assessable income, i.e. a beyond a certain level it is a flat rate tax. There is no tax on capital gains (although gains deemed to be trading in nature are taxable), and in practice individuals' securities trading gains are not assessed. There is no tax on dividend income nor, from , on inherited wealth. Overall, the rich pay little tax. The ‘wealth condensation' effect is particularly marked in Hong Kong: the rich can easily get richer.
On the expenditure side, transfer payments exist in Hong Kong - the Comprehensive Social Security Assistance (CSSA) scheme - but their overall scale is much lower than in most developed countries. Hong Kong has no unemployment benefit and no state pension (except for civil servants).
Government intervention in other aspects of the economy is also rather modest in Hong Kong. There is no statutory minimum wage. Equal opportunities legislation, which can help reduce inequality, has only recently been enacted.
The Government does provide substantial benefits in kind - almost-free health care, universal free education, and heavily subsidized public housing. These benefits are not always well-targeted: public housing tenants have been shown to have a similar income profile to private rental housing tenants. But without these benefits in kind, inequality would undoubtedly be worse, or have graver social consequences.
Although non-governmental organizations (NGOs) are developing in Hong Kong, and some, like Po Leung Kuk have a role in reducing inequality, the overall effectiveness of NGOs appears less than elsewhere. Trade unions exist but are relatively small in terms of members and rather fragmented. Charities and social support groups exist, as do political parties, but they are not always very effective. The rich do donate to charity, and (many being property developers) also donate buildings to universities. But they tend not establish foundations or trusts to do more substantial long term work for social good.
Why is Hong Kong like this? The answer lies partly in the unrepresentative political system. Business owners and professionals have disproportionate political influence. Other reasons may be found in the preference of an originally immigrant population for self-reliance rather than government support, and - having experienced China's experiments with socialism - distrust of welfare and political organization.
Why is Hong Kong's inequality getting worse?
In recent years, Gini coefficients have increased in many developed economies. It appears that globalization and technological advance allow talent to be leveraged to a greater extent than before - enabling outstanding sportsmen, artists, designers and financiers to apply their talent to a global market, earning very large rewards. The same forces of globalization and technology bring lower level workers into keener competition with one another. Unemployed workers in poor countries like China or India replace lower-level workers in rich countries, driving down incomes for the latter. These trends are socially disruptive, leading to resistance to globalization, which in turn would threaten world prosperity. Thus at a certain point thus it becomes in the interests of the haves to reduce inequality.
As a highly open economy, Hong Kong has shared in these trends3. Business owners, professionals and managers are able to leverage their talent across an expanded marketplace that includes Mainland suppliers and global customers. Lower level workers, on the other hand, are brought into competition with their Mainland counterparts, and see corresponding relative decline in their incomes. Such competition takes place not through large-scale migration of Mainland workers into Hong Kong but migration of production facilities from Hong Kong to the Mainland.
A further reasons for Hong Kong's rising Gini coefficient is the shrinking of average household size, including increasing numbers of singleton elderly. These elderly may still be supported by their families (although many may not). The ageing of the population bears harder on the less educated, since their earnings may decrease in middle age while the earnings of professional and managerial staff with tertiary education generally rise with age. A third factor is the recessions of recent years, which have resulted in unemployment and wage cuts for lower social groups.
The shift in employment from manufacturing to financial services was another contributing factor. Incomes in financial services are more dispersed (i.e. between very high and very low earners) than in manufacturing, hence the Gini coefficient for society as a whole rose.
Does income inequality matter?
Does income inequality necessarily bad? Is it perhaps a good thing, providing incentives which drive economic development? Or does it reflect a cultural choice on the part of the people, a rejection of socialistic measures to redistribute wealth?
Perfect equality of income would be unjust. Where the Gini coefficient is based on household income, some households are larger than others and so should have higher income. Some individuals work harder than others and/or are more talented; they contribute more to society and so deserve higher income. If the economic system does not have rewards and penalties for higher and lower contributions, it will become dysfunctional. Societies that have endeavoured to equalize income, such as former Communist countries, have failed, and almost all have abandoned the effort. Complete equality is not desirable.
Discussion of inequality often focuses on equality of opportunity, for example ensuring that children from whatever background receive an adequate education, that citizens of whatever means have access to adequate health care. However, equality of opportunity, even if achieved, does not mean equality of outcome. The brighter more determined child will get ahead and eventually earn more than his duller lazier counterpart.
Some degree of inequality of outcome is just and economically desirable. However, at a certain point too much inequality of outcome is dysfunctional. Society becomes divided, leading to unrest which also threatens the wellbeing of the high income groups. Depending on culture and individual preference, some people on high incomes feel uncomfortable if their fellow citizens are in poverty and require, for their own good life, that their fellows' poverty is relieved.
Economically too, inequality can be dysfunctional. High-end workers require monied fellow citizens to buy their services. The sophisticated economic activities that provide high incomes also usually require clusters of supporting services, which in turn require wide pools of talent within the economy. Thus some spreading of income is necessary even to ensure the well-being of the better-off.
To a certain extent, then, there is a self-balancing factor within the economy: high incomes for some lead to a wider rise in incomes across the society - the so-called ‘trickle-down effect'. There is a market solution to inequality. But it is only a very partial solution. Without government intervention there can still be large swathes of society that do not share in the higher incomes - which in turn limits the potential even for the better-off.
Research4 has established a link between income inequality and social cohesion. In more equal societies, people are more likely to trust each other (Uslaner and Brown, 2002), measures of social capital suggest greater community involvement (Putnam, 1993, 2000), and homicide rates are lower (Daly, 2001). Socio-economic status has also been clearly linked to health (Whitehall studies).
For economic as well as social reasons, in most developed countries government and voluntary action is taken to reduce inequality.
Does Hong Kong's inequality matter?
From observation it seems that Hong Kong people are relatively tolerant of inequality. This probably relates to the immigrant ethos, as referred to above, and negative experience of welfare and collective action in Mainland China. A second reason is that mobility has been good. It has been possible for individuals from lower social levels to rise to the top - many figures prominent today came from poor backgrounds.
Thirdly, as noted above, the Government has intervened substantially to ensure the provision of a basic standard of living for most of the population, thus averting the worst effects of inequality.
However, it appears that dissatisfaction with inequality is growing. For one thing, equality is increasing. For another, the recessions of the post-handover period have been quite severe, and have perhaps diminished people's optimism that they can make it through the existing system, particularly since the population as a whole is ageing. The maturation of society has probably also led to some softening of the self-reliance ethos, and more concern for fellow citizens. The gradual rise in political awareness also makes the factors leading to inequality - of which the central one is non-representative nature of the governmental system - appear less tolerable.
In recognition of these trends, in February 2005, the Government launched a Commission on Poverty (which having delivered its report has now disbanded). And the Chief Executive made the reduction of poverty a key item in his election platform.
What can be done to improve equality?
Numerous measures have been suggested to improve equality. These measures, and their possible applicability to Hong Kong, are discussed below. It should be noted that the Gini coefficient measures only financial income inequality, however the discussion below takes a broader approach.
One of the main recommendations of the Commission on Poverty was to gather more comprehensive data on poverty. This should indeed be done, although action should not wait until all studies have been completed.
The thrust of the Commission's report is, ‘to promote the idea of "From Welfare to Self-reliance"'. The report suggests various measures to encourage the able-bodied unemployed to find work. However, while some overseas developed countries are trying to move in this direction, the starting point for these countries is usually that they have very comprehensive and generous welfare systems that are distorting the incentive to work. Hong Kong is far from having such a system. Although there are abuses of the CSSA, which should obviously not be tolerated, the issue is marginal beside the central fact of social inequality.
It is naïve and incorrect to imply, as the Commission does, that unemployment is the fault of the unemployed. If there is insufficient demand for the labour in the economy, whether because of recession or because of an excess supply of workers from the Mainland - and both reasons have been operative in Hong Kong in recent years - unemployment is inevitable. It is not the fault of the individuals who suffer; rather, it is the fault of the policy makers who have failed to maintain sufficient demand5. Nor is it helpful to coach individuals to find jobs. To the extent that such efforts are effective, they serve only to shuffle individuals between the unemployed and employed pools, without affecting the total number in either pool.
It appears that the following groups are likely to be priorities for any programme to reduce inequality in Hong Kong.
Measures which can be considered to help reduce inequality.
1 The numerator is the area between the Lorenz curve of the actual income distribution in the society and the uniform (perfect) distribution line; the denominator is the area under the uniform distribution line.
2 Country Gini coefficients are compiled by the US Central Intelligence Agency, as quoted on Wikipedia (viewed on 1 July 2007). They are calculated on different dates, in some cases as far back as the mid-1990s, and may be on different bases.
3 As per analysis by KC Kwok, Hong Kong Government economist, Income Distribution of Hong Kong and the Gini Coefficient.
4 Quoted in Wikipedia, Income inequality, viewed on 30 June 2007.
5 For discussion of this topic, see among others J.K.Galbraith, The Good Society.
6 A poverty trap arises when available wages are little better than, or not as good as, available welfare payments thus deterring individuals from entering the job market and so trapping them in poverty.
國家堅尼系數有從0.23﹙丹麥﹚至0.71﹙納米比亞﹚2。 貧窮國家的堅尼系數，從最低到最高水平，取決於他們的社會制度。 富强國家往往有輕微至中等系數﹙低於0.40﹚。堅尼系數最低的國家在北歐和東歐以及日本。美國0.47的比率，對已發展的國家而言是很高，這使美國許多評論家表示關注。 香港鄰近國家的排名是拉丁美洲的國家如：薩爾瓦多、哥倫比亞和墨西哥。 唯一排名比香港高的已發展國家是南非。
像所有複雜社會現象的單一統計計量措施，堅尼系數是受限制的，並應謹慎看待。 計算方法從一國到另一國都不盡相同、數據的質量亦有分别。 當政府分派非現金福利予窮人﹙如香港的公屋﹚，這是不會被算作收入的，而現金補貼﹙多見於已發展國家﹚會被算作收入。 稅後收入和稅前收入也有很大差別。 例如：統計處還提供了一個根據稅收、社會效益和家庭大小的變化作調整，在1996年和2006年保持在同一水平0.43作計算的堅尼系數。
不過，統計處的報告承認，在所有選定的措施中，除了以下一項外，在1996-2006年期間香港家庭收入分配變得更為分散。 而無論如何調整後，香港的堅尼系數仍然大大高於多數已發展國家。 另一項由樂施會和香港中文大學的研究發現，2006年生活水平低於港幣5,000元的在職的貧困人士己增長至350,000或人口的5%。
在稅務方面，香港的制度對降低不平等並沒有多大幫助。 物業稅及印花稅，主要是較富裕的人支付， 但博彩稅則落在更多的低收入群眾身上。 薪俸稅是漸進式、分不同等階至[19%]、但不超過應評稅入息上限 [16.5%]，即超過了一定水平後、它是一個平均的稅率。 沒有任何資產增值稅﹙雖然交易性質的收穫是應課稅的﹚，而實際上，個人的證券交易收益也不作評稅。 從﹙2006﹚ 沒有股息稅、也沒有遺產稅。 整體而言，富有的人繳納很少稅款。 「財富凝結」的作用在香港尤為明顯：有錢的人可以很容易地更富有。
在支出方面，轉移支付存在於香港 - 綜合社會保障援助﹝綜援﹞計劃 - 但其整體規模，遠遠低於大多數已發展國家。 香港沒有失業救濟金、沒有國家退休金(公務員除外)。
政府也提供了大量實質的福利 - 近乎免費的醫療服務、全民免費教育、並大力資助公營房屋。 但這些福利並不十分針對性：已證明公屋租戶有私人租戶的類似收入。 但沒有了這些實質福利、不平等無疑將更惡化、或有更嚴重的社會後果。
儘管非政府組織 ﹙NGOs﹚在香港發展蓬勃，而且一些組織，如保良局對減少不平等有一定角色，然而非政府組織的整體效益卻少於其他地區。 工會存在、但規模都比較小和零散。 慈善機構和社會團體、還有政黨的存在、卻並非很有效。 富人作慈善捐獻、也有很多地產商向大學捐出建築物。 但他們往往不會建立基金會或信託、為社會多做長期的實質工作。
為什麼香港會這樣？ 答案某部分在於沒有代表性的政治制度。 商家與專業人士存有不相稱的政治影響。 其他原因，可能是原來的移民人口較偏向於自力更生、而不是政府的支持，因為經歷了中國的社會主義實驗，及對社會福利和政治組織的不信任。
近年來，堅尼系數在許多經濟發達的地區上升。 看來全球化和科技進步，令人才比以前發揮更大 - 讓傑出運動員、藝術家、設計師和金融家在國際市場運用其才幹，贏得了很大的收穫。 同全球化和技術的推動力，使低層次的工人進入更激烈的競爭。 失業工人在貧困國家、如中國或印度取代富有國家的低層次工人，降低後者的收入。 這些趨勢在社會上造成混亂，導致抗衡全球化，而這將威脅到世界的繁榮。因此，在某程度上，因此成為富有的人在利益上應減少不平等。
作為一個高度開放的經濟體，香港分享到這些趨勢3。 商家、專業人士和經理能夠橫跨包括內地供應商及全球客戶的擴大市場，發揮他們的才幹。 低層次的工人，在另一方面、被帶入與內地相對的單位競爭，並看着他們的收入相對下降。 這種競爭的發生不是通過大規模內地工人的遷移來港，而是生產設施從香港遷移往內地。
另一個令香港的堅尼系數上升的原因，是每戶平均人數萎縮、包括越來越多的單身老人。 這些老人可能仍然得到家人的照顧﹝雖然許多可能沒有﹞。 人口老齡化令低學歷的人生活更困難，因為到他們中年時，收入可能下降，而擁有大專學歷的專業及管理人員的收入，一般會隨著年齡增加。 第三個因素是近年的經濟衰退，造成社會地位較低的群體失業和減薪。
收入不平等必然是壞事嗎？ 也許這是一件好事，為帶動經濟發展提供誘因？ 這是否反映了一部分人的文化選擇、否定社會主義措施，將財富再分配？
完善平等的收入將是不公正的。 當堅尼系數是基於家庭收入時, 有些家庭人數比較多、收入應該較高。 有些人工作比別人勤奮和/或是更有才幹；他們對社會有更多貢獻，應有更高的收入。 如果經濟體系對有較高及較低貢獻的沒有獎罰的機制，它將會變得失調。 有些曾致力於均等收入的社會﹝如前共產主義的國家﹞都失敗，而幾乎所有都放棄了努力。 完全平等是不可取的。
討論不平等往往側重於平等的機會，例如確保不同背景的兒童獲得足夠的教育及公民得到足夠的醫療保障。 不過，平等的機會，即使實現，並不意味著平等的結果。 一個比較聰慧及堅決的孩子將會比一個平庸及懶惰的捷足先登。
不平等的結果某種程度是公正及經濟上可取的。 不過，在某一點太多不平等的結果是失調的。 社會開始分化、導致不安，也威脅到高收入群體的幸福。 某些人基於文化和個人的喜好，如果他們的同胞生活在貧窮中，會對自己的高收入感到不舒服，而為了自己美好的生活，會希望他們的同胞可以解決貧困。
經濟在某程度上有一個自我平衡的因素：某些人的高收入，提高整個社會的收入，即「涓滴效應」。 這是一個市場解決不平等的方法，但這只是一個非常局部的解決方案。 沒有政府的干預，社會上仍然有大部份人不能享有較高的收入，這反過來即使是較富裕的人也限制了潛能。
研究4為收入不平等和社會凝聚力建立了聯繫。 在較為平等的社會中，人們更容易互相信任﹝Uslaner and Brown, 2002﹞，社會資本的措施中，建議更多的社區參與﹝Putnam, 1993, 2000﹞，以及兇殺率較低 ﹝Daly, 2001﹞。 社會經濟地位也清楚地與健康聯繫﹝Whitehall Studies﹞。
從觀察看來，香港人對不平等比較寬容。 這可能涉及移民的特質，正如上文所述，和從中國大陸的社會福利制度和集體行動所得的負面經驗。 第二個原因是流動性一直很好。許多來自較低層次、貧困背景的個人，現在是社會上出人頭地和出名的人物。
但是，對不平等現象的不滿日益增加。 其一，是平等的增加。 另外，回歸後的低潮已相當嚴重，並有可能降低人們對於通過現有制度的樂觀情緒，特別是由於整個正在老化的人口。 成熟的社會，大概還導致一些軟化了自力更生的精神和更為關注同胞。在政治意識上逐漸的醒覺，認為一個非代表性的政府體系，也使人們不太容忍導致不平等的因素。
委員會報告的重點是，提倡「從福利轉向自力更生」。 報告提出多項措施，鼓勵健全的失業人士尋找工作。 但是，儘管一些海外已發展國家正試圖朝這個方向出發，這些國家通常有非常全面和慷慨的福利制度，從而是扭曲了尋找工作的動機。 香港遠未有這種制度。 雖然有濫用綜援的情況，這顯然是不能容忍的，但是問題在社會不平等的中心事實中是較為邊緣的。
對於委員會所暗示，說失業是失業者的過失，這說法是天真和不正確的。如果在經濟上對勞動力沒有足夠的需求，無論是因為經濟衰退，又或是因為來自內地過剩的勞工供應 - 而近年來這兩個原因在香港已起了作用 - 失業是不可避免的。 這並不是受害人的過錯；相反，這是決策者沒有保持足夠的需求的過失5，也不是對個人找工作作出輔導有所幫助。這些努力在某程度上是有效的，他們只是將個人從失業網和就業網之間移來移去，而不影響两者之間的總數。
3 香港政府經濟顧問郭國全在Income Distribution of Hong Kong and the Gini Coefficient所作的分析。
4 引用Wikipedia 2007年6月30日的 Income inequality。
5 如欲討論這題目，可參看如J.K.Galbraith, The Good Society。
Reproduction of this paper is permitted with proper attribution to the Hong Kong Democratic Foundation