F 6 A - Julitta Li (17)
Erica Liu (18)
Widening wealth gap – Strangling the poor
Introduction
Despite being a metropolitan city and Asian financial hub, Hong Kong has the widest income inequality among all developed economies.How ironic it is! According to the latest statistics from the city's Census and Statistics Department, the number of households earning HK$4,000 a month or less has swelled by 80,000 in the past decade, while those earning more than HK$40,000 have risen by 100,000. However, HK$4,000 is barely enough to rent a room for a month in the city. This report is intended to spell out the widening wealth gap between the haves and have-nots.
Mr. Chan Tat Kuen, a social worker of Family and Child Protective Service Unit,the social work officer of Social Welfare Department was interviewed for giving his expert knowledge of the issue. The report further details the current situation, causes contributing to the issue and assesses the effectiveness of the government policies implemented.
Current situation
While there have been improvements in the economic climate, wealth gap between he haves and have-nots in Hong Kongis becoming more distinct. Dividing the population into 10 income groups, the figures show that the median income of the bottom two groups dropped nearly 20 percent over the decade 1996-2006, while the median income of the top two increased nearly 10 percent.
Decile Group / Median monthly domestic household income (HK$) / Rise in income（%） / Rise in income（%）(at current prices) / （1991-2001） / （1996-2006）
1996 / 2001 / 2006
1st (lowest) / 2,952 / 2,888 / 2,400 / -3.47% / -18.71%
2nd / 7,277 / 6,548 / 6,000 / 1.79% / -17.56%
3rd / 9,840 / 9,700 / 9,000 / 8.08% / -8.54%
4th / 12,300 / 12,610 / 12,000 / 17.10% / -2.44%
5th / 15,646 / 16,005 / 15,300 / 19.78% / -2.21%
6th / 19,188 / 19,885 / 19,500 / 24.25% / 1.63%
7th / 23,124 / 24,934 / 24,250 / 28.23% / 4.87%
8th / 29,282 / 31,583 / 31,000 / 27.02% / 5.87%
9th / 39,360 / 43,311 / 42,900 / 28.89% / 8.99%
10th(highest) / 68,880 / 77,600 / 78,000 / 29.70% / 13.24%
Overall / 17,220 / 18,144 / 17,250 / 22.22% / 1.74%
Worse still, some economists have warned that the middle-class of Hong Kong is gradually dissolving as many of them are beginning to fall into the low-income group, while a few only are making it to the top.
Fears that ‘the wider the gap between the rich and the poor, the higher possibility of social volatility and political instability’ have been expressed by the general public.Therefore, the government has come under fire for lacking pragmatic and effective actions to deal with the issue.
Case: Sham Shui Po
Sham Shui Po is a poor district with the lowest median household income in Hong Kong.It is home to working-class population of 365,540 but the majority is working poor who have loweducationbackgroundand limited skills.One-fifth of the population are aged 60 or above. They get nothing but ridiculously low wages to make ends meet though they work endless day and night. Some of themare forced to live in "cage" or cubical flats with poor living and hygiene conditions, especially the elderly.Rats, lice and other insects are common in the squatter areas.
Factors contributing to the widening wealth gap
In recent years, the transformation to a service-orientedand knowledgeable-based economy has been brought by the wholesale relocation of almost all manufacturing processes to the Pearl River Delta region.Therefore, quite a number of manufacturing workers are being laid off.In addition, the Asian financial crisis in late 1997 that lasted until 2003 abruptly plunged the Hong Kong economy into a prolonged recession. Thus, the income of workers with lower skills and lower education level will gradually go downhill.
Hong Kong is a cosmopolitan economy facing the challenges and opportunities brought by globalization and rapid economic development in the Mainland. In the long run, restructuring towards higher value-added activities helps maintain its economic vitality and competitiveness. On the one hand, many high-income jobs are being created in the process. On the other hand, Quite a number of businesses outsourced part of their operations by employing temporary workers, whose salaries are so low that they cannot sustain their livelihood. What is more, some bosses believe that they are not worthy of earning reasonable incomes due to their lower education level. As these workers have no say or bargaining power in fighting their rights, their lives can only become tougher despite the economic rebound in Hong Kong.
Apart from the economic standpoint,the Hong Kong government has always adhered to its famous economic principle - minimum direct intervention and low tax system. Under this circumstance, the government regards intervention in the distribution of wealth as a potential threat to economic freedom. This indicates that the government did not put social welfare as top priority. Apparently, there is a disproportion in allocation of resources.
Last but not least, importing cheap labourers from other regions greatly deprive low-income group ofjob opportunities. It leads to the drastic reduction in wages and eventually it has dragged a growing number of households into poverty.
Intergenerational Poverty
Widening income disparity and intergenerational poverty are closely interlinked. A never-ending poverty will be shaped by this snowball effect if the widening income disparity continues to deteriorate.
Intergenerational poverty refers to the poverty induced by the socially oreconomically challenged background of a person’s parents. Those from less privileged backgrounds are more likely to continue facing disadvantages into adulthood, while the wealthy will continue to benefit disproportionately from educational opportunities if there is no policy intervention. ``The children who are living in poor families might have less motivation or aspiration to pursue academic excellence,'' Mr Chan said.“The development of such children would be greatly constrained”.
For example,the population in Tin Shui Wai below the age of 24 constitutes 38% of the total population. Many of the young people come from families with less privileged background (low-income/CSSA recipients, single parenthood, new immigrants etc.).
Children growing up in low-income households tend to have a higher chance of being deprived of access to services and opportunities.In combating intergenerational poverty and curbing the widening wealth gap, more support for poor children is needed and interventional efforts should be taken as soon as possible.
Criticism on measures implemented by the government
There has been a lot of discussion when it comes to the measures adopted by the government on the grounds ofits applicability and long-term effects.
- Comprehensive Social Security Assistance Scheme (CAAS)
Undeniably, this policy provides a safety net for those who cannot support themselves financially. It is designed to bring their income up to a prescribed level to meet their basic needs.
However, there are several loopholes in the scheme. Not all the poor can benefit from this scheme as applicants need to satisfy lots of requirements in order to be eligible for assistants. Applicants need to pass both income and asset test and must not exceed the prescribed limit. Moreover, despite the increase in the number of working poor, few apply for social handouts because of severe stereotyping toward receivers. This goes to show that there are still poor under the poverty line but not subsidized by the CAAS.
As scheme stresses onlessening the number of citizens who are living below poverty line rather than narrowing the wealth gap in Hong Kong but, it cannot reach to the bottom of the problem. Intergenerational poverty remains unsolved.
- District Cash Assistant
It is a district support scheme for children and youth development. The Social Welfare Department provides direct cash assistance and carries out projects to meet the development needs of the children and youth in deprived circumstances, which cannot be satisfied by their families or mainstream education system. These children and youth can receive subsidies on using internet at home, joining some extra-curricular activities to develop their interest and potentials. This scheme can help to reduce the chances of intergenerational poverty.
In fact, each applicant can only receive $1500/month and this is not sufficient to afford all the expenses of the child or youth. On top of this, the scope of subsidized items is so narrow that the recipientsare not able to benefit from the scheme even if they are qualified to apply for the assistance. Subsidies from the above schemes are clearly not the best tactic to deal with the upsurge of inflation in Hong Kong.
Recommendations
Minimum wage
(Redefine the wage structure to achieve a socially preferable distribution of income.) / - It helps raise the standard of living of the poor and the most vulnerable class
-By increasing incomes for the lowest-paid, labourers can earn decent living and in turn it decreases the expenses of social welfare programs / - There is a heated debate on how to set the minimum wage. In late March, Tommy Cheung, Legislative Councillor-elect of the Catering Functional Constituency, suggested that the minimum wage may be set below $20. But workers cannot sustain their livelihoodwith such a low minimum wage level.
- Some employers focus on maximizing profit and ignore their social responsibilities, which suppress workers by only pay minimum wages.
Widen the tax base/ Increase tax rate of high-income groups ( e.g. profit tax, salaries tax) / Massive tax collected could be used to fund all those new social welfare expenditures that arenecessary to lift the average living standard of the less-wealthy citizens who are living below the poverty line. / The government may not be willing to raise the social welfare spendingas dominant sectors are education and medical services.
Develop new industries that are labour intensive, such as the recycling business / It will boost domestic demand and in turn create jobs for people with low skills and poor education. / From the perspective of entrepreneurs, risks are involved in operating new businesses. Governments may have to cooperate with them via joint venture, which needs a considerable sum of money.
Training programs (with provision of subsidies) / - These can equip workers for achieving more equitable salaries after learning know-how.
-Qualifications push workers up the job ladder or into better-paying careers.
Conclusion
Income disparity in recent years has aroused increasing public concern. Undoubtedly, there is a common trend towards greater income disparity in many economies. But this cannot be taken as an excuse to remain slothful in tackling this pressing issue. It is of utmost importance for the Hong Kong government to take affirmative actions, comprising allocating more public money and resources on social welfare, providing adequate support to the poor especially of those low-income families who failed to apply for assistance from different kinds of welfare schemes.
Reference
The South China Morning Post
The Standard
Census and Statistics Department
Social Welfare Department