TH GAP The Wealth Gap In Hong Kong Comparing to the near area,like Singapore,Hong Kong’s Gini coefficient is more higher and ranked top in the world. Even the wealth gap is not common in western societies,however,it is no doubt that wealth gap has threatened the Hong Kong most. With the change of economic mode in Hong Kong ,it trend to knowledge-based economy rather than manufacturing industry so that a large number of worker are unemployed immediately,in the other hand,a lot of high-class people are benefited by the new mode economy.
Therefore the wealth disparity has become more serious. As the result of,those low-class people are low education and low skill so it is difficult for them to survival in the current Hong Kong. According to the structure of Hong Kong economy, mainly have six industries. However,those trades need higher education and skill. Thus it can been seem why there is lot of low-class people has been unemployed. Aside from what i mentioned above,another reason of extreme disparity between rich and poor ?????? During 1997, there is a stock crisis ??????? ,??????????????????????Because of economic mode; change in HK, the manufacturing industry has negative growth ???????????????????????? The wage of highly skill worker are increasing faster than the the low skill workers. ????????????????????????? Importing workers overseas making the local HK people who have low skills have no job ????? the inequality of the tax structure ?????? ,??????????? The HK population is aging.
There is no complete retirement plan to protect the old generation. ??????? ,??????????? There isn’t enough welfare program of HK governement to help to poorThe much talked about widening wealth gap in Hong Kong has raised the question that touches on the very heart of the city’s economic policy: What role does the government have in wealth distribution? Even the most ardent disciples of the guiding principle of small government, big businesses have agreed that the worsening economic injustice, as perceived by an increasing number of people in Hong Kong, can give rise to social discontent, which cannot be ignored by any responsible government, big or small. There is no doubt that the Hong Kong government is well aware of the situation.Indeed, the Hong Kong government, over the past many years, has done quite a lot in addressing the issue, albeit indirectly through housing subsidies, affordable medical service and various welfare benefits to the most needy. As the wealth gap continues to widen, the call for more direct government intervention is getting louder. But other than moral persuasion, there is little the government can do in achieving a more even distribution of wealth in Hong Kong. In the context of the guiding economic principle of a free market environment, the room for direct intervention is extremely limited.In many developed economies, the problems arising from a widening of the wealth gap between the rich and poor can be addressed, to some extent at least, through fiscal policies.
But making any material changes to Hong Kong’s long-cherished low and simple tax regime could risk undermining foreign and domestic investors’ confidence in the government’s commitment to preserving the very fabric of the market-oriented economy. With the salary tax burden falling on no more than 20 percent of the working population, any discussion of taxing the rich to subsidize the poor seems rather pointless.The government did on numerous occasions raise the rates of corporate and salary taxes to cover budgetary shortfalls in economic down-cycles.
It was always understood that such adjustments were nothing more than short-term budgetary fine-tuning that would be reversed once the economic tide began to turn. There is, of course, the strong argument for the government to widen the tax base. New sources of revenue are needed to finance the improvement and expansion of public welfare programs, primarily medical services, to help those hardest hit by the worsening economic imbalance.But an earlier attempt to introduce a sales tax failed because it was deemed by the public to be unfair to low-income families which must spend a larger proportion of their household income on food and other necessities than families in the higher-income bracket. In considering other new taxes, the government is constrained by strict guiding principles which were designed to preserve the free-market environment and maintain Hong Kong’s economic competitiveness. But the government is far from helpless in tackling the wealth gap issue.
As the biggest landlord in Hong Kong, it holds the key to what has been a primary source of wealth – property.Many economists have suggested that the government expand its low-cost housing program in cooperation with the private sector as it has been doing all along. Housing typically accounts for a large portion of an average family’s household expenditure, especially those in the lower income bracket. Providing quality housing at affordable prices to the less well-to-do families goes a long way in addressing the social problems brought about by raw market forces. This was the role that the Hong Kong government has been playing for many years in helping to reduce the economic imbalance that was taken for granted in a free market environment.All it needs now is for the government to expand this role. Wealth gap seen as threat to stability Chester Yung Friday, August 11, 2006 Hong Kong’s widening wealth gap is raising alarm bells and could become a structural rather than short-term problem with further economic integration with the Pearl River Delta, a government think-tank warns.
“The continued widening of the wealth gap is the burning issue in Hong Kong and has always been a potential threat to social stability,” Central Policy Unit head Lau Siu-kai said after a Commission on Strategic Development executive committee meeting.Lau said the wealth gap in Hong Kong has widened steadily in the past 20 years because of increasing integration with the Pearl River Delta – in particular the wholesale migration of the SAR’s manufacturing sector across the border. |ADVERTISEMENT | | | |[pic][pic] | |[pic] | |[pic] | |[pic] |Lau said cheap labor and land in the delta provides unprecedented opportunities for Hong Kong’s business sector. “But with that integration, jobs in low-skilled industries and services have relocated to the mainland at a fast pace,” he said. There are fewer jobs for low-skilled workers in Hong Kong and their wages have remained persistently low. Lau backed his claims with the upward trend of Hong Kong’s Gini coefficient, a measure of income equality and distribution, over the past 20 years. The coefficient is a number between 0, representing perfect equality, and 1, corresponding to perfect inequality.The higher the number, the greater the inequality of income distribution.
Put another way, higher numbers mean a greater portion of wealth is concentrated in fewer hands. Hong Kong’s Gini coefficient rose from 0. 45 in 1981 to 0.
53 in 2001. This is considered high, especially for a developed nation where incomes are distributed more evenly. For example, the coefficients in Scandinavian countries are about 0. 25, and Singapore’s was 0. 425 in 1998. The poorest 20 percent of households in Hong Kong shared 4. 3 percent of the city’s wealth in 1991 but only 3.
2 percent in 2001.Despite the continued economic recovery in the past two years, unemployment in certain sectors and job categories remains high. For example, it remained steady at 13. 6 percent for construction workers between February and April this year, much higher than the overall official unemployment rate of 5 percent, Lau said. With further integration between Hong Kong and the Pearl River Delta, greater wealth disparity may pose a structural instead of a short-term problem to Hong Kong if its low-skilled workers cannot upgrade themselves through retraining, he said. Once it becomes a structural problem, it will be much more difficult to manage.Instead, the issue must be tackled at a policy level, which requires a longer time, Lau said.
He added that the growing wealth gap is not confined to Hong Kong but is the by-product of globalization. “There has been a rapid flow of capital, goods, services and skills between countries. While promoting sustained global economic growth, these have also led to polarization of income distribution, thereby widening the wealth gap,” Lau said. ” I don’t believe there is any society in the world that claims it can solve the problem completely. ” Lau said the best solution to the problem is education, which increases social mobility