How the Wealth Gap isn't Growing Closer

Hong Kong has been the world’s freest economy for nearly 25 years and during that time, the lack of inheritance and capital-gains taxes have only increased the wealth of massive tycoons. The 20 richest people, according to the Bloomberg Billionaires Index, is worth about $210 billion USD. But despite this main attraction, Hong Kong’s income inequality is the highest of any developed economy in 2016 at a 45-year high. 20% of the city’s residents live below the poverty line.

Poverty in Hong Kong affects these six groups the most: residents of subdivided flats, low-income workers, women, children, the elderly and ethnic minorities.

For women in poverty in Hong Kong, due to family obligations and a lack of employment protections, they have to work less. Their participation rate in the Hong Kong labor force is only 19.8%, compared to 58% for women at large.

Amongst children, 25% live below the poverty line. The figure for the elderly is about 33%.

Between the 255,000 residents from ethnic minorities, Pakistanis have the highest poverty rate at 48.6%. South Asians suffer from a poverty rate of 23%. Oxfam, a confederation of 19 independent charity organizations fighting for the alleviation of global poverty, said this was largely due to poor proficiency in Chinese and a low school attendance rate.

This inequality is most starkly obvious in the housing of Hong Kong. The per capita residential space in Hong Kong is about 172 square feet, while the per capita residential space in the U.S. is nearly quadruple that. Furthermore, nearly 45% of Hong Kong’s residents live in a public rental apartment or subsidized housing. Hong Kong’s sky-high property prices and rents also drove up the number of Hongkongers living in properties illegally (divided up from larger ones), which increased by 5% between 2015 and 2016.

The lack of available housing also drives the wealth gap further apart. Susan Saegert, professor of environmental psychology at the CUNY Graduate Center and director of the Housing Environments Research Group says that when she studied children living in low-income buildings, “they can end up becoming withdrawn, and have trouble studying and concentrating.”. This, along with extra responsibilities for the household, will drive children away from better opportunities that they simply don’t have the money or grades for. This will create a new poverty-stricken generation that is still stuck in this poverty cycle.

Another reason for the inequality is the lack of public spending on poverty relief. Despite its HK$690 billion budget surplus and an expanding economy. Public spending stands at 14.4% of gross domestic product this year – higher than the 13.7% last year but lower than 15.7 in 2003 when an outbreak of severe acute respiratory syndrome forced officials to shell out cash to lift the struggling.

On the other side of the issue, the Hong Kong Government also is not taking a stance on taxing the ultra-rich and the tycoons more, lacking inheritance and capital-gains taxes that have only increased the wealth of massive tycoons. The lack of these laws allows massive tycoons to stay in control of Hong Kong and allow them to keep all their money and earn much more at the expense of the poor.

All together, we can see a Hong Kong that is driven further apart on the economic scale if no immediate action is done. The poor stuck in this never-ending poverty loop, and the rich becoming even richer. We as citizens of Hong Kong must take a stand on this issue and need to make sure that all the above is addressed for the betterment of Hong Kong.