Sat, Jun 17, 2017 - Page 9 News List

Unless you are a tycoon, life in Hong Kong is harder than ever

Entrenched corporations with ties to the government have given rise to income inequality nearly unrivaled worldwide

By Prudence Ho and Matthew Campbell  /  Bloomberg

Illustration: Lance Liu

Mrs Lau cannot help but glance nervously at the calendar. Her next paycheck is not for a week, and she does not have enough money to feed her family of four crammed into her small, government-subsidized Hong Kong apartment. Her husband cannot work, and the kids do not understand why their mother keeps buying stale food.

“We’ll eat rice soup for all three meals,” said the 42-year-old, a cashier at the Wellcome supermarket chain controlled by the Jardine Matheson group.

Lau, who asked that only her surname be used, has been the sole provider for her seven-year-old daughter and 15-year-old son since her husband injured his back. She makes the equivalent of US$5.40 per hour, nowhere near the US$15 per hour minimum wage in cities such as Seattle, where the cost of living is cheaper.

It is an increasingly familiar tale in Hong Kong, a territory of soaring skyscrapers and glittering luxury boutiques that has become perhaps the epitome of income inequality in the developed world.

Two decades after Britain handed the former colony over to China, its richest citizens — billionaires such as Li Ka-shing (李嘉誠) and Lee Shau Kee (李兆基) — are thriving, thanks to surging real-estate prices and their oligopolistic control over the territory’s retail outlets, utilities, telecommunications and ports, but not people such as Lau.

“Hong Kong is an incredibly extreme case of unmitigated inequality, with very little in place to stop it,” said Richard Florida, author of The New Urban Crisis and a director at the Martin Prosperity Institute in Toronto. “I don’t see it as being sustainable. It’s not the economics, it’s the political backlash. It generates a backlash, and people just get angry eventually.”

FREE ECONOMY?

Hong Kong’s struggle to help its citizens improve their lives might represent the greatest challenge to its unique economic model. The territory has been lionized for decades by some economists as the closest thing to a free economy, with few regulations of any kind and no retail sales or capital gains taxes.

More than half of Hong Kong’s working population, including Lau, live below the level at which they must pay income tax and for the minority who do, the standard rate is a low 15 percent.

However, wages have failed to keep up with costs, leaving hundreds of thousands of Hong Kong’s people barely able to get by.

A common measure of inequality, the Gini coefficient, in which zero is absolute equality and one is all money in a single person’s hands, illustrates the problem: Last week’s figure puts Hong Kong at a record 0.539, the highest since data started being kept in the 1970s. It is the biggest disparity in Asia and greater than places such as Papua New Guinea and Brazil.

“Hong Kong is a very interesting case study, where profits are sheltered from competition while labor cannot easily organize,” said Emmanuel Saez, an economics professor at the University of California, Berkeley, who often collaborates with Thomas Piketty, the French economist who wrote Capital in the Twenty-First Century. “This leads to very high inequality.”

In some respects, Hong Kong is experiencing a turbocharged version of the growing divide evident elsewhere. Formerly remunerative manufacturing jobs — Hong Kong used to be the world’s toy-making capital — have vanished, replaced at one end of the spectrum by highly paid bankers and at the other by low-wage waiters and floor sweepers.

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