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.
Illustration: Lance Liu
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.
Originally intended to stimulate entrepreneurial dynamism, the hands-off approach might have ended up having a perverse effect, allowing a few large companies to entrench their positions and ultimately stifle competition. Charges of collusion between business and government have felled several officials and led to public discontent.
“The earlier generations have managed to entrench themselves so effectively, it becomes much more difficult for a new upstart,” said Steve Tsang (曾銳生), director of the China Institute at London’s School of Oriental and African Studies.
Even deep-pocketed foreign companies have trouble breaking in. French supermarket giant Carrefour spent four years trying to build a Hong Kong footprint before abandoning the territory in 2000, citing the difficulty of obtaining store locations.
That is not a problem for the two dominant supermarket chains, Wellcome and ParknShop, which are backed by their parent companies: Jardines and CK Hutchison Holdings.
Debates about Hong Kong’s rich and poor tend to return to one word: land. Housing is the least affordable in the world, according to housing policy think tank Demographia, with median prices relative to incomes far outstripping those of Sydney, London and San Francisco. Home prices have risen nearly 400 percent since a real-estate slump ended 14 years ago.
That has created an unpleasant lexicon for living conditions unknown in other cities. “Cage homes,” as the name suggests, are compartments of wire mesh barely large enough to hold a single bed, often stacked on open-plan tenement floors. “Coffin home” berths are slightly larger and offer a modicum of privacy thanks to walls made of wood or plaster.
For the middle class, developers have been building an increasing number of micro-apartments, the smallest just 11.9m2, with price tags of more than US$400,000.
Almost all the territory’s richest people largely owe their fortunes to real-estate development. The wealthiest is Li, whose Cheung Kong Property Holdings posted HK$18 billion (US$2.31 billion) in underlying profit last year. The runner-up is Lee, whose Henderson Land Development Co made HK$14.2 billion.
The assets of the 10 wealthiest people now equal 48 percent of Hong Kong’s economy, according to the Bloomberg Billionaires Index.
They have thrived within a peculiar system in which the Hong Kong government, which technically owns all available land, auctions off long-term leases to developers, some of whom are indirectly on both sides of the exchange.
Hong Kong’s political leader is selected by a 1,200-member committee of notables, including Li and Lee, and others made wealthy by the system.
This is part of why tycoons have an advantage, said Mathew Wong (黃以恆), an assistant professor at the University of Hong Kong who studies inequality and democracy.
“The housing market is a huge struggle,” said Fred McMahon, a resident fellow at Canada’s Fraser Institute.
The think tank’s annual economic freedom index gives top honors to Hong Kong, a status that “highly correlates with economic well-being, but not exactly,” he said.
Hong Kong’s leaders have taken some steps to help. They introduced a minimum wage for the first time in 2011. It is now HK$34.50 per hour, or US$4.43 — a level the US exceeded in 1996.
In 2015, the first-ever broad anti-trust law was passed; previously, no formal competition rules existed, apart from in telecommunications and broadcasting.
Hong Kong chief executive-elect Carrie Lam (林鄭月娥) has pledged to step up construction of affordable apartments and improve education to help workers get higher-paid jobs.
Hong Kong certainly has economic successes to boast about. GDP per capita is US$45,000, greater than in Germany, Japan or France, IMF data showed.
Life expectancy compares favorably against western Europe, and Hong Kong’s citizens benefit from some of the best rail, road and airport infrastructure in the world.
“You won’t see people dying of hunger or cold,” said Michael Tien (田北辰), a lawmaker who also owns local clothing chain G2000.
He tried living the life of a poor Hong Konger for a 2010 TV show, sleeping in a cage home and working as a street sweeper for two days, and found it untenable.
BETTER OFF IN CHINA?
Hong Kong continues to construct subsidized apartments. More than 2 million people out of more than 7 million live in public rental housing paying an average of US$220 per month. Typically in outlying areas, they feature rows of identical towers of 50 stories or more — hardly luxurious, but modern and relatively affordable.
Still, waiting times can stretch nearly five years.
With living standards lagging behind rising costs, some of Hong Kong’s citizens have begun to wonder what was once unthinkable: whether folks across the border in China might be better off.
Take 61-year-old Yu Wen-mei. She started working in a garment factory in the 1970s and recalls ferrying food and appliances to grateful relatives in China’s Guangdong Province in the 1980s. As low-end manufacturing disappeared, she took a job in a Motorola plant, which closed in 2000. She is a mall security guard now, earning minimum wage.
“Now, they have everything,” she said of her mainland relatives.
For supermarket cashier Lau, little is likely to change. Living paycheck to paycheck is actually an improvement. Before qualifying for a subsidized apartment two years ago, she had to work three jobs to make the rent on a HK$5,000 per month apartment in Sham Shui Po, Hong Kong’s poorest neighborhood, that was half the size.
“I almost went crazy,” Lau said, fighting back tears.
She still has no savings and has not taken time off since 2010.
“I just hope my kids have higher educational qualifications and don’t repeat my path. I don’t see hope in my future,” she said.
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