Global Comment

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Investments and Construction Workers- The Income Gap in Hong Kong

Hong Kong is a global financial center, and a city famous for its “laissez-faire” economic policy. However, it is also a city with one of the highest income gaps in the world. The United Nations’ 2006 human development revealed that the Gini index of Hong Kong was 43.1, the highest among developed countries and cities in the world.

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The best way to discover the difference between lives lived by the rich and the poor in Hong Kong is to spend a whole day following individuals and watching them earn their income in the city.

Eddie Lo, 42, is a vice-President of an American investment firm in Hong Kong. Last year, his income reached ten million Hong Kong dollars (1.25 US dollars). “Things only got better after 2005, when the Chinese government allowed more private and state capitals and enterprises to come to Hong Kong for investment,” he told me in the morning, before the stock market opened.

The stock opened for morning trade. The Hang Seng index was booming to reach 25,000. The companies in the portfolio of investment funds Daniel managed were all high in history.

At lunch, Eddie went to the Mandarin Oriental Hotel, the five-star establishment in which the Queens of Sweden and Denmark stayed when they visited Hong Kong. He ordered Japanese Kyoto Beef, Brittany lobster tail cooked in black pepper butter, crab meat mayonnaise and chocolate cake. The lunch cost 3,000 Hong Kong dollars (350 US dollars). The meal was on the cheap side for Eddie.

Eddie returned to his office and worked till 4:30, when the stock market finally ended trading. On that day, the Hang Seng index was the highest in history. Daniel’s clients called to thank Daniel for his wisdom and analysis. His total value of his investment fund was increased by 128%, compared to October of last year.

Returning home at seven, Eddie played computer games with his seven-year old, Max. Before coming home, Max had just finished tennis class at his school, an international school where English is the first language. The school fee is 140,000 Hong Kong Dollars (17995 US dollars) a year.

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In contrast, Hu Man lives in a different world. Tin Shui Wai, his home, is the poorest district in Hong Kong. According to the article written by Thomas Tang and Michael Somers of Global Institute for Tomorrow, the median income for a household there is 13,750 Hong Kong dollars (1700 US dollars), in contrast with 17,250 (2217 US dollars) – the average Hong Kong household income.

Hu Man, 45, is a construction worker. He did not benefit from the stock boom. Neither does he earn any more under the improving economy. “Our bosses had no hearts. They earned the money and ran away. I became penniless as a result of their actions.” Hu Man shook his head sorrowfully when he described to me how hard it was for him to try to get salary or other forms of financial compensation from his bosses. “Outsourcing was not good for workers. Since I was not directly employed by land developers, I couldn’t ask them for money,” he continued.

His family currently lives on social security from the government. The amount of social security, after paying rent and electricity bills, is 400 US dollars. Money is tight for the family. Hu Man’s wife asks fruit and meat storeowners for unsold apples, beef, and pork. The family can’t spend more than 30 Hong Kong dollars (5 US dollars) on each meal.

Increasing inflation was bad news for Hu. Going to a supermarket in his housing estate he discovered that everything was getting more expensive. For example, the price of a bottle of cooking oil changed from 3 US dollars in August to 5 US dollars. “The chief executive said the economy would create more jobs for people, but I saw nothing better. The social welfare department claimed it would help me. Yes, some bosses were willing to employ me, but the bus fares to the job were too expensive.”

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Hu has two children, aged nine and seven. Looking at them, Hu is sorry for not being able to buy them a computer and accompany on enriching spare-time activities such as museum visits. “How can they have enough knowledge to compete when they grow up?” Hu was getting emotional now. “I feel ashamed that I cannot give the best to my children.”

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In his policy address two weeks ago, Donald Tsang, the Chief Executive of Hong Kong Special Administrative Region, announced the plan to cut income tax from 16% to 15% in the next fiscal year. While the tax cut is good news for Eddie, the policy address does not give Hu much to hope for.

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I talked to Eddie about poverty elimination. He suggested that widening income gap would be evitable as investment bankers and the wealthy could invest anywhere to make more money. The privatization of enterprises in ex-communist countries such as Vietnam and Laos would provide even more opportunities for investment banks to cash in from IPOs, as these enterprises would be likely to choose Hong Kong to be listed on the stock market.

Finally, I told the story of Hu Man to Eddie. Eddie had sympathy for Hu, but claimed that too many government interventions in business affairs would further harm poor workers by increasing the cost of employing them.

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Apparently, if people are right to define Hong Kong as a global financial center, the story of Eddie and Hu might imply what was happening and would happen in the future: The rich would get richer and weaken government power, while workers like Hu would be further left behind.

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download Fugitive Pieces dvd i‘Human Development Report2006’, United Nations Development Program, http://hdr.undp.org/hdr2006/statistics/indicators/147.html
ii‘ Heeding voices of Tin Shui Wai’ originally published by South China Morning Post ,
22,March,2007, http://www.globalinstitutefortomorrow.org/index.php?option=com_content&task=view&id=139&Itemid=35
iii‘2007-2008 Policy Address”, http://www.policyaddress.gov.hk/07-08/eng/p70.html

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