Hong Kong's Rich-Poor Divide Widens as Population Ages
The wealth gap is widening in Hong Kong, according to new data from the city's Census and Statistics Department, as the population ages rapidly and industries decline.
The Gini Coefficient or the Gini Index, a measure of income disparity, has been moving up in Hong Kong over the past 10 years as the number of unemployed households rose more than 48 percent over this period, government figures showed Monday.
The Gini coefficient is a number between 0 and 1, where 0 represents perfect equality and 1 indicates perfect inequality. For Hong Kong, the index hit 0.537 in 2011, up from 0.533 in 2006 and 0.525 in 2001.
One of the reasons for high unemployment is an aging population. Nearly 44 percent of the "economically inactive households" have all members aged 65 and above, according to government data.
Hong Kong resident and Head of Research at Reorient Financial Markets, Uwe Parpart, says it's not surprising the city's wealth gap has widened, because it's becoming even more difficult for working age people to make money in the city, unless they are employed in the financial or real estate sectors.
"I'm surprised that the Gini Coefficient didn't shoot up any higher," Parpart told CNBC. "There are some very basic structural and economic reasons for this. In terms of economic structure — how do you make money in Hong Kong? There's no more manufacturing left, that's gone."
The neighboring province of Guangdong with its low wages has lured manufacturers away from Hong Kong, which last year introduced a minimum wage to address growing tensions over income inequality, says Parpart.
Besides the lack of manufacturing jobs, Parpart says high property prices act as "indirect taxes" further adding to the wealth gap.
"People are taxed indirectly through the way the property market has been working over the past decades," Parpart said. "The government makes money through property auctions, defacto property speculation. The huge rents that you pay here have to come down relative to income."
In Singapore, another Asian financial hub, the Gini Coefficient among employed households inched up to 0.473 in 2011 from 0.47 in 2006, according to its Department of Statistics. Hong Kong's came in at 0.489 in 2011 for the same category. Even though this number has edged down from 0.49 in 2006, analysts say Singapore has been able to do more to narrow the rich-poor divide than Hong Kong.
Song Seng Wun, Regional Economist at CIMB Research says that while both Asian financial centers have seen a lot of wealth generated over the past decade, the government in Hong Kong has paid far too much attention to growth at the expense of quality of living.
He adds that in Singapore "there is a more conscious effort by the government to ensure lower income families are not left behind."