Unbalanced and narrow economic structure root cause of poverty in HK

Despite repeated efforts by the government to fight poverty in Hong Kong, the number of people falling below the poverty line has continued to increase, latest figures show.

Based on data from the government’s population census, Oxfam Hong Kong estimates that there are more than 1.3 million people out of a total population of about 7 million living in poverty.

These numbers don’t look real against the backdrop of persistent low unemployment rate at below 3 percent and an average year-onyear economic growth of about 3 percent, which is at the high end of the scale for developed economies.

Hong Kong also has the highest level of income inequality among its peers with a Gini coefficient at 0.539, indicating that the wealth gap between the minority rich and the rest of the population is one of the most extreme among its peers compared to 0.356 for Singapore.

Social activists and labor groups have been urging the government to greatly increase its welfare spending, which has already been going up rapidly in recent years. Such efforts have undoubtedly brought much needed relief to many thousands of low income families.

But worsening poverty shows that government subsidies have done little in addressing the root of the problem of rising poverty in Hong Kong. Economists blame the problem mainly on the unbalanced and narrow economic structure that has kept wages low and restricted economic and social mobility of the working people.

The poverty problem is seen to be compounded by the influx of immigrants for family reunion at a rate of 150 every day, in addition to the increasing number of migrant workers from South Asia and elsewhere. Many of them are employed by the services industry in cleaning and catering at minimum wages.

The rapidly aging population has also aggravated the problem as more people are retiring with little means to support themselves. Reform of the woefully inadequate pension scheme has dragged on for years because of employers’ resistance to any form of added benefit to workers.

Some sociologists put the blame on the wider use of outsourcing by the government and businesses as a means to cut operating costs. The fierce competition for contracts are said to have forced many outsourcing companies to put a squeeze on the workers who are mainly engaged in unskilled jobs. In doing so, they have dragged down the average wage which is not seen to have risen much in the past years, resulting in further widening of the income gap.

It is, of course, unrealistic to bring back to Hong Kong the manufacturing industries which could provide stable and well-paid jobs as they did when the local economy took off in the 1970s. The high-cost structure of Hong Kong’s advanced economy has made it impossible for manufacturers to compete with their counterparts in neighboring economies, particularly the Chinese mainland, in overseas markets.

In addition to raising welfare expenditure to subsidize the needy, the government has explored opportunities to help diversify the economic base from overdependence on finance and property. It has made serious efforts to promote entrepreneurship in the high value-added technology industry with direct subsidies and land grants.

It’s going to be a long and difficult struggle because of the constraints posed by the lack of supporting industries, small domestic market, high land cost and the lack of interest from banks and investors who feel much more at home in finance and property. Taking a long-term view in investing in a technology startup is not a risk many Hong Kong investors would like to take.

Despite all these constraints, developing a credible tech industry in Hong Kong is not necessarily a lost cause. The government and many economists believe that the chance of success can be greatly enhanced by plugging into the Guangdong-Hong Kong-Macao Greater Bay Area that can greatly expand the business horizon beyond the confines of the city.

That can help the prospective Hong Kong entrepreneurs to overcome some of the constraints by gaining access to a much larger marketplace with a thriving and diverse industrial base and an expanding talent pool.

Meanwhile, they can continue to enjoy the advantages unique to Hong Kong. These include strong protection of intellectual property rights, free flow of information, excellent infrastructure facilities and a tariff free port.

The government and many economists believe that the chance of success can be greatly enhanced by plugging into the GuangdongHong Kong-Macao Greater Bay Area that can greatly expand the business horizon beyond the confines of the city. That can help the prospective Hong Kong entrepreneurs to overcome some of the constraints...

The author is a current affairs commentator.