Sherina Motwani, Global Economics Columnist
When people hear the word ‘poverty,’ they immediately envision suburban slums in a third world country. Home to the freest economy in the world, Hong Kong never comes to mind. Although true to its reputation, Hong Kong is an industrialized city that thrives on capitalism, almost a million people in Hong Kong live below the poverty line. According to a recent article in Business Insider, New York City scored 0.5 on the Gini Co-efficient, a scale that measures inequality from 0 (complete equality) to 1 (complete inequality). Hong Kong scored 0.535, and is the most unequal developed city in the world.
The leading reasons behind Hong Kong’s inequality may come as a surprise to many economists, as they step outside the typical explanations such as gender inequality in the workplace and low education figures. Although both of these reasons are contributing factors, the social structure of Hong Kong is primarily at blame. Ethnically, more than 90% of the population is Chinese. The remaining residents include a number of wealthy expats, who rarely integrate themselves into the local culture, and fail to witness the poverty that surrounds them. However, even more significant are the foreign domestic helpers (FDHs).
As FDHs reside in the city without HKID cards, they not subject to local rules such as the HK$28 (~US$3.60) per hour minimum wage. Dolce, a Filipino foreign domestic helper in her mid-40s, is paid a mere HK$3000 (~US$387) per month to be on call 24 hours a day. As a live-in maid, her position includes free room and board, but her low salary is still shocking by developed country standards.
Conversely, but equally shocking, is the high purchasing power of visiting tourists from Mainland China. According to the Hong Kong Tourism board, these individuals make up the largest percentage of the visitor source market of Hong Kong, with 28.1 million arrivals in 2011. With overnight visitor capita spending at HK$7333 (~US$945), these tourists contribute significantly to Hong Kong’s GDP. Large luxury brand stores such as Louis Vuitton and Coach can be found all over the city, and high end shopping mall IFC has enjoyed steadily increasing traffic since the opening of its 2-story Apple Store last year. This stark contrast in wealth is problematic, as rich tourists drive up prices for local consumers beyond affordability.
To add insult to injury, Hong Kong is one of the most densely populated cities in the world. According to BusinessWeek, property prices have reached levels not seen since 1997. Although the newly appointed Chief Executive Leung Chun-ying hopes to regulate this worsening problem, it will be a difficult task to achieve – the current demand for housing in Hong Kong far exceeds supply. Hundreds of desperate individuals have taken up residence in ‘coffin homes,’ tiny 15-square-foot compartments that fit nothing more than a twin sized bed.
Hong Kong’s dirty little secrets are being exposed one by one, and the hidden misfortune under the glamour of the city could eventually be the source of political unrest. Although Hong Kong was late to the Occupy Wall Street party, the first protests ringing out almost a month after the movement began in New York, the Central financial district should potentially prepare itself for more local outrage in the future. The Hong Kong government and times are changing, and hopefully these changes are for the better – but only time will tell. Until then, corporate expats will continue to luxuriate in their high-rise apartments, while many less fortunate individuals, insignificant specks in the distance, look on wistfully from the streets.