Valuing the distinction between inequality and poverty
Professor LUI Hon-kwong
For many years, two of the main issues that have kept Hong Kong in the headlines have been sky-high property prices, and the fact that the city’s Gini coefficient – the international index of income distribution – has shown that Hong Kong’s gap between the earnings of the local rich and poor is the widest in the world’s developed economies.
In his research monograph, Widening Income Distribution in Post-Handover Hong Kong, published in 2013 by Routledge, Professor Lui Hon-Kwong of Lingnan’s Department of Marketing and International Business, put this latter phenomena under the microscope. He based his analysis on Hong Kong’s population census files, for a 30-year period stretching back to 1981, long before the handover. Having worked as government statistician before becoming a labour economist, he was familiar with this rich dataset which is based on individual not published records.
Professor Lui draws a clear distinction between income and wealth, noting that Hong Kong is home to a large number of people who are asset-rich but income-poor, having chosen to invest what money they have in property or shares, and keep it there. What’s more, unlike information regarding wealth, the data on income provided by the Hong Kong tax system is very reliable.
In the 1980s, with the advent of the Asian Tiger economies, income inequality began to rapidly grow. In his book, Professor Lui examined the effects on income distribution of both industry and occupation composition shifts, the expansion of tertiary education, the government’s public housing programme, and the arrival of recent immigrants. One of his most counterintuitive findings was that the policies introduced after the handover to make higher education more accessible to young people, had not reduced income inequality but had, instead, made the gap even wider. Professor Lui explains this outcome by pointing to the fact that when most people in Hong Kong only had access to elementary education, and worked in unskilled jobs, salary differences were very small. However, once more of the population went on to gain, at least, first degrees and then moved into higher paid jobs, the income gap naturally grew.
Prior to these fundamental changes in the local economy, a major focus for social policy had been on the eradication of poverty, rather than on the reduction of income inequality. Professor Lui is keen to clear up the confusion he believes often exists, by explaining, that, thanks to the well established Comprehensive Social Security Assistance Scheme though income inequality has been growing in Hong Kong, it is now difficult to find anyone living in abject, as opposed to relative poverty.
His desire to broaden the understanding of economic principles has also been evident in other of his projects. He was invited to collaborate with former US Federal Reserve Chairman, Ben Bernanke, and Professor Robert Frank of Cornell University, on the Principles of Economics, Asia Global Edition, published in 2014. Students in Asia had found the examples in the US edition difficult to relate to, and Professor Lui gave the Asian edition regional references that helped make the revised textbook a big success in universities across the continent.
To know more about Professor LUI Hon-kwong's research projects, please click Lingnan Scholars.