2009-2010
Learning Economics through current issues (4)
Income Inequality in Hong Kong
Source 1
金融海嘯影響本港經濟，香港社會服務聯會(社聯)分析發現，本港今年上半年有近 124 萬
人生活於低收入家庭內，即每六名香港人中便有一人為窮人，而青年貧窮率亦由 99 年的
15.4%升至今年上半年的 20%，升幅近三成。
社聯早前分析政府數據發現，在 89 年至 09 年期間，本港高收入家庭入息中位數升幅達
1.5 倍，但低收入家庭入息中位數的升幅少於 1 倍。高收入群組與低收入群組的入息中位
數比例，由 20 年前的 2.46 倍升至今年上半年的 3.6 倍。社聯業務總監蔡海偉指，市民入
息因經濟衰退下降，但高收入群組在經濟復甦後見反彈，惟低收入群組則不然，導致貧富
懸殊加劇。
蔡海偉認為，青年貧窮問題惡化原因有三。首先，由於近年青少年多接受專上教育，其就
職年齡因而延遲，令整體家庭收入減少。其次，青年的失業率近年急增。最後，由於大部
份青年的父母多已步入中年，而中年人士的貧窮問題近年亦趨嚴重，帶動青年貧窮率上
升。蔡警告，貧窮阻礙青年進修及學習機會，窒礙青年人發展，令年輕一輩以至香港整體
競爭力被削。
節錄自：
「6 個港人 1 個貧 10 年新高」
，香港經濟日報，2009 年 9 月 28 日。
「港貧窮人口高達 123 萬 貧富日益懸殊 社聯促撥 17 億扶貧」，星島日報，2009 年 9 月 28 日。
「2009 年最新貧窮及失業數據分析」香港社會服務聯會
Learning Economics through current issues/2009-2010/Income Inequality
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Source 2：Poverty Population in Hong Kong (Thousands) (99-first half of 09)
Poverty Rate
Poverty Population (thousands)
Poverty Population
Poverty Rate
Source: 2009 updated poverty and unemployment data analysis, The Hong Kong Council of Social Service
Note: Poverty population refers to the population living in a low income household. Low income household is categorized by the household size and
it refers to the household whose income is less or equal to the half of the median monthly domestic household income of the same size in Hong
Kong. Half of the median monthly domestic household incomes of the corresponding household size of the first half of 2009 are: single-member
household, HK$6,750 for a two-member household, HK$9,150 for a three-member household and HK$12,650 for household with four or more
members.
Source 3：The median monthly income between High income households and low income
households (89-first half of 09)
median household income of high income households
median household income of low income households
Source: 2009 updated poverty and unemployment data analysis, The Hong Kong Council of Social Service
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Questions for Discussion:
1. With reference to Source 3, can you describe the trend of monthly incomes between high
income households and low income households from 1989 to 2009?
In the period of 1989-2009, the general income of Hong Kong people increased. However, the
percentage increase in the median monthly incomes of high income households was larger
than that of the low income households.
2.
What kind of social phenomenon implied in Q.1?
The problem of income inequality became more severe/ the income-gap between the rich and
poor were widen.
3.
Apart from comparing the median monthly incomes between high income households and
low income households, are there any other references measuring the income inequality that
you know?
Gini Coefficient
Lorenz Curve
4.
Visit the website of Census and Statistical Department and search the Gini coefficient of
Hong Kong between 1989 and 2009. Explain whether the change in index between these
periods correlate to your conclusion drawn in Q.2.
1991
1996
2001
2006
0.476
0.518
0.525
0.533
Source: Census and Statistical Department
The Gini Coefficient is a widely used indicator of income inequality. The lower the
measurement, the more equal the wealth distribution. According to the above table, it shows
that the Gini Coefficient increased throughout the period. It implied that the problem of
income inequality became more severe. The conclusion draw in here match with our
findings in Q.2.
5.
Apart from labour income, what kind of return can also be regarded as income? Explain.
Income can be classified into two main categories, labour income and non-labour income.
Labour income refers to the factor income arises from factors of production. Non-labour
income includes the interest return (e.g. dividends, rental income) generated from capital.
6.
Why are there income differentials among different people? Explain from economics
perspective.





Differences in human capital
Supply and demand situation in the factor market
Differences in job nature
Ability, effort and opportunity of individuals
Unequal ownership of capital
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7.
Chua Hoi-wai pointed out that, during economic downturn, people’s income would decrease.
However, economic recovery can only benefit those at the top end of the salary scale but not
the grass roots, which widens the income gap between the rich and the poor. Explain his view
with reference to Source 3.
Source 3 shows the median income of high-income households decreased from $32,000 to
$29,500 during 2001-05, while low-income households also had their pay drop from $10,000
to $8,700 over the same period. In 2009, income of high income earners increased to $32,600,
which was higher than the previous level. However, the income of low income earners in
2009 was $9,000, which was lower than that before. It clearly shows that both income groups
suffered wage reduction during financial crisis, however, only the high-income households
can enjoy the returns from the economic recovery while the low income households did not
benefit from the economic revival.
8.
Why the low income households cannot enjoy the fruit from economic recovery? Explain
with reference to Q5.
Hong Kong economy faced a structural change during 1990s. It shifted from labour intensive
economy to knowledge economy. As a result, workers possessing more human capital (more
education and better skills) were in great demand. Conversely, the low-paid jobs requiring
low skill reduced drastically.
Besides, most of the low-income earners do not have much capital (e.g. shares and properties),
that they cannot enjoy the bloom from the property market and the stock market during
economic revival.
9.
Suggest two industries which pay relatively low wage. Do they have anything in common?
Catering and cleaning work. Workers of these jobs do not require possessing any special skills
and qualification.
10. Some people worry that intergenerational poverty would easily happen in low income
families. Explain their concern.
We can discuss their concern from two aspects:

Due to the unequal distribution of wealth. Since capital can generate income, unequal
ownership of capital can increase income inequality. People’s wealth will increase if they
receive the savings and wealth from the older generation. The higher income groups
having relatively more savings and wealth can pass more wealth on to the next
generation, who can then earn more capital income. Conversely the low income group
has less savings and wealth to pass on to the next generation. As a result, their next
generation is more likely to have a lower income. The intergenerational poverty will then
exist.

Human capital refers to the knowledge or skills that people accumulate through training
and education. Human capital can generate wealth; people who have more human capital
can earn higher income. However, as the low income group normally earns less than the
Learning Economics through current issues/2009-2010/Income Inequality
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high income group, children in low income families normally obtain less human capital
(e.g. fewer chance to study abroad or attend interest groups) than those living in higher
income families. The resources deprivation brings negative effects on children’s
development. They can be trapped in the poverty cycle easily.
11. According to Chua Hoi-wai, what factors lead to the deterioration of youth poverty in Hong
Kong?
There are three factors mentioned by Chua. Firstly, more and more youngsters prefer to
continue their studies and that would defer their age of entering the job market and hence
reduce the overall income of their families. Moreover, the youth unemployment rate rises
drastically these years. Last but not least, most of the parents of the youth reach middle-age
and the rise of middle-aged poverty problem leads to an increase in youth poverty rate.
12. Refer to the factors mentioned above, which of them would cause a short-term effect on Hong
Kong? Which of them would cause a long-term effect on Hong Kong’s future development?
Explain.
Students’ free answer.
The youth poverty caused by their further studies will only lead to a short term effect on Hong
Kong. The poverty problem is worsening as many youngsters pursuit further studies; however,
education does not only help them alleviate poverty, but also increase the overall labour
productivity of Hong Kong. It has a positive effect on Hong Kong’s future development.
On the other hand, the remaining two factors have adverse effects on Hong Kong’s future
development. High youth unemployment rate and middle-aged poverty problem reduce the
chance for the youngsters to accumulate human capital, their labour productivity will decrease
and the overall productivity of Hong Kong will be affected. It will also threaten the
competitiveness of Hong Kong among the world.
13. Can you suggest some possible ways to alleviate the youth unemployment problem in Hong
Kong?
Students’ free answers
Government should dedicate more resources to provide retraining and career counseling to
the youth. Besides, government can also create more temporary jobs for low skilled youth.
Learning Economics through current issues/2009-2010/Income Inequality
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Extended Questions
We are going to discuss the effects of passing the minimum wage law on society from efficiency
and equity perspectives in Q. 14 and Q.15. For more able students, teacher can refer to Q.14; for
students need more guidance, teacher can refer to Q.15.
14. Many people called on the government to pass the minimum wage which aims at protecting
the low income households. Do you agree? Explain your answer from economics perspective.
Students’ free answers
15. Many people called on the government to pass the minimum wage law which aims at
protecting the low income households.
(i) Explain why the minimum wage law can protect the low income group.
With the implementation of minimum wage law, the salary of low-paid jobs (e.g. cleaning,
security) would rise, the living standard of the low income group may then be improved.
(ii) With the aid of a Demand and Supply diagram, explain how the minimum wage law
affects market condition.
(hints: students can focus their analysis on the effect on equilibrium condition and efficiency)
Assume the labour market is at equilibrium before
the implementation of minimum wage law. With the
adoption of the law, the wage (W1) sets above the
equilibrium wage (W0), excess supply of workers
exists (L2-L1). Besides, the market deviates from
equilibrium and the deadweight loss (area ABC)
would exist. The market would deviate from
efficiency.
(Remarks: we assume the initial labour market is at
an equilibrium condition. It is also possible to set
the initial condition where unemployment exists.)
W
w
W1
P
Excess supply
S
A
C
WS
0
B
A
0
D
L1
L0
L2
Labour
D
S
L
Q
0
(iii) With reference to the above analysis, do you think the minimum wage law can narrow the
income disparity? Explain.
Students’ free answer
Though the minimum wage law can increase the income of the low income earners, part
of the labour would be laid off. With reference to the above diagram, with the rise of
wage, the quantity transacted of labour decreases from L0 to L1, i.e. some of them (L0-L1)
would be laid off under the law. A point to note is that these workers are normally
unskilled and with low education level that gives them fewer chances to join the labour
market again. Thus, minimum wage law would worsen the poverty problem and lead to a
more unequal situation.
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(iv) Do you think passing the minimum wage law is favourable to Hong Kong?
Students’ free answer

No, the market will deviate from efficiency and the problem of inequality would
increase.

Yes, interest of the majority is protected. Although some of the people, especially
those who are unskilled and with low education level would be worse off,
implementing some effective measures on transfer payment can reduce the problem
of income disparity and alleviate the social disputes and deadweight loss. Thus, even
if the law may lead to a deviation from market efficiency, it is still worth to pass it.
16. Do you think adopting the practice of mainland in late 1950s by paying a uniform wage to all
workers regardless of their differences in ability and the job nature is the best way to alleviate
the problem of income disparity in Hong Kong?
Students’ free answers
Hints: Students can discuss (1) the effects of such practice on efficiency and equity.
(2) the trade-off between efficiency and equity.
Report：
(1) Students can prepare an essay based on the discussion in extended part.
(2) This worksheet provides a framework for student to analyze a social issue with reference to
authentic data. After finishing the discussion on this worksheet, students are encouraged to
use other set of data/information to discuss some current issue.
Apart from comparing the income among different income group, what other set(s) of
economic data can also be adopted to analyze the current economic/social situation?
Search the data from the website of C&SD and discuss in detail.
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Reference:
1. Curriculum Development Institute (2009). Efficiency, Equity and Role of Government. Hong
Kong: Curriculum Development Institute.
http://cd1.edb.hkedcity.net/cd/pshe/resources/econ_income_inequality/Chinese%20Version/in
dex_c.htm
2.
Video Resources for Economics: Income Inequality. Hong Kong: Curriculum Development
Institute.
http://cd1.edb.hkedcity.net/cd/pshe/resources/econ_video/index.htm
3.
2006 By-census, Thematic Report: Household Income Distribution in Hong Kong, Census
and Statistics Department, HKSAR
http://www.bycensus2006.gov.hk/FileManager/EN/Content_962/06bc_hhinc.pdf
4.
Database on Particular Policy Issues- Proposal for a minimum wage in Hong Kong
http://www.legco.gov.hk/database/english/data_mp/mp-min-wage.htm
5.
2009 updated poverty and unemployment data analysis, The Hong Kong Council of Social
Service
http://www.hkcss.org.hk/cm/cc/press/documents/2009poverty.doc
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