Understanding Society: Wealth Disparities in Hong Kong

Question 1 :
What is the difference between structural-functional approach and social-conflict approach in terms of stratified rewards? Explain. (In not more than 100 words)
Question 2:
Read the following passage about wealth disparity in Hong Kong. If you were the supporter of social conflict approach, how could poverty be associated with inequality in the context of Hong Kong? Give two explanations with reference to the analysis as discussed in the passages below. (In not more than 250 words)
Oxfam believes inequality breeds poverty. Extreme wealth disparity reflects the fact that poverty cannot be effectively eradicated by economic development. As the wealth gap continues to widen, inequality has continued to worsen. According to Oxfam’s latest report titled ‘Reward Work, Not Wealth’, 82% of the wealth created in 2017 went to the world’s richest 1%. The poorest 3.7 billion people across the globe, however, did not share the fruits of economic growth.
During the decade, According to the Hong Kong Census Reports, Hong Kong’s Gini coefficient based on original monthly household income rose from 0.533 in 2006 to 0.539 in 2016, and the Gini coefficient based on post-tax post-social transfer monthly household income was 0.473 in 2016, which is worse than other developed economies (e.g. Singapore 0.356, United States 0.391, United Kingdom 0.351, Australia 0.337, Canada 0.318). The median monthly household income of the top decile is 44 times greater than that of the lowest decile in 2016, which it was only 34 times in 2006. The number of poor households has reached up to 530,000, of which 300,000 are working poor households; further, over 1.3 million people live in poverty. In May 2018, the total net worth of the wealthiest 21 mega-tycoons in Hong Kong amounted to HK$1.83 trillion, which is equal to the Hong Kong government’s fiscal reserves. Nonetheless, a profits tax at the rate of 16.5% paid by corporations run by these mega-tycoons is still significantly lower than the average tax rates in the Organisation for Economic Co-operation and Development (OECD) and G20 members (24.2% and 28% respectively). Beyond that, these tycoons receive at least HK$23 billion from untaxed stock dividends.
Although wealth disparity has worsened, the government has accumulated a budget surplus of over HK$690 billion over the past ten years; in fact, fiscal reserves have now surpassed the HK$1.1 trillion mark. In the 2018/19 Budget, the government’s recurrent expenditure is 14.4% of the GDP. However, this figure is still lower than the rate during the severe acute respiratory syndrome (SARS) period (15.7%) in 2003/04. In comparison to other OECD member states such as Japan, South Korea, the United Kingdom, Canada, Sweden and New Zealand, Hong Kong has spent the least on public services like healthcare and social welfare. The Hong Kong government employs a ‘conservative budgeting principle’, which keeps the growth of the government’s expenditure in line with general economic growth. Despite the fact that it has a tremendous amount in fiscal reserves, the government has failed to allocate resources into public services to help reduce inequality.
This phenomenon reflects the failure of the economic system; the rich have gotten richer, while the poor – despite their hard work – have not been able to share the fruits of economic growth. Currently, nearly 210,000 people live in subdivided flats, and despite an almost full employment rate, 920,000 work but remain poor. In 2016, almost 40% (37%, 114,467 households) of the 308,549 working poor households earned a monthly income that was lower than the corresponding amount of Comprehensive Social Security Assistance (CSSA). Though minimum wage is reviewed every two years, the increments in which it rises still falls behind the rate of inflation. Taking inflation into account, the purchasing power of the current minimum wage (HK$34.5 per hour) is equivalent to HK$26.8 in October 2010. Since 1997, the Hong Kong government has allowed outsourced private organisations to offer public services. Yet because of the ‘lowest bid wins’ principle where the cheapest bidder wins, outsourced workers are not paid more than minimum wage, which often leaves workers trapped in poverty. Oxfam believes this problem can be addressed by promoting a living wage, which is a wage level that can fulfil the basic necessities of living of workers and their families.
Furthermore, since wealth in Hong Kong is highly concentrated, the marginalised – including women, children, elderly and ethnic minorities – easily fall into poverty. The average income of females around the world is lower than that of males, and the situation in Hong Kong is particularly severe. The labour force participation rate of local women is low, which indicates that the problem of gender inequality is more serious than imagined. As the supply of child care services is in serious shortage, women from poor households can only take up part-time jobs with short working hours in order to earn an income and take care the family. However, most part-time jobs offer low wages, no insurance and are odd jobs, which do not help alleviate poverty. Currently, there are over 150,000 people engage in odd jobs, and 60% of them are women.
As of 2016, over 390,000 elderly people – people aged 65 or above live in poverty, meaning one in every three elderly persons lives in poverty. Though Hong Kong has now adopted the Universal Retirement Protection Scheme with four pillars, as per the World Bank’s suggested framework, there remain loopholes in each pillar. Since companies can offset employees’ long service payments and severance payments using their own pension funds when they are dismissed or companies go out of business, companies seriously diminish the money employees have accrued, which directly affects their retirement protection.
According to the Population By-census, the number of non-taxpayers in Hong Kong’s labour force has exceeded 1.5 million, which is nearly half of the labour force (45%), and most of them live in poverty and are unable to support their parents. For low-income senior citizens, it would be difficult to get by if they only rely on voluntary savings when they retire.
in poverty. Education is an effective tool that helps eliminate inequalities and empowers the weakest in community to move upward in society. However, nearly 60% of schools with non-Chinese speaking students receive no additional subsidy from the government to cater to the Chinese learning needs
Ethnic minorities are also a marginalised group in society. As many are often not proficient in Chinese, they face a lot of problems in daily life, school, their work and even applying for or using social services. The current poverty rate among South Asians, who make up the largest proportion of ethnic minorities in Hong Kong, is 23.0%, and one in every three South Asian child lives of ethnic minority students. This hinders their speed of learning in comparison to others.
Reference:
Oxfam (2018). Hong Kong Inequality Report. Hong Kong: Oxfam.