The Real Hong Kong and the Real Politics
Mr. LEUNG Chun-ying, Convenor of the Non-official Members of the Executive Council of the HKSAR, was the Foundation's guest speaker on 24 September 2009. Below is the text of his speech.
Thank you, George. Good afternoon, Ladies and Gentlemen and members of the press.
One thing that I have already accomplished without trying is a redefinition of Chatham House Rules. I have agreed to the presence of press here, so it is very nice to see you all here, together with our media friends.
Income distribution
There is nothing unreal about Hong Kong. Every single bit of Hong Kong is real. I think you may agree, as I move on with my presentation, that some part of Hong Kong is too real for our liking. So to look at the real Hong Kong, you look at a spectrum and how life is going on in practice - in politics, the political landscape, the political culture, in the past, at present and as we move down the track.
In the ten years to 2006, real per-capita GDP of Hong Kong grew by 34%. That is good news. But then, when you look at income distribution, that has got worse. This chart shows income from main employment - net of investment income, second jobs and part time employment. But for people in the low income brackets, there will not be much investment income to add on to the main employment income anyway.
What this chart shows us, is the bottom five percent of the population earns less than HK$3,500 per month. Anyone earning HK$45,000 or more belongs to the top five percent of Hong Kong working population in terms of employment income. Half of Hong Kong's working population earns less than HK$10,500 a month. That is roughly HK$350 a day.
Who are the people, or which occupations who earn this low income? They are cleaners and security guards - earning between HK$5,000 and HK$7,200 - normally for a 60-hour week, namely ten-hour days for six days a week. Between 2006 and 2009, the wage levels of these groups increased by approximately 3.8%. And these are accurate figure. The Government has been paying a lot of attention to this as a "Wage Protection Movement" was launched to try to encourage employers to pay the average to those earning less than the average. The Scheme was not very successful. The average hourly wages were HK$25, HK$21 and HK$27. If you were to compare these figures to the 34% increase in real GDP in the ten years between 1996 and 2006, the difference is quite alarming.
If you were to compare the workers in the various income brackets, you will see that in real terms, the income of the bottom 30% decreased over the ten years. Not much change took place in the mid-income brackets. And obviously the top income groups had the biggest increase in absolute terms and in percentage terms.
There is nothing wrong with income increases for the high income group. What I'd like to address is the bottom income groups. Please bear in mind that - 50% of the working population earns less than HK$10,500 - that is over 1 million people in Hong Kong.
If you were to look at people working in Chinese restaurants, they had a 4% decrease. Garments - a 12% decrease, fast food shops - 20%, and haulage 30%. We could even link some of these figures to the series of road accidents in Hong Kong, probably caused by fatigue, long work hours and work pressure.
Why are we where we are now?
Living standards
There are many reasons - globalization, opening up of the Mainland etc. But the main permanent feature of the working population is low education -- 13% of the work force only had primary education or lower, 16% had lower secondary education (up to the age of 15 or Form three). Put the two together, nearly 30% of Hong Kong's workforce, had education level below Form three. Only 10% of Hong Kong's workforce are degree holders. Many things may happen to the economy overnight, asset prices may change overnight, but the educational attainment of our workforce cannot be changed overnight.
If you were to look at the living conditions, the real lives of the real Hong Kong people, Hong Kong has done well in looking after the housing needs of the lower income groups - having built 1.1 million units of public housing, versus 1.3 million of private housing.
But what does a typical household in Hong Kong look like? We talk about the "middle class" in Hong Kong. What do "Mr. and Mrs. Average" look like? What does their household look like? The pie charts show how small the private sector housing unit in Hong Kong is.
From 2003 to 2008, there was very little change in the size of the private housing stock. 21% of the housing stock in Hong Kong comprised flats of less than 40 square meters, net area. 30% of the flats were between 40 and 49 square meters. The median is 47 square meters, roughly 500 square feet. In other words, half of Hong Kong's private housing units are less than 490 square feet. Many of these units are occupied by more than one household.
If you were to look at the public sector, the sizes are even smaller, even though the Government had done a great job in housing the lower income brackets. 12% or one-eighth of the public housing flats are smaller than 20 square meters, 22% are between 20 and 29 square meter, and 46% are between 30 and 39 square meters. If you put the private and public housing together, two-thirds of the housing stock in Hong Kong comprise flats of less than 500 square feet.
Suppose Hong Kong had the aspiration to give an additional 100 square feet to each of the household that is 500 square feet or smaller. The net land area required for such an aspiration would be prohibitive, particularly with the current emphasis on conservation, preservation and protection of the harbor.
The challenge of consensus-building
I'd now like to look at one or two things political and one or two things the community wishes to achieve. Let us just look at these three:
‧ Broadening the tax base
‧ Healthcare financing reform
‧ What the voters said in the 2008 Legco Election.
These issues have all occupied our attention over the past years. We have moaned and groaned about how narrow the tax base in Hong Kong is, that a small part of the population is bearing the burden of government expenses. We have also been moaning and groaning that the government has been funding the healthcare system and there is now a consultation out there asking for views on how to finance it. The election results of 2008 also seemed to surprise quite a few people in Hong Kong.
Knowing that we cannot broaden the tax base through salary tax, we proposed GST. The government commissioned an "Advisory Committee on the new Broad Based Tax" and a consultation was launched. The report said: "GST's comprehensive nature means that everyone is affected and every pays". Everyone will be affected, including the 1 point something million people in the workforce that earns less than HK$10,500 a month. A taxi driver I spoke to said: "I am not even going to say no, if you want to levy GST, you can take my life!"
Now we are looking at public healthcare reform. We don't know the conclusion yet; I am not going to preempt it in any way, or guessing what might be the outcome. This pyramid, not drawn to scale, represents the income distribution. Where to draw the line between "Self-funded" and "Government-subsidised" will be a big political dilemma. Bearing in mind that a high percentage of Hong Kong workforce is in the low income brackets, it is a huge political challenge to draw the line at the right level. The whole purpose of this exercise is to ensure that, as much as possible, we become financially responsible for our own healthcare needs. If we draw the line too high, the part of the income pyramid above this time will be too small for the reform to be meaningful. If we draw the line too low, those who are marginally above this line will not be able to afford their own healthcare needs. Income distribution in Hong Kong is something we always want to address, but has always been difficult.
The message from Legco elections
Then if we were to look at the 2008 Election results, there were some surprises. Elections are not meant to be entirely predictable. But of all the surprises to political analysts in Hong Kong, the LSD (League of Social Democrats)'s win was the biggest. A member of the newly formed political group and one of the candidates was Leong Kwok-hung (aka "Long Hair"). When "Long Hair" was elected in the previous election, people said that it would be a one-term anomaly. "Voters in his constituency were just having fun". But Leong Kwok-hung was returned for the second term, and his colleagues in the LSD did well too.
Instead of seeing this as an anomaly, we should see that the voters were sending out a clear message. Although the LSD has only three seats, their success should make us acknowledge - humbly - the message of how voters feel. The LSD received 10% of the total votes cast in Hong Kong. If you were to look at the social economic profile of the population in LSD constituencies, you realize that they are not the bottom strata.
My analysis is that LSD's voters have their own social aspirations and many were unfulfilled aspirations. Many in Hong Kong are not seeing the high social mobility that my generation saw when we joined the workforce. They need representatives such as Raymond Wong and Leung Kwok-hung of the LSD to vent their frustrations. And this is the message that we should all take home.
Going forward, I don't think we should play around with our voters or our election methods. It is a question of dealing with the root of the problem, namely - how big the cake is and how the cake is sliced up.
The Government has embarked on the legislation on minimum wage, which I support. Other than that, there are a number of things the Hong Kong Government should be aware of and on which it should do as much as it can.
We should be aware of "Mr. and Mrs. Average" of Hong Kong. The politics in Hong Kong will be determined by the ballot box. The ballot box is a numerical exercise. The vote cast by someone who earns HK$5,000 a month carries the same weight as someone who pays that kind of money for a bottle of wine. And therefore, we need to be conscious, very conscious, of the income distribution in Hong Kong and of the related social, economic and political aspirations. We should be mindful of the day-to-day issues of the real "Mr. and Mrs Average" in Hong Kong and should not do anything to aggravate the pressure they face. We should do everything we can to narrow the income gap. For minimum wage, we should publicly ask all employers not to try to bypass provisions in the legislation. We are already hearing employers of certain sectors hinting that while paying the statutory hourly wage, the monthly wage of their workers can actually go down. We should publicly appeal to employers not to do that.
In the long term, we must ensure that the Hong Kong economy has a sustained and robust growth rate. There are a number of things we can do. We are not short of funds, of ideas and good projects to enhance Hong Kong's productivity so that everyone can get a bigger slice. We should try to put social mobility back in Hong Kong - social mobility that we were known for, social mobility that is now lacking.
So on that note, I should end this presentation. Thank you. I welcome any views of question that you might have.
The above does not necessarily represent the views of the Foundation.
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