There is a growing public perception in Hong Kong that economic opportunity has worsened for the younger generation - those born after 1980 – as income inequality has risen and intergenerational upward mobility has decreased.
The rising Gini-coefficients of both household and individual income inequality are often cited as evidence of this. The Gini-coefficient for households rose from 0.429 in 1976 to 0.537 in 2011, while that for economically active individuals increased from 0.411 in 1976 to 0.487 in 2011.
The higher income inequality ratio for households is almost entirely the result of their changing demographic composition. Hong Kong has more low-income households today because there are more households composed of single parents, young working adults, and the non-working elderly than in the past.
The expansion of education opportunities has not happened fast enough to meet demand
Household income inequality therefore has risen naturally because of population ageing, divorce patterns, and preferences for not living with parents. Remove these factors and the changes are quite modest.
The picture is simpler for individual income inequality.
One factor cited as evidence of rising inequality is the survey finding that fresh university graduates are not paid much more than HK$10,000 a month. Since a person working 48 hours a week and paid the minimum wage of HK$32.50 an hour can make more than HK$6,760 a month, this would suggest that the investment in schooling and a university education might not substantially improve earnings.
But this conclusion is misleading. Rates of return to schooling for those with secondary education rose from 12.5 per cent in 1981 to 15.8 per cent in 2011. For university degree graduates they rose from 17.0 per cent in 1981 to 22.7 per cent in 2011. The greater increase among those with more education is conclusive evidence that education opportunities have not grown rapidly enough, for otherwise the returns could not have risen by so much.
These rates of return also increased even as average years of education for the working population increased, from 6.1 years in 1981 to 9.2 years in 2011, and more people attained higher education. This is yet more proof that the expansion of education opportunities has not happened fast enough to meet demand.
