Income and Wealth Inequality in Hong Kong

Income and Wealth Inequality in Hong Kong, 1981-2020: The Rise of Pluto-Communism?

In this paper, Thomas Piketty and Li Yang combine national accounts, household surveys, fiscal data, wealth rankings and election polls, in order to provide a comprehensive analysis of the evolution of income and wealth inequality in Hong Kong, as well as its impact on political cleavages over the 1981-2020 period. We find a very large rise in wage inequality since 1981, especially since the Handover of Hong Kong to China. We also observe an enormous increase in the capital share and the top wealth share (normalized by national income) since 2000. Today Hong Kong’s very top wealth share (top 0.001%) is ranked at very top in the world. Finally, we find that the top income earners and high-income professions (such as executives and managers) are more likely to vote for pro-Beijing camp, while the bottom 85% income group, students and lower-income professionals are more likely to be pro-democratic.

Key-findings

• Top 1% earners now receive a much larger fraction of the total wage bill than bottom 50% earners after the Handover of Hong Kong, while the opposite was true in pre-Handover Hong Kong.
• In pre-Handover Hong Kong (1981-1996), the changing pattern of education structure and wage premia, and the transformation of industrial structure from manufacturing sector to non-manufacturing sector (finance and service) were the major driving forces for the rise of wage inequality. In the post-Handover period (1997-2018), the latter factor becomes the only driver for the rise of wage inequality.
• The capital share and the top wealth share (normalized by national income) have raised dramatically since 2000.
• Hong Kong’s wealth concentration level appears to be one of the highest in the world. If we compare billionaires’ wealth or top 0,001% wealth to national income, then Hong Kong is far above all other countries in the world. If we express top 0,001% wealth as a fraction of total wealth (which appears to be relatively high as compared to national income in Hong Kong), then Hong Kong’s top 0,001% wealth share is close to 10% in 2020, which is comparable to the wealth concentration level in Russia, and much higher than the concentration level in the USA or China.
• The top income earners and high-income professions (such as executives and managers) are more likely to vote for pro-Beijing camp, while the bottom 85% income group, students and lower-income professionals are more likely to be pro-democratic.

Figure: Real growth rate of wage income per adult in Hong Kong

The figure shows two contrasting growth patterns for the period before and after the handover of Hong Kong in 1997. The wage growth rates of Hong Kong are strong and inclusive before the Handover. The average annual growth rate of wage income for the whole population is 7%, while the growth rates of top 1% and bottom 50% are not too divergent, 8.2% vs. 6.1%. After the Handover, Hong Kong features moderate but much less inclusive growth: The average growth rate is 3.1%, less than half of the growth rate before the handover. Top 1% grows more than 2.5 times of the bottom 50%, 4.6% vs. 1.8%.

Contacts

Authors

• Thomas Piketty (École des Hautes Études en Sciences Sociales; Paris School of Economics; World Inequality Lab): thomas.piketty@psemail.eu
• Li Yang (Paris School of Economics; INSEAD; World Inequality Lab): li.yang@psemail.eu.

Media inquiries

• Olivia Ronsain, World Inequality Lab: olivia.ronsain@wid.world; +33 7 63 91 81 68