Saturday, January 13, 2007

The wealth gap - an uneven recovery

This week both of Hong Kong's leading English language newspapers published articles about the widening wealth gap between the "rich" and "poor" in Hong Kong.

Like many emerging markets (and I do not think that that description applies to Hong Kong), wealth distribution is far less even than it is in many western countries. This is nothing new. what was interesting about the articles was that they made the point that per capita GDP is still below the levels seen at the 1997 peak. Put differently, it means that eight years after the Asian financial crisis, the income levels of the average Hong Kong employee are still below 1997 levels. Also, income distribution has widened during that time. One commentator made the point that those in the top 10% of income earners had essentially managed to maintain their income levels. The bottom 10% of income earners had experienced a very noticeable cut in incomes (partly offset by the net deflation during that time period).

The widening income gap is largely explained by skilled workers being in short supply and able to command higher salaries. The very clear message is that it pays (quite literally) to develop skills that are valued by employers and to keep them up to date.

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