Hong Kong observations

Some observations from my recent trip to Hong Kong:

1. Hong Kong’s number one economic freedom ranking would come as no surprise to anyone who just wandered its streets, without examining any economic laws. There’s more street advertising in Hong Kong than anywhere else I’ve seen in the world, and more commerce that spills onto the street in the numerous street markets. I liked the colour and light of the advertising, especially as it distracts from one downside of little regulation, a large number of very ugly and unimaginative (but presumably cheaply constructed) buildings.

2. Despite this economic freedom, Hong Kong’s free-market think tank, the Lion Rock Institute (chaired by my expatriate friend Bill Stacey), does have something to do. HK is currently debating introducing a minimum wage. Perhaps the high A$ at the moment makes this look worse, but a report issued while I was there found that the median wage in HK was only just over A$8 an hour, way less than the Australian minimum wage (though prices seemed generally lower than here). Given that HK’s per capita GDP is greater than Australia’s, this suggests very high income inequality.

3. One sign of this inequality is that there is a large servant class, mainly women from poorer Asian countries. The most interesting sociological sight while there was the maids’ day off on Sunday. Thousands of maids lay out mats and take over parks and streets for a weekly social gathering. They looked they were having a great time; I wasn’t there long enough to know whether such a stark class-ethnic divide otherwise causes issues.

4. One sign of inequality that wasn’t there in any great numbers was begging, a major nuisance in Australia, the US and Europe. The beggars I did see usually had terrible deformities. My brief visit makes it hard to confidently generalise, but the people I saw giving were not ethnically Chinese.

5. I read in a guide book that public displays of affection in HK are generally restrained. I did not notice anything to contradict that, but I have never before seen street market stalls selling sex paraphernalia. And I am pretty sure that Australian 7-11s do not have condoms at the front counter (though I presume this is to reduce the risk of them being stolen).

6. For Victorian readers: not only does HK have an excellent public transport system, but they have an electronic ticketing system that actually works. Lesson for Victorian government: Myki will only work on buses and trams if passengers only have to swipe once.

Normal blogging will now resume.

37 Responses to “Hong Kong observations

  • 1
    Manolis
    March 24th, 2010 13:40

    You can definitely buy condoms at the front counter of 7-11s — I’ve done so in the long gone past.

  • 2
    Liam
    March 24th, 2010 14:23

    Yeah, I was in HK for the first time in January and wandered through maids’ day without any understanding about what I was seeing. I had to have it explained to me later on.
    You’re right, all the women looked frankly jubliant to be socialising with each other.
    It was nice as well to see private commercial spaces used as genuinely public spaces, too, by huge crowds of people who’d brought their own food and weren’t buying anything; in Australia they’d have been moved on.

  • 3
    Karin
    March 24th, 2010 18:47

    Singapore also has an excellent public transport ticketing system, and Singaporeans seem capable of swiping their cards both as they enter and exit the train or bus. Your point #6 above implies that Victorians are too stupid to do the same. (Perhaps they are?)

  • 4
    Andrew Norton
    March 24th, 2010 19:01

    Karin – Nothing to do with stupidity, everything to do with saving time. The current system for trams completely separates ticketing and getting on and off. Passengers can validate their ticket while the tram is moving, and get off without revalidating (it’s a time based system). If the tram has to wait while people swipe on or off it will cost time, and trams are already slow. On long routes, even an extra 15 seconds a stop would add significantly to lengthy journeys.

    In Singapore they don’t swipe on trains – they do so at stations, so they don’t slow the process of getting on and off the trains, as should happen in an efficient system. I have not used buses in Singapore.

  • 5
    Russell
    March 24th, 2010 19:21

    “Thousands of maids lay out mats and take over parks and streets for a weekly social gathering. They looked they were having a great time; I wasn’t there long enough to know whether such a stark class-ethnic divide otherwise causes issues.”
    .
    In the years I was in or around HK it was never very long between horrific stories in the SCMP about abuse of maids. Indonesians were treated worst, Philippinas next worse ….
    .
    I also thought the HK underground was fantastic: clean, safe and entertaining.
    .
    Did you observe your collars during your stay? At the end of a day mine were almost black with grime – the humidity and pollution, but maybe you need to be there in July for the full effect.

  • 6
    Andrew Norton
    March 24th, 2010 19:53

    The HK underground is clean and safe, but entertaining? No buskers like in the Paris metro. Annoying safety announcements (being constantly told to hold the escalator handrail). Indeed, all rather clinical and controlled compared to the bustle and colour above.

    The weather was pleasant, mostly low 20s. But I have heard it is pretty bad during summer.

  • 7
    Russell
    March 24th, 2010 20:02

    Those underground stations are some of the few public places where high school kids can mix and flirt – I thought it was endlessly entertaining to observe.

  • 8
    conrad
    March 25th, 2010 03:57

    “Perhaps the high A$ at the moment makes this look worse, but a report issued while I was there found that the median wage in HK was only just over A$8 an hour”
    .
    Of course, these people pay zero tax (either income or GST), so a smaller amount is equal to a much bigger amount in Aus (indeed only a minority of the population pays any tax), and most live in public housing (50% of the population does if I remember correctly). This means public housing is fine, because it isn’t the case that every person with mental disease is stuck in the same place. Just lots of normal people.
    .
    “One sign of this inequality is that there is a large servant class, mainly women from poorer Asian countries”
    .
    This is essentially irrelevant to the inequality of HK citizens (or certainly not in the same class as poor HK people), because they’re foreign contract workers that come, make money, and leave. They’re certainly better off than where they come from (indeed it’s common for them to employs servants in their own country when they are gone).
    .
    “The beggars I did see usually had terrible deformities. My brief visit makes it hard to confidently generalise, but the people I saw giving were not ethnically Chinese.”
    .
    This is just Asia. You have a much bigger pool of people you really might feel sorry for begging, and they’re happy to beg vs. swear at you etc. like Australian beggars do. Apparently much of it is organized by organized crime, so you are far better off giving to foundations that help these people than giving money to the people themselves. Also, the reason you don’t see much poverty is due to public housing, no minimum wage helping to keep unemployment down ($350 per week is tolerable to live off in HK — you may have noticed you can get dinner for $2-$3 in many places, and all manner of consumer stuff is very cheap), and stronger family bonds.

  • 9
    Andrew Norton
    March 25th, 2010 05:55

    Even on no tax, $8 an hour *median* (not minimum) wage suggests that living standards for many people in HK can’t be that high, especially if tax is so low there is limited capacity for the handouts that in Australia significantly supplement the living standards of the bottom 50% of earners (who pay no net tax).

    Except for coffee (which seems to be marketed mainly to foreigners), I did find that things were cheaper in HK than here – but not ridiculously cheap that would make $8 an hour enough to live well.

  • 10
    conrad
    March 25th, 2010 09:04

    Actually, if you’re a poor local and don’t do Western stuff (i.e., you shop at wet markets, don’t go to supermarkets much, etc. — stuff which you won’t notice as a tourist) then, excluding rent (you’ll be in public housing anyway), I reckon that you would spend about twice as much in Aus. vs. HK, and you won’t need expensive things like cars in HK. So even $6 p.h. will buy you about as much as the minimum wage in Australiam, the government won’t steal one cent of it, and you will be very employable. Given this, it’s not clear to me that being poor in HK is worse than Aus.

  • 11
    Andrew Norton
    March 25th, 2010 09:46

    Conrad – The TV news on the night the report came out did of course find sob stories on people struggling on much less than $8 an hour – which is of course why there is pressure for a minimum wage in the first place. But it is really the median that I find striking, and still do despite what you have said. In Australia in 2008 the median hourly wage was about $22, close to three times as much as in HK – which on a PPP basis has a GDP of several thousands of $US a year more than Australia. In Australia, both the market and the state seem to generate much more equal outcomes.

  • 12
    conrad
    March 25th, 2010 10:08

    “In Australia, both the market and the state seem to generate much more equal outcomes.”
    .
    You mean equal outcomes for those that are employed. Who knows what the real rate of underemployment is in Australia (20%?) but it’s negligible in HK at least in part (probably large-part) because of the lower wage. See here for example. This means that if you want a job, you can get one, and hence potentially move on, quite unlike Australia. This is great if you’re young and have some ambitions, and probably not so great if you just want to be entrenched in a crappy job all your life.
    .
    The other obvious reason that the median in HK is low is because you have an essentially infinite number of people willing to do anything you can do across the border if it doesn’t involve high level skills. As such, the only industries left are ones that require really high skills (banking, money laundering, logistics, high level services that require people to do things without corruption (e.g., law, accounting), advanced design, and I think medical services were growing too). It also means things like markets need to stay cheap, lest people spend their money in Shenzhen. Not surprisingly, the government doesn’t want to hinder the main industries in any way (like taxing them), since they need to keep ahead of the mainland, as these things are really their only livelihood. The reason for this is also pretty easy for even the most ignorant person to understand due to the geographics of the place, since they can just look across the border and see what real life is about. If you’d stayed longer, you would no doubt have seen people protesting *against* the minimum wage, that salaries for public servants are too high, that the government wastes money on various things etc — The type of protest you would never see in Australia where people only protest if they don’t get enough government pork.

  • 13
    Andrew Norton
    March 25th, 2010 10:37

    Conrad – I can understand some of the reasons why the median is low, not just Shenzen across the border but also high-income industries and and individuals who locate in HK primarily for tax reasons. However the labour market statistics you linked to do not show anything very different to Australia. Their labour force participation rate is lower (60% there, 65% here), unemployment is only slightly better (4.6% there, 5.3% here) and only under-employment (2% there, 7% or 12% here depending on definition) is significantly better.

  • 14
    Jason Soon
    March 25th, 2010 10:46

    As conrad notes, you have to take account of the subsidised public housing that a lot of the population benefits from. In that sense HK does have a kind of welfare state that can’t be captured solely from income transfers. Perhaps some value can be imputed in hourly terms to that benefit and added to the $8 hourly wage.

  • 15
    Baz (the ordinary Aussie)
    March 25th, 2010 10:55

    Come on boys – let’s see the wood from the trees.
    Yes, as Conrad says, it’s possible to eck out a lifestye in HK on 8 bucks an hour. Hell I did it 15 year ago in my ole Canberra milkrun days. Didn’t hear em complaining.
    I would also imagine that Andy is also correct in saying that Australian society generates more equal outcomes. A lower gini co-efficient if you will.
    But what no one is discussing the ‘so-what’ factor. No one is looking at the bigger picture.
    Aussie outcomes are not equal due to markets. Rather, they’re equaler cause my mates, Joe Average, are taxed to the hilt. Is that fair, is it moral and just that hard working people make little more than bludgers? I think not. And this mass intervention, as the great Mark Steyn suggests, is permenantly eroding the spirit of hard working citizens, and contributing to the relative decline of the west. That is, the glorious ancestors of St Crispin’s day, Spanish Armarda, El Alamein, Dunkirk, Kokoda and many more, now bring to you the police blaming, welfare receiving, high speed driving Canberra car crashing types.
    As for Hong Kong, they’re slowly sinking anyhow….bit players and also rans in world of historical events.
    Interesting observation on the generosity of Hong Kong natives to charity. Not so much that they don’t give much, but more that you reported it. Good to see.

  • 16
    Jason Soon
    March 25th, 2010 11:13

    Baz
    Anyone who gives to a beggar in Australia is a goddamned fool. That money will go straight into their veins or the pub. I have never given a cent to a beggar and never will/

    And conrad has already explained the context behind HK begging.

  • 17
    Peter Whiteford
    March 25th, 2010 11:13

    Andrew

    GDP and even GNP may not be the most appropriate measure of household wellbeing in places like Hong Kong (and Singapore) because large parts of their economy are owned overseas, although offsetting this Hong Kong firms own significant parts of the Chinese economy (relative to Hong Kong’s economy).

    But overall there is a much wider gap between what gets produced in Hong Kong and then accrues as incomes to Hong Kong residents than in Australia.

    So, according to http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita GDP per capita in Hong Kong is about 15% higher than in Australia (and in Singapore it is about 30% higher).

    However, according to http://en.wikipedia.org/wiki/List_of_countries_by_per_capita_personal_income in Australia personal income per capita is about 35% higher than in either Hong Kong or Singapore.

    In addition, inequality in household income is much greater in Hong Kong (or Singapore) than it is in Australia. According to the 2006 Census – at http://www.bycensus2006.gov.hk/FileManager/EN/Content_962/06bc_hhinc.pdf the poorest quintile in Hong Kong received 3.8% of household income and the richest quintile received 51.5% of per capita household income after taxes and social benefits (their definition of social benefits includes education, health and housing).

    The comparable figure for Australia (equivalised – not per capita) are13.2% for the bottom quintile and 32.1% for the richest quintile.

    Interestingly, according to this report close to one-quarter of the richest 20% of households employ foreign domestic workers, but less than 5% of all other households have servants.

  • 18
    Andrew Norton
    March 25th, 2010 11:19

    I’ll believe that living standards are not as low as an $8 an hour median wage suggests – but unless the median figure is substantially wrong it still looks to me that most of HK’s residents have a much more ordinary standard of living by Western standards than HK’s GDP per capita figures suggest (the upside of high population density is that you can have a good metro and no car; the downside is that you live in a pokey flat 30 storeys up).

  • 19
    Baz (the ordinary Aussie)
    March 25th, 2010 12:23

    Jas ‘sometime’ Soonish,

    ‘Anyone who gives to a beggar in Australia is a goddamned fool’.

    That’s a big call buddy, and perhaps a little dramatic.

    Personally, I have given to beggers in Aus. Mostly food, but sometimes I’ll drop a coin in hat for the begger who does some grade 3 chalk drawings on the pavement…..at least he doing something to show he’s earning his keep!

  • 20
    Jason Soon
    March 25th, 2010 12:37

    Baz

    My point is that how much people give to beggars in different countries is frequently reflective of things other than the actual degree of charitableness in that society. A better measure would be recorded donations to charitable groups.

  • 21
    conrad
    March 25th, 2010 12:47

    “2% there, 7% or 12% here depending on definition”
    .
    10% is huge, and the HK 2% really means 2%, versus the somehwat rubbery figures and definitions which are generally used. I also think Australian is in a far luckier position in terms of employment, so HK really is doing a good job.
    .
    “the downside is that you live in a pokey flat 30 storeys up”
    .
    This would happen no matter what the GDP is with the sort of population there. It does make for a fun city if you can put up with the crowds, since everyone is essentially obliged to wander around and do stuff out of their apartments (oddly enough, a bit like Spain).
    .
    Baz:”Aussie outcomes are not equal due to markets”.
    .
    They are in part. Imagine if we let Indonesians work here and they all spoke English too. That’s the equivalent, except mainlanders often have degrees and a good eduaction also.

  • 22
    Baz (the ordinary Aussie)
    March 25th, 2010 13:35

    Fair point Conrad – to be honest I think that the ‘market’ facilitates more equal outcomes than in HK. That said, I don’t think the equality in outcomes is largely driven by the market, but rather by intervening government.

  • 23
    Andrew Norton
    March 25th, 2010 13:36

    Underemployment here is actually 7.8%; the higher figure is unemployment plus underemployment. But surprisingly Australia still provides jobs for a larger % of its adult population than HK (albeit not with the hours some want), despite ‘job destroying’ labour market regulations HK does not have.

    One theory: with such a skewed income distribution, there is no need for middle class women to work, as they do here.

    You are very defensive about HK! I liked it a lot (though I am glad to be able to lift my walking speed above the snails pace shuffle through the crowds), but that wages study gave me numbers that put a bit of perspective on it.

  • 24
    John Humphreys
    March 25th, 2010 13:52

    Andrew — careful not to compare PPP adjusted stats with non-PPP adjusted stats.

    Another reason for the low median wages in HK is that they allow a significant number of low-paid foreign workers. This significantly improves the lives of those workers and of regular HKers… but it will show up as a negative on wages.

    (Also, with Australian unemployment it is also necessary to include some DSP recipients.)

  • 25
    conrad
    March 25th, 2010 14:10

    “You are very defensive about HK”
    .
    I just think that people often use it as example of something that it really isn’t (as Jason knows also) based on a small number of stats, when the real situation is much more complex.
    .
    To me one of the most interesting things are the cultural effects on the labor market. When I worked there, the VC decided everyone would get a 10% pay cut (including himself) due to government funding cuts, and almost no-one complained as it was pretty obviously justified since there was deflation and the wages of all the private sector workers had been going down for ages. Thus it appears that people are quite happy to accept pay-cuts if need be. If the same thing happened here, I’d probably still be on strike today. There are also massive differences in working attitudes — no one wants to be on benefits (which are about half those of Aus if you can get them), and it appears most people would work even if the amount they got was identical to the benefits. Perhaps this is like Australia in a time I didn’t exist, but the mental attitude to work and what the government should do for you and society is entirely different. It’s quite refreshing.

  • 26
    Andrew Norton
    March 25th, 2010 14:13

    John – The wage figures I’m comparing are both non-PPP. While HK is cheaper for most things PPP would be a bit more favourable to HK, things aren’t two-thirds cheaper.

    I realise there are lots of low paid foreigners (point 3 in the post), but it really doesn’t affect my overall point where people come from (there are presumably lots of high-paid expatriates as well). My interest is in the dynamics of a society that seems very unequal by Western standards (or at least non-US Western standards).

    While I agree that some DSP recipients are really unemployed, I don’t know how many or whether there are HK equivalents.

  • 27
    conrad
    March 25th, 2010 16:38

    Try looking here and multiply by 3 to get the population equivalent figures.
    .
    I think looking at those figures (which would be about 130,000 in Australian population numbers), I’ll have to admit to John Humphreys that I’ve been previously wrong when I’ve thought that the disability numbers in Australia are at least possibly plausible. It’s obviously a big scam for the large part in Australia. Surely people in HK can’t be 5.5 times less likely to get a disability pension because of better health alone.

  • 28
    Andrew Norton
    March 25th, 2010 17:34

    There are some very useful statistics from Peter Whiteford at comment 17, which unfortunately because of the number of links was caught in moderation. It contains an important correction to one of my assumptions – overall per capita income is actually significantly lower than in Australia despite higher GDP per capita, and confirms another of my assumptions, that income inequality is very high compared to Australia.

    While obviously many people who are on disability pensions could do some work, I’m less convinced than some of my comrades that ‘scam’ is the right way to think about current numbers. If there has been a fundamental change in the structure of the labour market which makes a perhaps minor medical issue only one aspect of a much bigger mismatch with the skills and attributes demanded by employers, then there may not be much point in forcing DSP recipients to go through the charade of applying for jobs, employers having to process pointless applications, and Centrelink having to monitor pointless activity.

  • 29
    conrad
    March 26th, 2010 04:34

    “then there may not be much point in forcing DSP recipients to go through the charade of applying for jobs, employers having to process pointless applications, and Centrelink having to monitor pointless activity.”
    .
    I haven’t seen evidence this helps people on unemployment benefits either. What it does show is that hidden unemployment is much higher in Aus than other places. I think Japan is another good example where older people wind-down on work (i.e., go part-time, get lower paying jobs etc.), but don’t stop altogether. It’s also not clear to me it is a mismatch caused by employers — I’d like to see evidence of this. The alternative is that it’s older males not wanting to do various types of work that you now often see older females doing (sales etc.).

  • 30
    Andrew Norton
    March 26th, 2010 06:07

    Conrad – I don’t recall seeing good comparative studies of ‘hidden’ unemployment, and this is an area where intuitions should not be trusted. I think we also need to resist blurring issues – only including ‘discouraged jobseekers’, and not counting anyone we deem should be working.

  • 31
    Russell
    March 26th, 2010 12:06

    “If there has been a fundamental change in the structure of the labour market …. with the skills and attributes demanded by employers, then there may not be much point in forcing DSP recipients to go through the charade of applying for jobs, employers having to process pointless applications, and Centrelink having to monitor pointless activity”
    .
    Why can’t we make some more fundamental changes to the labour market to ensure that there is work for those people? Weren’t you recently grizzling about how long it takes for people to fiddle around with tickets on trams? Have conductors then, trams will go faster.
    .
    I know several people on the DSP and they all could work, if the jobs were created to get the work done. There are plenty of things that need doing and I’d rather people were paid to do them than sit at home on the DSP.

  • 32
    Andrew Norton
    March 26th, 2010 12:10

    Russell – Work for the DSP along with Work for the Dole?

    The current ticketing system is better than conductors, who would be just one more person on an already over-crowded tram. That said, it’s hard to see how a fiasco like Myki represents a cost saving over conductors.

  • 33
    Russell
    March 26th, 2010 12:26

    No, it would be a job, part-time or full-time, that used the skills they had or could easily acquire on the job, and paid at the going rate. For the non-technologically talented there’s gardening, or making healthy school lunches at school canteens, or visiting the housebound … there’s any number of things; they can come to the library I work at and start scanning years of old public documents that should be available online.
    .
    You would say that about conductors (if trams are that crowded you obviously need more trams) having no concept of social capital. My grandfather was a tram conductor and brightened the morning for everyone who got on his tram!

  • 34
    Andrew Norton
    March 26th, 2010 12:37

    I prefer not to get my social capital from someone who wants to look at my ticket.

  • 35
    Russell
    March 26th, 2010 12:48

    It seems you prefer that people only perform their job function and in no other way demonstrate their humanity?
    .
    Do you really think that people should be paid welfare when there’s useful work that they could do?

  • 36
    Andrew Norton
    March 26th, 2010 12:59

    The trouble is that I doubt many of the things you regard as ‘useful’ really are worth the money the welfare recipients would receive. We are disagreeing on your most important example. Of course I prefer it when people I deal with are at least polite. But my life is not so bereft of human contact that a 10 second exchange with a conductor would improve it.

  • 37
    Russell
    March 26th, 2010 13:20

    I must be the conservative then, because I think it’s better for people who are capable of work, to be paid for work, rather than to be given it for nothing. (Corrosive effects of welfare etc)
    .
    But as for no useful things to do … I think you just need to look around you.