Family Changes and Income InFamily Changes and Income Inequality under Globalization:equality under Globalization:

The Case of Hong KongThe Case of Hong Kong

Stephen WK ChiuStephen WK ChiuDepartment of Department of

SociologySociologyThe Chinese The Chinese

University of Hong University of Hong KongKong

Photo: Alex Chung

The ProblemThe Problem

Gini CoefficientGini Coefficient19911991 0.476 0.476

20012001 0.5250.525

► Increased by 10.3%Increased by 10.3%

The ProblemThe Problem

► Hong Kong has become one of the most unequal Hong Kong has become one of the most unequal societies in the developed world. societies in the developed world.

Country/Region Year Gini Coefficient

Brazil 2001 0.59

Hong Kong 2001 0.53

Argentina 2001 0.52

Costa Rica 2000 0.47

China 2001 0.45

Singapore 1998 0.42

United States 2000 0.41

Ghana 1999 0.41

Italy 2000 0.36

United Kingdom 1999 0.36

India 2000 0.33

Korea, Rep. 1998 0.32

Czech Republic 1996 0.25

Sweden 2000 0.25

Economic ExplanationEconomic Explanation

►Economists explain rising inequality by Economists explain rising inequality by Human Capital Theory and Trade Human Capital Theory and Trade TheoryTheory

►Globalization and technological Globalization and technological development the primary causes development the primary causes

Economic ExplanationEconomic Explanation

► In advanced economies, globalization incrIn advanced economies, globalization increases return to high level human capital aeases return to high level human capital and reduces return to low level human capind reduces return to low level human capital through trade with less developed labotal through trade with less developed labour-surplus economy.ur-surplus economy.

► Technological change, especially in IT, incTechnological change, especially in IT, increases return to skilled worker by increasireases return to skilled worker by increasing the demand. ng the demand.

Sociological ExplanationSociological Explanation

► Saskia Sassen’s Global City ThesisSaskia Sassen’s Global City Thesis

Sociological ExplanationSociological Explanation

► Globalization led to the rise of global cities with Globalization led to the rise of global cities with dispersal of production and centralization of codispersal of production and centralization of control.ntrol.

► Global cities are command centres of the global Global cities are command centres of the global economy with a high concentration of producer economy with a high concentration of producer services (banking, advertising, accounting, law) services (banking, advertising, accounting, law) controlling a dispersed network of production.controlling a dispersed network of production.

► Primary global cities: New York, London, Tokyo.Primary global cities: New York, London, Tokyo.► Secondary global cities: Hong Kong, Singapore, Secondary global cities: Hong Kong, Singapore,

Frankfurt, Sao Paulo, Chicago etc. Frankfurt, Sao Paulo, Chicago etc.

Sociological ExplanationSociological Explanation

► Global city development leads to social polGlobal city development leads to social polarization:arization: ““1) the growing inequality in the profit-making 1) the growing inequality in the profit-making

capacities of different economic sectors and in the capacities of different economic sectors and in the earning capacities of different types of workers; 2) earning capacities of different types of workers; 2) the polarization tendencies embedded in the the polarization tendencies embedded in the organization of service industries and the organization of service industries and the casualization of the employment relation; and 3) casualization of the employment relation; and 3) the production of urban marginality, particularly as the production of urban marginality, particularly as a result of new structural processes of economic a result of new structural processes of economic growth rather than those producing marginality growth rather than those producing marginality through abandonment.” (Sassen 1998: 137) through abandonment.” (Sassen 1998: 137)

Sociological ExplanationSociological Explanation

►Manufacturing generates a large Manufacturing generates a large number of middle-income jobs.number of middle-income jobs.

►Services typically consist of high Services typically consist of high income and low income employees with income and low income employees with few in the middle. Investment bankers few in the middle. Investment bankers vs the janitors.vs the janitors.

►Therefore globalization transforms the Therefore globalization transforms the occupational structure, leading to occupational structure, leading to polarization of income.polarization of income.

Criticisms on the Polarization Criticisms on the Polarization Thesis Thesis

1.1. First, there are doubts whether the polarizing trend First, there are doubts whether the polarizing trend in occupational and income structure is really in occupational and income structure is really observable in global cities and that it ignores the observable in global cities and that it ignores the process of professionalization and the growth of the process of professionalization and the growth of the new middle class in the global cities (Hamnett new middle class in the global cities (Hamnett 1994, 1996; Baum 1999).1994, 1996; Baum 1999).

2.2. Second, the concept of polarization as used in the Second, the concept of polarization as used in the global city literature by Sassen is also found to be global city literature by Sassen is also found to be imprecise, whether it points to merely “relative” imprecise, whether it points to merely “relative” polarization in the sense of widening income polarization in the sense of widening income differentials or “absolute” polarization leading to differentials or “absolute” polarization leading to the growth in both the top and bottom ends but a the growth in both the top and bottom ends but a shrinking middle (Hamnett 1994; Vaattovaara and shrinking middle (Hamnett 1994; Vaattovaara and Kortteinen 2003).Kortteinen 2003).

Criticisms on the Polarization Criticisms on the Polarization Thesis Thesis

3.3. Hamnett’s critique of the concept of Hamnett’s critique of the concept of polarization in the global city thesis boils polarization in the global city thesis boils down to the danger in the thesis to mask down to the danger in the thesis to mask the mediating role of local factors in the the mediating role of local factors in the social outcomes and urges the necessity to social outcomes and urges the necessity to “conceptually unpack the term polarization “conceptually unpack the term polarization and to examine the extent to which different and to examine the extent to which different forms of polarization are found in different forms of polarization are found in different contexts and to theorise the reasons for contexts and to theorise the reasons for such variations” (Hamnett 1996: 1408).such variations” (Hamnett 1996: 1408).

►My objective therefore is to look at My objective therefore is to look at local factors that mediating between local factors that mediating between global changes as well as the social global changes as well as the social factors interacting with economic factors interacting with economic changes.changes.

► One problem in unit of analysis in income One problem in unit of analysis in income inequality:inequality: Individual or household? Individual or household?

► Key Hypothesis:Key Hypothesis: Household formation strategies affect income Household formation strategies affect income

inequality significantlyinequality significantly Wives’ rising income and labour force particiWives’ rising income and labour force partici

pation increased overall household income inpation increased overall household income inequalityequality

► Data: Public Use Dataset of Population CeData: Public Use Dataset of Population Census 1991 and 2001.nsus 1991 and 2001.

► Definition of household income: primary aDefinition of household income: primary and secondary income excluding domestic nd secondary income excluding domestic helpers.helpers.

► Adjusted vs unadjusted income by househAdjusted vs unadjusted income by household size. old size.

► where Sk = μk/ (μh+ μw+ μo), CVk is the coefficient of where Sk = μk/ (μh+ μw+ μo), CVk is the coefficient of variation for income component k, ρkj is the correlation variation for income component k, ρkj is the correlation between a pair of income components, Sk is the share of total between a pair of income components, Sk is the share of total family income form component k, and μk is the mean of family income form component k, and μk is the mean of income from component k. In the analysis of the relative income from component k. In the analysis of the relative contribution of different sources in household income, the contribution of different sources in household income, the subscript subscript hh denotes husbands’ income; denotes husbands’ income; ww denotes wives; denotes wives; income and income and oo denotes residual income from other sources. denotes residual income from other sources.

► Basic statistical tool: decomposition analysis Basic statistical tool: decomposition analysis of coefficient of variationof coefficient of variation

► In simple terms:In simple terms:If :If : I = H + W (I = household income, H = husband I = H + W (I = household income, H = husband

income, W = wife income)income, W = wife income)Then:Then: The dispersal of I will be greater if:The dispersal of I will be greater if: H and W are highly correlated, and vice versa.H and W are highly correlated, and vice versa.

► Also important is the share of each source of Also important is the share of each source of income in the total household incomeincome in the total household income

► as well as the level of income of each as well as the level of income of each marital partner. marital partner.

Table 4A: Household Income by Table 4A: Household Income by Sources, 1991 and 2001Sources, 1991 and 2001

　 Share　(%)

Sources 1991 2001 %　Change

1.　Unadjusted　Household　Income 　 　

Husband 58.08 55.66 -4.17

Wife 18.86 24.29 28.79

Others 23.06 20.05 -13.05

Couple Households 100 100 ---

2.　Adjusted　Household　Income　by　Household　Size

Husband 59.65 56.49 -5.3

Wife 20.03 25.3 26.31

Others 20.32 18.21 -10.38

Couple Households 100 100 ---

Table 4B: Household Income by Table 4B: Household Income by Sources, 1991 and 2001Sources, 1991 and 2001

Mean　(HK$)Correlation　with　Wife’s　

Income

Sources 1991 2001 %　Change 1991 2001

1.　Unadjusted　Household　Income  

Husband 12985.51 15820.73 21.83 0.333 0.382

Wife 4217.34 6903.73 63.70 --- ---

Others 5156.35 5700.35 10.55 -0.085 -0.132

Couple Households 22359.2 28424.81 --- 0.589 0.658

2.　Adjusted　Household　Income　by　Household　Size  

Husband 6844.61 8522.36 24.51 0.376 0.416

Wife 2298.06 3817.14 66.10 --- ---

Others 2331.29 2747.15 17.84 -0.121 -0.159

Couple Households 11473.96 15086.65 --- 0.652 0.702

Table 6: Decompositions of Change in Income Inequality Table 6: Decompositions of Change in Income Inequality by Income Source, 1991 and 2001by Income Source, 1991 and 2001

CV2 Relative　ContributionContribution　ofIncome　Source

to　Change

Income　Sources 1991 2001 %change 1991 2001 %change %

1.　Unadjusted　Household　Income

Husband 0.908 1.081 19.087 0.53 0.561 5.81 8.99

Wife 2.753 2.321 -15.712 0.237 0.297 25.501 9.166

Others 3.676 3.851 4.739 0.233 0.142 -39.038 -7.613

Couple Households

0.608 0.672 10.541 1 1 --- 10.543

2.　　Adjusted　Household　Income

Husband 1.017 1.153 13.295 0.601 0.593 -1.318 4.915

Wife 2.955 2.442 -17.342 0.278 0.329 18.125 8.209

Others 3.481 3.699 6.255 0.12 0.078 -35.298 -3.503

Couple Households

0.649 0.712 9.624 1 1 --- 9.621

► Next I assess the impact of changes in income Next I assess the impact of changes in income sources among households by comparing the sources among households by comparing the observed distribution with a reference distribution. observed distribution with a reference distribution. The reference distribution is constructed by The reference distribution is constructed by assuming three counterfactual conditions in order assuming three counterfactual conditions in order to evaluate whether wives’ income had a to evaluate whether wives’ income had a disequalizing effect on the income distribution:disequalizing effect on the income distribution: Counterfactual 1: all wives did not work and had Counterfactual 1: all wives did not work and had

zero income.zero income. Counterfactual 2: the mean and dispersion of wives’ Counterfactual 2: the mean and dispersion of wives’

income had not changed over the period in income had not changed over the period in question.question.

Counterfactual 3: the mean, dispersion and Counterfactual 3: the mean, dispersion and correlation of wives’ income with other sources had correlation of wives’ income with other sources had not changed over the period in question.not changed over the period in question.

Table 7: The Impacts of Changes in Table 7: The Impacts of Changes in Wives’ Earnings under Different Wives’ Earnings under Different

Counterfactual Conditions for Married Counterfactual Conditions for Married CouplesCouples

CV2　of　Couple　HouseholdsActual

Counter-factual　1

Counter-factual　2

Counter-factual　3

1. Unadjusted Household Income 10.55 -2.00 -17.88 -18.88

2. Adjusted Household Income 9.62 -1.56 -12.80 -13.85

Table 8: The Impacts of Changes in Wives’ Earnings under Table 8: The Impacts of Changes in Wives’ Earnings under Different Counterfactual Conditions for All HouseholdsDifferent Counterfactual Conditions for All Households

All　Households　

Acutal　%　Change　in　CV2　between　1991　

and　2001

%　Change　in　CV2　between　

Counterfactual　2001　&　Actual　

1991

Counterfactual　2　(mean　and　dispersion　of　wives'　income　hand　not　changed)

Unadjusted Household Income 10.55 -4.93

Counterfactual　3　(mean,　dispersion　and　correlation　of　wives'　income　with　other　sources　had　not　changed)

Unadjusted Household Income 10.55 -5.71

The Broader PictureThe Broader Picture

1.1. Expansion in Higher EducationExpansion in Higher Education2.2. Increase in female enrolment in higher educationIncrease in female enrolment in higher education

► Girls outnumbered boys in tertiary institutions in 2001, Girls outnumbered boys in tertiary institutions in 2001, accounting for 54.4% of all students in state-funded accounting for 54.4% of all students in state-funded programmes. programmes.

► The proportion of women with tertiary education in the The proportion of women with tertiary education in the population also increased from 9.4% in 1991 to 15.2% in population also increased from 9.4% in 1991 to 15.2% in 20012001

3.3. The overall labour force participation rate among The overall labour force participation rate among all women rose moderately from 49.5% to 51.6% all women rose moderately from 49.5% to 51.6% during the same period. The proportion of wives during the same period. The proportion of wives with tertiary education who were working also with tertiary education who were working also rose from 68.5% in 1991 to 71.1% in 2001. rose from 68.5% in 1991 to 71.1% in 2001.

The Broader PictureThe Broader Picture

4.4. The percentage of households with an The percentage of households with an economically-active wife increased economically-active wife increased moderately from 30.9% of all moderately from 30.9% of all households in 1991 to 32.7% in 2001.households in 1991 to 32.7% in 2001.

5.5. Rising income level of working women Rising income level of working women because rising producer services offer because rising producer services offer high income jobs to womenhigh income jobs to women

6.6. Other institutional factors also help: Other institutional factors also help: foreign domestic helpers “released” foreign domestic helpers “released” middle class wives from childcaring.middle class wives from childcaring.

► Higher correlation between husband and wives’ Higher correlation between husband and wives’ income, from 0.333 in 1991 to 0.382 in 2001income, from 0.333 in 1991 to 0.382 in 2001

► The reason: educational homogamy The reason: educational homogamy

ConclusionConclusion

► Economic factors contributed to widening indiviEconomic factors contributed to widening individual inequality but socio-demographic factors fdual inequality but socio-demographic factors further accentuated household inequalityurther accentuated household inequality

► As households typically pool together resources As households typically pool together resources in consumption and human capital investment in consumption and human capital investment (eg education for children), inter-household ine(eg education for children), inter-household inequality is important in determining life chancesquality is important in determining life chances

► Institutions and policies encouraging the workinInstitutions and policies encouraging the working of women in low-income households deserved g of women in low-income households deserved more considerationmore consideration