Many people complain that social mobility in Hong Kong is decreasing, causing various social problems.
I agree that social mobility has worsened in recent years as the economy has become more mature.
However, the real situation is not as severe as some people describe it, and it may not be the root cause of some social problems.
The government recently released the results of the 2015 Study on Earnings Mobility.
Unlike previous studies, the survey used data from the Inland Revenue Department and the student finance office of the Working Family & Student Financial Assistance Agency.
The study found substantial upward earnings mobility was enjoyed by first-degree graduates from the 2001/02 cohort, born in 1980, and 2006/07 cohort, born in 1985.
It showed that among the first-degree graduates, 62 percent of the 2001/02 group reached the 80th percentile of the income distribution or higher within 10 years, and 80 percent reached the 70th percentile or higher.
Their average annual salary was around HK$160,000 (US$20,600) in the first year after graduation, and most of them were between the 50th and 60th percentiles of the income distribution, earning between HK$103,000 and HK$159,000.
Five years later, the annual earnings of those in the cohort had risen to HK$360,000, and most were between the 80th and 90th percentile of the income distribution, earning between HK$225,000 and HK$464,000.
Their average annual income increased to HK$500,000 after 10 years, when most were between the 90th and 100th percentile of the income distribution, earning between HK$360,000 and HK$860,000.
Simply speaking, a bachelor’s degree holder earned about HK$13,000 per month in the first year after graduation, and the monthly salary increased to HK$30,000 five years later and to HK$42,000 10 years later.
These graduates climbed to the top two tiers of the working population in Hong Kong.
It’s worth noting that this applied to ordinary college graduates, not just those entering investment banking or becoming doctors.
By contrast, social mobility was less for the 2006/07 cohort.
Their average annual salary in the first year after graduation was around HK$210,000, notably higher than the HK$160,000 for the 2001/02 group. That reflected the city’s economic growth.
However, five years later, their annual earnings rose only to HK$350,000, just short of the HK$360,000 of the earlier group.
The survey did not offer detailed explanations for this outcome.
I believe there are three main reasons.
First, the 2001/02 group of graduates encountered the outbreak of severe acute respiratory syndrome, during which the city’s economy hit rock bottom.
But it staged a quick rebound, resulting in the raising of pay.
By contrast, the 2006/07 group encountered the global financial crisis shortly after graduating, but the economy has posted only a modest recovery thereafter.
Also, local universities only offered 7,000 places for students each year in the early 1990s, but the number has soared to 25,000 in recent years.
So, the 2001/02 cohort encountered less competition in the job market.
However, the later group experienced more intense competition, and it’s more difficult for them to get promoted.
In addition, salaries are determined by market supply and demand.
There are large numbers of local associate degree holders and mainland migrants.
As a result, entry-level salaries are under pressure, because of the greater supply of graduates.
Nevertheless, 81 percent of the 2006/07 cohort managed to reach the 70th percentile of the income distribution or higher five years after graduation.
Simply speaking, upward social mobility for Hong Kong’s younger generation remains quite adequate.
In fact, the real issue for them is not earnings mobility.
They are struggling to keep up with skyrocketing home prices in the city.
For example, while members of the 2001/02 cohort may be able to afford mortgage payments 10 years after graduation, with their average salary of HK$42,000, they may not have enough savings for a down payment.
This article appeared in the Hong Kong Economic Journal on May 23.
Translation by Julie Zhu
[Chinese version 中文版]
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