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China, although income distribution has been used for political mobilization to

press for democracy since 2003 in Hong Kong.8

The contrast between China and Hong Kong in terms of public responses to

increasing income inequality leads to a puzzling question: what amount ofincome inequality can be called large? In other words, what income gap is con-

sidered to be reasonable and what considered to be problematic? What are the

social and political implications for the rising income inequality? This article

makes a distinction between equality and equity in income distribution and

argues that the perceptions of inequality and distributive justice, which invoke

normative judgements concerning income inequality, are directly linked to public

discontent and political action. Such normative judgements are based on the

dominant cultural values and political ideologies of the society.9 In this sense,

China and Hong Kong provide two interesting cases for comparative studiesbecause they share the Chinese culture but differ diametrically in ideological

orientation towards inequality: one is associated with egalitarian socialism and

the other with laissez-faire capitalism. Based on survey data collected in China

(2005) and Hong Kong (2007), I examine the peoples tolerance of inequality,

their perceptions of legitimate earnings inequality and opportunities in the two

Chinese societies, and how they differ from each other and from other

countries.10 Such analyses will shed new lights on the social and political conse-

quences of rising income inequality in mainland China and Hong Kong.

Limitations of the Gini Coefficient as a Measure of Income InequalityAmong measures of income inequality, the Gini coefficient has remained the

most popular, at least in part because of its ease of interpretation.11 Many social

commentators in mainland China and Hong Kong have cited the Gini coefficient

to illustrate the growing income disparity seen in recent years, and some

even suggested that the Gini coefficient should be used to monitor social andpolitical stability: 0.2 or lower egalitarian, 0.2 ~ 0.3 relatively egalitarian,

8 To win back public support, Mr Tung Chee-hwa, the former Chief Executive, made poverty alleviation

a key theme in his 2005 annual policy address. The government set up a new Commission on Poverty,

chaired by the Financial Secretary, with inter-generational transfer of poverty at the top of its agenda.

See Henry Tang, Expectations towards the Commission on Poverty, speech delivered by the Financial

Secretary, 2 March 2005, http://www.info.gov.hk/gia/general/200503/02/03020298.htm, accessed 20

February 2008; Lee Cheuk-yan, Testimony on democracy in Hong Kong before the subcommittee

on East Asia and Pacific Affairs of the United States Senate Committee on Foreign Relations, 4

March 2004, http://foreign.senate.gov/testimony/2004/Cheuk-yanTestimony040304.pdf.9 Bernd Wegener, Political culture and post-communist transition a social justice approach: introduc-

tion, Social Justice Research, Vol. 13 (2000), pp. 7582; Martin K. Whyte and Maocan Guo, How

angry are Chinese citizens about current inequalities? Evidence from a national survey, forthcoming,

Social Transformation in Chinese Societies, Vol. 3.

10 For a similar kind of comparison, see Bernd Wegener and Stefan Liebig, Is the inner wall here to stay?

Justice ideologies in unified Germany, Social Justice Research, Vol. 12 (2000), pp. 17797.

11 Paul Allison, Measure of inequality, American Sociological Review, Vol. 43 (1978), pp. 86580; Tim

Futing Liao, Measuring and analyzing class inequality with the Gini Index informed by model-based

clustering, Sociological Methodology, Vol. 36 (2006), pp. 20124.

Income Inequality and Distributive Justice 1035


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0.3 ~ 0.4 reasonable, 0.4 ~ 0.5 alerting and above 0.5 dangerous. According

to this criterion, Chinas income inequality is approaching the dangerous zone.12

However, the Gini coefficient has many limitations in comparing income

inequality across countries and over time. First, it can be calculated at differentlevels, such as household, household per capita or individual person, on which

data are not always consistently available. In general, if non-working spouses,

children and retirees in the household are included in the calculation, the Gini

coefficient for household income is greater than that for household income per

capita, which is greater than that for individuals work income.

Secondly, measures of income inequality vary under different definitions of

income. For example, in a comprehensive database on cross-country income

inequality constructed by the World Institute for Development Economics

Research of the United Nations University, Gini coefficients in China are calcu-lated based on household gross income, or disposable income per capita, or

expenditure or consumption per capita from different data sources,13 and there

is no consistent measure for the country over the period of economic reform

from 1978 to 2005 (also see footnote 5). Comparing the coefficients across

nations can also be problematic because the measure of income inequality may

be subject to the influence of income taxes, the efficiency of income use, welfare

benefits, life quality and purchasing power. Even within China, a great difference

in cost of living exists between urban and rural areas.Finally, even if the coefficients are consistently measured at the household level

over time, a temporal trend in increasing inequality may reflect a change in

family structure, such as household size, the number of working household mem-

bers, the age distribution of household members, their health conditions and edu-

cation attainments, and so on. For example, an upsurge in the number of elderly

households in Hong Kong has led to a rapid rise in the number of low-income

families and thereby to the increase in income inequality. In response to criticism

citing the high Gini coefficient, the Census and Statistics Department published a

thematic report on household income distribution in Hong Kong, pointing out

the difficulties encountered in analysing and comparing Gini coefficients.

According to the report, after adjustments for taxes and social transfers, the

Gini coefficient is reduced from 0.533 to 0.475, and the trend towards increasing

inequality has remained largely stable over the past ten years.14

Based on solid statistical data analysis, this thematic report has received neither

much criticism nor much attention by the public in Hong Kong. In contrast, a

remark on the limitation of using Gini coefficients to measure income

inequality by Professor Li Yining , a well-known liberal economist,encountered harsh condemnation by the Chinese public via the internet.

12 Francesco Sisci, Is China headed for a social red alert? Asia Times, 20 October 2005; Ma, Wealth

gap fueling instability.

13 UN-WIDER, World Income Inequality Database.

14 Hong Kong C&SD, Thematic Report: Household Income Distribution in Hong Kong, 2007, p.111, http://

www.censtatd.gov.hk, accessed 1 March 2008.

1036 The China Quarterly, 200, December 2009, pp. 10331052


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According to Li,15 because of the dual social structure in China, under which

rural and urban residents differ greatly in income sources, living standards, con-

sumption behaviours and lifestyles, a single Gini coefficient may have overstated

the degree of inequality; had it instead been computed for rural and urban areasseparately, both Gini coefficients would be between 0.32 and 0.35, which fall

within a reasonable zone. Hence, the gap between rich and poor and the trends

towards social polarization may not be as serious as suggested by the single Gini

coefficient.

Li may be right to some degree, for reasons similar to those laid out in the the-

matic report by the Hong Kong Census and Statistics Department, and especially

in terms of the social and political implications of the increasing income inequal-

ity. A Chinese farmer in rural Guizhou province could never imagine the life of a

senior-level professional working for a multi-national firm in Shanghai. In thissense, pooling their statistics to compute an inequality index makes little sense,

particularly in terms of how those who lag behind would respond to the income

disparities. Indeed, analysis shows that it is not the most disadvantaged people

such as peasants who are most angry about current patterns of inequality in

China.16

Therefore, while the Gini coefficient provides a very powerful tool for monitor-

ing temporal trends in the income inequality in a country and for comparing

income distributions across countries as long as the measures are consistent, ithas two major limitations. On the one hand, it can be manipulated both by

left-wing analysts seeking to decry extreme inequalities and by right-wing pundits

wishing to demonstrate that inequality is not a serious issue. On the other hand,

the objective calculations of the Gini coefficient, or any other measures of

inequality, no matter how sophisticated, involve no normative judgement of

how large the income gap in a country should be.17

Chinese Exceptionalism? Rhetoric on Equity and Equalityin Income DistributionParties involved in the policy debate about rising income inequality have rarely

made an explicit distinction between equality (pingdeng) and equity (gong-

ping). Equality is a measure indicating what the distribution of income actu-

ally is, whereas equity is an ethical judgement on what the distribution of income

should be. If everyone receives an equal share regardless of their contribution and

performance, equality is achieved but equity is not for those who worked

harder.18 From a functionalist perspective, inequality and stratification in

15 Li Yining, Li Yining on the issue of reducing income gap, Guangming Daily, 7 January 2002.

16 Whyte and Guo, How angry are Chinese citizens.

17 Ibid.; Martin Kreidl, Perceptions of poverty and wealth in Western and post-communist countries,Social Justice Research, Vol. 13 (2000), pp. 15176; Wegener, Political culture and post-communist

transition.

18 Aristotle, Nicomachean Ethics, trans. W.D. Ross (Oxford: Clarendon Press, 1995 [1908]).



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resource distribution are necessary in any modern society,19 but such differen-

tiation must be legitimate according to the dominant values of the society; that

is, those who get more must deserve more, and those who get less also must

deserve less.For a long time Chinese people were said to favour egalitarianism (pingjun

zhuyi), which is often linked both to the long Chinese cultural tradition

and to the short socialist past in the mainland. As Confucius articulated in his

Analects, he is not concerned lest his people should be poor, but only lest

what they have should be ill-apportioned (bu huan gua er huan bujun

).20 Such egalitarian mentality was further enhanced by the income dis-

tribution policy during the socialist era since the 1950s. Hence, to improve effi-

ciency and boost productivity, economic reforms in the late 1970s emphasized

breaking the iron rice bowl (tie fanwan ) and enlarging the incomegap. The policy, articulated as efficiency as priority and equity as supplement

(xiaolu youxian, jiangu gongping,), has essentially ignored the

equity issue in income distribution for almost two decades. To address the shar-

ply rising income inequality, recent policies have been shifted to paying more

attention to equity (gengjia zhuzhong gongping) under the rubric

of a harmonious society (hexie shehui ), which, in President Hu

Jintaos words, should feature democracy, the rule of law, equity, justice,

sincerity, amity and vitality. All the people can work to their fullest abilities,be paid according to their hard work and get on well with each other.21

In spite of this policy shift, liberal economists continue to dismiss the usage of

Gini coefficients and insist that the current income disparities should not be a

great concern.22 Those who express serious concerns about increasing income

inequality are often labelled as resenting the rich (choufu xintai) or

having the red eyes disease (hongyan bing), a Chinese colloquial term

for jealousy. In Hong Kong, such rhetoric is rarely heard, but it was recently

aroused when a local business tycoon made the controversial comment that

Hong Kong is the most communist place in China.23

The implicit assumption of the rhetoric is that equality (or egalitarianism) is

desired among those who complain about high income inequality. On the

other hand, Chinese people seem to tolerate high inequality and believe in indi-

vidual effort and merit-based disparities, partially because the tradition of the

imperial examination system provided a channel for social mobility.24 This is

19 Kingsley Davis and Wilbur E. Moore,

Some principles of stratification,

American SociologicalReview, Vol. 10 (1945), pp. 24249.

20 Arthur Waley, The Analects of Confucius (London & New York: Routledge, 1995[1938]).

21 Hu Jintao, Speech in the Fourth Plenary Session of the 16th Central Committee, 19 September 2004,

http://www.xinhuanet.com/newscenter/zht0919/xgzl.htm, accessed 20 February 2008.

22 Li Yining, Reducing income gap; Zhang Weiying, Market reform and income distribution, http://

www.chinahrd.net/zhi_sk/jt_page.asp?articleid=138311, accessed 19 February 2008.

23 Chaim Estulin, Hong Kongs new culture, The Times, 17 January 2005.

24 Ping-Ti Ho, The Ladder of Success in Imperial China (New York: Columbia University Press, 1967);

Whyte and Guo, How angry are Chinese citizens.



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consistent with some liberal economists suggestion that education is an impor-

tant way to reduce inequality. As long as equality in opportunities (jihui ping-

deng) is achieved, inequality in socioeconomic outcome, regardless of

how large it is, would not be a problem.

25

If equality in educational opportunitiescan be achieved, would inequality based on education be considered acceptable?

This question touches upon the fundamental value of a society, namely, what is

considered to be fair (equitable).26 The objective calculation of the Gini coeffi-

cient, or of any other sophisticated measures of inequality, cannot be a substitute

for the normative judgement of inequality.

In my view, much of the public debate and the governments concerns are

related to the issue of equity. Over the past few decades, empirical research on

the origins and development of peoples norms about the distribution of income

has flourished in Western sociology.27 This article contributes to the literature byproviding an empirical investigation of Chinese peoples perceptions of inequality

and distributive justice. Based on survey data collected in China and Hong Kong,

I attempt to answer the following questions: first, do Chinese people tolerate a

high degree of inequality or do they favour egalitarianism; second, how do

Chinese people in China and Hong Kong differ in their perceptions of pay equity

(distributive justice); and finally, how is the perception of distributive justice

associated with the perception of opportunities?

Data, Variables and MeasuresI analyse data from the China General Social Survey (2005) and the Survey on

Social Inequality and Mobility in Hong Kong (2007). The Chinese General

Social Survey is an annual survey of a national representative sample of the

adult population aged 18 or above in both rural and urban China (except for

Tibet). It uses a multi-stage stratified random sampling method. First, 125 prin-

cipal sampling units are selected from 2,798 county or county-level districts, stra-

tified by region, rural and urban populations, and education levels, then four

25 Jianhui Liu, Equity is a must but equality is not, 2005, http://en.ce.cn/Insight/200511/30/

t20051130_5362706.shtml, accessed 20 February 2008.

26 For example, analyses show that Chinese people tend to tolerate merit-based inequalities. In the 2003

Chinese General Social Survey, respondents were asked who should get a higher income? 64% of

respondents said professionals and highly educated, 13.7% said workers and 12.8 % said state

cadres or managers in state or collective owned enterprises should earn more. Chinese people stress

much more than many other societies that merit-based attributes are the main reasons why some people

are poor while others are rich. See Yanjie Bian, Chinese General Social Survey 2003: Technical Report

and Users

Manual (Hong Kong: HKUST Survey Research Center, 2005); Whyte and Guo,

Howangry are Chinese citizens.

27 Duane F. Alwin, Distributive justice and satisfaction with material well-being, American Sociological

Review, Vol. 52 (1987), pp. 8395; Guillermina Jasso, A new theory of distributive justice, American

Sociological Review, Vol. 45 (1980), pp. 332, and How much injustice is there in the world? Two new

justice indexes, American Sociological Review, Vol. 64 (1999), pp. 13368; Jonathan Kelly and M.D.R.

Evans, The legitimation of inequality: occupational earnings in nine nations, American Journal of

Sociology, Vol. 99 (1993), pp. 75125; Jonathan Kelley and Krzysztof Zagorski, Economic change

and the legitimation of inequality: the transition from socialism to the free market in Central-East

Europe, Research in Social Stratification and Mobility, Vol. 22 (2005), pp. 231366.



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second-level sampling units are selected in each principal unit, two third-level

sampling units are selected in each second-level unit, and finally, ten households

are selected in each selected third-level unit. One eligible person aged 18 or above

is randomly selected from each sampled household to serve as the survey respon-dent. In all, 10,372 completed interviews are included in the sample, 6,098 from

urban areas and 4,274 from rural areas. Because urban residents are over-

sampled to yield enough cases for examination of variations within cities, we

use sampling weights to correct for this over-sampling to compute figures repre-

sentative of the general population in China.28 In this article, I restrict the sample

to those aged between 18 and 60, giving a total of 8,696 individuals.

The Hong Kong survey is a large-scale, city-wide representative probability

survey on social stratification and mobility among the adult population aged

between 18 and 60. A two-stage stratified replicated sampling design is adoptedfor the survey. In the first stage, a random sample of addresses (or all households

in the addresses sampled) is selected, with the type of housing and residential dis-

trict as the stratification factor. This arrangement ensures that respondents living

in different types of housing and different districts are sampled. In the second

stage, a person aged between 18 and 60 in the sampled households is randomly

selected and interviewed using the last birthday method. In all, 4013 interviews

are included in the sample. To make the data representative of the general popu-

lation, a weight is created based on the official statistics in terms of sex, age, edu-cation and household size from the 2006 Hong Kong population by-census

data.29 The descriptive statistics of the demographic characteristics for the

samples are presented in Appendix A.

Both the China and Hong Kong surveys include some comparable questions

on the subjects attitude towards income inequality and fair pay. First, respon-

dents were asked about the perceived boundaries of poor and rich.30 The

ratio can be used to measure peoples tolerance of income inequality.

Secondly, to make distinction between the empirical estimation of income

inequality and ethical evaluations that people may have about their perceptions,

respondents were asked to estimate how much people in particular occupations

28 While the official technical report ofthe China General Social Survey 2005 has not yet been released,

the research designs and implementation are similar to those in CGSS 2003. See Yanjie Bian, Chinas

General Social Surveys 2003. The response rate in CGSS 2005 is 53%. In China, as elsewhere, very

rich people are less likely to participate in surveys. However, given its tiny size, the under-representation

of this group will not have a substantial impact on the national averages of tolerance of income inequal-

ity (also see the discussion on a similar issue Khan and Riskin, Chinas household income, n. 3).

29 Hong Kong Census and Statistics Department, 2006 Population by-Census Summary Results; XiaogangWu, Hong Kong Social Stratification and Mobility Survey: Technical Report and Users Manual (Hong

Kong: HKUST Survey Research Center, 2008).

30 In the Chinese survey, respondents were asked: According to the local living standards, in your

opinion, a household with 34 members can be considered poor if the average monthly income is

below _____ and rich if the average monthly income is _____ or above. In the Hong Kong survey,

respondents were asked: According to recent statistics, the household median income was HK

$17,100 in Hong Kong in 2006 (with a household size of 3). In your opinion, what average monthly

household income would mean that the household was poor? What average monthly household

income would mean that the household was rich?



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actually earn per month (do earn) and how much they should earn (should

earn). In contrast to the large literature that has analysed statistical data to

measure objective trends in income inequality, these questions capture peoples

perceptions and enable researchers to examine the issues more relevant to individ-uals normative evaluations of income inequality. If the do earn and should

earn are approximately equal, the income distribution can be construed as

fair. By this measure, inequality and equity are empirically differentiable.

Finally, respondents were asked to answer a set of questions on their attitude

towards inequality and perceptions of opportunities on a five-point scale (1

strongly agree, 2 agree, 3 neutral, 4 disagree, 5 strongly disagree).

These questions are linked to individuals normative evaluations of income

inequality in these two societies to account for why Chinese people have a

high acceptance of inequality.

Results

Perceived boundaries ofpoor andrich

As mentioned above, respondents in both China and Hong Kong were asked

about what average household income per month would be considered poor

and what would be considered rich. Table 1 presents the mean monthly income

considered as poor and rich in China and Hong Kong as a preliminary analy-

sis of the difference in perception of inequality between the two Chinese societies.

As the results show, on average, respondents in China believe that a household

monthly income below 633 yuan can be considered poor and a monthly

income above 4,575 yuan can be considered rich. In Hong Kong, people

believe that a household monthly income of HK$6,299 and below can be con-

sidered poor and a monthly income of HK$102,888 can be considered

rich. The larger standard deviation of the second perceived figure suggests

that there is much less consensus on what can be called rich than what canbe called poor in both societies.

In the last column, I compute the rich-to-poor ratio, which indicates peoples

degree of tolerance of income inequality. In other words, as long as the household

Table 1: Perceived Boundary for Poor and Rich in China and Hong Kong

Monthly householdincome below which is

considered poor(standard errors)

Monthly household incomeabove which is considered

rich (standard errors)

Rich/poorratio

(standarderrors)

China (yuan) 633 (602) 4,575 (8,885) 9.9 (19.4)

Hong Kong (HK$) 6,229 (1,768) 102,888 (110,542) 17.1 (18.1)

Notes:

Data are weighted.

Sources:

China General Social Survey (2005); Hong Kong Social Inequality and Mobility Survey (2007).



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monthly income falls within the range, it is considered to be in the middle.

A higher ratio indicates more tolerance of inequality. Results show that the

ratio is 9.9 in the mainland and 17.1 in Hong Kong. As expected, the huge dis-

crepancy suggests that people in the mainland are much less tolerant of incomeinequality than are people in Hong Kong, even though inequality measured by

Gini coefficients is lower in China than in Hong Kong.

Actual and ethical inequality

In the China survey, respondents were asked to estimate the actual (do earn)

and ethical (should earn) earnings of six occupations: farmers, peasant-

workers, factory workers, professors, senior government officials (at provincial/ministerial levels) and executives in large state-owned enterprises. Lawyers and

doctors were not included because these private-practice professionals are rarely

visible to most Chinese people. In Hong Kong, eight occupations were included

in this exercise: cleaners, factory workers, office clerks, lawyers, corporate execu-

tives, professors, doctors and senior government officials.

A key advantage of using the do earn/should earn questions is that many

confounding factors can be held constant at the respondent level; that is, attitudes

about what specific occupations should earn can be conditioned on what the

individual believes they do earn so that individual errors in estimating actual

earnings are directly controlled.31 Moreover, these questions are clearly restricted

to differences in the earnings of specific occupations thus avoiding complex

issues such as household size, income sources, tax rates or welfare transfers.

Indeed, these questions have also been used by International Social Survey

Programmes elsewhere, thus enabling us to compare perceptions of distributive

justice in China and Hong Kong with those in many other countries.32

Table 2 presents the average monthly earnings of what respondents think that

people do earn and should earn for the selected occupations in the mainlandand Hong Kong. For example, Chinese farmers are estimated to earn 459 yuan

per month and peasant workers 781 yuan per month. On the other hand, senior

government officials at provincial/ministerial levels are estimated to earn 5,894

yuan a month and CEOs in large companies about 25,885 yuan a month.

Even without the actual monthly earnings for these occupations, these figures

make sense and are not far from reality. The highest paid occupation (CEO in

large companies) earns 56.4 times more than the lowest paid (farmer).

In the Hong Kong survey, the respondents estimate that cleaners earn about

HK$4,796 per month and factory workers about HK$6,258, while doctors in pri-

vate practice earn HK$77,949 per month and senior government officials HK

31 Lars Osberg and Timothy Smeeding, Fair inequality: attitudes towards pay differentials: the United

States in comparative perspective, American Sociological Review, Vol. 71 (2006), pp. 45073.

32 Kelley and Zagorski, Economic change and the legitimation of inequality.



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$155,140. The highest paid occupation (senior government officials) earns 32.3

times as much as the lowest paid (cleaners). These figures are not objective but

subjective assessments of actual pay. While the Gini coefficient indicates that

earnings are distributed more unequally in Hong Kong than in China among

the working population, mainland people tend to perceive higher income inequal-

ity than do people in Hong Kong.

Respondents were also asked how much people in these specific occupations

should earn. The means of these ethical monthly earnings for these occupations

are presented in Column B. Comparing Columns B and A suggests that in both

China and Hong Kong, people generally believe that income inequality is very

large and they favour less inequality, as expressed by higher should earn salaries

for low-paid occupations and lower should earn salaries for high-paid occu-

pations. Nevertheless, there is no evidence that people prefer absolute egalitarian-

ism and want all occupations to be paid equally. In China, a gap of 29.4 times is

considered acceptable, while a gap of 23.1 times is acceptable in Hong Kong.One can also compare the do earn with should earn for each occupation and

compute the ratio of Column A to Column B. An occupation is fairly paid if the

ratio is close to 1, over-paid if the ratio is greater than 1 and underpaid if the

ratio is less than 1. In China, people believe that, on the one hand, farmers are

underpaid by 41 per cent ([1-0.59]*100), peasant workers are underpaid by 28

per cent and urban factory workers are underpaid by 27 per cent; on the other

Table 2: Perceived Monthly Income Measured as Do Earn and Should Earnfor Selected Occupations in China and Hong Kong

A: Do earn B: Should earn C: Ratio: A/B

China1. Farmer 459 778 0.59

2. Peasant worker 781 1,082 0.72

3. Urban factory worker 966 1,317 0.73

4. Professor 4,285 4,514 0.95

5. Senior government official 5,894 4,361 1.35

6. CEO in large company 25,885 22,894 1.13

Ratio: highest/lowest 56.4 29.4

Hong Kong

1. Cleaner 4,796 6,310 0.76

2. Factory worker 6,258 7,472 0.843. Office clerk 7,650 8,915 0.86

4. Lawyer 53,958 57,606 0.94

5. Corporate executive 54,130 62,170 0.87

6. Professor 75,383 76,754 0.98

7. Doctor in private practice 77,949 81,171 0.96



Notes:

Data are weighted.

Sources:




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hand, managers and executives in large companies (most owned by the state) and

senior government officials are overpaid, by 13 per cent and 35 per cent, respect-

ively. This suggests that higher earnings for these two occupations, which are associ-

ated with public power and public assets, are considered less legitimate in China.In Hong Kong, the sentiment about equitable pay is different. People believe

that professionals like lawyers, doctors and professors are fairly paid (do earn/

should earn ratios range from 0.94 to 0.98). However, they believe that cleaners

are underpaid by 24 per cent and factory workers by 16 per cent. The only occu-

pation that is considered overpaid is senior government officials, but the overpaid

rate is only 7 per cent. This probably reflects the publics discontent with govern-

ment policy on curbing income inequality. Interestingly, corporate executives are

believed to be underpaid by 13 per cent. This may be because company size is

not specified. A clear message from the ratio of do earn to should earn isthat there is little egalitarian sentiment in Hong Kong. Peoples main concern

about inequality is that the poor are too poor and thus need to be helped, but

the rich are not said to be too rich. Perception of income inequality has therefore

caused more widespread social discontent in mainland China than in Hong Kong.

One may argue that the do earn/should earn approach can give a misleading

outcome if the perceptions of respondents on payment for their own occupation

are taken into account, because few people will think that their jobs are overpaid.

However, previous studies of occupational prestige show a consensus in ratingoccupational status, rather than respondents over-rating their own occupation.33

This may also be applicable to occupational earnings. Appendix B presents the

average monthly earnings of what respondents think that people do earn

and what people should earn for selected occupations, excluding respondents

own occupations.34 Results remain largely the same.

Pay equity: an international comparison

To place the results in a broader international context, I use the Gini coefficient

to summarize each respondents assessment of earnings inequality. Specifically, I

calculate the Gini coefficients of estimates of actual earnings (do earn income)

and ethical earnings (should earn income) among the listed occupations for

each person. The ratio between the second Gini coefficient and the first indicates

how much respondents own estimate of the actual degree of inequality in pay

among a range of occupations diverges from their own ethical inequality. This

ratio is called the fairness index.

Table 3 presents the means of the two Gini coefficients and the fairness indexin China and Hong Kong. Because the International Social Survey Programmes

33 Donald J. Treiman, Occupational Prestige in Comparative Perspective (New York: Academic Press,

1977); Vered Kraus, E. O. Schild and Robert Hodge, Occupational prestige in the collective con-

science, Social Forces, Vol. 56 (1978), pp. 90018.

34 The selected occupational categories cannot be matched exactly to respondents own occupations.

In many cases, approximately similar occupations are used in this exercise.



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collected similar information in many other countries in 1999, I also include com-

parable figures from 27 countries varying by region, size, development level, insti-

tutional legacy and culture.35

Results show that the Gini coefficient of the do earn income is 0.44 in China

and 0.47 in Hong Kong. It should be noted that respondents average estimates ofthe Gini coefficient are not estimates of income inequality in the labour market as

a whole, because the occupations included in the surveys are only a small subset

Table 3: Perceived Actual and Ethical Inequality: Cross-Country Comparison

Countries GiniA: average Giniindex of salaries

people do earn

GiniE: average Giniindex of salaries people

should earn

Average ratioof GiniE/GiniA

China (2005) .44 .38 .86

Hong Kong (2007) .47 .44 .94

Russia .66 .39 .61

Chile .60 .47 .79

Poland .58 .44 .77

Latvia .58 .41 .70

Hungary .56 .37 .67

Czech Republic .53 .39 .76

France .52 .38 .74

Philippines .49 .46 .97Great Britain .49 .36 .73

Slovenia .47 .34 .74

Japan .46 .37 .81

Israel .45 .36 .80

Canada .45 .33 .76

Portugal .45 .33 .73

United States .43 .35 .82

New Zealand .43 .32 .76

Germany East .43 .32 .74

North Ireland .42 .32 .76

Australia .42 .31 .74Bulgaria .42 .28 .68

Germany West .41 .34 .82

Austria .41 .32 .78

Cyprus .40 .33 .82

Sweden .35 .22 .65

Spain .34 .22 .65

Norway .30 .21 .73

Slovakia .25 .19 .82

Average of all .46 .34 .76

Notes:Figures for other countries are calculated based on the data from the International Social Survey Programme, 1999 (see Lars Osberg

and Timothy Smeeding, Fair inequality: attitudes towards pay differentials: the United States in comparative perspective, American

Sociological Review, Vol. 71 (2006), pp. 45073, Table 3).

35 Despite the fact that the list of occupations in China and Hong Kong is not identical to the list in ISSP, it

is modified based on the ISSP questions and covers the major occupations. The comparisons of the do

earn and should earn Gini index are informative.



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of all occupations.36 There is a discrepancy between the actual Gini coefficient

and the estimated Gini coefficient in some other countries, particularly post-

socialist countries. In Russia, for instance, whereas the actual Gini coefficient

is 0.31,

37

the Gini coefficient estimated by Russian respondents is 0.66. The senti-ment captured in the divergence between actual and estimated income inequality

may have important social and political consequences.

The second column shows that the Gini coefficient for the should earn

income is 0.38 for China and 0.44 for Hong Kong. This difference suggests

that people in the mainland tolerate less income inequality than people in

Hong Kong, a finding consistent with the results in Table 1. However, according

to the international standard (an average of 0.34), the perception of ethical

(should earn) earnings inequality is high in both Chinese societies. Chinese

people are therefore not particularly prone to egalitarian distribution of income.Because peoples perceptions of fair pay may be conditioned on how much

inequality they think there is, the third column of Table 3 presents the ratio of

the two Gini coefficients, which captures the acceptable perceived income

inequality (fairness index). If the index equals 1, it means that the respondent

considers the existing income inequality fair; the lower the index, the more

unfair the respondent feels the existing income distribution is.

Again, respondents in both China and Hong Kong have high acceptance of the

existing income inequality: the ratios are 0.86 and 0.94, respectively, whereasthe average ratio for the other 26 countries is 0.76. Indeed, Hong Kong is ranked

the second highest after the Philippines, and China is ranked the third highest.

While determining if these figures are strictly comparable may require further

investigation, the remarkable differences observed across countries suggest that

respondents in both China and Hong Kong are more likely to think that income

inequality is fair than are respondents in other countries, even though actual

inequality has been very high in both societies.

For Hong Kong, the unusually high rate of acceptance of income inequality

can be linked to the laissez-faire capitalism adopted since the colonial era. For

a long time, Hong Kong has been considered as a land of opportunity where indi-

vidual efforts and hard work will allow people to get ahead. This view has been

constantly enhanced by the personal stories of successful businessmen and poli-

ticians who came from disadvantaged backgrounds.38 Not incidentally, people

in the United States, another land of opportunity, also have a high rate of

acceptance of income inequality (the ratio is 0.82). The Gini coefficients that

measure actual income inequality in both the United States and Hong Kong

are among the highest of the high-income countries.

36 Osberg and Smeeding, Fair inequality, pp. 45073.

37 World Bank, World Development Report (New York: Oxford University Press, 2007).

38 For example, the appointment of Wong Yan Lung, the son of a street peddler, as Secretary for Justice

was termed a Hong Kong story. The appointment of K.C. Chan, the son of a taxi driver, as Secretary

for Financial Services and the Treasury was seen as another Hong Kong legend by the local media.



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Probably as a result of the experience of socialist egalitarianism, Chinese

people in the mainland seem to believe that income inequality is not as fair as

the Chinese people in Hong Kong do. However, compared to other countries,

people in the mainland still have very high normative support for incomeinequality. Kelly and Zagorskis research39 also found that people in Poland

and Hungary, after the fall of communism, had more normative support for

income inequality than their Western counterparts. In China, increasing income

inequality has been perceived as a necessary evil to improve efficiency during

the economic reforms.40 Chinas rapid economic growth in the past few decades

has also created a perception of new opportunities for those who have lagged

behind.

Attitude about inequality and perception of opportunities

The extent to which people perceive income inequality to be equitable may be

associated with the perceived opportunities in the society. In both the China

and Hong Kong surveys, respondents were asked to answer a set of questions

to measure their attitude towards inequality using a five-point scale (from

strongly agree to strongly disagree). The five questions were not identical in

the two surveys but were all related to attitudes towards inequality and percep-

tions of opportunity. Table 4 presents the respondents answers to those questions

(in percentages). For brevity, I aggregate strongly agree and agree into one

category and disagree and strongly disagree into another. However, the

mean is calculated on the five-point scale, with strongly agree coded as 1

and strongly disagree as 5. Therefore, a mean score lower than 3 (the average)

indicates an attitude leaning towards agree.

Nearly 85 per cent of mainland respondents and 60 per cent of Hong Kong

respondents agreed to tax the rich more to help the poor. Despite the general sup-

port for this leftist policy, people believe that there are still sufficient opportu-nities in both societies: in China, 80.3 per cent of respondents believe in equal

opportunities if smart enough and 74.8 per cent agree that peasants and

workers children have equal chances; in Hong Kong, 75.7 per cent of respon-

dents agree that Hong Kong is full of opportunities and 58.4 per cent agree

that Hong Kong is a place for competent people. On the other hand, many

respondents do not think that the government has done sufficient work to

curb the rising income inequality: only 40.3 per cent agreed that the Hong

Kong government takes good care of the poor

and an even lower percentage(22.9 per cent) in China stated that the government did a good job to help

the poor.

39 Kelley and Zagorski, Economic change and the legitimation of inequality.

40 Li Yining, Reducing income gap.



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To what extent are the attitudes towards income inequality and perceptions of

opportunities related to the fairness of income distribution in peoples minds?

Table 5 reports the results of a series of OLS regressions of the attitudes evaluated

on the five-point scale on the fairness index.

Because this index is highly skewed, I take the logarithm of the fairness index

as the main independent variable in the linear regression analysis, and include

education, gender, age and age square as the control variables. Education is

measured in four levels and converted to three dummies in the model, and

male is coded as a dummy variable (yes = 1). Except for question 3 in the

China survey, the results show that the fairness index is a significant predictor

of a persons attitude towards inequality. In both China and Hong Kong, if

people believe that the perceived actual income distribution is fairer, they tendto disagree to tax the rich to help the poor (indicated by the positive coefficient)

and tend to agree that there are equal opportunities and merit-based competition

in the society (indicated by the negative coefficient). Hence, the relationship

between the fairness index based on the should earn and do earn ratio

and the perceptions of opportunities are associated with each other. Because of

data limitation, the causal relationship cannot be established. A single index of

Table 4: Attitude about Inequality and Perception of Opportunities

Strongly agreeor agree (%)

Neutral(%)

Disagree orstrongly disagree

(%)

Mean

China

(1) Tax the rich more to help

the poor

85.0 8.1 6.9 1.86

(2) It is fair that some earn

more and some less

59.7 13.0 27.3 2.58

(3) Equal opportunities if

smart enough

80.3 6.9 12.8 2.08

(4) Peasants/workers kids

have equal chances

74.8 8.0 17.3 2.21

(5) Government does a goodjob to help the poor

22.9 38.3 38.8 3.23

Hong Kong

(1) Tax the rich more to help

the poor

59.3 21.4 19.3 2.47

(2) HK is full of opportunity 75.7 14.1 10.1 2.20

(3) HK is an equitable

society

51.1 20.0 16.9 2.43

(4) HK is a place for

competent people

58.4 20.7 6.6 2.20

(5) HK government takes

good care of the poor

40.3 22.0 37.7 2.98

Notes:

Data are weighted.

Sources:




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fairness thus can be used to examine the social and political consequences of

distributive justice in future research.

Summary and ConclusionsTo sum up, this article has adopted a different approach to examining increasing

income inequality in two Chinese societies with distinct institutional legacies:

reforming socialist China and laissez-faire capitalist Hong Kong, both suffering

from high income inequality. I make a distinction between equity and equality in

the discussion of the social and political consequences of increasing income

inequality. In particular, I argue that whether an income gap is large or not is

subject to the normative/value judgement of the public. In this respect, both cul-

ture and institutions play an important role in legitimizing income inequality.Using survey data collected in China and Hong Kong, I compare peoples atti-

tudes about income inequality and their perceptions of opportunities, and by

implication their attitudes about government policies. The results dismiss the con-

ventional wisdom that Chinese people tend to favour absolute egalitarianism.

Instead, the analysis reveals that both societies have certain degrees of tolerance

for income inequality, although respondents in China appear to be less tolerant

of income inequality than those in Hong Kong.

A unique feature of the data analysed in this article is that respondents wereasked to estimate the do earn and should earn income for a list of occu-

pations, following the designs used in the International Social Survey

Programme. Comparing the do earn and should earn income for each occu-

pation shows that people in Hong Kong believe that the pay is fair in general:

workers in each occupation deserve what they are paid except for those in the

low-status occupations, who are underpaid, and senior government officials,

who are slightly over-paid. In contrast, in China, although people also believe

that farmers and workers are underpaid, they think that senior government offi-

cials and executives in large state-owned companies are overpaid by a large

amount. This may explain why income inequality has led to a high degree of per-

ceptions of unfairness and wide social discontent in the mainland.

Compared to most other countries with available data, both mainland and

Hong Kong respondents have a very high rate of normative acceptance of income

inequality. The Gini coefficients ofdo earn and should earn income are cal-

culated to measure perceived inequality and legitimate inequality. The results

suggest that perceived income inequality is not distorted in reality, that is, people

have recognized the high income inequality in their societies. On the other hand,this high inequality is considered legitimate, as indicated by the fairness index

determined by the ratio of the two Gini coefficients.

Why do people think that high income inequality is fair? I further examine per-

ceived opportunities in China and Hong Kong based on a set of attitude ques-

tions and their relationships with the fairness of perceived income inequality.

I found that both mainland and Hong Kong respondents are surprisingly



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optimistic about opportunities for social mobility and this is positively associated

with their sense of the fairness of income distribution.

The perception of distributive justice also affects their support of government

tax policies and their evaluation of government performance in addressing theproblem of large income disparities. If people feel that the income distribution

is unfair, they are more likely to support left-wing initiatives to tax the rich

more to help the poor, and they are more likely to disagree with the statement

that the government has done a good job to help the poor. Such subjective evalu-

ations may lead to further political participation.

The findings of this article suggest the importance of a subjective dimension,

which has largely been neglected, in studying the relationship between inequality

and social/political stability in a society. As John Rawls put it, a society is well-

ordered, when it is not only designed to advance the good of its members butwhen it is also effectively regulated by a public conception of justice.41

Therefore, high inequality measured by Gini coefficients in the two Chinese

societies may not necessarily lead to continuous and unsettling struggles that

could challenge the legitimacy of the social institutions and the state, because

there is a core Chinese belief that talent, education and hard work are the key

routes to economic success as well as an optimistic perception of opportunities

for mobility. This conclusion does not mean that political leaders in China and

Hong Kong should not seriously address the problems of rising income inequal-ities, particularly the unmet needs of the most disadvantaged. Rather, if well

informed about the subjective factors in income distribution, policy makers

could do more to alleviate the social discontent and anger about rising inequality

that may pose great challenges to social and political stability.

Appendix A: Descriptive Statistics for Demographic Characteristics of theSamples Included in Analysis: China and Hong Kong Surveys

China Hong Kong

Male 46.2 46.7

Education

Primary school or below 36.5 27.2

Junior high school 33.2 20.3

Senior high school 21.8 36.8

College or above 8.5 15.7

Age 40.06 (11.04) 41.43 (12.06)

Age2 1,727 (886.0) 1,862.5 (997.0)

N 8,696 4,013

Notes:

Data are weighted. Figures in the parentheses are standard errors for continuous variables.

Sources:


41 John Rawls, A Theory of Justice (Cambridge, MA: Harvard University Press, 1971), pp. 45.



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Appendix B: Perceived Monthly Income Measured as Do Earn and ShouldEarn for Selected Occupations in China and Hong Kong (ExcludingRespondents Own Occupation).

A: Do earn B: Should earn C: Ratio: A/BChina

1. Farmer 463 787 0.59

2. Peasant worker 785 1,076 0.73

3. Urban factory worker 970 1,326 0.73

4. Professor 4,331 4,529 0.96


6. CEO in large company 26,720 23,682 1.13


Hong Kong

1. Cleaner 4,800 6,313 0.762. Factory worker 6,257 7,473 0.84

3. Office clerk 7,655 8,874 0.86

4. Lawyer 53,955 57,600 0.94

5. Corporate executive 54,147 62,201 0.87

6. Professor 75,383 76,754 0.98

7. Doctor in private practice 77,957 81,180 0.96



Notes:

Due to data limitation, respondents

occupations cannot be matched exactly to the listed occupations here. In calculating theaverages ofdo earn and should earn for a specific occupation, I exclude respondents with approximately similar occupations.

Sources:



6 wu 2009 income inequality

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