Education and Individual Income Inequality

Abstract

The contribution of recent immigrants to income dispersion has grown slightly. This reflects the fact that their numbers have been rising over time and that they tend to have a higher proportion of lower-productivity individuals. Immigration policy is of course another form of human capital investment policy. In a free society, the decision to emigrate is an individual right over which government should not exercise control. But in Hong Kong, government policy decides who is allowed to emigrate here. Family reunion cases are also related to human rights, although what constitutes family is subject to policy delineation. To sum up, then, the increase in individual income dispersion is primarily affected by education. Other factors contribute, too, but none is as significant. Education policy must therefore be at the center of efforts to tackle the rising inequality in individual incomes. This sets up the analysis understand what underlies the rise of household income dispersion over this period.