Is the high cost of living an advantage of Hong Kong?

By Benedict Lam

According to the HK government's official website, Hong Kong is a city that developed into an international business, trade and financial hub with a robust economy. However, how did Hong Kong manage to achieve this status and what impact does it have on the city?

Hong Kong achieved this status due to its close financial integration with Mainland China, and extensive networks with the rest of the world, as stated on the Hong Kong Monetary Authority's official website. Given that, a robust economy and a significant financial link with Mainland China and the global market require a considerable pool of financial talent. Recognizing that Hong Kong has a limited land area in comparison to other cities can drive up the property and rental price, which in turn, influences the price of the necessities and wages. This shows Hong Kong is a high-cost-of-living city, having ranked first on Mercer’s Cost of Living City Ranking 2024. Cost of living is defined as the amount of money that a person needs to pay for basic needs such as food and somewhere to live, as defined by the Cambridge Dictionary. This allows Hong Kong to become home to international corporations which create more opportunities and increase the quality of living. However, this can result in increased prices of essential goods and services which easily cause inflation and also make Hong Kong a very intense and competitive city.

Hong Kong, a high-cost-of-living city, has a robust economy which draws in international corporations, including Apple, Swire Group, and Langham Hospitality Group, to invest in the city. This can result in economic stability as these international corporations allow the city to create abundant job opportunities for the local citizens. According to the World Population Review, this will lead to a significantly low unemployment rate of 3.1%, compared with the rest of the world. This suggests that the majority of citizens are at least able to manage their basic financial needs. In addition, this can also show the economy is likely to be stronger, as disposable income (The money remaining after essential expenditures and taxes) generally rises. This can lead to increased consumer spending that can stimulate economic growth, benefiting businesses from higher sales and revenue. Thus, a high-cost-of-living city not only offers more opportunities for individuals to sustain their livelihood, but it can also benefit businesses as more individuals can afford additional goods and services.

Due to an increase in purchasing power, individuals are more likely to feel more happiness and consumer satisfaction provided by additional goods and services that they can purchase. It illustrates Hong Kong can achieve a higher quality of living as it is the standard of health, comfort, and happiness experienced by an individual or group, as per the Oxford Dictionary. In fact, Mercer's quality of living ranking 2024 places Hong Kong at the 76th position, while cities like New Delhi in India and Istanbul in Turkey rank lower in terms of quality and cost of living. These data indicate that there is often a directly proportional relation between quality and cost of living because, in a high-cost-of-living city, citizens typically earn higher income which correlates with higher tax obligations. This can enable the government to gather more taxes which can be allocated to enhance education, healthcare, and community infrastructure. Subsequently, the overall quality of living can also be increased which is a benefit of living in a high cost of living city.

Nevertheless, there will be some drawbacks when living in a high cost of living city. As indicated by the term “high cost of living”, this means the cost of living in the city must be higher than other cities, including the price of all the goods and services. This can influence all the aspects that require those goods and services. For instance, if the price of cotton increases, the price of all the products linked to cotton is likely to increase in order for the business to remain profitable. It can also impact the stakeholders and they might adjust the price of their products. This can easily cause inflation in the city, making it more challenging for them to afford essential items.

Despite the fact that the high cost of living does cause inflation in Hong Kong, it can also create greater competition in the society, compared to other cities with a lower cost of living. As mentioned above, Hong Kong is home to numerous international corporations. International corporations must take very serious consideration of the employers that they are choosing as their affairs spread all over the world and require talented, skilled workers to complete their work. This can increase the competition in the city, making it very competitive. An official study conducted by the US National Library of Medicine research on individuals who are living in competitive environments often experience higher levels of anxiety. The study also reveals that individuals tend to avoid feelings of inferiority in competitive settings, which can lead to depression. Therefore, a high cost of living city can create a competitive environment which leads to individual mental illness.

Overall, a high-cost-of-living city such as Hong Kong can offer more job opportunities, which can easily improve individuals living conditions. However, the trade-off of these advantages is the increased price of the goods and services, alongside a higher risk of developing a mental illness. As a result, a high cost of living city is not always an advantage.