Minimum Wage in Hong Kong

...

According to the John Schmitt’s, an American economist, article on Year 2000, he pointed out that the rising of MW level will only have little or no impact for the unemployment rate. Besides, The Economist also stated in Year 2013 that if the MW level was not setting to high, there was no negative effect for the employment. For US, the MW is just the 38% of the median monthly wage, which is one of the lowest case in the developed country. However, the MW in France is near 60% of the median monthly wage, which cause the high unemployment rate, especially for the youth (unemploymate rate is 26%). In Hong Kong, the median monthly wage on 2015 May is HK$14800, where the MW one year before is HK$30 per hour. Assume the MW earner working 8 hours per days and 26 working days per month, his salary will be HK$30 X 8 hours x 26 days=HK$6240, which is 42% of the median monthly wage. Thus, we may conclude the MW level in Hong Kong is appropriate.

According to the law of demand, the wage increase will lead to the quantity demanded decrease. However, the total income for the society, i.e. Wage X Quantity of Labour, is depended on the elasticity of demand, which whether the decrease in quantity can be offset by the increase in wage. We find that most of the level is in the inelastic area of demand. For the graph on the right, the elasticity of the middle point of the demand curve, e.g. Point E, will be 1. As it is a , the MW level is set on the lower part, i.e. Part B, of the demand curve. In such inelastic part, any pay rise will also lead to the total income of the society increase, as the % decrease in quantity of labour is less than the rising % of wage.[pic 4]

In Year 2012, Michael Reich, Polish-born economist, has addressed an empirical study that the rise of MW has stimulated San Diego’s economy by US190 million. The GDP of Hong Kong keeps at the steady and low level after Year 2010. Instead, Hong Kong has faced the full employment and shortage of labour, and the launching of MW will rise the wage and attract the idle workforce re-participate to the labour market. It is very significant for this workforce as the immigration policy in Hong Kong is quite rigorous for the imported labour. Although the effect on the GDP is difficult to measure, it is sure the MW has brought more private consumption and labour to the economy[pic 5]

The adverse effect on the economic competitiveness is arguable. MW is focusing on the low-paid worker, who is concentrated on the Low-paying sectors (comparing 7.5% of the total labour force):

Low-paying Sectors (LPSs) in Hong Kong on 2011

Low-paying sector

Proportion of low-paid employees

Retail

17.4%

Restaurants

24.3%

Estate management, security & cleaning services

52.3%

Other LPS

23.7%

All LPSs

29.8%

Despite the security and cleaning services sector, most of the employer has addressed that they do not agree that there will be a great negative impact for the launching of MW. It is because the main portion of the operation cost is the rents and cost of goods sold. For example, the percent of rent, cost of goods sold and labour expense in retail sector is around 45%, 40% and 10% of the whole operation cost respectively. Thus, the raising of MW will not be a fatal impact for them.

Besides, the vulnerable groups will be lack of the market information. In Hong Kong, there is no standard employment terms that the employer needed to follow. For example, it is why people has suddenly discovered the meal hour and rest day has different calculation method among different company. The vulnerable group always is a grassroot level and the information cost for them is too high for identifying the difference in several salary package. MW has at least to provide them a basic protection to avoid the exploit in the paid working hour area.

In conclusion, I have recognized the launching of MW in Hong Kong. However, under the current MW policy, there are some drawbacks which the employment of vulnerable groups is not well protected and the income inequity cannot be solved. Thus, I will make some suggestions in next part.

Part 6: Suggestions for the Current Minimum Wage Policy in Hong Kong

MW policy is one of the main economic and social policy in Hong Kong. In order to improve the living standard of the low-paid worker, MW policy should not be independent to other social issue and need to be coordinate in the whole labour protection and social welfare framework.

For the aforesaid part, information cost is invaluable to the labour. Although the MW Ordinance has defined the hours worked, the argument for the paid meal break and rest days is continuously. It is a good chance for the government to regulate the fundament terms and condition in the employment contract and make it easier for the employee to compare.

MW level is decided by the negotiation between the employer’s and employee’s representative in the Minimum Wage Commission. Actually, there is no calculated mechanism for the appropriate level of MW. We find that other social welfare policy is not well coordinate with the pay rising effect after the launching of MW. For example, the minimum employee MPF contribution threshold, the requirement for application of public housing and Comprehensive Social Security Assistance (CSSA) Scheme, the ceiling for the severance payment and employee compensation, all of these do not have the definite relationship in response to alter of the MW level for each time. As the housing and social benefit is vital to the vulnerable groups, it make them not easy to adapt to the MW policy and still do not dare to re-participate to the labour market.

According to the survey conducted by Social Work Department of Chinese University of Hong Kong in Year 2012, it has focused on the social being for the vulnerable groups. It discovered the MW launching has the most positive impact for the homemaker, and then the CSSA Scheme recipient, and the last is handicapped person. Homemaker is capable for working but abandon the labour market because they need to take care the child or dependent. They satisfied with the MW level which the employment can bring a dignity to them, and the society has recognized