Minimum Wage Law in Hk

Recently, there has been a debate on the subject of a statutory minimum wage. Different parties have different point of views about it. The unionists believe setting a higher amount can help to reduce the continuously increased wealth gap in Hong Kong, but the businessmen worry that it will increase the operating costs of their businesses. I will discuss the pros and cons of a statutory minimum wage in the following paragraphs.
For the advantages, firstly, a minimum wage can force employers to offer reasonable salaries to their employees and give them guidelines on how rational salaries should be set. This can help to protect employees from being exploited. Secondly, the problem of income inequality can be addressed by increasing low-income groups’ salaries so that it can help to promote social justice and greatly improve social harmony and stability. Moreover, the policy can encourage the unemployed citizens to rejoin the work force and thus reduce the burden on the government.
Although there are many advantages of setting a minimum wage, there are some drawbacks too. The unemployment rate may rise after implementing the minimum wage law. Due to the increase of operating costs or production costs, some employers may lay off their staff. And it may discourage employees to improve their working attitude and skills as their wages are protected under the statutory minimum wage system, working incentive may thus become low.
When we talk about the level of a statutory minimum wage, we have a lot to concerned about, for example, the economic situation, GDP etc. I think the living standard is very high in Hong Kong at present, so the level of a statutory minimum wage should be high enough to meet a family’s daily expenses. At the same time, we should also consider the financial burden on the employers. If not, laying off staff or even closing down the businesses may be the result. The government, therefore, should consider all these issues, think twice and make a wise decision.
From - http://www.tkp.edu.hk/newsletter/archives/2610

【明報專訊】News Point

Secretary for Labour and Welfare Matthew Cheung Kin-chung (勞工及福利局長張建宗) explained how the members of the Provisional Minimum Wage Commission (臨時最低工資委員會) came to be agreed on the initial statutory minimum wage rate. According to him, they considered four main criteria:

1. it should not be too low;
2. it would not cause low-paid jobs to disappear in large numbers;
3. it would not inhibit economic development;
4. it would not significantly damage Hong Kong's competitive advantages.

To protect labour rights, Hong Kong may need not only minimum wage legislation but also standard working hours legislation (標準工時立法). The Legislative Council has adopted a motion to call for the enactment of such a law. To encourage underprivileged citizens and low-income employees living in remote districts to find work or stay in employment, the government launched in 2007 a pilot transport support scheme (交通費支援計劃). Under the scheme, eligible citizens have been provided with time-limited transport allowances. The Labour Department (勞工處) is responsible for protecting other labour rights enshrined in various pieces of labour legislation (such as the Employment Ordinance (《僱傭條例》)).

Minimum wage a issue for people to decide: Hong Kong chief

Hong Kong Special Administrative Region (HKSAR) Chief Executive Donald Tsang on Friday continued to defend his decision not to legislate on the controversial minimum- wage issue in his latest Policy Address.

Speaking on RTHK Friday, two days after presenting his Policy Address, Tsang said he did not want to see the issue dealt with in court as some legislators have said they would press ahead with plans to seek a judicial review after the government decided not to legislate for a minimum wage at the moment.

"It is a matter for the people to decide, not the courts," Tsang told a call-in radio show Friday morning. "I think we should try to solve this matter amicably, in the community."

"Fundamentally it is not even the legislature and the government. It is a matter for the people," he added, in response to what he called "a very strong union and labor voice" on minimum wage.

In Hong Kong, the arguments on minimum wage between the labor and the employers have lasted for many years but without consensus. The labor has always pressed ahead to legislate on minimum wage among the security and cleaners sectors in particular as soon as possible. But employers said in order to compete in a globalized economy, it is a remaining advantage for Hong Kong not to force employers to accept the deal via legislation.

"If this matter were pushed through the Legislative Council at the moment," Tsang said, "it would be a very, very bloody fight... there would be serious arguments over this, the community would be torn apart."

In his policy address, Tsang proposed to launch a Wage Protection Movement for workers in the security and cleaning sectors. He promised to legislate on the minimum-wages issues two years later if the movement fails and employers are not paying market rates.

‘Hong Kong lawmakers debate minimum wage
CNN
14 Jul 10

Hong Kong lawmakers resumed debate Wednesday on a bill that may result in the region's first statutory minimum wage.

The Minimum Wage Bill is a controversial piece of legislation that lawmakers hope will protect the most vulnerable workers in Hong Kong, one of the few places in the world without any sort of minimum wage law.

The debate is set to take two to three days.

A recent government survey showed that around half a million workers in Hong Kong earn less than $4 an hour. These include low-skilled workers from the catering, retail, and cleaning industries.

According to Man Hon Poon, a policy researcher at the Hong Kong Confederation of Trade Union, the lack of legal protection for workers has led to serious exploitation.

"Workers in restaurants have to work for 12 hours or even 14 hours a day to earn a living," he said. "They cannot even go to the cinema."

Legislator Tommy Cheung, however, claims that the government should not interfere with the free market economy, which he says has served Hong Kong well in the past. A minimum wage could deter investors and lead to increased unemployment, said Cheung, who represents the catering industry.

"There is one fear within the industry, that they would have to close down," he said. "When you see a closure, everyone loses out."

The government first proposed the current bill in 2008 following a failed attempt at a voluntary minimum wage. Labor unions, however, have been lobbying for a minimum wage since 1998, following the Asian financial crisis.

The rate of the minimum wage has also been under great debate. Trade unions have been demanding a minimum wage of $4 while employer groups have been asking for $3 per hour.

If the bill passes this week, the rate of the minimum wage will be set by the Minimum Wage Commission, a consortium of trade union members, employers and scholars, in the coming months.

Once the chief executive approves the rate, employers will have six months to implement the law.

The Hong Kong government estimates that the earliest the minimum wage law may take effect is May 2011.

http://edition.cnn.com/2010/WORLD/asiapcf/07/14/china.hong.kong.minimum.wage/index.html?hpt=T2&fbid=cFYYtTV0ap3

The Minimum Wage: An Unfair Advantage for Employers
October 1989 • Volume: 39 • Issue: 10 • Print This Post • 1 comment Professor Boudreaux teaches economics at George Mason University in Fairfax, Virginia.

Suppose you want to help the sellers of a specific product. One thing you might want to do is try to ensure that a buyers’ market for that good or service isn’t created.

A buyers’ market is an economic situation that favors buyers over sellers. For example, everyone hopes that the real-estate market in his hometown will be a sellers’ market when the time comes to sell his house. No one wants to have to sell a house when real estate is in a buyers’ market. Nevertheless, people who advocate mini- mum-wage legislation to improve the lot of unskilled workers in effect support government creation of a buyers’ market as a way to help sellers of unskilled labor.

Freely Moving Prices: The Great Equalizer

Economics and common sense teach us that, other things being equal, as the price of a product rises, more units will be offered for sale but fewer units will be demanded by consumers.

If a price is too low, there will be an excess demand for the good or service in question, and buyers will compete for the limited quantities available by offering higher prices to sellers. If a price is too high, there will be an excess supply, and sellers (who cannot sell all that they wish at the high price) will compete for customers by offering lower prices. So long as there are no government-imposed restrictions on prices, prices will tend to adjust in each market so that the quantities demanded will be equal to the quantities supplied.

It is important to realize that prices change only when there are bargaining inequalities between buyers and sellers. Prices rise only when the amount demanded by buyers is greater than the amount supplied by sellers; prices fall only when the amount demanded by buyers is less than the amount supplied by sellers. Put another way, prices rise only when there is a sellers’ market, and prices fall only when there is a buyers’ market. The rise or fall of prices, however, eliminates the inequality of supply and demand and, thus, eliminates the conditions that people describe as sellers’ markets and buyers’ markets. Freedom of price adjustments ensures equality of bargaining power among buyers and sellers. Freely moving prices are the great equalizer.

Employers compete for human labor services, like most things of value in a society based on private property in a market in which sellers and buyers engage in voluntary exchanges. Wage rates (in combination with other forms of compensation) are determined in the labor market. If this market isn’t hampered by government, wages will constantly adjust so employers and employees enjoy equal bargaining power.

Of course, unskilled workers aren’t as productive as workers with greater skills, and so wage rates for skilled labor tend to be higher than wages for unskilled labor. It is a myth, however, that highly skilled workers enjoy greater bargaining power with employers than do workers with fewer skills. If wage rates are free to adjust to their market-clearing levels, unskilled workers will enjoy as much bargaining power as the most highly skilled workers, because freely moving wage rates adjust so that the amount of each type of labor demanded will tend to equal the amount supplied. Employers can have no bar gaining advantage over even the most unskilled workers if wage rates are free to move to the levels at which the amount of labor services demanded is equal to the amount supplied by workers. Freely moving wage rates are the great equalizer of bargaining positions among employers and employees.

The Minimum Wage: The Great Unequalizer

Minimum-wage legislation prohibits wages from falling low enough to equate the number of people seeking jobs with the number of jobs being offered. As a result, the supply of unskilled labor permanently exceeds the demand for’ unskilled labor at the government-mandated minimum wage.

Minimum-wage legislation thus creates a buyers’ market for unskilled labor. And as in all buyers’ markets, buyers (employers) have an unequal bargaining advantage over sellers (unskilled workers).

Consider, for example, a grocer. Suppose he decides that a clean parking lot will attract more customers, and that this will increase his sales by $10 per day. Of course, the grocer will pay no more than $10 a day to have his parking lot cleaned. He then investigates how best to get this done.

Suppose there are two options available to him. One way is to hire a fairly skilled worker who can clean the parking lot in one hour, while the second way is to hire two unskilled workers who, working together, will get the job done in the same time. Other things being equal, the grocer will make his decision based upon the relative cost of skilled versus unskilled labor.

Let’s assume the skilled worker will charge $6 an hour, while each of the unskilled workers will charge $2.50 an hour. In a free labor market, the grocer will hire the two unskilled workers be-cause, in total, it costs him $5 per hour for the unskilled workers whereas it would cost $6 for the one skilled worker.

But what will the grocer do if a minimum wage of $4 per hour is imposed? To hire the two unskilled workers will now cost him a total of $8 an hour. The skilled worker now becomes the better bargain at $6 an hour. Minimum-wage legislation strips unskilled workers of their one bargaining chip: the willingness to work at a lower wage than that charged by workers with more skills. The result is unemployment of the unskilled workers.

Consider another effect of the minimum wage. Because there are more people who want jobs at the minimum wage rate than there are jobs to go around, employers have little incentive to treat unskilled workers with respect. If an employer mistreats an unskilled worker, the employer need not be concerned if the worker quits. After all, there are plenty of unemployed unskilled workers who can be hired to fill positions vacated by workers who quit.

In addition, the permanent buyers’ market created by the minimum wage encourages employers to discriminate in their hiring and firing decisions on the basis of sex, race, religion, and so on. Suppose an employer has two minimum-wage jobs available, but there are ten unskilled workers who apply for the jobs. Bemuse the workers are prohibited from competing with each other on the basis of wage rates, other factors must determine which of the workers will be hired. If the employer dislikes blacks, and if there are at least two non-black workers who have applied for employment, no black workers will be hired. With a surplus of unskilled workers, there is no economic incentive to stop this bigoted employer from indulging his prejudices.

Conclusion

Minimum-wage legislation creates an excess supply of unskilled labor and gives the buyers of unskilled labor an unfair bargaining advantage over the sellers of unskilled labor. It is a fantasy to believe that the welfare of unskilled workers can be improved by such legislation. Unskilled workers shouldn’t be restricted to a permanent buyers’ market.

Hong Kong Sets Minimum Wage At HK$28 Per Hour
The city's new minimum wage finally has been released. The HK$28/hour base is roughly the cost of two cartons of milk, a fast food meal or four premium beers.
Secretary for Labor and Welfare Matthew Cheung Kin-chung said the new wage, set to come into effect May 1 if it passes the legislature, represented an average wage increase of 16.9 percent affecting some 314,600 employees. The cost will be roughly HK$3.3 billion.
Tabled for discussion at the Legislative Council Wednesday, the new wage was a milestone in the protection of the rights of low-income workers and a hard-won achievement given the controversy amid the city's laissez faire system, Chief Executive Donald Tsang said.
To offset the impact on the labor market, the Labor Department will improve employment services for the young, middle-aged and those with disabilities, he added.
By the Minimum Wage Commission's estimates, the new minimum wage amounts to 48 percent of Hong Kong's median hourly wage during the second quarter of 2009.
More than half (61.4 percent) of the more than 314,000 workers expected to benefit from the new minimum wage are women. A quarter of those who will benefit are over the age of 65 and 18 percent work in a part-time capacity, Cheung said.
On a sector basis, 35.5 percent of workers are from security and cleaning companies while 19 percent work in restaurants and 16 percent in retail.
Cheung said the impact on employment will be relatively mild, "especially when viewed against the improving economic and labor market conditions".
Shying away from commenting on concerns that employers would start cutting back on employee benefits to offset increases in costs due to the new wage, Cheung urged employers to "communicate closely with their employees, particularly to have frank discussions [and to] work together".
Unionist lawmaker Lee Cheuk-yan said he was disappointed with the rate saying it will be based on figures two years old before its implementation, adding HK$28 an hour was not enough to provide for a family. He favored the HK$33 an hour rate supported by employee groups.
Commission chairwoman Teresa Cheng Yeuk-wah said the commission does not think a HK$33 hourly rate was sustainable. She noted, half the burden would eat into company profits while the number of companies falling into the red would go up by 60 percent. She added those companies employed 120,000 workers.

Catering lawmaker Tommy Cheung Yu-yan said the new wage would be difficult for smaller operators to bear, calling for government relief such as the waiver of licenses fees for one year and subsidies

(RTTNews) - Hong Kong will implement its first minimum wage rate, set at HK$28 per hour, from next year, the Secretary for Labor and Welfare Matthew Cheung Kin-chung said Wednesday.

The initial statutory minimum wage rate at 3.61 per hour in U.S dollar terms will come into force on May 1, 2011. The rate was higher than that demanded by business, and less than the HK$33 favored by trade unions.

Cheung said that the statutory minimum wage, which is totally new to Hong Kong, is intended to protect grassroots workers and ensure that the pay that they get is commensurate with the hours worked.

Regarding the wage rate, Chief Executive Donald Tsang said that it has been a subject of controversy and it is also a milestone in our protection of the rights of low-income workers.

The minimum wage ordinance notice 2010 will be published in the Gazette on November 12 and tabled at the Legislative Council on November 17.

About 314,600 or 11.3% of Hong Kong's employees will be effected by the change, with 61.4% being women staff, 25.3% employees aged 55 and above, and 18.8% part-time workers, the government's information service department said.

In July, Hong Kong's Legislative Council passed the Minimum Wage Bill without stipulating the actual wage and thereafter formed a committee to set the minimum rate.