On Minimum Wage

When Ms. Weng, a receptionist who the Minimum Wage is sure to impact, was asked about the legislation, she didn’t seem to know what it was. Ms. Weng moved to Hong Kong from Shun De (順德) China when she was ten. At 25 years old, she works as a receptionist for a commercial building on the Island. She works 12 hours a day, from 7:30am to 7:30pm, and 6 days a week; public holidays are not in her dictionary. She gets paid HK$7,000 a month, which calculates to HK$24 per hour, less HK$2.91 than Donald Tsang’s suggested wage level. Ms.Weng lives with her sister, brother-in-law and their 5-month-old baby in a one-room apartment with a rent of HK$4,700 a month. Is she happy? She shrugged and said that life was uncomfortable. Will the legislation make her life better or worse? Consider a unskilled worker – a convenience store staff or a cleaner. He or she, like Ms. Weng, works 40 or more hours a week to support a relatively basic way of life – one which is seriously contingent on a steady daily or weekly flow of income.

The repercussions of unemployment are immense for this individual – with a low level of education and little to no savings, his or her options are limited, while the need to support a family and pay rent places a further economic toll. In a vain effort to view an easy solution to inequality through rose-tinted glasses, the newly legislated Minimum Wage is sure to cause unemployment. Before the Law was legislated, reports emerged that businesses were already sacking long-time service workers. As economic theory dictates and experience has reinforced, implementing a minimum wage results in unemployment, cutbacks in working hours, and frozen wages. For individuals like Ms. Weng, the impact of the Minimum Wage will very much become a reality, and, indeed, she is only one of many unskilled lower-wage earners where a minimum wage will now decide whether she, or her peers, will be in or out of work. It is a wonder, then, that Hong Kong legislators are in support of a proposition that will be the veritable death knell of these laborers’ job prospects. Little do unionists, workers and youths, like those who protested on July 12 for a $33 minimum wage, understand how dire their own employment situation will be in the wake of the Law? Setting a wage level, albeit out of good intentions, does not necessarily raise the income of low-wage earners, or shorten the inequality gap. Minimum wage is known to do more harm than good, as it hurts the majority of people it is intended to help. In this case, Hong Kong, with a high unemployment rate for youths and a low unemployment rate overall, will see an increase in the aforementioned and in the latter, abetted by an equally undesirable wave of transformation in business culture. When a company is forced to raise its workers’ pay to conform with the Minimum Wage Law, it can either accept the higher costs and lower profits, increase the price of its products, transferring the financial burden to the consumers and increasing the cost of living, or cut back on the number of employees to compensate for the costs.

With employers looking to cut costs in every way imaginable, we may see self-busing become the norm in Hong Kong’s plentiful food courts, cleaners forced to work twice as hard to compensate for laid-off coworkers, and the extinction of motivational tools and other compensation. What choice, then, do we leave the newly unemployed with other than to turn to the Comprehensive Social Security Assistance (CSSA) Scheme in earnest? Minimum Wage, after all, will annihilate people’s livelihoods, and mass layoffs of the kind incited by Minimum Wage will no doubt cause a surge in applications for CSSA, and in turn, government expenditure. With the recent court ruling on right of abode for CSSA, the government must already contend with the costs of funding expanded coverage; how will it find a way to accommodate those people that minimum wage legislation inevitably leaves jobless?

This leads to the most troubling question – how can legislators put people out of work? It is with these issues in mind that The Lion Rock Institute has a task force in place to monitor the aftermath of minimum wage. Central to the task force’s responsibilities would be the collection of unemployment figures and anecdotal evidence from the disgruntled or jobless. By bringing together academics and policymakers, the Institute will facilitate dialogue regarding the crucial ramifications of implementing a minimum wage.

View Lion Rock’s articles on labour and welfare policies.

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