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Minimum wage helps HK's poorest workers

Publication Date : 10-10-2012


Seventeen months after the world's freest economy introduced a minimum wage, the verdict is that this has given Hong Kong's poorest workers a leg up with little adverse impact on its companies or competitiveness.

In fact, a government-appointed commission of academics, labour and employer representatives agrees that the minimum wage should be raised - from HK$28 (US$3.61) an hour now to HK$30.

It will submit the recommendation to the government at the end of this month, and the Legislative Council will debate it. If it is passed, the new rate is expected to come into force next May.

Professor Stephen Cheung, dean of the business school at Hong Kong Baptist University and a member of the commission, told The Straits Times: "We consulted the various stakeholders, looked at all the statistics, weighed the indicators - employment, inflation, social harmony and so on - and decided the impact has been quite positive overall."

The policy, he said, had "benefited substantially" some 140,000 workers mainly in cleaning, catering or security services who used to get about HK$4,000 a month. They now get a minimum of HK$5,400, based on an eight-hour, six-day work week.

Meanwhile, fears that the policy would hurt companies and lead to job losses appear, by and large, unfounded.

There were some anecdotes recounted about smaller companies forced to shut down, but these were minimal, said Prof Cheung. In fact, the net number of businesses registered has risen by 100,000.

David Ting, president of the Hong Kong General Chamber of Small and Medium Business, said this was because HK$28 was "rather low" and many firms were already paying that rate. "Most employers think it's reasonable."

Thanks to a healthy economy, unemployment stands at 3.2 per cent - one of the lowest levels in the past 13 years, and down from 3.5 per cent in the first quarter of last year before the policy was introduced.

But what of older workers?

Another concern was that this vulnerable group - who might have been hired previously due to their willingness to accept lower wages - would be displaced. This did not happen.

In fact, the jobless rate of those aged 60 and above dipped from 2 per cent to 1.8 per cent in the second quarter of this year, even as the higher pay enticed more people to enter the labour force.

In tandem, 6,500 people exited the government's social aid scheme, said legislator Lee Cheuk Yan, who is also general secretary of the Hong Kong Confederation of Trade Unions.

A more uncertain risk is inflation, with concerns that higher wages are driving up prices. The rate last year was 5.3 per cent, compared with 1.7 per cent in 2010, although this has moderated this year with forecasts of 3 per cent to 4 per cent.

Companies are worried about rising costs, said Ting. Official statistics show wages account for 35 per cent of operating expenses on average, rising up to 56 per cent for labour-intensive sectors such as cleaning and security and also Hong Kong's famous tea houses, or cha chaan tengs.

Prof Cheung and Lee acknowledged this but argued that spiralling rents and imported food costs hit firms harder.

"Why should workers accept low pay, while property developers get away with rising rents?" Lee asked. "The minimum wage that workers get is peanuts by comparison."

That Hong Kong does not depend on foreign workers for cheap labour also takes a sensitive element - whether they should be covered by minimum wage protection - out of the equation. But the picture is not all rosy. The policy has led to some unintended fallouts.

Dishwashers and cleaners are leaving their more physically demanding jobs to become security guards since the pay is the same. Before the policy kicked in, guards were paid HK$25 an hour.

Another ramification is that employers who used to pay more now start at the minimum wage level. Security guard Luk Wan, 56, said her monthly salary of HK$7,300 had fallen to HK$6,944.

Other companies find other ways of cutting costs.

Ng Wai Tung, of advocacy group Society for Community Organisation, said some cleaning companies make their staff work from 7am to 7pm with two two-hour breaks in between. They save money as they no longer need to hire two shifts of workers and because the cleaners are not paid when they take their breaks.

Ting sees this as symptomatic of a new and calculative employer-employee relationship. "In the past, companies may ask employees to stay back a while to finish some work, and reward them with bonuses in a good year. Now you're counting every minute; the interpersonal relationship doesn't exist any more."

On whether Hong Kong can help firms manage costs with a system like Singapore's Workfare, touted as the Republic's version of minimum wage, Prof Cheung said Hong Kongers may perceive it as "collusion", with government subsidising businesses.

Going ahead, the new HK$30 rate is a compromise between labour and employer groups which wanted the level to stay at HK$28. But Hong Kong's labour groups will not be resting. Next on their agenda: annual instead of biennial reviews of the rate, as well as standard working hours.


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