21 April 2019
Workers press for a yearly revision of the minimum wage during a Labor Day rally in Hong Kong this year. Photo: Bloomberg
Workers press for a yearly revision of the minimum wage during a Labor Day rally in Hong Kong this year. Photo: Bloomberg

Will workers really benefit from a minimum wage hike?

More than 150,000 workers in Hong Kong are expected to receive an 8.3 percent increase in their minimum wages next year.

According to the Secretary for Labor and Welfare Matthew Cheung Kin-chung, the Provisional Minimum Wage Commission has proposed to raise the statutory minimum pay to HK$32.5 (US$4.2) per hour, up from HK$30 at present.

The new minimum wage policy is awaiting approval from Chief Executive Leung Chun-ying and Executive Council, and is expected to take effect in May next year.

Cheung told media last week that more than 200,000 people have re-entered the labor market over the last three years as a result of the minimum wage policy.

Middle-aged women have rejoined the labor force and the economic situation of the working poor (workers whose incomes fall below a given poverty line) has also improved.

Still, the minimum wage policy has been a subject of debate.

There are worries that raising the minimum wage will discourage companies to hire more people, and bosses will try to keep down the labor cost by increasing the workload of its current employees and cutting back benefits.

On the other hand, some quarters point to the positive impact of the policy on the living standards of the poor.

Jeffrey Lam Kin-fung, a representative of the employers and vice chairman of the Business and Professionals Alliance for Hong Kong, is against the bill, warning that small and mid-sized firms would suffer if the minimum wage rose further.

Lam also said the Occupy campaign is hurting consumer sentiment and affecting the retail and catering businesses. In view of the political uncertainties, he said, now is not the right time for workers to ask for a large pay rise.

Leung Chau-ting, a worker representative at the Labor Advisory Board, supports the pay hike, noting that the proposed HK$32.5 minimum wage won’t even be enough.

He told the media that at the proposed level, the minimum wage worker’s monthly income would just be around HK$6,700.

He said HK$35 is a more appropriate level, which amounts to HK$7,200 a month. These few hundred dollars of additional income would be “extremely important for the poor”, Leung added.

Experience of foreign countries shows that a minimum wage policy would raise the living standards of some workers, but it may also hurt others.

For those who are working full-time, a rise in the minimum wage could definitely raise their total income. However, the policy has also prompted employers to cut the number of full-time jobs and hire more temporary workers in order to bring down costs.

In other words, the “disemployment” effect could lower the number of full-time workers. So while full-time workers benefit from the hike, others may be crowded out and forced to become part-time workers and earn even less.

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EJ Insight writer

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