Hong Kong Minimum Wage Decision to Influence Many Others

Hong Kong’s decision to implement minimum wage is expected to have a domino effect on many resurgent Asian economies as most of them are socialistically inclined democracies. Hong Kong floor wage, which will take effect from May 1 2011, has already prompted Macau to debate on minimum wage slab.

To start with, the Hong Kong government is aiming to usher in a base wage of HK$28 (US$3.60) lower than the HK$33, which labour activists have been demanding and far less than other major countries. The proposed rate is significantly lower than the wage floor in other developed economies in Asia-Pacific region such as Australia and Japan, where the minimum wage is about A$15 (US$15.1) and Y730 (US$8.9) respectively.

According to the UN, Hong Kong, which is ranked 2nd in the World Bank’s Ease of Doing Business Index, has one of Asia’s highest per-capita GDPs, it also has the biggest wealth disparity among the world’s most advanced economies. Although the new minimum wage is aimed to reduce that divide, the trade unions’ claim that anything less than HK$33 an hour would fail to cover basic living expenses.

Critics claim that Hong Kong will lose its competitiveness triggering unemployment as most SMEs which operate on tight profit margins will be forced to lay-off. But the positive outcome is projected as a quick boost to consumerism and rise in income to those who are in extremely lower wage category including toilet cleaners and security guards.

In economic parlance, hourly wage will create level playing field for workers across the world if most countries implemented floor wages. However, without stringent labour norms such as permanent residency or stipulated work permit criteria in place domestic workforce will be thrown out of the job market.

According to Macau Director of the Labour Affairs Bureau (DSAL), the Standing Committee for the Co-ordination of Social Affairs will start discussing the implementation of minimum wage this month. A senior industrial relations and social dialogue specialist of the International Labour Organisation Changhee Lee stated last month in Macau, on a floor wage related symposium, that it was inevitable to prevent anxiety among workers in regards to purchasing power. He also said in the last ten years, he was able to witness more and more countries in Asia adopting the minimum wage system.

According to Hong Kong’s labour department, the new wage would benefit almost 315,000 workers, boosting their pay by 16.9 percent on average. Experts claim, taking into account many floor-wage implemented countries, instead of creating joblessness, minimum wage increases competition and productivity among workers thus helping the economy to grow at even better pace, at least initially.

By Jose Roy