HKDF

Proposal for Hong Kong’s initial statutory minimum wage rate

Executive summary

  • All members of society have a stake in the rate of a minimum wage.

  • All stakeholders' concerns and demands need to be fairly considered.

  • The issue is how to balance the different demands and concerns and derive a reasonable minimum wage rate fair to all stakeholders.

  • Based on the available data and evidence, a fair compromise is at a level no less than $30 per hour.

  • Rationale:

    • The proposed rate is close to the demand of unionists as well as the living wage proposed by local research studies. Any rate less than $30/hour requires too much concession from labour and is unfair.

    • The proposed rate will only marginally affect the majority of economic sectors in Hong Kong and will not have serious repercussion for Hong Kong's competitiveness, general price levels or employment.

    • Apart from the majority that will hardly be affected, some other sectors will be able to make reasonable profits even after absorbing a minimum wage of $30/hour.

    • The proposed rate will substantially cut the profits of the security services and cleaning services sectors. Adjusting the minimum wage downwards just to keep these two sectors afloat, however, should not be an option. A better alternative is to use a high-enough minimum wage as a policy tool to encourage the two sectors to restructure their business operations so that they do not have to rely on low wages.

    • The ripple effects referred to by some quarters in society are overstated. Given the profit levels of the majority of firms, such effects, if any, will not cause much difficulty to firms.


The full proposal is available for download as a PDF file here.
The Excel worksheet on profit ratios vs. minimum wage referred in end-note 3 of page 7 of the proposal is available for download here.
(Note: The EC/BR ratio in first column of the Excel worksheet refers to reduction in profit ratios calculated by using the following formula: Change in profit ratio = ratio of employees' compensation (EC) to business receipts (BR) [or EC/BR] × change in employees' compensation due to a minimum wage.)

Reproduction of this paper is permitted with proper attribution to the Hong Kong Democratic Foundation