It may have taken seventy-eight years, but the debate over whether or not Hong Kong should have a minimum wage has finally been settled.
The result is a sensible outcome. At the expected level (see below), the new minimum wage will not compromise the city’s competitiveness or place an unreasonable burden on employers. Yet it will help address Hong Kong’s persistent problems associated with income inequality and the growing number of ‘working poor’ families.
But it is disappointing that domestic workers have been excluded from the legislation.
In July this year, the Hong Kong government passed legislation guaranteeing minimum wages for the vast majority of employees within the city.
(According to The Economist, the idea of minimum wages in Hong Kong has been debated since 1932.)
Under the legislation, members of a task group chosen by the city’s chief executive will propose a minimum wage level, which the legislature will then accept or reject. The new wages, which will come into force next year, are to be reviewed every two years (AFP).
Whilst the precise rate for next year is yet to be confirmed, a level of close to HKD28 per hour (USD3.61) is widely anticipated (The Epoch Times).
The new law does not, however, cover domestic workers employed as live in help for Hong Kong families. These workers, many of whom are Filipino or Indonesian immigrants, are guaranteed a minimum monthly HKD3,580 as well as accommodation under existing law (Sydney Morning Herald).
A sensible decision ..
At the expected rate referred to above, those on the minimum wage will earn about HKD1,120 for a forty hour work week. This equates to a monthly income of HKD4,853.
To put this in perspective, the Hong Kong Council of Social Services puts the monthly income required for a single adult to remain above the poverty line at HKD3,300 (Epoch Times). And that’s just for a single: families obviously cost more. A family of say, four, could probably scrape by on HKD4853 per month – but only just.
Given this, a minimum wage at the expected level is hardly excessive. Nor is it overly burdensome on employers. In a rich world economy, wages that only just cover the cost of living are not too much to ask.
And it’s hardly as though the new law will compromise the city’s competitiveness: compared with elsewhere in the rich world (American dollar equivalent hourly minimum rates stand at $9.26 in Britain, $14.06 in Australia and a whopping $56.44 in Japan), Hong Kong workers on a minimum wage of USD3.61 per hour will still be dirt cheap.
Nor will it cause much business to go elsewhere. The main types of workers who are expected to benefit (restaurant workers, security guards and cleaners) are not employed in sectors where operations can be relocated easily.
But it is necessary. Hong Kong ranks last in income equality out of thirty-eight countries and territories, according to the United Nations Development Programs 2009 Human Development Report (Sydney Morning Herald). Worse still, despite an unemployment rate of just 4.2%, Hong Kong Council of Social Services estimates that 17.9% of the city’s population are poor (The Epoch Times). This means that a significant portion of Hong Kong’s residents live below the poverty line despite being employed.
That shouldn’t happen. Surely in any rich world city, those who work full time should have the right to expect to make enough money to provide basic necessities for their family.
.. but pity about the domestic workers
Nevertheless, the exemption of domestic workers from the new law is a great pity.
[As mentioned above, these workers are already granted a minimum wage under existing law (HKD3,580 per month plus accommodation).]
Granted, families who employ the services of these workers may not be enterprises or businesses. But they are still employers nonetheless. Those who work for them are as much employees as workers employed in any other sector of the economy. There is no reason why these workers should be entitled to the same minimum wage as everyone else.
Hong Kong’s new minimum wage law is sensible and should be welcomed. Pity it doesn’t apply to everyone.