The current minimum wage in Hong Kong is HK$37.50 ($4.78) an hour, which equals $6,500 per month based on a 40-hour workweek. This is far too low for a rich society like Hong Kong, and we therefore propose that the Minimum Wage Commission recommend an increase in the minimum wage to HK$45 per hour in 2023 and to HK$75 per hour by 2027.
The Minimum Wage Commission made its last recommendations in 2020. The purpose of its 164-page report was to make recommendations to the government on the level of the minimum wage for the following year. The report recommended no change in the HK$37.50 level, where it has been since 2019 and remains to this day.
The 2020 report makes interesting reading. The report lists multiple arguments from the business side such as “an increase in the minimum wage would jeopardize the business environment and the employment situation”. The commission was influenced heavily by the potential impact of a minimum-wage increase on the low-paying sectors (LPSs) such as retail, food-and-beverage, estate management, elderly homes, local courier services, etc.
The report does mention that, according to a trade union, the minimum wage was insufficient for lower-paid employees to meet their basic living expenses, but did not consider this reason enough to increase it. The key question is why that was so. Why does the Minimum Wage Commission set a minimum wage knowing full well that it is well below a basic living wage?
It is interesting to compare our minimum wage to other cities. Our minimum wage is already the highest in the People’s Republic of China by some margin. Some will argue that this makes it adequate. However, our upper-quartile employees do not compare themselves to the Chinese mainland when it comes to compensation. They expect and receive compensation competitive with the highest international levels. Why should our lowest quartile be treated so differently?
We have therefore compared the Hong Kong minimum wage with the minimum wage in three other cities. We chose New York, London and Sydney for this purpose since they are, like Hong Kong, rich cities with a high cost of living.
In London, the minimum wage is 8.72 pounds ($10.93) per hour, which equals HK$85.8 per hour. In Sydney, the minimum wage is A$20.33 ($14.46) per hour, which equals HK$115.3 per hour. In New York City, the minimum wage is $15 per hour, which equals HK$117.7 per hour.
Numbeo is a service that compares the cost of living in different cities. Its data shows that Hong Kong has the highest cost of living of these four cities. New York has a similar cost of living to Hong Kong. Sydney and London have a significantly lower cost of living.
How can we justify such a dramatic difference between the minimum wage in Hong Kong and the other three cities? The simple answer is that we cannot.
The comparison with New York City (NYC) is interesting. Hong Kong and NYC have a similar cost of living, both driven by very high housing costs. We are not admirers of the US political system, but it is interesting that in that city, the employees of low-paying sectors are guaranteed an income that is triple the level of similar employees in Hong Kong. Despite these far-higher pay levels, New York’s restaurants, stores, courier services, etc, continue to operate profitably and employ many people. This is starkly at odds with the input from Hong Kong’s LPS employers, who predict disaster from even a modest increase in the minimum wage.
If the minimum wage is significantly increased, it is true that many LPS employers will need to increase their prices, resulting in increased expenditures for the users of these services. In most cases, that will not damage the LPS employers significantly since their competitors are all in the same boat.
However, one particular sector needs attention. COVID-19 has demonstrated that our elderly homes need to be improved substantially. It’s a serious concern that these homes rely on very low-paid workers. Surely the quality and compensation of these employees need to be upgraded in recognition of the importance and hardship of their profession. In this case the only solution, as the minimum wage is increased, is to significantly increase government subsidies to elderly homes. This would come with increased oversight of the quality of these homes.
Hong Kong’s very low minimum wage is one of the most potent indicators of the extreme inequality in our society. At one end of the spectrum, we pay our most vulnerable citizens a wage that is insufficient to purchase even the basic necessities of life. At the other end of the spectrum, we have a tax system that results in our richest citizens paying almost no tax. Also, these richest citizens get full advantage of the low minimum wage because it keeps down the cost of many services they purchase.
The minimum wage is not the only contributor to the ever-increasing wealth inequality in Hong Kong but it is a good place to start work on trying to improve things. New York is a richer city than Hong Kong even though the cost of living is similar. We are not therefore arguing that the minimum wage should be tripled. However, it’s perfectly feasible to double the minimum wage to HK$75 per hour. This would still be low by international standards, but it would represent a major move in the right direction.
Our recommendation is therefore that the minimum wage should be increased to HK$75 over the next five years — HK$45 in 2023, HK$52.50 in 2024, HK$60 in 2025, HK$67.50 in 2026, and HK$75 in 2027.
If the government deems that this would be too high a burden on certain LPS employers, they could implement a program to assist these companies with cash grants on the basis that they can prove that the increase in the minimum wage has adversely reduced their profits.
The author is an Executive Committee member of the Business and Professionals Federation of Hong Kong.
The views do not necessarily reflect those of China Daily.