Minimum Wage is Final in Hong Kong

Hong Kong lawmakers have given final approval for the city’s first minimum wage, but critics say it is too low for many low-income people struggling to make ends meet in the financial hub, reported AFP news. Moreover, the inflation rate in Hong Kong is forecasted to be around 4.4% in 2011.

The approved pay of HK$28 (approximately US$3.6) per hour is believed to be well below many other international cities. Moreover, the inflation in Hong Kong is forecasted to be around 4.4% this year.

The law is scheduled to take effect on May 1. At the moment, it still needed an official stamp of approval from the city’s law-making body. The controversial issue has divided business and labour groups for more than a decade, with business groups warning that a wage floor would lead to widespread job losses among poor workers. The southern Chinese financial hub is famous for its stunningly wealthy tycoons whose business empires span all sectors of Hong Kong’s economy and the world. But the densely populated city of seven million is also home to hundreds of thousands of workers who live on hourly wages sometimes as low as $2 an hour.

Concern about Hong Kong’s growing income gap — which the UN Development Programme in 2009 pegged as the world’s biggest among wealthy economies — prompted the government to introduce a wage floor.

Besides criticism that the wage was too low, other legislators had reservations about a minimum wage in a city regularly credited with having the world’s freest economy.

‘‘A minimum wage interferes with a free market principle... Some enterprises will suffer — going from profit to loss — as a result of the introduction of this,’’ said lawmaker Miriam Lau.

And another lawmaker Paul Tse said: ‘‘I have great reservations about setting a minimum wage. If the economy is good, wages will rise naturally. ‘‘This is forced, unnatural and artificial. ‘‘The city’s success has been built on freedom of trade.  We seem to have forgotten about this important principle,’’ he added.

Our View:

In general 2011 has seen increasing wages in China and to lesser extents in most of the countries in SE Asia.  Inflation continues to be a virulent problem in China and Vietnam and to a lesser extent in many other countries in the region.  In looking at areas for investment we believe investors need not only to look at the minimum wage rates plus also the expected wage rates for the actual types of employees that the new factory or company will be hiring.  Generally, we find minimum wages to not be as good a measure of a country's investment potential as is a more detailed analysis of the particular jobs your company will actually need to staff your new office or factory.


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