Hong Kong Trends - Minimum Wage and Unemployment

HK Economic Trends was published on 28 Feb, from the CSD. Page 3 looks at happy figures for unemployment in Hong Kong, said to be the lowest in Hong Kong's recent history.

Watch this space, however, for the minimum wage to have its effect on unemployment. For Oct to Dec 2010, unemployment in "Retail, accommodation and food services" was the highest, over a percentage point more than in other industries, and Hong Kong can expect that trend to continue.

Payrolls increased across the board, and with economists predicting at least 100,000 people out of work (and unfortunately, now perhaps more; the undefined law created the consequence of surprising businesses with greater payments than they imagined with the $28 rate/hour, translating to even higher unemployment forecasts), looks like the unemployment rate in this sector is set to further increase.

Hong Kong's Populist Turn: Milton Friedman Wouldn't Approve

The Wall Street Journal, July 20, 2010

The WSJ has published an editorial criticizing the establishment of the minimum wage law in Hong Kong, echoing the sentiments that Lion Rock has propounded for the past months. The article delineates the following:

• The competition policy proposal and the minimum wage law are part of a broader pattern that flies in the face of the Hong Kong free market traditions; this is evidence of the imminent shift toward a more bureaucratic state and politicized economy.
• Tsang's calculations in these matters are a result of "misguided populism," according to the WSJ; he seems to think that these laws are a way to assuage the dissent of a "small but noisy" group of people.
• The article warns that the government has thus far been fortunate enough to be able to fund the many subsidy programs it engages with - youth internships, for example - despite its relatively low tax rates for households and businesses. However, low taxes "aren't inevitable," according to the WSJ, and expansion of labor legislation could drastically change the situation as it stands.
• Milton Friedman is quoted as writing: "At the end of World War II, Hong Kong was a dirt-poor island with a per-capita income about one-quarter that of Britain's. By 1997, when sovereignty was transferred to China, its per-capita income was roughly equal to that of the departing colonial power, even though Britain had experienced sizable growth over the same period. That was a striking demonstration of the productivity of freedom, of what people can do when they are left free to pursue their own interests."

Hong Kong's economy: End of an experiment

Tom Easton (The Economist, 16 July 2010)
The introduction of a minimum wage marks the further erosion of Hong Kong’s free-market ways.

...The struggle over the minimum wage reflects a gradual shift, not a sudden one. Legislation giving the colony’s governor the right (but not the obligation) to impose a minimum wage was enacted in 1932, augmented in 1940 and considered again in 1999. A voluntary plan for a minimum wage was proposed in 2006. Only now is a pay floor becoming law. Lee Cheuk-yan, a union leader and member of the legislature, says this has occurred despite the private opposition of Donald Tsang, Hong Kong’s chief executive, and many business groups. But with the notable exception of the Lion Rock Institute, a free-market think-tank, public comment has been minimal. The few groups to raise objections, such as caterers and restaurateurs, have been criticised in the press and have retreated...

Read the full article at: http://www.economist.com/node/16591088?story_id=16591088

新聞稿: 獅子山學會專責小組監察最低工資的損害 LRI Task-force monitors damage of Minimum Wage

致： 各大傳媒機構編輯先生小姐

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新聞稿

由：獅子山學會
日期：14/7/2010, 星 期三 (共1頁)

獅子山學會專責小組監察最低工資的損害

獅子山學會重申，堅決反對任何形式的工資立法，因為永遠都只有我們的城市中最弱勢的社群會受到傷害。為此獅子山學會決定投入資源，成立一個常設專責小組， 監察最低工資對香港所造成的損害。

專 責小組將會就政府在最低工資實施後投入金錢和時間作衡工量值研究；以及處理政府不顧企業的現實情況，用盡一切手段執行最低工資的荒謬 個案。此外，專責小組將深入探討因最低工資帶來的失業、凍薪以及隨就業機會損失帶來的福利開支增加。

獅子山學會行政總監王弼：「最令人擔憂的是最低工資做成的局部高失業，尤其是對年青人的影 響。 新移民沒有工作，我們又如何可以幫他們融入社會？」

獅子山學會歡迎邀請市民分享在最低工資下 有關個人經驗的故事和評論。獅子山學會也將收集因最低工資帶來的局部失業數據，以及跟進其他對市場帶來的轉變，例如一次性使用的餐具 使用、 商場減少開放私人廁所、客戶需要自己處理表格等。低工資將會改變香港的生活方式，企業也或許將被迫裁減員削減成本。

本來以為會因這項法例得益的，最終卻受到損害，這就是有關最低工資立法最大的損失。 「最低工資將來在香港會生產文化的轉變，但失業始終是最大的衝擊。」獅子山學會研究助理梁妍珂表示：「這是獅子山學會唯一關心的問 題。」


THE LION ROCK INSTITUTE PRESS RELEASE

FOR IMMEDIATE RELEASE
Wednesday, 14 July 2010


Lion Rock’s task-force monitors damage of Minimum Wage

HONG KONG – The Lion Rock Institute firmly reiterates its opposition to the minimum wage legislation, as it will harm our city’s most vulnerable. It is only becoming more obvious that forcing a minimum wage will be disastrous, and in response, Lion Rock has a task-force in place to monitor the damages of the law.

In the aftermath of the law’s implementation, the Government will throw away money and time, as well as businesses’, in efforts to implement the minimum wage. Subsequently there will be unemployment and frozen wages. Questions such as, how many vulnerable workers will be forced out of a job and rely on CSSA, will be tracked by the task-force.

Peter Wong, Lion Rock’s Executive Director, fears the impact of job losses, “How will young people get on the career ladder? How many old people will lose their job and also their social life? How will new immigrants integrate into society without being able to enter the workforce?”

Moving forward, The Lion Rock Institute welcomes the public to share their stories and critiques involving personal experiences under minimum wage. LRI will also be collecting data on unemployment, track the use of disposable utensils and other indicators which signal job losses in low-income industries. Lion Rock suspects that the law will change Hong Kong’s way of life, as many businesses will have to cut costs through eliminating staff, or reduce regulatory risk by outsourcing, taking the form of less public convenience, such as less availability of free, private toilets, increased use of disposable utensils and bowls as a result of less staff, and the need for customers to bus their own tables.

Those who should be benefited by this legislation will ultimately be harmed; it is the biggest loss associated with the Minimum Wage legislation. “Yes, there will be cultural changes in Hong Kong because of minimum wage, but unemployment will be the biggest issue” said Nicole Alpert, LRI Research Associate, “and at the end of the day, that’s the biggest issue Lion Rock cares about”.

Notes:
The Lion Rock Institute, founded in 2004, is Hong Kong’s leading free market think tank. Lion Rock subscribes to the view that open and free markets, strongly defended property rights, small government, low taxes, and minimal restrictions on the business environment create the best atmosphere for freedom and prosperity. For more information, visit www.lionrockinstitute.org