Minimum_Wage_Law_–_a_Blessing_or_a_Curse_

The controversial proposal of minimum wage law has been widely discussed within the local community. Minimum wage refers to the least amount of salary paid to workers of a country, either on an hourly, daily or monthly basis. It can be set at a uniform level applied to all industries or a tailor-made level for a particular sector. This is to protect employees from being exploited in the prevailing national economic and social conditions (“Minimum wage”, 2006). In the world there are about 90% of countries having statutory minimum wage (“Minimum wage”, 2006). Such prevalence does somehow acknowledge the benefit brought about. Though, minimum wage law should in no way be adopted for its far-reaching adverse impacts to the economy of Hong Kong. The very first potential drawback is the likelihood of a surge in unemployment rate as those with a lower productivity will be driven out of the market. The situation in America is a perfect proof, with the number of people employed within the minimum wage level in 2007 dropped by 4% compared with the previous year (U.S. Department Of Labor, 2007). In Hong Kong, many low-skilled workers perform labour intensive works such as dish cleaning and guarding which do not require professional knowledge. The only criterion which makes those workers capable of the job is acceptance to low wages. Raising the wage level legitimately may increase income of some workers, but not all of them. Many of them may end up losing their jobs as employers would be reluctant to hire as many labour as at the market level. Not only would employees suffer, but also employers’ business. Small businesses will gradually be driven out of the market as they cannot cover the surge in labor cost which prompts them leave the market. Again in the U.S., the marketplace ecosystem in the U.S. is altered. Many small businesses could not sustain as a result of the increase in cost (Ruwart, 1991). A piece of empirical statistic from the US Fiscal Policy Institute also shows that a 10 percent increase in the minimum wage is associated with a 0.9 to 1.1 percent decline in retail employment and a 0.8 to 1.2 percent reduction in small business employment between 1979 and 2004 (Sabia, 2006). While in Hong Kong, the small and medium sized enterprises account for over 98% of the total business units and offer job opportunities to over 1.2 million people, which are about 50% of the total employment (HKSAR Trade And Industry Department, 2008). Without them it is likely that the local economy would be dampened. Apart from the concerns mentioned, inflation is another issue that matters for both employers and employees. Inflation is likely to occur as prices of goods and services are raised by the business sectors to compensate the additional labor costs incurred. The minimum wage policy contributed to the famous “Wal-Mart effect” in the U.S., causing a rise in food prices (Carden, 2006). While Hong Kong, if not the whole world, is severely affected by the persistent rise of the general price level, burdens of citizens will only be further increased, particularly in the present stage where economic downturn is drawing nearer. Perhaps Britain’s experience of introducing a minimum wage during an economic downturn causing a 5 percent less of profit for retail business provides a clue (Chen & Tsoi, 2008). Hong Kong is a place noted for “positive noninterventionism” and free market operation. The minimum wage policy, which alters the market mechanism and brings along adverse effects in various fields, is definitely not suitable for Hong Kong. While critics argue that 90% of the countries are adopting the minimum wage policy (“Minimum wage”, 2006), it is high time to stop and consider why the remaining 10% reject it. Suiting the majority in the world does not necessarily imply that it is feasible for Hong Kong. While the potential benefits brought about by the minimum wage law could hardly be ignored, the detrimental effects indeed far outweigh the good that brought about. Minimum wage law is rather a curse than a blessing. It is for the sake of Hong Kong’s sustainable social and economic development that such a law should not be imposed.