Minimum wage of Hong Kong

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Minimum wage of Hong Kong

  1. 1. Chan Wing Hong, Fred Kwan Ho Man, Mic Lam, Sunny Chan, Castrol
  2. 2.  Introduction  History  Stakeholders’ view  Suggestions  Conclusion  Q &A
  3. 3.  Lowest wages which paid by employers  New Zealand in 1894  Increases the standard of living of workers and reduces poverty
  4. 4.  More than 90% of all countries have some kind of minimum wage legislation (ILO, 2006)  Australia, Japan, U.S.A, Britain, France
  5. 5. The Minimum Wage in UK Aged 16-17 Aged 18-20 Aged 21 or over £3.57  £3.64 £4.83  £4.92 £5.80  £5.93
  6. 6.  Income inequalities
  7. 7.  In 1999 Hong Kong Confederation of Trade Unions (HKCTU)  Opposed by functional constituencies in 2004
  8. 8.  Government  Employer  Employee  Customer  Investor  Trade union
  9. 9. Different Actor’s Point of view
  10. 10. In the beginning •Rejected the motion by LEE Cheuk-yan’s motion for imposing minimum wage (MW) in 1999 Later on…… •Donald Tsang announced the launch of Wage Protection Movement (WPM) for cleansing workers and security guards in 2006 •Result of the Movement was found to be unsatisfactory Finally…… • Government agreed to proceed the legislation work on minimum wage in 2008
  11. 11.  Employers forced to pay higher share of their profit margin (Asia Monitor, 2010)  Profit decreased if don’t take any cost-saving action like:  reducing employee benefits  cutting number of workers  outsourcing operation to cheaper destination  automated labor process Therefore in fact employers don’t agree!!
  12. 12. However, survey by Liberal Party (2010) shown 56.2 % support MW, 11.7% more than last year. Reasons: Legislation of MW already a factual reality A study in Denmark and New Zealand (Colm McLaughlin,2009) shown that MW can:  Help retention of employees  Improve recruitment  Increase productivities  Encourage employers to invest in training Change the entire business sector toward a more “productive system” with high quality (Wilkinson, F. 1983 )
  13. 13. According to Fred Foldvary (2010)  Create unemployment  Job seekers > job vacancies  Especially for Unskilled worker (e.g. cleansing workers & security guards)  In order to offset the higher operation cost, employee’s health or pension benefits will also be cut (Royalty, 2000) MW will decrease the welfare of employee!!
  14. 14. However a survey by Oxfam Hong Kong in 2010 indicates >70% support MV  it reduce the poor-rich gap  enable workers to earn enough to support the family Sabia, Joseph J. and Burkhauser, Richard V (2010) also agree MW  increase quality of life  more than a wage floor  achieve a more equitable distribution of income (Oren Levin-Waldman, 2009)  Motivate employees to work harder  therefore increase the productivity
  15. 15. News: 1.Increase $1 in price 2.Elimination of wages in meal time
  16. 16. For a businessman, 2 ways to do for compensation: 1. Open Source e.g.: (a) Increase in price (b) Increase the width of market 2. Cut cost e.g.: (a) Procurement of inferior quality (b) Layoff employees (c) Modify the working hour Customer
  17. 17. Cut cost: 1) Is it possible to layoff employee? For an efficient company: Fully utilization of resources and labor Output with poor quality and quantity 2) How about eliminating wages for meal hour? Cut wages or benefits Employees regard these actions as theft of their property right in the job Get less motivation and reduce work effort Poor-quality service and product e.g.: greater absenteeism or calling in the union organizer (Perlman 1928; Polanyi 1944)
  18. 18. Open source: Would you mind paying $1 more? Leader member exchange THEORY  Employees receive more salary  Reciprocate Employers by showing more commitment to the company and motivation  Better quality and quantity of service or products  Better relationship between employees and customer  Better relationship between employees and employers (Polyanyi 1944; Kaufman 1999b)
  19. 19. - Many HK people were unsatisfied with the action of Café De Carol to eliminate the wage for meal - HKCTU and other 35 organizations proposed to call a strike to stop patronizing Café De Carol in HK and affiliated restaurants in US and Canada
  20. 20. -cancel the policy -emphasize three “NO” 1. No increase in price 2. No lay off 3. No eliminating wage for meal time However, the cost would increase 120millions  7000 of 16000 employees are under wage of $28  Relative increase of other employees with higher qualification
  21. 21. Alternatives to compensate the increased cost rather than cutting the benefits of the employees: 1. Consider to install auto-selling ticket machine 2. Hire less people when expanding the business 3. Central process of food materials and sauce Cut down wages is not the only remedy for high cost production!!!
  22. 22. The minimum wage would increase the operation cost  lower revenue and return  Less will to make investment Separation of ownership and control (Altman 2001) Investors (owners) : maximum profit Salaried managers: utility maximization The managers would tolerate organizational slack find equivalent cost savings in other areas Treat employees as costs or resources? Cost : would try to eliminate as much as possible Resources: would believe the increased investment in the employees would return increased profit
  23. 23. Other possibilities: 1. Filtration of inefficient companies The companies which only take advantage on low wages would be driven away  companies with higher efficiency would be remained (can generate revenue better) 2. Economic growth Paying at a living wage (minimum wage) produce profitable consumers  help to boost the economy
  24. 24.  All stakeholders are for the legislation  Only a small part of the stakeholder against  Argument of the opposite side is not valid  Minimum wage is beneficial in long run  No economy harm  A factual reality  Debating on the amount & detail
  25. 25.  Comprehensive discussion  Consultation document  Face to face discussion  Involvement of experts  Implementation of industry  Implementation of job category
  26. 26.  Asia Monitor. 2010. Minimum Wage Will Likely Lead To Job Losses. China & North East Asia, Vol. 17, No. 9, pp. 6-7  China CSR. 2008. Hong Kong Plans Minimum Wage Legislation  http://www.chinacsr.com/en/2008/10/16/3369-hong-kong-plans-minimum- wage-legislation/  Colm McLaughlin. 2009. The Productivity-Enhancing Impacts of the Minimum Wage: Lessons from Denmark and New Zealand. British Journal of Industrial Relations, Vol. 47, No. 2, pp. 327-348.  Eva Liu and Jackie Wu, 1999. Minimum Wage Systems, Legislative Council Secretariat, RP08/98-99.  Neumark, David, and William Wascher, 2001. “Minimum Wage and Training Revisited”. Journal of Labor Economics, Vol. 19, No. 3, pp. 563–95.  Oren Levin-Waldman. 2009. “The broad Reach of the Minimum Wage”. Challenge, Vol. 52, No. 5, pp. 100-116  Oxfam Hong Kong. 2010. Survey on Minimum Wage and Standard Working Hours.  http://www.oxfam.org.hk/txt/en/news_1092.aspx  Royalty, Anne. 2000. “Do Minimum Wage Increases Lower the Probability That Low- Skilled Workers Will Receive Fringe Benefits?” Working paper, Indiana  University–Purdue University Indianapolis, and Stanford University  Sabia, Joseph J. and Burkhauser, Richard V., 2010. Minimum Wages and Poverty: Will a $9.50 Federal Minium Wage Really Help the Working Poor, Southern Economic Journal, Vol. 76, Issue 3, p592-623  Liberal Party. 2010. SME Survey on Minimum Wage.  http://www.liberal.org.hk/contents/index.php  Wilkinson, F. 1983. Productive systems. Cambridge Journal of Economics, 7: 413- 429
  27. 27. Thank You Q & A

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