some people say too high of a minimum wage will affect businesses and damage the economy. i wanna use a simple example to illustrate this is hardly the case.
let's compare the highest and lowest minimum wage being proposed by unions and business interest groups.
the highest minimum wage proposed so far = hKD 35/hour
assumed working hours = 8 hours/day
monthly salary = HKD5600 (20 working days)
when this is compared with the lowest proposed benchmark (hkd 20/hour),
wage proposed: HKD 20/hour
assumed working hours = 8 hours/day
monthly salary = 3200 (20 working days)
the difference between them is HKD 2400/month/worker
let's look at an SME A with 10 employees, if the employer is paying all of its staff below the minimum wage, god should condemn it. but mostly likely, the number should be much smaller.
I assume 2 of the staff in company A are currently paid below minimum wage, say HKD20/hour. if it's forced to pay hKD35/hour, it is going to have to pay HKD4800/month more.
will this company shut down because of HKD5000? i believe the answer is no.
i have a friend who's business in a new territories shopping mall is catering. he is paying hkd 150,000/month in rent to landlord in order to keep his business running.
when we compare this with the so little ordinary workers are making , we know who is causing businesses to shut down.
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The main problem that minimum wage may create is unemployment. Also, it will put a larger burden on small businesses which their owners are only making maybe $20-30k a month (or less as for a lot of new businesses). To understand more about the controversies, just do a search for "minimum wage" on wikipedia.
or watch the following link:
http://www.youtube.com/watch?v=y1CcKJu-Tok
Yet I totally agree about what you said in the last part of the article. The high rents in HK is actually putting the most pressure on businesses. This is why I think the policy targeting wages instead of high rents is way off the target and useless in helping the HK economy. It will only hurt the small business and will hardly make a dent on the big companies. Worst of all, it may affect some international investors in choosing their company base in Asia to switch to nearby places where wages are lower (which is already happening), and further deminish the competivity of HK.
The only good thing about minimum wage policy in hong kong, I think, is that some politicans will get more votes from the lower class voters.
I noticed one thing in the calculation. You suppose a person is only working for 160hrs/month, which is not usually the case. Many people are not only working 20days a week... they often work >=48hrs a week, i.e. 192hrs/month, 32 hrs more than your assumption.
I do not oppose to the idea of a minimum wage. But for the more labour-intensive businesses, if wages were to occupy say 30% of expenses, the increase would be really tremendous.
For your example, maybe you can quote more data from other sources to show how many % would go to wages as compared to rent. It would be interesting to know if expenses in rent would be more than thrice that of the wages... that would mean that the prices may have to go up for their product then, and instead of striping off the worker, the whole community should pay for it!
thank you very much for your comments. you raised a very good point on my assumption on working hours. yes. a lot of workers are working much longer than what i assumed. however, my wrong assumption does not have an effect on how much more employers have to pay overall.
there is a simple way to illustrate this.
there are 24 hours a day and the amount of money employers have to give out in order to complete x amount of work is 24*y, with y being the hourly wage.
let z be the increase in hourly wage due to the minimum wage legislation.
the new wage an employer needs to give out is 24*(y+z) in order to complete x amount of work.
the formula does not change no matter a worker works 8 hours or 12 hours a day.
however, i am aware an employer will try their best to reduce the number of labor hours needed to complete x amount of work. one simple way of doing so is to fire staff and ask remaining staff to complete the work.
and the remaining staff may not get overtime compensation for doing extra work, which is very common in hong kong.
therefore, i strongly support capping the number of working hours to 8 hours a day, but it will be even more controversial.
also i don't agree that overseas investment will go away as i still insist that the cost increase is too trivial for them.
as to small businesses, it's a good topic to further discuss. but we will need more information.
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