Hong Kong’s statutory minimum wage will be frozen at HK$37.50 (US$4.84) an hour, the government has announced, citing a struggling economy battered by the coronavirus pandemic.
The decision, which marked the first time the figure has not changed since it was introduced in 2011, was revealed on Tuesday after a review by the Minimum Wage Commission comprising representatives from business and labour, as well as government officials and academics.
But some union representatives were angry over the lack of change, saying it would mean a pay freeze for low-earning workers for four consecutive years and they called for another review later this year if the pandemic eased.
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Secretary for Labour Law Chi-kwong said a “majority consensus” was reached to keep the minimum wage at its current level. “The commission has considered that Hong Kong’s economy is in a deep recession and the unemployment rate remains high,” he said.
The conclusion represented a “fine balance” between competing views among members of the body, which submitted its recommendation to the government for a final decision.
Law said the next review would be conducted in October 2022, dismissing suggestions that the exercise should be moved forward if an easing of the Covid-19 pandemic helped to bring about an economic recovery later this year.
If that process was carried out in just a year, there would not be enough time to run a comprehensive review with data analysis and input from various social sectors and instead the assessment would likely rely on mathematical formulas, he argued.
“The outcome would very likely be contrary to what the labour side wants,” Law said.
The decision takes effect on May 1 and will apply for two years, meaning the lowest hourly wage will not increase again before May 2023 at the earliest.
According to the 2019 statistics, 21,200 people, or 0.7 per cent of the city’s workforce, were earning the minimum wage.
Earlier, commission members representing workers had called for an increase to at least HK$39, while the business sector insisted the figure stay at HK$37.50, or be raised only to HK$38. Both sides argued they had been badly hurt by the economic pain inflicted by the health crisis.
According to an advance government estimate, gross domestic product fell by 6.1 per cent last year, marking the worst annual contraction since records began in 1961. Figures for retail sales released on Tuesday showed retail sales plunged a record 24.3 per cent, while the jobless rate between October and December stood at 6.6 per cent, a new 16-year high, data from January found.
Government economist Andrew Au Sik-hung said the city was facing the most severe recession since the second world war. He argued that even unchanged wages should be enough to protect the average worker against inflation.
The minimum wage was raised from HK$34.5 in 2017 to HK$37.5 in 2019, representing an 8.7 per cent increase, which was higher than the 5.2 per cent inflation in the two years. Between May in 2019 and last December, inflation only edged up 1.7 per cent, he said.
“The last time when we adjusted the figure, there was still [a buffer] of 3.5 percentage points, which is much higher than 1.7 per cent,” he said, predicting the inflation rate in the first half of this year would also be minimal.
The commission estimated that if minimum wage was raised to between HK$38 and HK$44, the additional payroll costs to businesses would be between HK$160 million (US$20.63 million) and HK$15.53 billion, assuming the economy would grow 4 per cent in the first half of 2021.
Those estimates include not only the additional wages needed to cover workers now earning below the minimum, but the knock-on effect of companies raising the pay of those already earning more in order to maintain their wage hierarchy.
Jimmy Kwok Chun-wah, who represents businesses at the Labour Advisory Board, welcomed the decision, saying many businesses were losing money.
“Some said their savings over the last two decades for the business were all used up,” Kwok said.
But employee representative Bill Tang Ka-piu, also a member of the advisory board, expressed disappointment.
“The government could have had another chance to discuss the wage level in 2021, but it gave up. This is what makes me so angry,” Tang said.
The Federation of Hong Kong & Kowloon Labour Unions said the consumer price index which gauged the price of goods and services bought by low-spending households had risen 5.2 per cent over the last two years excluding the impact of the government’s one-off relief measures.
“Many lower-class workers suffered an income cut,” it said.
Noting other places such as Taiwan had decided to raise their minimum wage during the economic downturn, Law said: “I would say the decisions are primarily political. In the Hong Kong regime, it is very different.”
The decision was based on discussions with the community, employers and employees seeking to obtain a consensus, he said.
The minister stressed that the minimum wage should not be seen as the only way to tackle poverty, saying welfare policies were in place to support low-income workers and families.
Additional reporting by Phila Siu
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