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Time HK had a minimum wage law

By Hong Liang (China Daily)
Updated: 2008-08-12 08:10

The Olympics that exemplifies fair play is a perfect backdrop for the Hong Kong government to set in motion the long-overdue process of legislating a minimum wage.

When we take time to reflect on this galling social issue in the spirit of the Olympics, even the most hard-nosed of Scrooges among us should feel a tinge of embarrassment that a large portion of our fellow citizens are shut out from sharing the benefits of Hong Kong's economic prosperity that is the source of our pride.

In fact, there really isn't much to be proud of after the plight of the under-class was forcefully brought to the open in a series of industrial strikes by low-paying workers in some of the most venerated enterprises. The strikers have put a face on poverty that was, to many Hong Kong people, nothing more than an academic notion based largely on published figures that had very little real-life meaning.

Now, we know. With an estimated 150,000 workers earning an average monthly income of less than HK$3,000, the social and economic system is showing signs that its automatic adjustment mechanism, which should have a built-in function for income distribution, has somehow broken down, requiring government intervention.

In the past, rapid economic growth in an economic upswing, fuelled by rising exports, would invariable result in a strong demand for workers. This increased demand would, in turn, drive up wages, enabling the workers to enjoy a larger share of the economic pie.

There was, of course, the second stage of the economic cycle, which would set in when wages went up to levels that began to undermine the competitiveness of Hong Kong exports in overseas markets. In the resulting down cycle, wages would fall along with declining demand for workers.

But even in a deep recession, there was hope because both employers and employees had faith in the automatic adjustment mechanism, and believed that the economic pendulum would almost certainly swing the other way. That was the time when government intervention, aside from the occasional fine-tuning, was widely considered to be unnecessary, or even undesirable.

But the restructuring of the Hong Kong economy that began with the wholesale migration of all manufacturing industries to the Pearl River Delta region in the 80s and early 90s has fundamentally changed the economic adjustment process through the massive elimination of low-skill industrial jobs. The impact of the change was largely masked by the expansion of the service industry, from a very low base at that time, which had helped absorb the bulk of the displaced industrial workers during the go-go years.

The dark force of the new economic regime was unleashed by the outbreak of the Asian financial crisis in late 1997, resulting in a brutal destruction of asset value and a sharp plunge in average income of the workforce. Hardest hit were the low-skill workers in the service sector as employers were scrambling to cut cost by outsourcing chunks of their non-core businesses.

The economic recovery since 2003 has been driven not by exports but rather by the services sector, particularly finance and tourism. This pattern of growth has greatly deepened the economic restructuring that began some three decades ago.

For that reason, the economic recovery has not led to any significant increase in the demand for low-skill laborers. Trapped at the bottom rung of the social ladder, hundreds of thousands of able-bodied men and women are forced to find temporary employment at salaries dictated by their employers who are trying to undercut each other in the fight for service contracts from big businesses.

Setting a minimum wage can help these workers support their families and provide an improved living environment so that their children can enjoy a better chance of moving up the social ladder.

E-mail: jamesleung@chinadaily.com.cn

(China Daily 08/12/2008 page10)