Since January 2011, Hong Kong workers had been under the protection of a 28 Hong Kong dollar (HKD) per hour minimum wage, roughly the equivalent of $3.50. Recently, Hong Kong’s government approved a seven percent rise in the city’s minimum wage to help workers cope with the inflation rate of one of the world’s most expensive places to live. The move will make hourly wages two HKD higher than the current amount for workers in the financial centers of the city. The increase is roughly equivalent to 25 cents per hour. However, this rise in Hong Kong’s meager minimum wage is far from enough. According to Oxfam Hong Kong, in the past ten years, Hong Kong residents who fall below the government’s poverty line number 1.2 million, which corresponds to roughly 15 percent of the population. Many of the poorest in Hong Kong live in “cage homes” or “coffin homes,” usually 15-square-foot metal enclosures for a rent of 1,200 HKD, or $150, per month.
Still, the biggest cause of poverty in Hong Kong is not unemployment, but underpaid employment. For this reason, despite the decent unemployment rate of 3.4 percent as of January 2013, Hong Kong’s poverty rate still stands high. The most immediate and effective measure to address the burgeoning issues of wealth inequality and poverty is to further increase Hong Kong’s mandatory minimum wage for all workers in all industries.
Organizations such as Oxfam Hong Kong also identify low wages caused by low payment to grassroots workers as one of the main causes of poverty in Hong Kong. According to these organizations, an increased minimum wage would mean a rise of wage for one out of every six workers in Hong Kong. However, the pro-business groups argue that an increase in minimum wage would cause higher unemployment. While companies will certainly want fewer workers if their labor expenditures increase, government tax reliefs and subsidies can alleviate the costs of increased minimum wage. Furthermore, if minimum wage is higher than unemployment benefits, workers gain another incentive to seek employment.
Many in the business community are also voting against a minimum wage increase because they believe such an increase would kill the competitiveness of Hong Kong’s economy due to increased costs imposed on companies. However, this increase in costs is precisely what drives the competition for higher efficiency. A minimum wage increase would push firms to be more innovative about the ways of reducing costs without undermining the quality of goods and services, such as providing training for workers to increase efficiency. Thus, a minimum wage increase would also enable the economy to be more competitive in a globalized world.
If we assume eight hours of work per day and 26 working days per month, a 30 HKD minimum wage comes out as a meager 6,240 HKD, or roughly $800, a month. Yet even renting a 15-square-foot cage home in Hong Kong would cost roughly 1,000 HKD, or around $130, a month, which accounts for roughly one-sixth of the total amount of pay. Families barely have any money left to save and invest in their children’s education. More than 20 percent of children under 14 live in poverty. Unable to afford an education, children from low-income families are stuck at the bottom of the economic ladder.
Unfortunately, the Hong Kong government still appears to believe that, with enough economic growth, money will eventually trickle down from the rich to the poor. However, as Michael Chugani says in his article “In Your Dreams,” “If money was trickling down, Hong Kong wouldn’t have the widest rich-poor gap in the developed world.” It is becoming increasingly evident now that the trickle-down effect is not happening and is unlikely to happen in the near future. In order to narrow this “rich-poor gap,” it is crucial for the Hong Kong government to concentrate on socio-economic development instead of simply economic growth as measured by hard gross domestic product values.
Hong Kong should indeed be proud of its rapid economic growth. At the same time, however, Hong Kong’s social and economic development must catch up with its spectacular economic growth. As social tensions escalate with an increasing income gap, the rich might soon find it difficult to enjoy the full benefits of economic growth. Thus, while it is impossible and perhaps not ideal to totally eliminate the wealth gap, lessening the gaps in wealth distribution and income would provide more harmony for Hong Kong’s society as a whole. A most effective way to reduce the wealth gap is to increase the wages of the working poor, thereby enabling more parents to invest in children’s education and instilling a competitive drive in Hong Kong’s economy. A 2 HKD increase in the minimum wage is simply not enough. Hong Kong’s minimum wage needs to be higher.