Blackballing minimum wage a bit rich

PUBLISHED : Sunday, 03 January, 2010, 12:00am
UPDATED : Sunday, 03 January, 2010, 12:00am

Business organisations in Hong Kong have a long record of opposing any advances in the rights or remuneration of employees including working hours, safety issues and access to publicly funded services. So it should be no surprise that the Hong Kong General Chamber of Commerce has taken to scaremongering over the amount of additional unemployment that would be created by a minimum monthly wage set at varying levels - an estimate of from 35,000 at a minimum of HK$4,000 to 152,000 at HK$6,000.

As the chamber did not reveal its methodology I will not argue whether or not these claims have any basis in reality. Minimum wage levels obviously can impact employment of the currently very low paid. But several aspects of its position raise issues.

The opposition to a minimum wage appears to be that it will have negative economic as well as social consequences, is incompatible with Hong Kong's free market principles and will adversely affect its competitive position.

First, one must note that the chairman of the chamber is the chief executive of Hong Kong's largest private monopoly, CLP Power, which has vigorously opposed attempts to submit it to direct competition in power generation. Even after the reduction in their permitted return, Hong Kong's power utilities enjoy returns well above most regulated monopolies, such as those in Australia and Britain, in which they have invested their excess profits.

But what the chamber most clearly fails to grasp is not the issue of whether a minimum wage is or is not economically efficient. Rather, it is the concept accepted in almost every developed society except this one: that a minimum wage plays an important role in social cohesion, in creating a sense of fair play and of minimum standards that should apply to wages as well as to access to education and health. The logic of the chamber's position is to abolish not just unemployment benefit, forcing wages at the bottom even further down, but the provision of public housing and health care.

The incessant rise in income inequality in Hong Kong may be of no concern to the chamber leadership. But it should be to a government that has pledged to address the issue. It is not natural economic forces that have led Hong Kong to be out of step with the other advanced economies of east Asia - Japan, South Korea and Taiwan, all distinguished by equality measures similar to or better than in northern Europe.

Many small and medium-sized businesses operating on thin margins may have good reason to oppose a minimum higher than what they pay now. But that merely points up the source of some of their problems. Hong Kong's level of profits to national income is very high, but most of this is captured by the property, utility and banking giants operating in protected environments. Not only do they reap higher profits from privileged positions, but like to build empires by investing in lower-profit businesses overseas rather than return profits to shareholders. Their main victims are the smaller local enterprises that the Chamber is also supposed to represent.

Take, for example, businesses that might like to open a shop or restaurant on Repulse Bay beach. They have been deprived of such opportunity for almost a decade by the Emperor Group, which took years to develop a 200-metre beachfront property that it has kept vacant since completion a year ago. It is holding out for excessive rents, depriving the government of rates revenue and tourism of essential facilities.

Meanwhile, Emperor has paid a record price for retail space in Canton Road. It seems officials were too afraid of the reputation of this group to impose meaningful conditions on leases of prime public land. As a result, small businesses lose opportunities, employment generation is thwarted - but the power of the oligopolies grows.

Philip Bowring is a Hong Kong-based journalist and commentator

 

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