Doomsday for companies? More like business as usual

PUBLISHED : Saturday, 06 August, 2011, 12:00am
UPDATED : Saturday, 06 August, 2011, 12:00am


When the very long debate raged over whether Hong Kong should introduce a minimum wage law, there were dire predictions over job losses, increased inflation and companies being forced to close. Recently published data shows that the impact has been minimal, and so the time has come to name and shame those doomsayers.

The fact is that, since the introduction of the law in May, Hong Kong's unemployment level has remained low. The rate of 3.5 per cent for the three months ended June is unchanged from that for the quarter of the year prior to the law's introduction. Economic growth remains strong and there is zero evidence of businesses being forced to close.

Admittedly, only three months have passed since the introduction of the law, but we had been confidently advised that, as soon as it was introduced, the sky would fall in. Clearly this has not happened.

It's hard to know where to start when recalling the misleading information about the idea, but let's get going with an opinion leaders' survey sponsored by this newspaper and published back in 2006. It showed that 41 per cent of 'top executives' were convinced that the new wage law would adversely affect the business and socio-economic environment.

Miriam Lau Kin-yee, the leader of the 'pro-business' Liberal Party, confidently predicted that even at a level of HK$24 per hour (a figure the party proposed in preference to the HK$28 rate implemented), there would be 30,0000 job losses.

Lau's Liberal Party colleague Tommy Cheung Yu-yan, who allegedly represents the catering industry in the legislature, went further, initially warning of disaster if the wage level was above HK$20 per hour, but then had to backtrack and apologise. However, he was still able to issue this dire warning: 'There is one fear within the industry, that they would have to close down.' Maybe it's time for Cheung to issue another apology.

The same can be said for the Hong Kong General Chamber of Commerce, which likes to think of itself as the voice of business. It consistently campaigned against the law and said that the 'minimum wage will inevitably affect employment in the low-paying sectors, especially the small and medium enterprises and their employees'.

A slightly more nuanced view came from Duncan Abate, a partner at the law firm Mayer Brown JSM and an executive council member of the Employers' Federation of Hong Kong. 'Minimum wage is a very intrusive piece of legislation that warps the balance between supply and demand and creates unemployment,' he said.

Well, he was wrong about creating unemployment, and as a lawyer he should know that Hong Kong is riddled with intrusive legislation, but most of it does not favour the lowest-paid.

Meanwhile, The Economist magazine, which can be described as the defender of the laissez-faire faith, carried a long article that concluded with the words, 'a remarkable economic experiment is at an end'. It is strange that the magazine only noticed this end of an epoch when it came to employee protection, and not the mass of government regulations that preserve the monopolies of the big corporations.

The world did not collapse when some 300,000 people in Hong Kong got a pay rise out of this law. Even so, poverty remains a major blot on the local landscape and we retain one of the highest levels of income disparity in the world.

Writing in these pages before the legislation, I was sceptical over claims that the introduction of a minimum wage would damage business, and I did so not just as a commentator but also as a catering industry employer, well aware that we face far greater inflationary pressures from rising rentals and food costs.

Lamentably, people like myself are tarred by the impression that our so-called representative in the legislature, Tommy Cheung, speaks for the industry and that we all share his Scrooge-like views. Well, he does not, and I know a large number of other catering industry employers who are similarly embarrassed by Cheung and the antics of business lobbying groups that have proved to be both inaccurate and objectionable.

Stephen Vines is a Hong Kong-based journalist and entrepreneur