'Ripple effect' warning on pay

PUBLISHED : Monday, 30 April, 2012, 12:00am
UPDATED : Monday, 30 April, 2012, 12:00am


Major business groups have warned that raising the hourly minimum wage from HK$28 to HK$33 will prompt higher-salaried workers to demand fatter paycheques, as the city government prepares to review the pay law.

The trade organisations, voicing their concerns on the eve of the law's first anniversary, also urged a delay in the review of the minimum wage level, saying data collected now would be 'premature and misleading'.

The review, to be carried out by the Minimum Wage Commission, is likely to stir intense debate. Workers' unions, which are fighting for wage rises, are expecting thousands of people to take to the streets on Labour Day tomorrow.

But Stanley Lau, the vice-chairman of the Federation of Hong Kong Industries, told the South China Morning Post that the increases proposed by these unions were simply 'too much'.

'When we hear unions promoting a fight for HK$33 or HK$35 [hourly wage], I would like to ask if nowadays there is any sort of job that would see an 18 per cent increase in pay every two years,' he said.

Since the wage law was passed a year ago, companies gripped by a 'ripple effect' raised pay by 5 to 10 per cent after higher-ranked workers demanded thicker pay packets when low-income workers' pay rose, according to Lau. 'The ripple effect will indeed increase. If they are blindingly calling for a new [wage] level, businesses will only channel the costs to end-users,' he said.

Hong Kong General Chamber of Commerce CEO Shirley Yuen also said any data collected on the minimum wage law's effect at this time would be 'premature, incomplete, and perhaps misleading'.

'The statutory minimum wage was introduced at a time of economic stability and near-full employment, which has masked the true effects of a wage floor,' she said in a written statement. 'Overseas experience suggests it normally takes two years for the effect to be filtered through the entire economy.'

The law requires a review of the wage level every two years, despite earlier calls for an annual review. The commission, which is inviting citizens to express their views on the policy, is set to submit a recommendation report by the end of October.

A survey by the Hong Kong Institute of Human Resources Management after the law came into effect, which studied 95 firms that employed some 150,000 staff each, found that 15 per cent of the firms, due to the ripple effect, raised pay for employees who earned more than the hourly minimum wage.

Julita Leung, who heads an institute team studying the impact of changes in labour laws, said the government should take into account some concerns that the wage floor had increased labour costs.

Lau, from the Federation of Hong Kong industries, said there was ample time for the government review to be completed by the middle of next year, two years after the law came into effect in May 2011.

Lau also said HK$31 was an acceptable level of the new wage floor, assuming the inflation rate stands at about 5 per cent per annum during the review period.

He warned that a 'blind call' for an increase would lead to repercussions from the business sector although further rises may or may not happen.

'We can see that some cha chaan teng [Hong Kong-style restaurants] are already raising their prices citing reasons such as [further] increase in wages,' he said.

Recent surveys have shown that low-income workers benefit from the mandatory wage floor, with incomes rising by 17.7 per cent for the bottom 10 per cent of earners, according to the Census and Statistics Department. In one of the government's consultation papers, it was said that if the wage floor were increased to HK$31 an hour, wage costs could rise by 2.3 per cent.


The rise in incomes for the bottom 10 per cent of workers after the minimum wage law was passed last year