Jake's View

Keep wages down and we will all pay in the end

Rewarding the workers whose toil created the boom times will help HK move up to next tier

PUBLISHED : Tuesday, 29 October, 2013, 1:45am
UPDATED : Tuesday, 29 October, 2013, 12:13pm

Labour and Welfare Secretary Matthew Cheung Kin-chung said the city should explore new ideas to bring in more non-local workers ...

SCMP, October 25

I think the union people are right on this one. Sure, bring in some people with special skills when truly needed but if "explore new ideas" means relieving the wage pressure on employers with cheap migrant labour, then no. All it means is greater income polarity.

Just look at how it works in Macau. They handed out casino licences there to the big gambling operators for free on the reasoning that the benefits would come through a booming economy and jobs for all.

They came that way all right - a booming economy for the gambling lords and jobs for anyone who cared to come to Macau. More than 35 per cent of the workforce is now non-resident. But go for a walk in the old harbour districts or in Coloane village and you get the feeling that some of the long-time residents can barely afford shoes.

The point about being a First World city is that people have to make some wrenching changes in expectations to achieve it. Imagine that instead of dithering over whether we can raise the minimum wage from HK$30 an hour, we make the immediate jump to the Canadian level, HK$77 an hour. Add further costs for unemployment insurance and workers compensation.

Would that be a bit of jolt, do you think? Then try a minimum wage of HK$95 an hour for Belgium at present exchange rates. What about HK$118 an hour for Australia?

And here is the kicker. I think it a good thing. It spreads the wealth more equitably and thus creates a livelier society where more people can devote their wits to great productive ideas rather than just to staying alive from day to day.

But of course not every society can do it. Enforce a wage of the equivalent of HK$118 an hour in Burundi and you bring what little productive effort Burundi yet manages to an immediate, crashing halt.

There are two ways of moving up the scale. The first, the crude way, is through enactment of a minimum wage. The second is through keeping borders closed to labour migrants and letting boom times and full employment push up wages for the people who have created the boom times through hard work.

The chart shows how tightly wage growth and joblessness in Hong Kong are inversely correlated.

Yes, if we persist in this course, it means that some of your favourite restaurants may close and others turn to eat-it-and-beat-it shops under the wage pressure. You may not eat out so often. Don't expect cheap massage spas any longer or building attendants who hold lift doors for you. Any service or domestically made product with a high labour content rapidly becomes much more expensive.

People can devote their wits to great productive ideas rather than just to staying alive

But, of course, we don't have to endure this. We can elect to keep this town in the Third World forever. Any time that wages start to go up, any time that a bar manager says he has trouble finding staff, we can bring in more Indonesians, or perhaps Kenyans if Indonesians start getting stroppy about pay.

Life will be very comfortable for those who have it made. There will be plenty of domestic help, the easy-to-sack sort, too, with the ample availability on hand, and plenty of cheap workers for any business you care to start. We may have to hire more police to keep unrest down in the worker quarters but that's cheap.

And people will say: "Strange place, Hong Kong. Never seen such a mix of rich and poor. Dull though. Nothing will ever come out of that town any more."

And they will be right.