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Jake's View
PUBLISHED : Tuesday, 19 November, 2013, 12:42am
UPDATED : Tuesday, 19 November, 2013, 12:42am

Rising wages pay off in the end for a World City

Businesses can bleat, but a little pain may be the price for a shift that better uses skills and separates HK from the development wannabes

BIO

Jake van der Kamp is a native of the Netherlands, a Canadian citizen, and a longtime Hong Kong resident. He started as a South China Morning Post business reporter in 1978, soon made a career change to investment analyst and returned to the newspaper in 1998 as a financial columnist.
 

"A cement mixer with no experience is getting paid HK$1,100 a day. If the demand for workers only goes up by about 1.9 per cent a year, why should they get paid this much?"

Thomas Ho On-sing, 
HK Construction Association,
SCMP, November 18

"In the past, a waiter got paid only HK$35 an hour. Now it's difficult to hire one even if you are offering HK$60."

Simon Wong Ka-wo,
Federation of Restaurants,
SCMP, November 18

And that's exactly the point, gentlemen. These greater wages are exactly the benefit brought to the working people of Hong Kong by our policy of maintaining a tight control on the entry of labour migrants and it is exactly why we do it.

What is more, this is the only workable remedy that exists to the problem of growing income polarity. Crude measures like minimum wage legislation will never meaningfully narrow the gap. If we want this society to move upmarket and truly deserve that self-bestowed accolade of Asia's World City, then we shall just have to take the pain of these income adjustments.

This may include eating out less often or at less classy restaurants as menu prices outstrip the general rate of inflation with higher wages for waiters.

Higher wages for cement mixers may also mean government having to reconsider its long wish list of big infrastructure projects, which it should do anyway for many other good reasons.

But this is not a step backwards. It rather represents a society adapting itself to its own success and ensuring that the benefits are widely spread. It enables people to fulfil their real potential and it is how we get real social advance.

The alternative is to stagnate along with oil sheikhdoms, macho man republics and a long line of other wannabes, the laughing stock of social development. There is every reason to lift ourselves out of this class. We do it by spreading the wealth and this in turn is best done by keeping a tight rein on labour migrants.

However, I recognise the counter-argument. It is that we actually slow down development this way. Restaurateurs will not open new restaurants, construction projects will be delayed and any company faced with higher wage requirements will delay investments. We are constantly warned of these potential evils.

The alternative is to stagnate along with oil sheikhdoms and macho man republics

I don't buy it. I shall accept that very big pay rises very widely spread across an economy can indeed cause dislocation and slow things down for a period

But we are talking very big and wide here. It rarely happens that way. Yet employers consistently warn of such dislocations from even small and narrow pay rises.

What actually happens with the sort of gradual change we are undergoing at the moment is that unproductive jobs such as lift attendant drop out of an economy and are replaced with jobs that make better use of people's abilities.

More than a quarter of job-holders in this town are now degree holders from a tertiary institute of education, up from barely half that proportion 15 years ago.

It is unlikely that we need quite so many highly educated people at our present stage of development and many of these people indeed complain that their jobs are still quite menial. Any move up market induced by higher pay, however, will put these talents to work. This is more likely to boost than to slow down economic growth.

In any case, there is one large economic sector that always grows gangbusters with higher wages. It is the retail sector. Shopkeepers see the immediate benefit to themselves of customers who are paid more and thus have more money to spend than they did before.

More growth sectors soon also arise. They tend to centre on services, already long a growth field for Hong Kong, and particularly on publishing, the arts and entertainment.

This is certainly the lead established by London and New York, the two developed world cities whose historical development path we are most closely following.

But we can always choose not go down that path and instead explore the showy building excesses of a Dubai or the living conditions of Sri Lanka. Just keep the wages down. That will do it every time.

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This article is now closed to comments

singleline
It seems that most economic problems finally boil down to political problems of income or wealth distribution, and the problems can only be solved politically.
Don't forget that economics was originally called political economy. Anyway, it remains a dismal science.
XYZ
A sensible column from JVDK reflecting a much more appealing perspective than the repulsive one put forward by Thomas Ho and Simon Wong.
 
 
 
 
 

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