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Would you like a rise with that? How Hong Kong fares on the Big Mac Index

As a new minimum wage recommendation nears, an alternative Big Mac Index shows just how Hong Kong workers fare on the world stage

PUBLISHED : Tuesday, 05 August, 2014, 10:50pm
UPDATED : Wednesday, 06 August, 2014, 6:24pm

How many burgers can a minimum-wage earner afford?

It's an odd question, but it goes to the heart of a debate over how much spending power is wielded by workers who earn the minimum wage of HK$30 an hour.

As the city's Minimum Wage Commission prepares to recommend a new wage level to Chief Executive Leung Chun-ying before the end of October, the Post attempted to gauge how the current wage ranks in purchasing power compared with other nations. While it is almost impossible to make such a comparison because of a plethora of factors - food prices, rents, transportation - the Post borrowed from a well-known indicator, the Big Mac Index, to try to do so.

The index was invented by The Economist magazine in 1986 to make foreign exchange more digestible to readers by comparing the ability to buy an item sold nearly throughout the world, a popular McDonald's burger. With the price of a Big Mac at HK$18.8 in the city, a worker making the hourly minimum wage of HK$30 can afford 1.59 Big Macs after an hour on the job, or 1.54 Big Macs if the effects of inflation are deducted from the minimum wage.

Of the 22 countries that have statutory minimum wages - compiled by the Organisation for Economic Cooperation and Development, a Paris-based international forum - Hong Kong ranks 11th in terms of the number of Big Macs a worker can afford after an hour of work.

According to the OECD, the hourly minimum wage is highest in Australia at HK$117.80; followed by France at HK$96.10; Belgium at HK$90.70; and Ireland at HK$88.40.

Prices of Big Macs, as collected by The Economist, varied across countries, so just because the wage is high doesn't mean that wage earners in a particular locale can afford many Big Macs or have a higher purchasing power. Australian workers enjoy the highest burger purchasing power, being able to afford 3.18 Big Macs after an hour's work. They're followed by the Irish, who can bring home 2.44 burgers, then folks in the Netherlands, with 2.38 burgers, and France with 2.37 burgers.

At the bottom were Mexicans, where a minimum hourly wage of HK$4.65 affords just one-fifth of a Big Mac.

Federation of Hong Kong Industries chairman Stanley Lau Chin-ho said the Post's study showed that the city's minimum wage level was right. "It shows that it is not too high or low. For a place that has just implemented minimum wage for a short time, this level is very suitable," he said.

But a union leader was surprised by the results. "I think Hong Kong should rank even worse if you take into account other factors like rents, which are notoriously high," said Poon Man-hong, policy researcher at the Confederation of Trade Unions and spokesman for the People's Alliance for Minimum Wage.

He suggested that Hong Kong learn from London. "The London city government conducts studies to find out the basic cost of living in London. The government takes it into account when deciding the new minimum wage level," he said.

"Here in Hong Kong, [the commission] only looks at wage changes and economic growth over the years. It does not have a conclusion on the cost of living."

The confederation is demanding that hourly minimum wage jump to HK$38. Hong Kong implemented its first minimum hourly wage of HK$28 in May 2011 after years of heated debates between unionists and employers. At the time about 189,000 workers were making HK$28 an hour while 327,200 were earning HK$30 an hour.

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The level, which is reviewed at least every two years by the Minimum Wage Commission, headed by senior counsel Jat Sew-tong, climbed to HK$30 in May last year. Meanwhile, the monthly median wage for men jumped 21 per cent to HK$15,800 from the second quarter of 2010 to that of 2013. It also rose 19.6 per cent for women during the same period to HK$12,200.

Lau suggested that the wage level be adjusted to no more than HK$32.

If it is set too high, Hong Kong's competitiveness could be affected as companies struggled to bear the rise in labour costs, he said, pointing out that the minimum wage's impact affected those beyond low-level earners. Workers earning more were given a raise, too, in what has often been described as the "ripple effect".

But the law had been hard on some small- to medium-sized businesses, he said, with some declaring bankruptcy because they could not afford the higher payments to workers.

Similarly, he said, Hong Kong businessmen had suffered from the sharp rise of the minimum wage on the mainland in recent years.

The monthly minimum wage in Dongguan city , he said, climbed 19 per cent from HK$1,100 to HK$1,310 last year. "Companies are either firing people or are afraid to expand" because of the wage increase, Lau said.

Union leader Poon said that before the minimum wage was introduced, the business sector warned that many people could get laid off because the law would increase their operation costs.

"But when the minimum wage was introduced in May 2011, the unemployment rate was about 3.6 per cent. It has since dropped to 3.1 per cent," Poon added.

The Federation of Trade Unions had suggested that the hourly minimum rise to HK$39.70, its labour sector lawmaker, Tang Ka-piu, said.

Tang said that the current review mechanism had a "two-year delay" when any new level becomes effective.

The commission, he said, was using the Census and Statistics Department's latest report on annual earnings and hours worked , among other factors, when considering a new wage level.

"The commission is using 2013 figures to decide the next level later this year, in 2014. And the new level will only be implemented in 2015," Tang said.

"When the new level becomes effective in 2015, the level will not be able to reflect the needs of the people."

He urged the government to review the level every year, and to pass an increase that was no less than the rate of inflation, which was 3.6 per cent in June, the latest figure available.

Tang said in making the recommendation, his party considered a basket of factors, including food and transportation costs.

Wong Hung, an assistant professor of social work at Chinese University, supports raising the minimum wage level to HK$35. In 2005, he released a report on the basic cost of living in the city, in collaboration with the Hong Kong Council of Social Service.

He found in the study that a three-member family had to make HK$9,004 a month to meet basic needs.

He then took into account inflation over the years, and calculated that Hongkongers need to make HK$35 an hour now to afford a basic living in the city.

Whichever proposal the city backs, Yu Mei-wan knows she just needs more money.

The 58-year-old security guard works nights at a Tai Po shopping mall and makes HK$30.20 an hour - 20 cents more than the statutory minimum.

"I have asked for a raise, but my company told me I either take it or quit," she said.

Yu makes about HK$8,000 including overtime a month.

After paying rent at a public flat in Tai Po - more than HK$1,000 - water and electricity bills of HK$3,000, as well as food and other necessities, she said she often had not a single dollar left.

Her 32-year-old son, who lives with her, makes HK$9,000 working in an estate management company, while her husband takes home about HK$10,000 as a lorry driver. How many Big Macs can she afford? The answer is obvious. "I haven't eaten beef for a long time," she said.

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aplucky1
everyone thinks fixing the housing issue is the panacea
it will help
but there needs to be some serious anti monopoly laws enacted, there is NOT ENOUGH COMPETITION
tell me, why is there no walmart here?
because that giant POS lks controls the food supply
that is just ONE EXAMPLE
virokick
The Economist Intelligent Unit together with many other data collection bodies does not take into account property prices when calculating living standards.
This is a rather inaccurate calculation for HK.
rvto
According the Big Mac index from the Economist is the HK$ 50% under valued, correcting this will lower HK in the index.
virokick
We want to follow Singapore in everything but are we willing to follow Singapore's politics?
One strong leader calls all the shots. Limited freedom of speech etc.
JC
Frd. I think you need to understand the politics of Singapore better. It has most certainly evolved towards greater participatory democracy over the last decade. What is not condoned, is politicking for the sake of politicking. This applies to "freedom of expression" and "speech" as well. You are free to criticize government policies and offer suggestions, but you must also be prepared to have your proposals scrutinized and be ready for a rebuttal, like in all debates. "Freedom of speech and expression" does not give one the license to twist facts and smear someone's reputation. Be prepared to defend yourself if you indulge in that. I don't see anything wrong with upholding such standards of integrity.
kongshan2047
If that leader can transform a backwater economy into one of the world's leading financial centres in 30 years, then I am all for it. Unfortunately we don't have anyone in HK that is anyway near Lee Kuan Yew.
virokick
Agree. And even 'IF' we had LKY, China won't let him have ultimate power.
kongshan2047
I have said it many times and the root cause of poverty problem in HK is our immigration policy. We are probably the only developed society in the world where the financial condition of the local spouse is not assessed before letting the non-HK based spouse to enter. A mainland spouse married to an HK resident can come to HK directly after 4 years of marriage regardless of their financial conditions. Further, more than a third of our immigrants in the last 10 to 15 years have education level of secondary or below. While more than 40% of Singapore's immigrants have education level of tertiary or above. Nobody ever said HK is a cheap place to live in and if people are deciding to move to HK then they ought to be made aware of this and make sure they and their family members can sustain a living beyond subsistence level. As the saying goes, "if you can't stand the heat then get out of the kitchen".
Yet the problem is if you say this in the open, you will be branded as "politically incorrect".
virokick
Immigration policy , economic policy and perhaps many things else.
Why not follow everything about Singapore.
kongshan2047
I am not saying we should copy everything from Singapore. But there is no reason why we shouldn't at least explore some of their ideas. For example, someone who is highly educated and has worked in Singapore for a year, is entitled to apply for permanent residency. Yet here in HK, everyone needs to wait for seven years regardless of your skills and educational background. At a time when almost every developed society is looking for ways to attract high net-worth and highly skilled individuals, can HK afford to be left behind?

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