Hong Kong's government is to press ahead with the introduction of a legal minimum wage, presenting a bill to the Legislative Council as early as next week. That means we can expect a reprise of all the old arguments both for and against a statutory minimum wage. The reasoning in favour of a legal minimum wage is straightforward. It asserts that all workers should be entitled to fair compensation for their labour: a decent living wage on which they can support themselves and their families in dignity. Minimum wage enthusiasts argue that the market has signally failed to deliver this in Hong Kong. As evidence, they point to the city's high Gini co-efficient. This is a measure of income distribution, where a score of zero would indicate perfect income equality - that is, everyone earns the same wage. A score of 100, meanwhile, implies perfect inequality - that is, Li Ka-shing pockets the lot and the rest of us get nothing. In general, the less developed a country's economy, the greater the inequality of income and the higher its Gini co-efficient. Hong Kong bucks the trend. As the chart below shows, the city not only has the highest Gini co-efficient - the greatest inequality of income - in Asia, but of any developed economy (unless you count Bosnia and Herzegovina as developed). Given the proven tendency of statutory minimum wages to compress income distributions and lessen inequality, supporters maintain Hong Kong needs a minimum wage to make our society more equitable. Opponents, meanwhile, advance a whole spate of arguments against a minimum wage. Some of these are political, the libertarian arguments that the law has no business interfering in the free workings of the marketplace. Others, usually made by trade unions and big employers, are nakedly self-interested. Let's disregard those and take a look at the economic case against, which argues that a minimum wage does more harm than good, often hurting the very people it is intended to help the most. The argument goes like this: a company faced with having to raise its workers' pay to conform with minimum wage legislation can react in one of three ways. It can absorb the cost increase and accept lower profits. It can pass the cost increase on to its customers in the form of higher prices, or it can compensate for the higher costs of increased wages by cutting the number of its employees. All three outcomes sound possible, and there is a case to be made that all three rebound disproportionately on the lowest-paid workers. In the first case, the competitiveness of companies in labour-intensive industries is damaged, eventually forcing employers out of business. In the second, prices go up and inflation rises, hurting the poorest members of society the most. In the third case, companies simply cut back on their workforce, throwing employees out of work or forcing them into insecure contract work or illegal employment in the black economy. Although these ideas sound plausible, there is little hard evidence to back them up. Studies from countries with minimum wages indicate very few companies take the hit on their bottom line in the form of lower profits, especially if the minimum wage is introduced on an economy-wide basis. There is more evidence that the introduction of a minimum wage could push up inflation. Studies from Brazil indicate that a 10 per cent increase in the minimum wage pushes up food prices there by 4 per cent. In Hong Kong, the increase would be less because of the greater weight of rents in companies' costs. As a result, it seems unlikely that the introduction of a minimum wage would push up consumer price inflation by more than 1 to 2 percentage points at most. Finally, there is the argument that minimum wages push up unemployment. Here the evidence is inconclusive. While some studies suggest that the introduction of a minimum wage can increase unemployment among the lowest paid by a percentage point or two, others suggest total employment actually goes up because of an increase in hours worked. Either way, the impact is small. Of course, a great deal depends on the level at which the minimum wage is set. That is a political decision. So expect the arguments to continue, but don't expect to hear much real evidence in support of them.