Unemployment is the greatest cause of poverty in Hong Kong

Your editorial ('A minimum wage must tackle poverty', October 19) opined, without evidence, that the 61.3 per cent collapse in the number of US dollar millionaires in Hong Kong made it 'safe to assume' that tens of thousands of Hong Kong families have fallen into poverty since 2007.

You referred to the (allegedly) widening wealth gap, by citing the Gini coefficient (a measure of income disparity) from 1990-2006. The logic, not supported, appears to be that a level of income inequality evident in 2006 must have worsened after the economic shock wave that led to the collapse of Bear Stearns, Lehman Brothers and others.

Hong Kong ranks in the mid-80s among the nations of the world in terms of its Gini coefficient. Many argue that we should be higher, alongside such tax-and-spend stars as Finland and Sweden. Few grasp that the more egalitarian economies also include Ghana, Malawi and Albania. Singapore is at about the same place we occupy. Exactly how millionaires, income disparity and the proposed minimum wage law are related to poverty you never explain. Instead, it is simply assumed that a higher minimum wage will reduce the number of people in poverty. If such were the case, why not set the minimum legal wage at HK$500 an hour?

You missed the single most important threat to the society-wide desire to reduce poverty in Hong Kong: unemployment.

I offer my view of what are the most important factors to be considered in establishing a minimum wage.

First, we need to recognise that establishing a legal minimum wage is a form of price fixing. As such, the Provisional Minimum Wage Commission must examine other cases of price fixing for their costs and benefits. In Europe, fixing prices led to lakes of milk and mountains of butter unable to be sold at legal prices. In the context of a minimum wage, that unsold commodity is unemployment, resulting not in mere waste but more poverty.