Minimum wage will not narrow the gap between rich and poor

I would like to respond to Mario Tsang's letter 'Disregard for working poor', July 10).

He referred to my comment 'So be it', quoted in the Pearl Report. This quote was taken out of context. During the interview, I was actually trying to explain that the wealth gap would not decrease even after the implementation of the minimum wage, taking into account experiences of other countries.

In 1997 two leading experts in labour economics, David Neumark and William Wascher, conducted research: 'Do Minimum Wages Fight Poverty?' They concluded that the minimum wage in the US resembled 'income redistribution among low-income families [rather] than income redistribution from high- to low-income families'. The reason is that 'minimum wages increase earnings per worker among families' but 'cause the number of workers per family to decline'. As far as I know, there is no research supporting the claim that minimum wages at any level reduce the proportion of poor households. Census and Statistics Department figures show that profit margins are very low in the catering industry. In 2008 about 50 per cent of restaurants were just breaking even before deducting tax and depreciation ratio. Most importantly, the percentage of wage costs in their expenditure is, on average, about 50.1 per cent.

An increase in wages will adversely affect operators' finances, especially those businesses which are part of two traditional culinary cultures in Hong Kong - Chinese restaurants and local tea restaurants. They mostly employ low-skilled workers with many job differentials.

To fight for their survival, these operators will resort to cost-cutting measures such as offering fewer choices in their menus, squeezing job differentials, and a major change in manpower structure.

This may lead to a further cut in non-technical jobs, mostly performed by the most deprived members of society like the aged, minorities and the least-skilled workers.