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Fears subside on minimum wage

Martin Wong

The city's buoyant economy has put paid to a doom-and-gloom scenario of businesses being forced to close as a result of the minimum wage, according to an economist and a lobby group for small businesses.

Three months after the Minimum Wage Ordinance set the lowest pay at HK$28 an hour, the unemployment rate remains low at 3.5 per cent, the economy is tipped to grow 4 to 5 per cent this year and an estimated 300,000 low-paid workers have had a pay rise.

'Yes, we can say that the influence of the minimum wage is not as severe as we once believed,' said Danny Lau Tat-pong, chairman of the Small and Medium Enterprise Association. 'The market is in very good shape now. Businesses can raise their prices to offset the increased wages and other costs.'

Small and medium-sized enterprises, which make up more than 98 per cent of the city's employers and account for more than 48 per cent of private-sector jobs, were tipped to suffer after the minimum wage came into effect on May 1.

But City University economist Dr Li Kui-wai said the measure was introduced at a good time. 'The economy is very good now so employers can easily transfer increased costs to consumers,' he said. 'If the wage floor was introduced during an economic downturn there would be a very different picture.'

Li said people had become accustomed to price rises, including increases in fares on the MTR, buses, minibuses and taxis, along with rises in restaurant menu prices.

Inflation is at a three-year high of 5.6 per cent but the government says the minimum wage is not to blame. Announcing the latest consumer price index two weeks ago, it said: 'Private housing rentals and food prices were the two major driving forces, accounting for about 70 per cent of the year-on-year rate of increase.'

Li agreed, saying the minimum wage played only a minor role in increased prices. 'Frankly, the increase in rentals and food prices put more pressure on business than the wage floor,' he said.

The closure of a few restaurants and internet cafes in May, when the wage floor was introduced, 'had little connection to the minimum wage but to the ever-increasing rents'.

Poon Man-hon, spokesman for the People's Alliance for a Minimum Wage, said unions had received virtually no requests for help from workers over business closures or lay-offs after the minimum wage came into force.

About 300,000 low-paid workers got a pay rise after the minimum wage took effect, but at the expense of paid meal breaks and rest days, the alliance found.

'We have not seen any bad impact of the minimum wage law,' Poon said.

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