Minimum wage a balancing act between poor and free enterprise

Hong Kong's minimum wage mechanism has been put to the test for the first time since a floor was put under the earnings of the lowest paid in May last year. After its first two-year review, the Minimum Wage Commission will recommend a rise from HK$28 an hour to HK$30 to the government starting in May next year. If grumbles from both bosses and workers are any guide, the amount strikes a balance between costs faced by both without unduly raising them.

The minimum wage dented the city's reputation as a free economy. However, the absence of one contributes to perceptions of a growing wealth gap by enabling employers to offset rising costs such as rents against wage costs, leaving workers out of pocket. Indeed, the employers' line in the commission's deliberations was that because they faced rising costs they should not have to pay a higher minimum wage, even though the lowest-paid also face higher costs.

Commission chairman Jat Sew-tong broke a deadlock by proposing HK$30 an hour, which is a little on the employers' side of a compromise between no increase and the HK$33 sought. Nearly 330,000 workers were earning less than HK$30 an hour last year, according to a government survey. Employers say the new rate will lead to price rises, especially for food, and higher building management fees. Unions and workers' advocacy groups say it will do little to ease poverty and will soon be eaten up by inflation.

Fears expressed by business before the introduction of the minimum wage that it would lead to closures and higher unemployment have not been borne out so far. The impact cannot be judged on these factors alone, but they did create a more positive environment for the review, along with surveys showing the wages of about 70 per cent of low-income workers and their families rose in the first year of the minimum wage. The advance had to be protected.

This does not mean the government should relax efforts to improve the lives of the poor. A minimum wage is just one aspect of poverty alleviation, along with medical care, housing and welfare services, amid an ageing population and a growing wealth gap. That said, a free market remains the Hong Kong way and the foundation of its success. The minimum wage mechanism must continue to strike a balance between helping protect the most vulnerable in society and safeguarding an environment for enterprise and innovation.