With some of the world's most expensive rents and rising food prices, we need a minimum wage that ensures workers can adequate provide for themselves. Photo: Bloomberg

Minimum wage must be enough to sustain basic living for the poor

Kalina Tsang says minimum wage calculations should take into account the actual needs of the working poor, to enable them to live with dignity

More than a million people live in poverty in Hong Kong, with the working poor making up a large percentage of this number. When the statutory minimum wage was implemented in 2011 to ensure workers were paid enough to sustain a basic standard of living, many had high hopes. Three years on, however, many are wondering: has the minimum wage achieved this? Or are the working poor actually poorer than before?

The statutory minimum wage is having its second biennial review this year. Sources have suggested that the Minimum Wage Commission is proposing to raise the current level (HK$30) to HK$32.50 per hour. This is not enough to support the basic livelihoods of workers and their family for several reasons.

This rise in the minimum wage clearly lags behind the rate of inflation. The wage was first set in October 2010 and introduced in May 2011. The composite consumer price index (CPI) in October 2010 was 102, and had risen to 121.2 by this September - an increase of 18.8 per cent. If we just take inflation into account, the new wage level should be at least HK$33.30. Since it is supposed to take effect next May, it would probably lag even further behind inflation.

In 2012, about a year after the minimum wage was introduced, Oxfam conducted a study to compare the working and living standards of low-income workers and their families, before and after the law came into effect. It showed that among respondents with increased household income, 40.5 per cent still could not afford to fulfil their basic needs.

Therefore, in setting and reviewing the wage, apart from making reference to statistical figures, it is more important to take people's actual standard of living into account.

Oxfam recently conducted a study to estimate the basic cost of living for various types of households on a healthy diet. Results show that the basic cost of living for one adult is HK$7,344, and HK$4,613 for an elderly person. For two- to five-person households, the thresholds are HK$9,083, HK$12,704, HK$15,776 and HK$17,006 respectively.

According to our 2012 Hong Kong Poverty Report, among average working households, each employed member supports 0.8 non-working members. So, proposals should ensure the minimum wage can support one employed member and an additional unemployed family member.

With the basic monthly cost of living for a two-person household at HK$9,083, assuming that an employee works 10 hours a day, 26 days a month, the hourly rate should be HK$35. This would not only cover basic living costs but also inflation and would thus be more reasonable.

While the official poverty line guides the setting of a minimum wage level, the basic cost of living should be taken into consideration, too. The government should raise the minimum wage to HK$35 for the coming year and review it annually, to keep pace with the fast-changing economic situation.

With some of the world's highest rents and ever-rising food prices, we need a minimum wage that ensures workers can adequately provide for themselves and their family. It is not only about money; it is about allowing all who contribute to Hong Kong's prosperity to live with dignity.

This article appeared in the South China Morning Post print edition as: Basics of life