Rich Hong Kong should start paying its low-skilled workers a decent wage

Paul Yip says the city must ensure those on the bottom rung of society receive a respectable salary, taking inspiration from cities that show severe inequality isn’t inevitable

PUBLISHED : Wednesday, 22 June, 2016, 12:30pm
UPDATED : Wednesday, 22 June, 2016, 12:30pm

According to the latest study on prices and earnings by UBS, Hong Kong ranked second in average wages, after Tokyo, among 71 cities.

In terms of purchasing power and taking into account differences in the cost of living, Hong Kong ranked top for the amount of time it would take an average worker to earn enough to buy a McDonald’s Big Mac and an Apple iPhone 6: nine minutes, and 52 hours, respectively. That’s better than the likes of Sydney, New York, London and Singapore.

However, the average salary does not reflect the whole picture for the community, especially for low-income groups. We examined the minimum wages of these cities to make another comparison. It turns out it would take a Hongkonger on the minimum wage about 35 minutes to earn enough for a Big Mac, four times longer than an average worker. In Zurich, Geneva and Sydney, it takes only 18 minutes for workers on the minimum wage to earn enough – just seven minutes longer than for the average worker.

The roots of Hong Kong’s income inequality

Such differences reflect income disparities. Hong Kong’s Gini coefficient is 0.537, the highest in OECD countries. The city may have ranked first using average wages but it slips to 21st if we use the minimum wage. High-income Western cities (Sydney, Zurich and Geneva) remained in the top 10 for both, meaning their low-income earners are not as disadvantaged compared with the rest of the working population. Clearly, these low-income earners still receive a wage that allows them some quality of life. It is not surprising that they are viewed as the most livable cities globally.

Hence, economic development and income disparity do not have go in opposite directions. Business can do their share, but we should also aim for a higher standard, so economic development benefits most, if not all, rather than only a select few. It is possible to both improve company profits and employees’ well-being.

Hong Kong has a very low unemployment rate at 3.3 per cent. However, we need to create work with career prospects and a respectable salary. Otherwise we create only a pool of working poor who require government subsidies. Long-term improvement requires reducing poverty.

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In our latest research on youth mobility in alleviating poverty, education is still the most important factor. It’s worth noting we do not produce too many graduates. Hong Kong’s percentage of tertiary-educated young people is one of the lowest in high-income Asian and OECD countries. Strategic investment in education plus appropriate job creation are the key elements in reducing poverty. It is of the utmost importance to maintain investment in education and skills training to enhance our competitiveness.

Society has paid dearly for the persistently low wages for low-skilled workers

On another front, it is pleasing to see a proposed change of outsourcing rules by the government so that companies bidding for contracts would be viewed favourably if they provide higher salaries for low-skilled work. There are some 50,000 low-skilled workers providing regular services for government departments. They should benefit from the new proposal, and hopefully it will spill over and improve employment conditions in the private sector.

Society has paid dearly for the persistently low wages for low-skilled workers in Hong Kong over the past 15 years. It has widened income disparity and created many grievances in the community. The impact is felt not only among low-income families but also in the substandard service provided as a result. With no job security, there is no incentive to improve. Parents earning low wages need to spend more time at work to make ends meet, leaving less time for their children, which is not conducive to family well-being. The government has absorbed the social impact of low wages; it provides subsidies to low-income groups and public housing. Would it not be better for workers to earn a respectable salary rather than receiving handouts?

It is time to rethink our salary structure so that the whole community can benefit from economic development.

Paul Yip is a professor of social work and social administration at the University of Hong Kong