Minimum wage law will not lead to fair markets in HK
I refer to Richard Fielding's letter ('Why we need fair wage law', October 6).
I do not think a minimum wage law paves the way for fair markets.
Imagine a hamburger company with three employees. Employees A and B produce 100 hamburgers each day per person, but employee C's output is only 80. If they are paid HK$10 a burger, employees A and B each earn HK$1,000 a day and employee C gets HK$800. The employer pays for the value of the goods each employee creates, which is HK$2,800 in total. This is fair since each worker gets what he contributes to the company.
With the introduction of a minimum wage of HK$900, the employer has to pay a total of HK$2,900 (HK$1,000 each to A and B and HK$900 to C). He has to make up for the HK$100 extra labour cost, which does not reflect the value of goods created by employee C.
The employer has three options. First, he can sack employee C and employ another worker who can produce 90 burgers. This ensures he is worth his salary. Second, the employer may have to cut the wage rates of employees A and B, say, to HK$9.50 per burger, so that the total cost can remain at HK$2,800. Third, the fringe benefits for employees would have to be reduced. For example, the daily meals provided may be cut from three to two. This may cover the extra HK$100 incurred in paying employee C.
The first way will create unemployment, with low-skilled workers bearing the brunt. The second way will benefit the less productive workers at the expense of the more productive ones.
The third way harms all workers in a sense that fringe benefits are reduced.
No matter in which scenario, the minimum wage law only brings problems for workers.
As we can see, such a law will only create unemployment or reduce the welfare of some workers (if not all).
Is it fair to enact such a law which harms high-skilled workers, so as to help the low-skilled? Is it fair to introduce this law to take away employment opportunities for less productive workers?
Daniel Lee, Quarry Bay