The minimum wage policy of the SAR government has left much to be desired. To begin, it is difficult to understand why the government set only an hourly minimum wage without a monthly equivalent. On the mainland, local governments fix both minimum hourly wages and minimum monthly salaries (and the monthly salaries include all of the entitlements of the workers required by law, including paid holidays). The Hong Kong policy lacks mandatory entitlements and allows employees to negotiate with employers.

A monthly salary system represents a progression from the piece rate and hourly wages of the early days of capitalism. It ensures job security and the necessary welfare of workers, as workers cannot be dismissed at will by their employers or have their pay reduced through cuts in working hours. In the process of the development of industrial relations from the late 19th to the 20th century, both government and labor unions tried hard (through political struggle and legislation) to improve the conditions of workers (working environment, terms and amount of wages, working hours and the like). The conflict of interests between employers and employees should not be seen as a zero sum game. This is because without the enthusiasm and devotion of workers to their jobs, it would be difficult for companies to achieve the necessary efficiency, productivity, and innovative capability to survive in the intensified competition of the market. This is the reason why minimum wage policy is often labeled fair wage policy in many countries around the world. An hourly wage system pertains mostly to temporary and part-time jobs. It serves as complimentary to monthly paid systems for jobs in which demand is varied and uncertain over time. In some advanced countries, an hourly wage also carries mandatory entitlements and other welfare arrangements agreed by the employers and employees or by convention in the industries of the place.

As the Asian world city with a per capita GDP at the level of developed societies, Hong Kong ought to have a fair wage policy in the form of minimum wage. The recent enactment comes far too late. Unfortunately, the government seems to be using the minimum wage policy to turn all low paid jobs into hourly paid ones (It has not stipulated any mandatory entitlements such as paid holidays (including Saturdays and Sundays) and paid lunch breaks for workers). This could open the gate for employers to rescind all existing paid entitlements. In fact, even before the policy officially takes effect from May 1 this year, some employers have already tried to change employment contracts with the excuse of adjusting to the minimum wage policy (but actually eradicating all existing entitlements). The new policy has thus not contributed to increased welfare and a fair wage for the poorly paid employees of Hong Kong. Instead, it acts to destroy job security by turning monthly paid jobs into hourly paid temporary ones and to reduce the overall benefits of workers by removing all paid entitlements.

It is true that some other countries have even worse terms in their minimum wage policies than Hong Kong. The competition between cities and countries should be for improving the welfare of citizens rather than a race to subject people to harsher working conditions. In the current world of globalization, simply cutting wages to reduce cost is not a sustainable strategy of competition. In the case of Hong Kong, even the average wage level could be pushed down or frozen (this has already been done in the past more than a decade since the handover in 1997). This would not increase Hong Kong's advantages over its competitors. There are always other cities that have even lower costs of production, including lower wages. More importantly, city competition nowadays focuses not on cost reduction, but on innovation. Yet, innovation is not something done by experts and professionals. It requires the active involvement of all those involved in the production process for industry as well as for services. If wages are cut down and job security is destabilized in the low paid sector (which includes millions of workers), it will have the effect of workers losing all loyalty and commitment to the jobs that they perform. The loss of efficiency, productivity, and most importantly, the chance of improvement and innovation will cost Hong Kong and the firms far more than what it is to be saved by trickery aimed at cutting down wages and benefits. It will also give Hong Kong a very bad image as a world city that relies on exploitation of its workers under sweat shop conditions.

The central government has been promoting inclusive growth and social harmony so that every citizen can share the fruits of society's prosperity. It has gradually introduced many good practices learnt from developed countries and its minimum wage system is much more sustainable and fair than that which Hong Kong is attempting to implement.

The author is head of China Business Centre, Hong Kong Polytechnic University.

(HK Edition 04/01/2011 page2)