Left to sink or swim - the HK wage gaps
SCMP May 17, 2006
The news that minimum wages are being raised across the border is a
useful reminder that Hong Kong is rare in not having one - rare not
just by Chinese standards, but by those even of the United States,
which is celebrated for its flexible labour market, most of Europe
and much of developed Asia. So should we have one?
Since 1995, the number of people in the top three income bands -
anything over $30,000 - has increased significantly, while those
in the bottom
two bands - under $6,000 - have also risen. The percentage of people
in the two middle brackets - $10,000 to 20,000 - has fallen sharply.
The figures suggest that the minimum-wage issue deserves support.
An examination of the motives of those who oppose it - headed by chambers
of commerce and other business organisations - offers one of the strongest
arguments in its favour. Remember economist Adam Smith's warning: "People
of the same trade seldom meet together, even for merriment and diversion,
but the conversation ends in a conspiracy against the public, or in
some contrivance to raise prices."
If nothing else, a minimum wage would be justified as a partial and
inadequate counter to hugely profitable monopolies and oligopolies
that daily gouge the public and return huge profits, relative to both
equity capital and turnover. These include the banks, power companies
and supermarkets, not to mention the government's very own land price
Basically, the lower down the income scale you are, the more - relatively
speaking - you suffer from this officially approved gouging. The lower
your income, the higher the proportion spent on lighting, power and
gas. The lower your income, the more likely you are to be charged for
just having a bank account, let alone be able to earn a reasonable
return on your savings. The lower your income, the higher the proportion
of savings will go through the financial intermediaries' racket known
as the Mandatory Provident Fund, rather than directly into a superannuation
fund, or through a cheaper medium of your choice.
Of course, there are government expenditures that offset the law of
the wage. As in all advanced, and many developing, countries, we enjoy
free education to secondary level, subsidised housing and low-cost
medical services. However, what is notable about Hong Kong in recent
times is that in a desperate attempt to avoid tax increases, and to
pay for the likes of the bureaucrats' Tamar palace, the public sector's
contribution to some modest income redistribution has been eroded.
This has added to widening income gaps resulting from market forces,
the tax system and those oligopolistic practices mentioned previously.
The government itself has been directly to blame for some of the widening
income gaps. For instance, in pursuit of its goals of cutting public
expenditure, it has hived off various activities to the private sector.
Low-skilled workers, such as cleaners, who used to enjoy the government's
own minimum wage now find themselves paid even less by their new employers.
Contrast this abandonment of the low paid with the fat cat bureaucrats'
attitude to their own jobs. Have they been put out to public tender?
Have headhunters been set loose to find the best possible candidates
at the lowest possible salaries? Have they had to face being sacked
for anything other than outright criminal behaviour? No, they are safe,
protected by their pay scales and inflation-proof pensions.
Of course, minimum wages and conditions are no cure-all. They can
be set too high and impede employment, or so low as to be meaningless.
But they reflect the need of any system to be able to distribute income
and wealth in a manner society regards as fair, as well as economically
If we simply believed in following the laws of economics without regard
to social issues, we would have no borders, no public education and
complete freedom of movement of labour. That is not acceptable in Hong
Kong or almost anywhere else. Likewise, any civilised society, wealthy
or not, accepts the need to prevent its members from falling below
some minimum standard of income and life.
That was why the colonial government introduced public housing and
free medical care. It may have gone too far down that road, in particular
resulting in the huge gap between public and private housing. But if
we are to continue to go down the path of the user-pays principle,
bringing public rents closer to private ones and charging more for
medical services, we must also look at a minimum wage.
The brutal fact is that, for a variety of reasons, Hong Kong has the
worst income distribution of all the developed economies of East Asia.
Singapore would run close if the data there included the armies of
foreigners paid a fraction of the locals' minimum wage, but compared
with South Korea, Taiwan or Japan, Hong Kong is a disgrace.
Income gaps have been widening almost everywhere, a byproduct of mostly
beneficial globalisation. But that does not mean we should shrug our
shoulders and say it doesn't matter and there is nothing to be done
If Chief Executive Donald Tsang Yam-kuen really cared about a harmonious
society, he would address this issue with actions, not platitudes.
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