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Written by: Huang Yongyu and Yuan Shu
2021-02-02 21:05
The last update date: 2021-02-02 21:05
The government announced today (2nd) that the minimum wage level "frozen wages" will be maintained at 37.5 yuan per hour, which is the first time since the policy was introduced 10 years ago.
According to the government's public minimum wage committee report, estimated in different scenarios, the economy has "zero growth" in the first half of this year, and the minimum wage level is still increased by 0.5 yuan to 38 yuan, which will reduce employers’ desire to recruit and increase the number of grassroots unemployment by 800. If it is raised to 44 yuan, the number of unemployed will increase sharply by 54,200.
The government explained that an increase in the minimum wage will affect employers’ desire to hire, but at the same time it will attract more people to re-enter the labor market. Therefore, the projection shows that it will push up the unemployment rate.
The government also predicts that the business environment will remain severe in the short term, and the labor market will still face greater pressure and even deflation.
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The government today announced the "Minimum Wage Committee 2020 Report", in which the committee uses different scenarios to calculate.
Among them, in Scenario 2 (assuming 4% economic growth in the first half of 2021), when the minimum wage is raised to 38 yuan, the additional salary expenditure will be approximately 160 million; if it is increased to 44 yuan, the additional salary expenditure will be approximately 15.53 billion.
Increasing the minimum wage level, employers have reduced recruitment, and the number of grassroots jobs has increased. The
government explained that an
increase
in the minimum wage will affect employers' willingness to recruit, but at the same time attract more people to re-enter the labor market. The combination of these two factors will increase the unemployment rate.
The government predicts that even if the economy improves this year, if the minimum wage is raised between 38 and 44 yuan, the number of unemployed at the grassroots level will increase between 500 and 48,400, and the overall unemployment rate will increase by less than 0.1 to 1.2.
Screenshot of the 2020 Report of the Minimum Wage Commission
However, if calculated in Scenario 3 (no economic growth in the first half of 2021), if the wage level is increased to 38 yuan, the additional expenditure will be approximately 240 million; if it is increased to 44 yuan, the additional salary expenditure will be approximately 16.82 billion. Equivalent to less than 0.05% to 1.8% of total salary expenses.
However, the authorities also estimate that the number of unemployed at the grassroots level will rise further. The increase in the number of unemployed will range from 800 to 54,200, and the overall unemployment rate will increase by less than 0.1 to 1.2.
Screenshot of the 2020 Report of the Minimum Wage Commission
In both scenarios, if the minimum wage is raised to $38 to $44, the employer's potential financial responsibility for long service payments will increase by about $30 million to $3.62 billion.
As for the corresponding impact on the inflation rate of category A consumer prices, it is about less than 0.05 to about 0.9 percentage points.
According to government analysis, there is greater pressure on additional salary expenses for property management, security and cleaning services, and the ability to increase prices is generally strong, and service prices may increase significantly.
However, economic activity in the first half of this year was still lower than before the recession. Therefore, companies should have limited ability to raise prices. There is little opportunity for companies to pass all the salary expenses to consumers. If the minimum wage is raised, I believe it will have a real impact on inflation. It should be smaller than the above estimate.
The government announced today that it will maintain the minimum wage at 37.5 yuan per hour.
(Photo by Yu Junliang)
The economy recorded the largest half-year decline in 2020, the future or deflation
The report also pointed out that the economic and labor market prospects have a greater impact on the minimum wage level.
During the review period, Hong Kong’s macroeconomic and labor market deteriorated sharply. In the second half of 2019, the economy contracted for the first time since 2009. In the first half of 2020, it contracted by 9% year-on-year, the largest half-year decline on record.
The labor market has also deteriorated, with serious job losses, and most of them are low-skilled jobs.
According to government analysis, although major economies seem to have passed their worst time, the global economic recovery is still uncertain, and changes in the epidemic have continued to pressure the labor market.
In terms of inflation, global and local economic conditions are sluggish, and foreign and local price pressures will remain mild in the short term, and deflation cannot be ruled out.
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Minimum Wage Labor and Welfare Bureau
