Is the economic downturn not suitable for raising the minimum wage?

The Minimum Wage Commission is currently conducting public consultation on the minimum wage review. Last week, the Hong Kong and Kowloon Federation of Labour Associations (AFL) proposed an increase of more than 20% to an hourly wage of $46 or more, and that the two-year review should be changed to an annual review.

As a labor organization, the AFL's aggressive upward recommendation is not surprising.

And business representatives counter-offered, is also expected.

However, whether the refutation is justified and whether the reasoning in the case is reliable is another matter.

For example, Mr. Shau Ka-fai, a member of the Legislative Council of the wholesale and retail sector, questioned that now is not the right time to discuss raising the minimum wage, citing the contraction of Hong Kong’s GDP in the first quarter and many companies facing the pressure of closing down. He believes that such a move will have ripple effects. Will ask for a raise.

In fact, the consultation document of the Minimum Wage Commission also mentioned that the review of wage levels should take into account the impact on the profitability of enterprises and long-term business strategies, and pointed out that an increase in the minimum wage may make employers tend to hire people with higher working ability or more experience. employees, and disguisedly attack the employment opportunities of disadvantaged groups.

Wholesale and retail legislator Shau Ka-fai questioned that now is not the right time to discuss raising the minimum wage, and believes that this move will have a ripple effect.

(Photo by O Jiale)

Although these inferences are reasonable, the reality is not necessarily so.

The research of last year's Nobel Laureate in Economics is exactly what we should refer to.

Three scholars including David Card won the award for their commitment to "natural experiment", a different mainstream research method. Among them, Card conducted a minimum wage study in the 1990s, which became a classic in economics.

In 1992, New Jersey raised its minimum wage from $4.25 an hour to $5.05 an hour, while neighboring Pennsylvania kept it unchanged at $4.25.

Card and a now-defunct economist then compared employment in the two places, including jobs in fast-food restaurants, and concluded that the negative employment effect of raising the minimum wage was minimal, and could sometimes lead to more jobs.

The "natural experiment" research method of scholars such as David Card shows that the causal inference of economics is not necessarily correct, and the actual situation is often not necessarily so.

Of course, the policy can't be discussed on paper, and the review of the minimum wage must be taken back into consideration of its economic environment.

At present, Hong Kong's economy is facing severe pressure, and many businesses and restaurants have even closed due to the fifth wave of the epidemic. The impact of increasing wages must be carefully considered.

But from another angle, we can also say that it is precisely because employers are under pressure that they may sacrifice their employees' income to meet the challenges. At this time, the protection of the minimum wage is even more necessary.

The increase in the income of grassroots workers actually means that if they have greater spending power, the society as a whole may ultimately benefit together.

In addition, the world has entered an era of high inflation. Although the inflation rates in Hong Kong in the first three months of the first quarter were 1.2%, 1.6% and 1.7%, they are obviously getting higher and higher. If wages cannot catch up with the trend, only low-income earners will suffer Labor is increasingly at a disadvantage.

Inflation in Hong Kong is clearly getting higher and higher, and if wages fail to catch up with the trend, it will only make low-income workers more and more disadvantaged.

(Photo by Huang Shiying)

In the end, the minimum wage is not just an economic or mathematical question, it is a moral question: how exactly should economic gains be distributed to different citizens?

Hong Kong, whose economy has been dominated by finance and real estate for many years, should realize that during the new crown epidemic, workers who provide necessary services such as cleaning, catering, and transportation have contributed a lot, and have quietly worked hard to maintain the operation of society.

Even if there is a price to pay for raising the minimum wage, the real problem lies in our society. Do we agree to give these grassroots workers more affirmation and greater protection?

For details, please read the 316th issue of "Hong Kong 01" e-weekly report (May 10, 2022) "