Employment stability is an issue of paramount importance for Hong Kong in 2021. The grim local employment condition has aggravated the burden on grassroots families. Labor unions report that low-income families are beset by the double whammy of insufficient savings and long-term unemployment or underemployment, forcing them to borrow money to make ends meet. Recently, the government announced that the statutory minimum wage (SMW) will be maintained at HK$37.5 ($4.83) per hour following a review by the Minimum Wage Commission. Since the SMW is reviewed every two years, it implies that the income for grassroots workers will be frozen for the next two years. Although the minimum wage freeze is now a fait accompli, we can take this opportunity to explore the role of the SMW as a social safety net for grassroots workers.

Ever since the SMW came into force in 2011, questions about the role of a minimum wage remain unanswered. It is said that the SMW provides an assurance of the lowest possible income that safeguards workers against exploitation by employers. This is the concept of a “wage floor”. The SMW can also be explained by the concept of a “living wage”, the amount that meets the basic needs of grassroots households. As the SMW in Hong Kong adopts the concept of a “wage floor”, government policies are therefore centered on prohibiting extremely low wages while avoiding the loss of low-paid jobs and maintaining Hong Kong’s economic progress and competitiveness. Hence, some argue that the SMW should not be viewed as the only way to tackle the problems of low-income and working poor, and they champion a more conservative approach to adjusting the minimum wage level.

How can the SMW help the working poor amid a widening wealth gap between rich and poor in Hong Kong? According to the median monthly income by decile group of working population published by the Census and Statistics Department, between 1996 and 2016, the median income of the two highest income groups increased by 73.3 percent and 75 percent respectively. The two lowest income groups also benefited from the implementation of the SMW since 2011, with their median income increasing by 18.9 percent and 30 percent respectively, from 2011 to 2016, compared with a 9.3 percent increase and no change respectively from 1996 to 2011. Therefore, although the increments are not able to catch up with those of high-income groups, the income gap would have been worse without the SMW. 

As the biggest employer in Hong Kong, the SAR government should take the lead in implementing a “living wage” for its permanent employees, contract staff and outsourced workers

Even though subsidies and other allowances are available on application, employment remains the core part of household incomes in Hong Kong, with wage income being the major living resource of grassroots households. As the SMW has been implemented for more than a decade, it is time to review the policy in its entirety. Firstly, the SAR government should continuously adjust the minimum wage in response to fluctuations in the inflation rate derived from the consumer price index in addition to the current biennial holistic review of the SMW. 

Secondly, the SAR government should also study the feasibility of adjusting the minimum wage and its welfare policies based on the concept of a “living wage”, which refers to the salary level that affords an employee a basic but decent standard of living through employment without government subsidies. Elements of a decent standard of living comprise food, water, housing, education, healthcare, transportation, clothing and other basic needs, as well as savings emergencies.

Many parts of the world like the United Kingdom, New Zealand and Canada have all embraced the “living wage” concept and rolled out relevant measures to promote the scheme. The SAR government can first conduct a study on a “living wage”, then set a wage level suitable for Hong Kong’s living standards and make adjustments on an annual basis. Subsequent to setting a “living wage”, the government can consult with various sectors of society and formulate policies to bridge the gap between a “living wage” and the SMW. As the biggest employer in Hong Kong, the SAR government should take the lead in implementing a “living wage” for its permanent employees, contract staff and outsourced workers. This will, for sure, set an example for the private sector to follow. 

The author is senior research officer of the One Country Two Systems Research Institute.

The views do not necessarily reflect those of China Daily.