UK’s realistic minimum wage is the answer (SCMP)
I refer to the letter by Edward K. S. Leung on the minimum wage (Government has an obligation to protect the less powerful, July 29). The British model of a minimum wage law deserves more careful insight.
Some analysts attributed the success of its minimum wage to the benign economic conditions since the law was enacted in 1999. Britain’s Low Pay Commission is examining if the statutory minimum wage proved to be a burden during the recent recession.
Measures have been taken by the British government to sustain small businesses and prevent large-scale lay-offs.
The country has established two wage floors at a level lower than the minimum wage to tackle the problem of unemployment among young and inexperienced workers.
These wage floors cover the 16-17 and 18-21 age groups. The widespread use of these rates in low-skill industries can lower the ripple effect on wage costs.
The Hong Kong government should seriously consider adopting a similar measure for our early school leavers.
Another important point we should learn from Britain is that we have to start the minimum wage at a prudent level to allow firms to adapt.
Britain initially set the hourly minimum wage rate at £3.60, which only covered 5 per cent of workers in 1999.
For Hong Kong, we can take a similar approach and start the minimum wage at HK$24 an hour, which will cover about 5 per cent of workers. However, an hourly rate of HK$33 will cover 17 per cent of workers.
For the catering industry that would mean a pay rise for 50 per cent of workers.
According to the Census and Statistics Department, profit margins in the catering industry are 9 per cent for the overall trade and even -3.9 per cent at the first quartile before deducting tax and depreciation ratio in 2008.
I want to explain to Mr Leung that some restaurant owners will shut their doors, not because they are no longer earning huge profits but because they just cannot afford the drastic rise in wage costs.
Some of them would even risk losing their life savings, which were invested in their businesses.
More than 90 per cent of enterprises in the catering industry are small and medium-sized businesses and definitely not dominated by restaurant chains.
These SMEs will be hardest hit by the statutory minimum wage.
The large chains have a lot more help with a centralised operation, including factories.
Things will be particularly tight in the low-end market or areas of Hong Kong where residents are likely to spend less.
We have an obligation to protect the less powerful.
I just wonder whether we are protecting them if the minimum wage starts at a high level, causing many people to be forced to leave the workforce and turn to CSSA.
The most important thing that we should learn from the British experience is the need to adopt a sensible yet practical approach when it comes to implementing the minimum wage.
