Understanding the Minimum Wage in Hong Kong: 2021
What is the Minimum Wage Policy In Hong Kong?
In May 2011, Hong Kong implemented a minimum wage policy of HK$28 per hour. Every two years since, this wage has been reviewed and subsequently raised to combat inflation - apart from the most recent review in 2021. At present, the minimum wage sits at HK$37.5 per hour and applies to all local workers apart from domestic helpers.
The notion of raising the minimum wage is a fairly contentious concept, as many argue that it does more harm than good. The most common argument used against it is that increasing the minimum wage, despite improving the living conditions of those who receive it, can increase unemployment rates nationwide. This is because as the minimum wage rises, businesses will have to absorb the costs of having to pay employees more, subsequently resulting in them letting a few of them go.
What does the Minimum Wage Aim to Solve?
Before the minimum wage was implemented in Hong Kong, there were thousands of workers being paid extremely low wages, meaning that they were struggling to make ends meet. The goal of introducing a minimum wage was to alleviate this problem and improve the living conditions of workers who are forced to work in low-paid jobs. By protecting the rights of these workers, Hong Kong could become a better city for all strata of society. Additionally, the minimum wage could effectively help boost the economy by giving money to those who will spend it - thus creating more demand and, therefore, more jobs.
What are Some of the Problems with Minimum Wage?
While the minimum wage is undeniably a great thing for people earning a low income, some people argue that it’s a solution that’s too idealistic. In a capitalistic economy like Hong Kong, employers are forced to find ways to widen their profit margins where possible in order to avoid bankruptcy. One way of doing this is finding cheaper labour. Put simply, if employers can’t afford to hire employees on the minimum wage, they won’t be able to hire anybody.
Alternatively, if businesses are forced to pay their employees more, they may be required to offset these costs through the price of their product or service. This could simply mean that the cost of living goes up, so will the minimum wage — thereby trapped in a cycle of inflation.
What is its Impact in Hong Kong?
The Hong Kong government had one main goal with its minimum wage policy: to find the perfect balance between giving people a reasonable income and avoiding disruption to the economy.
In the past decade since the minimum wage was introduced, stakeholders and business owners have expressed concerns that the repeated increase of the minimum wage causes a “knock-on effect”, whereby employers need to raise the wages they pay for, not just those on the minimum pay, but each level up accordingly. If they don’t, their employees will simply leave for a better paying job.
It is for this reason that the government must consider the rate carefully. Increasing the minimum wage could have negative effects on the wider economy, even if it helps a portion of society in the short term. Between 2011 and 2018, the Hong Kong economy was in a period of growth - this is when the minimum wage was periodically increased from HK$28 to HK$37.5. However, since 2019, the economy has recessed. Because of this, the government is wary of increasing the minimum wage further at this point, instead of keeping the present equilibrium untouched. You can read more about this in the Minimum Wage Commission’s 2020 report.
How to Calculate the Minimum Wage in Hong Kong
Calculating the minimum wage is done by multiplying the hours worked by the current minimum wage.
There are several different factors that come into play when calculating how much an employee in Hong Kong on minimum wage earns, including how many calendar days are in the month, how many days are worked, the hours worked each day and more. Any time the employee spends at the workplace should form part of the calculation, excluding time taken to travel to and from home.
To easily calculate the monthly salary of those on minimum wage, you fill out all the details on the Hong Kong government’s minimum wage calculator.
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