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Following is a question by Hon Poon Siu-ping and a reply by the Secretary for Labour and Welfare, Mr Matthew Cheung Kin-chung, in the Legislative Council today (May 22):
Question:
On May 1 this year, the Statutory Minimum Wage (SMW) rate which had been in force for two years was adjusted upwards for the first time from $28 per hour to $30 per hour, representing an increase of 7.1 per cent. Nevertheless, the rate of adjustment of SMW is lower than the cumulative inflation rate in the same period, resulting in a drop, instead of a rise, in the living standard of those employees earning SMW. In this connection, will the Government inform this Council:
(a) whether the Government has considered providing living allowances to employees earning SMW, so as to ensure that their living standard will not drop as a result of the inflation rate being higher than the rate of adjustment in SMW; if so, of the details; if not, the reasons for that;
(b) whether it will consider requiring that the rate of adjustment in SMW recommended by the Minimum Wage Commission must not be lower than the inflation rate in the same period; if so, of the details, if not, the reasons for that; and
(c) whether the Government will make reference to the existing practice of adjusting the civil service pay on an annual basis and reconsider shortening the review cycle of SMW from two years at present to one year; if so, of the details; if not, the reasons for that?
Reply:
President,
My reply to the question raised by the Hon Poon Siu-ping is as follows:
(a) Statutory Minimum Wage (SMW) aims at providing a wage floor to forestall excessively low wages, without unduly jeopardising Hong Kong's labour market flexibility, economic growth and competitiveness or causing significant adverse impact on the employment opportunities of vulnerable workers.
Separately, the Government has put in place a non-contributory social security system which includes, amongst others, the Comprehensive Social Security Assistance (CSSA) Scheme serving as a safety net of last resort to help families which cannot support themselves financially to meet their basic needs. The amount of CSSA payment is the difference between the applicant's/family's "assessable income" (including their wages) and "recognised needs" under the CSSA Scheme. In addition, the Community Care Fund rolls out different programmes to provide support to those in need of financial assistance.
To relieve the burden of work-related travelling expenses on low-income earners and to promote sustained employment, the Labour Department implements the territory-wide Work Incentive Transport Subsidy Scheme. Applications may be made either on a household or an individual basis. An eligible applicant receives a monthly subsidy of $600 (for those working no less than 72 hours per month) or $300 (for those working less than 72 hours but at least 36 hours per month).
(b) Under the Minimum Wage Ordinance (MWO), the Minimum Wage Commission (MWC) is tasked to recommend to the Government the amount of the prescribed minimum hourly wage rate. In performing its role, the MWC must have regard to the need to maintain an appropriate balance between the objectives of forestalling excessively low wages and minimising the loss of low-paid jobs and also the need to maintain Hong Kong's economic growth and competitiveness. In reviewing the SMW rate, the MWC has to take into account a basket of indicators reflecting the latest socio-economic and employment situation which include, among other things, relevant data on inflation. As a matter of fact, there has been substantial improvement in the earnings of grassroots employees following the implementation of SMW. For the period of January to March 2013, the average monthly employment earnings of the lowest decile group of full-time low-income employees registered a year-on-year increase of 7.7 per cent (or an increase of 3.4 per cent after discounting inflation), outpacing the overall average pay rise of 2.4 per cent.
SMW impacts on an array of factors like the labour market, employment, society, economy, inflation, productivity and competitiveness which interact constantly and vary according to different socio-economic circumstances. If there is a rigid requirement that the rate of adjustment in SMW recommended by the MWC must not be lower than the inflation rate in the same period, it cannot take account of the changing social, employment and economic environment in an effective, timely and flexible manner. It will also lead to the chain effect of wages and prices chasing each other, thus causing a self-perpetuating inflationary spiral.
Adopting an evidence-based approach, the MWC undertakes detailed analyses on wage distribution data and findings of other surveys, and makes reference to various employment, social and economic statistics. It conducts assessment of the impact of the SMW rate as well as extensive consultation with all stakeholders in order to recommend an appropriate rate. The existing arrangement is considered objective and appropriate.
(c) The MWO requires that the SMW rate must be reviewed at least once in every two years. Setting a limit of not exceeding two years for the review cycle is a pragmatic arrangement which was the consensus when legislating on SMW. Following the implementation of the new SMW rate of $30 per hour with effect from May 1, 2013, the MWC has now commenced a further study of the SMW rate.
Ends/Wednesday, May 22, 2013
Issued at HKT 17:07
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