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LCQ6: Statutory minimum wage
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     Following is a question by the Hon Frederick Fung Kin-kee and a reply by the Secretary for Labour and Welfare, Mr Matthew Cheung Kin-chung, in the Legislative Council today (November 30):

Question:

     Will the Government inform this Council:

(a) since the implementation of the statutory minimum wage on May 1 this year, whether it has assessed the positive and negative impacts of the implementation of the minimum wage on the basis of the latest statistics and the employment data collected by the Labour Department; if it has, of the outcome; whether there are negative impacts such as waves of closures and layoffs, reduction in junior jobs, worsening of the unemployment situation of the middle-aged and the elderly, as well as "ripple effects", etc, as warned earlier by some business people and academics who opposed the implementation of the minimum wage; if such an assessment has not been made, of the reasons for that;

(b) given that it has been reported that surveys and interviews conducted by community groups reveal that the negative impacts in (a) have not been found since the implementation of the minimum wage, and wage rises and increase in junior jobs have instead benefited grass-roots workers, whether the authorities will, when conducting the review of the minimum wage rate in the future and the current study on standard working hours, weigh carefully the dissenting views raised by some business people and academics and avoid discussions being led by subjective and biased views, so as to strive to take an objective approach on the basis of evidence in reviewing the minimum wage rate and promoting the implementation of standard working hours; and

(c) given that the first statutory minimum wage rate was set according to the prevailing data at that time, and the economic environment, in particular inflation, has worsened since then, whether the authorities will, in response to the recent social situation and the heavy pressure on the livelihood of the grassroots, review and raise the minimum wage rate as soon as possible and implement it with effect from 1 May next year?

Reply:

President,

     My reply to the three parts of the question raised by the Hon Frederick Fung is set out below:

(a) The statutory minimum wage (SMW) is a new policy in Hong Kong.  Its actual impact on society, economy and employment, as well as whether there is any ripple effect, can only be assessed thoroughly through studies and surveys over a longer implementation period.

     As reflected by preliminary data, since the implementation of SMW on May 1, 2011, the potential negative impact of it on the labour market and business sentiment has been largely moderated by the rapid economic growth in the six consecutive quarters since 2010.  The overall labour market has largely held stable so far.  The latest employment figures (August - October 2011) showed that the seasonally adjusted unemployment rate fell cumulatively by 0.2 percentage points to 3.3%, when compared with the pre-SMW situation (i.e. February - April 2011).  It also dropped by 0.9 percentage points when compared with the same period last year.

     As a result of robust economic performance, the employment situation of some vulnerable groups witnessed some improvements.  Compared to the periods before SMW implementation, the unemployment rate for middle-aged persons aged 40-49 fell by 0.7 percentage points to 2.4% in August - October 2011, while the unemployment rate for persons aged 50-59 remained at 3.3%.  These two rates also decreased by 0.6 percentage points and 0.5 percentage points respectively over the same period last year.  For older workers aged 60 or above, the unemployment rate in August - October 2011 was 2.3%, up by 0.3 percentage points and 0.4 percentage points respectively over the pre-SMW period and a year ago.

     No obvious waves of business closure or retrenchment have been caused by the implementation of SMW, owing to the largely favourable macroeconomic environment.  According to the latest statistics spanning July - September 2011, 47.9% of the unemployed persons (excluding first-time job seekers and re-entrants into the labour force) were dismissed or laid-off, which was smaller than 54.2% in the pre-SMW period and 53.4% in the same period last year.

     Since the implementation of SMW, the number of private sector vacancies recorded by the Labour Department has stayed at a high level of over 3 000 per working day on average, similar to the pre-SMW situation, reflecting the abundant employment opportunities in the labour market.  However, the Hong Kong economy will continue to be affected by the worsening external conditions amidst the deepening Eurozone debt crisis and the subdued economic growth in the United States.  Employers have turned more cautious in staff hiring.

     The Government will remain vigilant and closely monitor and evaluate the actual impact of SMW on various fronts.

(b) Regarding the review of the SMW rate in future, the Minimum Wage Commission (MWC) will study and recommend the next SMW rate by adopting an evidence-based approach.  The MWC will take into account empirical data of related researches and surveys, examine the potential impact of SMW on society, local economy and employment, and consult stakeholders extensively.  This ensures that the SMW rate can be deliberated in a comprehensive, objective and balanced manner.

     As regards standard working hours, this is a highly complex issue.  We would not underestimate its implications on employers and employees, as well as society and economy at large.  Because of this, the Government will need to adopt an independent, objective and unbiased approach and conduct the policy study in a serious manner.  We will conduct detailed analysis and assessment of relevant data, including the collection of statistics on the current working hours situation of our labour force in general and of various sectors of Hong Kong, so as to facilitate in-depth analysis.  The findings of the study would deepen society's understanding of the topic, promote deliberation and discussion in this respect, and facilitate the building of consensus.

(c) In recommending the initial SMW rate, inflation was one of the important considerations of the Provisional Minimum Wage Commission (PMWC).  The PMWC not only considered the latest prevailing inflation situation but also the inflation forecast.  Indeed, the initial SMW rate has brought about substantial improvement to the employment earnings of low-income workers.  The latest figures in July íV September 2011 showed that the average employment earnings of the lowest decile full-time low-income employees registered a year-on-year hike of 14.2%, or an increase of 6.0% net of inflation, which was much higher than the overall average increase of 8.8%.

     When the post-implementation wage distribution data for May to June 2011 become available in the first quarter next year, the MWC will review the SMW rate by conducting comprehensive and prudent studies and analyses based on the wage distribution data and results of other surveys, taking fully into account the views of various stakeholders.  According to the Minimum Wage Ordinance, the MWC must recommend the next SMW rate to the Chief Executive in Council no later than mid-November 2012.

Ends/Wednesday, November 30, 2011
Issued at HKT 15:05

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