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Following is a question by the Hon Jeffrey Lam and a reply by the Secretary for Labour and Welfare, Mr Matthew Cheung Kin-chung, in the Legislative Council today (November 21):
Question:
It has been reported that the implementation of the statutory minimum wage (SMW) has changed the salary structure of the labour market, resulting in a "reshuffle effect" and quite a number of restaurants as well as small and medium enterprises (SMEs) have therefore encountered great difficulties in recruitment of staff. In this connection, will the Government inform this Council:
(a) apart from commissioning a consultancy study on pay hierarchies in the retail and catering trades, whether the Government has conducted any survey on the impact of the implementation of SMW on the business environment; if it has, of the rates of increase in wage cost for various trades (particularly the catering and retail trades);
(b) whether it has surveyed how the implementation of SMW has caused a "reshuffle effect" in the labour market, as well as the difficulties in staff recruitment posed to restaurants and SMEs by such a situation; if it has, of the number of trades affected and the extent to which they have been affected; if not, the reasons for that; and
(c) whether it has surveyed the situation where enterprises passed onto consumers the cost increases arising from the implementation of SMW (eg property management companies raising management fees), as well as the ripple effect on commodity prices triggered by such a situation; if it has conducted such a survey, of the rates of increase in commodity prices?
Reply:
President,
Since the statutory minimum wage (SMW) came into force, the Administration has been closely monitoring its implementation and impact. My reply to the question raised by the Hon Jeffrey Lam is as follows:
(a) According to the results of the 2011 Annual Earnings and Hours Survey (AEHS) conducted by the Census and Statistics Department (C&SD), the total wage bill in all sectors rose by 10.9% in 2011 over 2010, with increases of 9.8% and 18.1% recorded for the restaurant and retail sectors respectively. Relevant statistics on other sectors are provided at Annex of the written reply.
However, it is worth noting that the increase in the total wage bill of individual sectors was affected by many factors. Apart from SMW, other factors leading to the increase in labour costs included improved experience and skills of employees in the sectors, more hiring owing to business expansion of enterprises, etc. In fact, according to the findings of the AEHS, the number of employees engaged in the restaurant sector in May to June 2011 increased by around 1 000 (or 0.5%) year-on-year, while that in the retail sector by some 4 600 (or 1.8%) year-on-year. Moreover, labour costs generally rose on the back of a relatively tight labour market since 2011 which boosted the general wage level. On the other hand, owing to the robust economy last year, the restaurant and retail sectors in particular recorded a notable growth in business receipts throughout the year at 6.4% and 24.9% respectively. This in turn helped relieve the cost pressure on these sectors brought by SMW.
(b) SMW commenced operation in May last year (2011) amidst robust local demand and persistent strength in labour demand in Hong Kong. Based on information from the Quarterly Survey of Employment and Vacancies of C&SD, the number of job vacancies in private sector establishments reached 70 800 in June this year (2012). This was a record high in 18 years, and represented a year-on-year upsurge of 25.1%. Data of the General Household Survey (GHS) of C&SD showed that the seasonally adjusted unemployment rate fell from 3.5% in the first quarter of last year (ie before the implementation of SMW) to 3.4% in August to October this year. The unemployment rate also hovered at lower levels of 3.2% to 3.6% during this period.
Sectors hiring more low-paid employees would be more susceptible to the impact of SMW, especially those relatively labour-intensive sectors such as restaurants, retail, estate management, security and cleaning services, and elderly homes. Wage differentials among lower-skilled jobs across different sectors were narrowed after the implementation of SMW. Employees in some trades such as cleaners, dishwashers and care workers in elderly homes might prefer other jobs with more favourable working environment, which in turn led to difficulties in hiring staff in these sectors. The buoyant economy also exacerbated the competition for labour among sectors. There were also views that while large enterprises could offer better recruitment packages and career prospects in attracting talents, small and medium enterprises lacked competitive edge in recruitment, resulting in difficulties in hiring staff.
Although some trades faced hiring difficulties last year, individual sectors still recorded increases in their employment. According to the latest GHS data, the number of employees in the retail sector increased by 26 900 (or 10.7%) in August to October this year as compared to the first quarter of last year (ie before the implementation of SMW), while that in the restaurant sector also rose by 2 200 (or 1.0%). It is thus evident that SMW has lifted wages of the grassroots employees in real terms, thereby encouraging potential labour force to enter or re-enter the labour market and boosting their incentive to work.
(c) The implementation of SMW resulted in some upward pressures on the prices of products and services in sectors where staff costs constituted a larger proportion of the total operating costs, especially in security services and cleaning services. According to the 2010 Annual Survey of Economic Activities, staff costs accounted for as high as 80% of the total operating expenses for these two services. Based on the Consumer Price Index statistics compiled by C&SD, for consumption goods and services with larger shares of staff costs in total operating expenses such as management fees and other housing charges, the inflation rate for the year 2011 as a whole reached 4.1%, significantly higher than the corresponding inflation rates ranging from -0.2% to 1.4% in the previous five years (ie 2006 to 2010).
As employment earnings improved amidst a robust economy, the purchasing power of people at large grew stronger and enterprises were more likely to pass on the additional labour costs caused by SMW to consumers. This might to some extent slightly push up the inflation rate of last year. Nevertheless, of the 5.3% year-on-year inflation rate for 2011, food prices and private housing rentals together accounted for over 70%. SMW was not the major cause of the inflation hike last year.
Ends/Wednesday, November 21, 2012
Issued at HKT 12:20
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